Document:

Exhibit
10.12

 

 

ASSET PURCHASE AGREEMENT

 

Relating to the Acquisition of

 

Substantially All Assets of

 

DVO — EXTREMITY SOLUTIONS, LLC

 

by

 

DVO ACQUISITION, INC.

 

and

 

TORNIER B.V.

 

 

dated as of March 5, 2007

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I  DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  1.1

  	
  DEFINED
  TERMS

  	
  1

  
	
  1.2

  	
  CONSTRUCTION
  OF CERTAIN TERMS AND PHRASES

  	
  11

  
	
  1.3

  	
  MUTUAL
  NEGOTIATION

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE II  PURCHASE AND SALE OF ASSETS; ASSUMPTION OF
  CERTAIN LIABILITIES

  	
  11

  
	
   

  	
   

  
	
  2.1

  	
  PURCHASE
  AND SALE OF ASSETS

  	
  11

  
	
  2.2

  	
  EXCLUDED
  ASSETS

  	
  13

  
	
  2.3

  	
  ASSUMED
  LIABILITIES

  	
  13

  
	
  2.4

  	
  RETAINED
  LIABILITIES

  	
  14

  
	
  2.5

  	
  UNASSIGNABLE
  CONTRACTS

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE III  PURCHASE PRICE AND CLOSING

  	
  15

  
	
   

  	
   

  
	
  3.1

  	
  TOTAL
  PURCHASE PRICE

  	
  15

  
	
  3.2

  	
  INITIAL
  PURCHASE PRICE, CLOSING PAYMENTS AND SHARE DELIVERY

  	
  15

  
	
  3.3

  	
  NET
  WORTH ADJUSTMENT

  	
  16

  
	
  3.4

  	
  DEFERRED
  PURCHASE PRICE

  	
  17

  
	
  3.5

  	
  TAXES

  	
  19

  
	
  3.6

  	
  BULK
  SALES COMPLIANCE

  	
  19

  
	
  3.7

  	
  CLOSING

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF SELLER

  	
  20

  
	
   

  	
   

  
	
  4.1

  	
  ORGANIZATION
  OF SELLER

  	
  20

  
	
  4.2

  	
  AUTHORITY;
  APPROVAL BY OWNERS

  	
  20

  
	
  4.3

  	
  NO
  CONFLICTS

  	
  21

  
	
  4.4

  	
  GOVERNMENTAL
  CONSENTS, APPROVALS, AND FILINGS

  	
  21

  
	
  4.5

  	
  CAPITALIZATION

  	
  21

  
	
  4.6

  	
  SUBSIDIARIES

  	
  22

  
	
  4.7

  	
  BOOKS
  AND RECORDS

  	
  22

  
	
  4.8

  	
  FINANCIAL
  STATEMENTS

  	
  22

  
	
  4.9

  	
  ABSENCE
  OF CHANGES

  	
  22

  
	
  4.10

  	
  NO
  UNDISCLOSED LIABILITIES

  	
  24

  
	
  4.11

  	
  ASSETS

  	
  24

  
	
  4.12

  	
  EMPLOYEE
  BENEFIT PLANS

  	
  24

  
	
  4.13

  	
  REAL
  PROPERTY

  	
  26

  
	
  4.14

  	
  INTELLECTUAL
  PROPERTY

  	
  26

  
	
  4.15

  	
  LITIGATION;
  DISPUTES

  	
  29

  
	
  4.16

  	
  COMPLIANCE
  WITH LAW

  	
  29

  
	
  4.17

  	
  CONTRACTS

  	
  29

  
	
  4.18

  	
  ENVIRONMENTAL
  MATTERS

  	
  31

  
	
  4.19

  	
  ACCOUNTS
  RECEIVABLE

  	
  31

  
	
  4.20

  	
  INSURANCE

  	
  31

  
	
  4.21

  	
  TAX
  MATTERS

  	
  32

  
	
  4.22

  	
  LABOR
  AND EMPLOYMENT RELATIONS

  	
  32

  
	
  4.23

  	
  PERMITS

  	
  33

  

 

ii

 

	
  4.24

  	
  MATERIAL
  CUSTOMERS

  	
  33

  
	
  4.25

  	
  BROKERS

  	
  34

  
	
  4.26

  	
  TRANSACTIONS
  WITH AFFILIATES

  	
  34

  
	
  4.27

  	
  POWERS
  OF ATTORNEY

  	
  34

  
	
  4.28

  	
  REGULATORY
  MATTERS

  	
  34

  
	
  4.29

  	
  PRODUCT
  WARRANTY; PRODUCT LIABILITY

  	
  35

  
	
  4.30

  	
  ACCREDITED
  INVESTOR STATUS

  	
  35

  
	
  4.31

  	
  FULL
  DISCLOSURE

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE V  REPRESENTATIONS AND WARRANTIES OF PARENT
  AND BUYER

  	
  35

  
	
   

  	
   

  
	
  5.1

  	
  ORGANIZATION

  	
  35

  
	
  5.2

  	
  AUTHORITY

  	
  35

  
	
  5.3

  	
  NO
  CONFLICTS

  	
  36

  
	
  5.4

  	
  GOVERNMENTAL
  CONSENTS, APPROVALS, AND FILINGS

  	
  36

  
	
  5.5

  	
  CAPITALIZATION

  	
  36

  
	
  5.6

  	
  PARENT
  FINANCIAL STATEMENTS

  	
  37

  
	
  5.7

  	
  COMPLIANCE
  WITH LAW

  	
  37

  
	
  5.8

  	
  BROKERS

  	
  37

  
	
  5.9

  	
  THE
  SHARES

  	
  37

  
	
  5.10

  	
  FULL
  DISCLOSURE

  	
  37

  
	
  5.11

  	
  LITIGATION;
  DISPUTES

  	
  38

  
	
  5.12

  	
  INTELLECTUAL
  PROPERTY

  	
  38

  
	
  5.13

  	
  REGULATORY
  MATTERS

  	
  38

  
	
  5.14

  	
  PRODUCT
  LIABILITY

  	
  39

  
	
  5.15

  	
  MATERIAL
  CUSTOMERS

  	
  39

  
	
  5.16

  	
  TAX
  MATTERS

  	
  39

  
	
  5.17

  	
  MATERIAL
  CONTRACTS

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI  PRE-CLOSING COVENANTS

  	
  40

  
	
   

  	
   

  
	
  6.1

  	
  ACCESS
  AND INVESTIGATION

  	
  40

  
	
  6.2

  	
  INTERIM
  OPERATIONS

  	
  40

  
	
  6.3

  	
  NEGATIVE
  COVENANTS

  	
  41

  
	
  6.4

  	
  NOTIFICATION

  	
  42

  
	
  6.5

  	
  BEST
  EFFORTS

  	
  42

  
	
  6.6

  	
  EMPLOYEE
  BENEFIT PLANS

  	
  42

  
	
  6.7

  	
  NO
  SHOPPING

  	
  43

  
	
  6.8

  	
  MUTUAL
  CONFIDENTIALITY

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII  ADDITIONAL AGREEMENTS

  	
  44

  
	
   

  	
   

  
	
  7.1

  	
  FURTHER
  ASSURANCES

  	
  44

  
	
  7.2

  	
  EMPLOYEES
  — GENERALLY

  	
  44

  
	
  7.3

  	
  DAMAGE
  TO ASSETS

  	
  45

  
	
  7.4

  	
  POST-CLOSING
  TAX MATTERS

  	
  45

  
	
  7.5

  	
  GUARANTY

  	
  47

  
	
  7.6

  	
  MAINTENANCE
  OF ORGANIZATION; CESSATION OF BUSINESS

  	
  47

  
	
  7.7

  	
  SALES
  EFFORTS

  	
  47

  
	
  7.8

  	
  JOINT
  PRESS RELEASE

  	
  48

  

 

iii

 

	
  7.9

  	
  INFORMATION
  RIGHTS

  	
  48

  
	
  7.10

  	
  SHARE
  DELIVERY OBLIGATIONS

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII  CLOSING CONDITIONS OF PARENT AND BUYER

  	
  48

  
	
   

  	
   

  
	
  8.1

  	
  REPRESENTATIONS,
  WARRANTIES, AND COVENANTS OF SELLER

  	
  48

  
	
  8.2

  	
  NO
  MATERIAL ADVERSE EFFECT

  	
  49

  
	
  8.3

  	
  OFFICERS’
  CERTIFICATE

  	
  49

  
	
  8.4

  	
  ABSENCE
  OF LITIGATION

  	
  49

  
	
  8.5

  	
  THIRD-PARTY
  CONSENTS

  	
  49

  
	
  8.6

  	
  CLOSING
  DELIVERIES OF SELLER -

  	
  49

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX  SELLER’S CLOSING CONDITIONS

  	
  50

  
	
   

  	
   

  
	
  9.1

  	
  REPRESENTATIONS,
  WARRANTIES, AND COVENANTS OF PARENT AND BUYER

  	
  50

  
	
  9.2

  	
  OFFICERS’
  CERTIFICATE

  	
  50

  
	
  9.3

  	
  ABSENCE
  OF LITIGATION

  	
  50

  
	
  9.4

  	
  CLOSING
  DELIVERIES OF PARENT AND BUYER

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE X  TERMINATION

  	
  51

  
	
   

  	
   

  
	
  10.1

  	
  TERMINATION

  	
  51

  
	
  10.2

  	
  EFFECTS
  OF TERMINATION

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI  INDEMNIFICATION

  	
  51

  
	
   

  	
   

  
	
  11.1

  	
  SURVIVAL

  	
  51

  
	
  11.2

  	
  INDEMNIFICATION

  	
  52

  
	
  11.3

  	
  INDEMNIFICATION
  PROCEDURES

  	
  53

  
	
  11.4

  	
  REMEDIES

  	
  55

  
	
  11.5

  	
  TAX
  TREATMENT OF INDEMNITY PAYMENTS

  	
  55

  
	
  11.6

  	
  RIGHT
  TO OFFSET

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII  MISCELLANEOUS

  	
  55

  
	
   

  	
   

  
	
  12.1

  	
  NOTICES

  	
  55

  
	
  12.2

  	
  ENTIRE
  AGREEMENT

  	
  56

  
	
  12.3

  	
  WAIVER

  	
  56

  
	
  12.4

  	
  AMENDMENT

  	
  57

  
	
  12.5

  	
  NO
  THIRD-PARTY BENEFICIARIES

  	
  57

  
	
  12.6

  	
  NO
  ASSIGNMENT; BINDING EFFECT

  	
  57

  
	
  12.7

  	
  HEADINGS

  	
  57

  
	
  12.8

  	
  SEVERABILITY

  	
  57

  
	
  12.9

  	
  GOVERNING
  LAW

  	
  57

  
	
  12.10

  	
  CONSENT
  TO JURISDICTION AND FORUM SELECTION

  	
  57

  
	
  12.11

  	
  EXPENSE

  	
  58

  
	
  12.12

  	
  SPECIFIC
  PERFORMANCE

  	
  58

  
	
  12.13

  	
  COUNTERPARTS

  	
  58

  
	
  12.14

  	
  DISCLOSURE
  SCHEDULE

  	
  58

  

 

iv

 

Schedules and Exhibits

 

Schedules

 

1.1(a)      DVO Products

1.1(b)      Key Trademarks

1.1(c)      Historical Accounting
Principles

2.1(a)      Real Property Leases

2.1(b)      Fixed Assets

2.1(c)      Assigned Contracts

2.1(d)      Permits

2.1(i)       Domain Names, Databases,
Telephone Numbers, E-Mail Addresses

2.2(g)      Certain Excluded Assets,
Rights, and Properties

5.1           Tornier Organizational
Structure

8.5           Required Third-Party
Consents

 

Exhibits

 

A             Form of Seller Investment
Letter

B             Form of Joinder Agreement

C             Form of Member Investment
Letter

D             Form of Bill of Sale and Assumption
Agreement

 

v

 

ASSET PURCHASE AGREEMENT

 

This
Asset Purchase Agreement (this “Agreement”) is
made and entered into as of March 5, 2007 among:

 

(a)           DVO - EXTREMITY SOLUTIONS,
LLC, an Indiana limited liability company (“Seller”);

 

(b)           TORNIER B.V., a private
company with limited liability organized under the laws of the Netherlands (“Parent”); and

 

(c)           DVO Acquisition, Inc., a
Delaware corporation and indirect wholly owned subsidiary of Parent (“Buyer”).

 

Recitals

 

Buyer
desires to acquire substantially all of the assets and assume certain
liabilities of Seller, and Seller desires to transfer such assets and assign
such liabilities to Buyer, on the terms and conditions set forth herein.

 

Agreement

 

Therefore,
the parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.1          Defined
Terms.  As used in this Agreement, the
following terms have the meanings indicated below:

 

“Actions or Proceedings” means any actions, suits,
proceedings, arbitrations, Orders, inquiries, investigations, hearings,
assessments with respect to fines or penalties, or litigation (whether civil,
criminal, administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Authority.

 

“Affiliate” means, as to any Person, a Person directly or
indirectly, through one or more intermediaries, controlling, controlled by, or
under common control with, such Person, including any officer, director, or
executive employee of such Person.   For
these purposes, “controlling,” “controlled by,” or “under common control with”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management of such Person, whether through ownership of
voting securities, by contract, or otherwise.

 

“Agreement” means this Asset Purchase Agreement and any
amendment hereto.

 

“Allocation Statement” has the meaning set forth in Section
7.4(a).

 

“Arbitrator” has the meaning set forth in Section 3.3(d).

 

“Assets” has the meaning set forth in Section 2.1.

 

 

“Assigned Contracts” has the meaning set forth in Section
2.1(c).

 

“Assumed Liabilities” has the meaning set forth in Section
2.3.

 

“Best Efforts” means the efforts that a prudent Person
desiring to achieve a particular result would use in order to ensure that such
result is achieved as expeditiously as possible; provided, however, no party
shall have any obligation to incur any material expense in order to use its
Best Efforts.

 

“Bill of Sale and Assumption Agreement” has the meaning set
forth in Section 8.6(b).

 

“Books and Records” of any Person means all data, files,
documents, instruments, papers, books, computer files (including files stored
on a computer’s hard drive or on other storage media), electronic files, and records
in any other medium relating to the business, clients, customers, vendors,
operations, or condition (financial or otherwise) of such Person.

 

“Bridge Notes” means the promissory note of Seller dated
January 24, 2007 payable to Tippman Industrial Products and the promissory note
of Seller dated January 24, 2007 payable to Micropulse, Inc.

 

“Business Day” means a day other than Saturday, Sunday, or
any day on which banks located in the State of Minnesota or Indiana are
authorized or obligated to close.

 

“Buyer” has the meaning set forth in the introduction to this
Agreement.

 

“Buyer Representatives” has the meaning set forth in Section
6.1(a).

 

“Change of Control” means the occurrence, after the Closing
Date and prior to the end of the Secondary Revenue Period, of any of the
following events (provided that no Change of Control shall occur so long
as the Institutional Investors beneficially own (as defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”)), a majority of the voting power of the
then-outstanding shares of all classes and series of capital stock of Parent
entitled to vote in the general election of directors of Parent (the “Voting  Stock”), or more than 50% of the voting power
of the then-outstanding shares of voting stock (or comparable voting equity
interests) of the surviving or acquiring entity resulting from a Business
Combination described in paragraph (c) or such entity’s direct or indirect
parent):

 

(a)           a majority of the directors
of Parent shall be persons other than persons serving as directors of Parent as
of the date hereof or whose election or appointment was approved by such
persons;

 

(b)           50% or more of the voting
power of the outstanding Voting Stock is acquired or beneficially owned by any person,
entity, or group (within the meaning of Section 13d(3) or 14(d)(2) of the
Exchange Act) other than (i) an entity in connection with a Business
Combination in which clauses (i) and (ii) of paragraph (c) apply or (ii) a
licensed broker/dealer or licensed underwriter who purchases Voting Stock
pursuant to an underwritten public offering solely for the purpose of resale to
the public;

 

2

 

(c)           the consummation of a merger
or consolidation of Parent with or into another entity, a sale or other
disposition (in one transaction or a series of transactions) of all or
substantially all of Parent’s consolidated assets, or a similar business
combination (each, a “Business Combination”),
in each case unless, immediately following such Business Combination:

 

(i)            all or
substantially all of the beneficial owners of Voting Stock immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
50% of the voting power of the then-outstanding shares of voting stock (or
comparable voting equity interests) of the surviving or acquiring entity
resulting from such Business Combination (including such beneficial ownership
of an entity that, as a result of such transaction, owns Parent or all or
substantially all of Parent’s assets either directly or through one or more
subsidiaries), in substantially the same proportions (as compared to the other
beneficial owners of Voting Stock immediately prior to such Business
Combination) as their beneficial ownership of Voting Stock immediately prior to
such Business Combination; and

 

(ii)           no person,
entity, or group beneficially owns, directly or indirectly, 50% or more of the
voting power of the outstanding voting stock (or comparable equity interests) of
the surviving or acquiring entity (other than a direct or indirect parent
entity of the surviving or acquiring entity, that, after giving effect to the
Business Combination, beneficially owns, directly or indirectly, 100% of the
outstanding voting stock, or comparable equity interests, of the surviving or
acquiring entity); or

 

(d)           approval by Parent’s
shareholders of a definitive agreement or plan to liquidate or dissolve Parent.

 

“Chase Note” means the promissory note of Seller dated
September 18, 2006 payable to Chase Bank.

 

“Class A Holders” means the members of Seller holding Class A
Units.

 

“Class A Units” means the units of Class “A” Capital of
Seller.

 

“Class B Holders” means the members of Seller holding Class B
Units.

 

“Class B Units” means the units of Class “B” Capital of
Seller.

 

“Closing” has the meaning set forth in Section 3.7.

 

“Closing Cash Payment” has the meaning set forth in Section
3.2(a)(i).

 

“Closing Date” has the meaning set forth in Section 3.7.

 

“Closing Date Assets” means the current assets of Seller,
including accounts receivable, inventory and prepaid expenses, and the fixed
assets of Seller comprised of cases and instrument sets as of the Closing Date,
determined in accordance with GAAP; provided that Closing Date Assets
shall not include any Excluded Assets.

 

3

 

“Closing Date Liabilities” means the total book liabilities
of Seller as of the Closing Date, determined in accordance with GAAP; provided
that Closing Date Liabilities shall not include any Excluded Liabilities (other
than the amount of the Closing Debt Repayment, which shall be included in
Closing Date Liabilities).

 

“Closing Debt Repayment” has the meaning set forth in Section
3.2(a)(ii).

 

“COBRA” has the meaning set forth in Section 6.6(b).

 

“Code” means the Internal Revenue Code of 1986 and the rules
and regulations promulgated thereunder.

 

“Common Share” means a share of common stock, par value €0.01
per share, of Parent.

 

“Damages” has the meaning set forth in Section 11.2(a).

 

“Disclosure Schedule” means the disclosure schedule delivered
by Seller concurrently herewith setting forth the exceptions to Seller’s
representations and warranties contained in Article IV and certain other
information called for by this Agreement.

 

“DVO Products” means the products, systems and
instrumentation listed on Schedule 1.1(a) hereto, together with any
modifications or next-generation versions of such products, systems and
instrumentation.

 

“Employee” means any employee of Seller or any member of
Seller actively involved in Seller’s business.

 

“Employee Agreements” has the meaning set forth in Section
4.14(j).

 

“Employee Benefit Plan” means any plan established, arranged,
or maintained by Seller or a controlled group member or to which Seller or a
controlled group member contributes or has contributed, under which any current
or former Employee (or any dependant or beneficiary thereof) is covered, is
eligible for coverage, or has benefit or compensation rights.  A “plan” for this purpose includes any bonus,
incentive compensation, deferred compensation, pension or superannuation,
profit sharing, retirement, stock purchase, stock option, restricted stock,
stock ownership, stock appreciation rights, phantom stock, group registered
retirement savings plan (RRSP), registered pension plan (RPP), employee or
deferred profit sharing plan (EPSP or DPSP), leave of absence, layoff, vacation,
day or dependent care, counseling, legal services, cafeteria, life, health,
hospitalization, accident, disability, workers’ compensation or other
insurance, severance, separation, or other employee benefit plan, scheme,
practice, policy, or arrangement of any kind, whether written or oral,
including any “employee benefit plan” within the meaning of Section 3(3) of
ERISA, and including any arrangement that is part of an employment agreement
with any current or former Employee, but not including any plan or program that
is sponsored by or operated by a Governmental Authority (such as Social
Security in the United States).  A “deferred
compensation” plan for this purpose includes any plan that provides for
deferred compensation within the meaning of Section 409A of the Code (or a plan
that would provide for deferred compensation but for the application of the
grandfathered exception or the short-term deferral exception of Section 409A of
the Code).  A “controlled 

 

4

 

group
member” for this purpose is any business entity that is required to be
aggregated and treated as one employer with Seller under Section 414(b), (c),
or (m) of the Code.

 

“Employee List” has the meaning set forth in Section 7.2(a).

 

“Encumbrance” means any mortgage, pledge, assessment,
security interest, deed of trust, lease, mechanic’s, materialmen’s, judgment,
or other lien, adverse claim, levy, charge, license, or other encumbrance of
any kind, or any conditional-sale or title-retention agreement or other
agreement to give any of the foregoing in the future.

 

“Enforcement Limitations” has the meaning set forth in
Section 4.2(a).

 

“Environment” means any surface water, ground water, drinking
water supply, land surface, subsurface strata, or ambient air, and any indoor
workplace.

 

“Environmental Laws” means all national, state, local, and
foreign laws, codes, regulations, common law, requirements, directives, Orders,
and administrative or judicial interpretations thereof in the form existing as
of the date hereof or the Closing Date (as applicable) relating to pollution,
the protection of human health or the Environment, or the emission, discharge,
disposal, release, or threatened release of Materials in or into the
Environment, including the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. § 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. § 6901 et seq.), the Clean Water Act (33
U.S.C. § 1251 et seq.), the Clean Air Act (42
U.S.C. § 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. § 2601 et seq.), and
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.), and the regulations promulgated pursuant thereto.

 

“Environmental Notice” means any written notice by any Person
alleging potential liability (including potential liability for investigatory
costs, cleanup costs, governmental costs, harm, or damages to person, property,
or natural resources, or other fines or penalties) arising out of, based on, or
resulting from (a) the emission, discharge, disposal, release, or threatened
release in or into the Environment of any Material or (b) circumstances forming
the basis of any violation, or alleged violation, of any applicable
Environmental Law.

 

“ERISA” means the Employee Retirement Income Security Act of
1974 and the rules and regulations promulgated thereunder.

 

“Excluded Assets” has the meaning set forth in Section 2.2.

 

“Excluded Liabilities” has the meaning set forth in Section
2.4.

 

“Fair Value” means the fair market value of a Common Share as
of a given date, as determined by an investment banking firm of national
reputation engaged by Buyer and reasonably acceptable to Seller.

 

“Final Month End Assets” means the current assets of Seller,
including accounts receivable, inventory and prepaid expenses, and the fixed
assets of Seller comprised of cases and

 

5

 

instrument
sets as of February 28, 2007, determined in accordance with GAAP; provided
that Final Month End Assets shall not include any Excluded Assets.

 

“Final Month End Liabilities” means the total book
liabilities of Seller as of February 28, 2007, determined in accordance
with GAAP; provided that Final Month End Liabilities shall not include
any Excluded Liabilities (other than the amount of the Closing Debt Repayment,
which shall be included in Final Month End Liabilities).

 

“Final Month End Net Worth” has the meaning set forth in Section 3.2(a)(i).

 

“Financial Statements” means (a) the unaudited balance
sheets of Seller as of December 31, 2006 and 2005 and the related
unaudited statements of income and cash flows of Seller for the fiscal years
then ended and (b) the unaudited balance sheet of Seller as of January 31,
2007 and the related unaudited statements of income and cash flows of Seller
for the one-month period then ended.

 

“GAAP” means generally accepted accounting principles in the
United States.

 

“Governmental Authority” means any court, tribunal,
arbitrator, authority, agency, commission, official, or other instrumentality
of the United States or other country or any state, county, city, or other
political subdivision.

 

“Hired Employee” has the meaning set forth in Section 7.2(b).

 

“Initial Common Shares” has the meaning set forth in Section 3.2(c)(ii).

 

“Initial Revenue Period” means the 12-month period commencing
the second full month following the Closing Date.

 

“Institutional Investors” means the “Institutional Investors”
listed on Schedule I to the Parent Stockholder Agreement as of the date hereof,
together with their respective Affiliates.

 

“Intellectual Property” means any of the following:

 

(a)           inventions
(whether patentable or unpatentable and whether or not reduced to practice),
all improvements thereto, all invention disclosures, records of invention, and
all patents, patent applications, and patent disclosures, together with all
reissuances, divisions, continuations, continuations-in-part, revisions,
extensions, reexaminations, and international and foreign counterparts thereof;

 

(b)           trademarks,
service marks, trade dress, logos, trade names, brands, product and service
names, logos, other identifications used or intended for use in commerce, other
indications of source, endorsement, or sponsorship, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof, including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith;

 

6

 

(c)           moral rights,
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith;

 

(d)           trade secrets
and confidential business information, product specifications, data, know-how,
formulas, compositions, processes, designs, sketches, photographs, graphs,
drawings, samples, concepts, and ideas, past, current and planned research and
development, current and planned research and distribution methodologies and
processes, client and customer lists, current and anticipated client and
customer requirements, price lists, market studies, business plans, however and
whether or not documented;

 

(e)           proprietary
computer software (including object code and source code) and all associated
documentation (including development documentation, maintenance documentation,
and end-user documentation) and other proprietary rights and copies and
tangible embodiments thereof (in whatever form or medium);

 

(f)            database
technologies, systems, structures, and architectures (and related processes,
formulas, compositions, improvements, devices, know-how, inventions,
discoveries, concepts, ideas, designs, methods, and information) and any other
related information, however documented;

 

(g)           all
personnel-training techniques and materials;

 

(h)           all notes,
analyses, compilations, studies, summaries, and other material prepared by or
for a Person containing or based, in whole or in part, on any information included
in the foregoing, however documented;

 

(i)            all industrial
designs and any registrations and applications therefor;

 

(j)            databases and
data collections and all rights therein;

 

(k)           any similar or
equivalent rights to any of the foregoing or any proprietary or intellectual
property rights anywhere in the world; and

 

(1)           domain names,
uniform resource locators (URLs), whether common law, statutory or otherwise,
domestic and foreign, and all registrations, registration applications and
rights related to the foregoing.

 

“Key Trademarks” means the marks listed on Schedule 1.1(b),
together with all stylized or logo versions thereof currently used by Seller.

 

“Knowledge” means, with respect to (i) Seller, the
actual knowledge of Rod K. Mayer, Jeff M. Ondrla, Donald E. Running, Brian G.
Emerick, or Brian More, and (ii) Parent, the actual knowledge of Doug
Kohrs or Rob Ball, in either case without any obligation to conduct any further
review or inquiry.

 

“Leased Real Property” has the meaning set forth in Section 4.13(b).

 

7

 

“Liabilities” means any liability, debt, or obligation of any
kind or nature (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and due or to
become due), including any liability for Taxes.

 

“Licensed Intellectual Property” means all Intellectual
Property that Seller uses or has the right to use pursuant to a license,
agreement, obligation or other commitment from any Person.

 

“M&A Qualified Beneficiaries” has the meaning set forth
in Section 6.6(b).

 

“Material” means pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes, including petroleum and
its byproducts, asbestos, and any material or substance that is defined as a “hazardous
waste,” “hazardous substance,” “hazardous material,” “restricted hazardous
waste,” “industrial waste,” “solid waste,” “contaminant,” “pollutant,” “toxic
waste,” or “toxic substance” under any Environmental Law.

 

“Material Adverse Effect” means a material adverse effect,
whether individually or in the aggregate, on (a) the business, operations,
condition (financial or otherwise), results of operations, assets, properties,
or Liabilities of a party and its subsidiaries (if any), taken as a whole, or (b) the
ability of a party to consummate the transactions contemplated hereby; provided,
however, that none of the following (individually or in the aggregate)
shall be deemed to constitute, or shall be taken into account in determining
whether there has been, a Material Adverse Effect: (i) any such effect
resulting from or relating to general economic, industry, or securities or
financial market conditions that do not have a disproportionate impact upon the
party and its subsidiaries (if any); (ii) any such effect resulting from
or relating to the taking of any action required by this Agreement; and (iii) any
such effect arising in connection with acts of war, terrorist or military
actions, or any material worsening of the foregoing that does not have a
disproportionate impact upon the party and its subsidiaries (if any).

 

“Material Contracts” has the meaning set forth in Section 4.17(a).

 

“Member Investment Letter” has the meaning set forth in Section 7.10(b).

 

“Notice of Disagreement” has the meaning set forth in Section 3.3(c).

 

“Order” means any writ, judgment, decree, injunction, ruling,
arbitration award, or similar order of any Governmental Authority (whether
preliminary or final).

 

“Ordinary Course of Business” means an action of Seller that
is consistent with the past practices of Seller and is taken in the ordinary
course of Seller’s operations.

 

“Owned Intellectual Property” means all Intellectual Property
(a) created, conceived or developed by Employees of Seller who have
assigned or have an obligation to assign all rights to Seller; or (b) to
which Seller has acquired, by purchase, assignment or other transfer, the
unconditional, unrestricted, exclusive right to control or prevent any and all
use of such Intellectual Property by others, without the consent or approval of
or payment to any Person.

 

“Parent” has the meaning set forth in the introduction to
this Agreement.

 

8

 

“Parent Audited Financial Statements” means the audited
balance sheet of Tornier SAS as of December 31, 2005 and the related
audited statements of income and cash flows of Tornier SAS for the fiscal year
then ended.

 

“Parent Unaudited Financial Statements” means the unaudited
consolidated balance sheet of Parent as of October 31, 2006 and the
related unaudited consolidated statements of income and cash flows of Parent
for the period then ended.

 

“Parent Stockholder Agreement” means the TMG B.V.
Securityholders’ Agreement dated as of July 18, 2006.

 

“Permits” means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, and similar consents
granted or issued by any Governmental Authority.

 

“Permitted Encumbrance” means:

 

(a)           any Encumbrance
for Taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP;

 

(b)           liens securing
indebtedness disclosed in the Financial Statements, which indebtedness does not
constitute an Assumed Liability, and which liens will be released at or prior
to the Closing;

 

(c)           the title of
the lessor under any Real Property Lease disclosed in the Disclosure Schedule
or under any personal-property lease disclosed in the Disclosure Schedule or
the non-disclosure of which does not constitute a misrepresentation under this
Agreement; and

 

(d)           any minor
imperfection of title or similar Encumbrance on tangible property that,
individually or together with other such Encumbrances, does not materially
impair the value of the property subject to the Encumbrance, the use of that
property or the ability of Seller to consummate the transactions contemplated
hereby.

 

“Person” means any natural person, corporation, general
partnership, limited partnership, limited liability company, proprietorship,
other business organization, trust, union, association, or Governmental
Authority.

 

“Real Property Leases” has the meaning set forth in Section 2.1(a).

 

“Revenues” means accrued worldwide gross revenues (determined
in accordance with GAAP and Seller’s historical accounting principles, as
described on Schedule 1.1(c)) resulting from sales of DVO Products that
are sold by Parent, Buyer, or any of their Affiliates, representatives,
licensees, agents, distributors, partners, joint-venturers, or any other
third-party pursuant to a contractual relationship with any such party, less
credits or allowances granted upon claims, rejections, or returns.  The sale of a unit of a DVO Product shall
only be included once in the calculation of Revenues (for example, Buyer’s sale
of a unit of a DVO Product to its 

 

9

 

distributor
shall be included in the calculation, but the distributor’s sale of the same
unit to an end user shall not be).

 

“SEC” means the United States Securities and Exchange
Commission.

 

“Secondary Revenue Period” means the 12-month period
following the last day of the Initial Revenue Period.

 

“Seller” has the meaning set forth in the introduction to
this Agreement.

 

“Seller Investment Letter” has the meaning set forth in Section 3.2(c).

 

“Share Repurchase Election” has the meaning set forth in Section 3.4(h)(ii).

 

“Subsequent Common Shares” has the meaning set forth in Section 3.4(h)(iv).

 

“Tax” means:

 

(a)           any federal,
state, local, or foreign income, alternative, or add-on minimum tax, gross
income, gross receipts, sales, use, value added, ad valorem, transfer,
franchise, profits, Iicense, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental, or windfall
profit tax, custom, duty, or other tax, governmental fee, or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax, or additional amount imposed by any Governmental
Authority responsible for the imposition of any such tax (domestic or foreign);

 

(b)           any Liability
for payment of any amounts of the type described in clause (a) as a result
of being a member of an affiliated, consolidated, combined, unitary, or other
group for any taxable period; and

 

(c)           any Liability
for the payment of any amounts of the type described in clause (a) or (b) as
a result of any express or implied obligation to indemnify any other Person.

 

“Tax Return” means any return, report, information return,
schedule, or other document (including any related or supporting information)
required to be filed with any Governmental Authority with respect to Taxes or
any claim for refund.

 

“Transaction Documents” means the Bill of Sale and Assumption
Agreement and all other agreements, documents, instruments, and certificates
contemplated by this Agreement to be executed by Parent, Buyer, or Seller
pursuant hereto and any amendments thereto.

 

“Transfer Taxes” has the meaning set forth in Section 3.5(b).

 

“Unaudited Balance Sheet” means Seller’s unaudited balance
sheet as of January 31, 2007 included in the Financial Statements.

 

10

 

1.2          Construction
of Certain Terms and Phrases.  In this Agreement, unless the context clearly
requires otherwise:

 

(a)           words of any
gender include each other gender;

 

(b)           words using the
singular or plural number also include the plural or singular number,
respectively;

 

(c)           the terms “Article”
or “Section” refer to the specified Article or Section of this
Agreement;

 

(d)           “including” (or
any variation thereof) means “including without limitation”;

 

(e)           a reference to
a number of days refers to calendar days unless otherwise specified;

 

(f)            all accounting
terms used, but not expressly defined, have the meanings given to them under
GAAP;

 

(g)           all dollar
amounts are expressed in United States funds;

 

(h)           the words “herein,”
“hereof,” “hereunder,” and similar words refer to this Agreement as a whole and
not to any particular Article, Section, or subsection of this Agreement;

 

(i)            all references
to statutes or regulations are deemed to refer to those statutes and
regulations as amended from time to time up to the date of this Agreement or
the Closing Date (as applicable); and

 

(j)            when
calculating the period of time before which, within which, or following which
any act is to be done or step taken pursuant to this Agreement, the date that
is the reference date in calculating such period shall be excluded, and, if the
last day of such period is not a Business Day, then the period in question
shall end on the next Business Day.

 

1.3          Mutual
Negotiation.  The parties
have participated jointly in the negotiation and drafting of this Agreement
and, if an ambiguity or question of intent or interpretation arises, it is the
intent of the parties that this Agreement shall be construed as jointly drafted
by the parties and that no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provision of this
Agreement.

 

ARTICLE II

PURCHASE AND SALE OF ASSETS; ASSUMPTION OF CERTAIN LIABILITIES

 

2.1          Purchase
and Sale of Assets.  Subject to
the terms and conditions of this Agreement, at the Closing, Seller shall sell,
grant, convey, assign, transfer, and deliver to Buyer, and Buyer shall (and
Parent shall cause Buyer to) purchase from Seller, free and clear of any 

 

11

 

Encumbrance
or adverse claim of any kind whatsoever (other than Permitted Encumbrances),
all of Seller’s right, title, and interest in and to all of Seller’s properties
and assets listed in clauses (a) through (n) of this Section 2.1
and all of Seller’s other properties and assets (the “Assets”),
excluding the Excluded Assets, which Excluded Assets shall not constitute
Assets.

 

(a)           The real
property leases listed on Schedule 2.1(a) and all interests of
Seller therein, including real estate fixtures, leasehold improvements,
security and other deposits, common-area-maintenance refunds, adjustments, and
other amounts now or hereafter payable to Seller under or in respect of such
leases (the “Real Property  Leases”).

 

(b)           All furniture,
furnishings, equipment, hardware, motor vehicles, and other similar fixed
assets, including those listed on Schedule 2.1(b).

 

(c)           All contracts,
agreements, purchase orders, and statements of work with customers, all license
agreements, vendor contracts, capital leases, and all other contracts and
agreements, in each case including those listed on Schedule 2.1(c), to
the extent assignable (the “Assigned Contracts”).

 

(d)           All Permits
issued to or held by Seller, including those listed on Schedule 2.1(d),
to the extent transferable.

 

(e)           All Books and
Records of Seller, provided that Seller may retain copies of the originals of
such Books and Records to the extent necessary for Seller to perform its
obligations hereunder, under applicable laws, under its organizational
documents, or to any third parties.

 

(f)            All prepaid
expenses, deposits, and deferred items of Seller.

 

(g)           All accounts,
accounts receivable, notes, and notes receivable of Seller, including (i) those
that are not evidenced by instruments or invoices, whether or not they have
been earned by performance or have been written off or reserved against as a
bad debt or doubtful account, and (ii) all documents of title representing
any of the foregoing and all right, title, security, and guaranties in favor of
Seller with respect to any of the foregoing.

 

(h)           All prepayments
by customers.

 

(i)            All domain
names, web site content, databases, telephone numbers, and e-mail addresses,
including those listed on Schedule 2.1(i).

 

(j)            All inventories
of finished products, cases, instrument sets, tooling, work in process, raw
materials, spare parts, and all other materials and supplies.

 

(k)           All of the
Owned Intellectual Property and all of Seller’s rights in the Licensed
Intellectual Property.

 

(l)            All joint
venture equity interests.

 

12

 

(m)          All claims of
Seller against third parties relating to the Assets, whether or not asserted
before the Closing Date, including all claims with respect to warranties and
guaranties of vendors.

 

(n)           Seller’s
company name, goodwill and going-concern value.

 

2.2          Excluded
Assets.  Notwithstanding Section 2.1, the Assets
do not include the following (the “Excluded Assets”):

 

(a)           cash, cash
equivalents, bank accounts, and marketable securities;

 

(b)           reimbursements
owed to Seller for sales, use, value added, research and experimentation
credits, and similar Taxes that have been paid by the Seller and Tax refunds,
in each case to the extent relating to periods before the Closing Date;

 

(c)           any contract or
agreement not disclosed in Section 4.14 or 4.17 of the Disclosure Schedule
if such non-disclosure constitutes a misrepresentation under Section 4.14
or 4.17, unless Buyer shall give written notice to Seller that it deems such
contract or agreement to constitute an Asset;

 

(d)           any agreement
or contract creating indebtedness of Seller for borrowed money or for purchase
money indebtedness for the acquisition by Seller of any business, or
guarantying or securing any such indebtedness of others;

 

(e)           all personnel
records related to any Hired Employee that Seller is not legally permitted to
transfer to Buyer or of any employee or former employee of Seller not to be
employed by Buyer;

 

(f)            Seller’s
organizational documents, qualifications to conduct business as a foreign
organization, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, general ledgers, tax
returns, seals, minute books, unit transfer books, and similar documents of
Seller relating to the organization, maintenance, and existence of Seller as an
entity;

 

(g)           any other
assets, rights, and properties set forth on Schedule 2.2(g); and

 

(h)           all rights of
Seller under this Agreement and the Transaction Documents.

 

2.3          Assumed
Liabilities.  Subject to
the terms and conditions of this Agreement, at the Closing, Buyer shall assume
the following Liabilities of Seller (the “Assumed Liabilities”):

 

(a)           Liabilities and
obligations under the Assigned Contracts, but only to the extent that such
Liabilities and obligations:

 

(i)            arise on or after the Closing Date;

 

(ii)           do not arise from or relate to any breach by Seller
of any obligations under any provision of any of the Assigned Contracts; and

 

13

 

(iii)          do not arise from or relate to any event,
circumstance, or condition occurring or existing before the Closing Date that,
with notice, lapse of time, or both, would constitute or result in a breach of
any obligations under any provision of any Assigned Contract.

 

(b)           All third-party
accounts payable to the extent incurred in the Ordinary Course of Business.

 

2.4          Retained
Liabilities.  Other than
the Assumed Liabilities, Buyer shall not assume, or be deemed to have assumed
or guaranteed, or otherwise be responsible for, any Liability, obligation, or
claim of any nature of Seller, whether matured or unmatured, liquidated or
unliquidated, fixed or contingent, known or unknown, or whether arising out of
acts or occurrences before, on, or after the date hereof (collectively, the “Excluded Liabilities”).

 

2.5          Unassignable
Contracts. 
Notwithstanding anything to the contrary stated in this Agreement, if:

 

(a)           the assignment
of any contract that would otherwise be an Assigned Contract without the
approval, consent, or waiver of another party thereto would violate, conflict
with, result in a breach or termination of, or constitute a default or event of
default under (or an event that with due notice, lapse of time, or both, would
constitute a default or event of default under), the terms of the contract or
result in the creation of any Encumbrance (other than a Permitted Encumbrance)
on any Asset or enable another party to the contract to terminate the contract
or agreement or impose a penalty or additional payment obligations or
accelerate any obligation of Seller or Buyer under the contract; and

 

(b)           all reasonably necessary
approvals, consents, and waivers of all parties to the contract have not been
obtained on or before the Closing Date in order to avoid the consequences set
forth in Section 2.5(a);

 

then
Buyer shall not be obligated to assume the contract (and if Buyer does not
assume the contract, the contract shall not be included in the Assigned
Contracts or the Assets at the Closing); provided that Buyer may, at its
sole discretion, elect, by written notice to Seller, to assume the obligations
and liabilities of Seller under the contract (to the extent the same would
constitute Assumed Liabilities had such contract been included in the Assigned
Contracts at the Closing) (but not the contract itself), in which event:

 

(i)            such obligations and liabilities (but not the
contract itself) shall be included in the Assumed Liabilities, the claims,
rights, and benefits of Seller arising under the contract or resulting
therefrom (but not the contract itself) shall be included in the Assigned
Contracts and transferred to Buyer hereunder, and any payments or other
benefits received by Seller therefrom after the Closing shall immediately be
transferred by Seller to Buyer; and

 

(ii)           after the Closing, Seller shall use all reasonable
efforts to assist Buyer in attempting to obtain the necessary approvals,
consents, and waivers and shall promptly execute all documents necessary to
complete the transfer of the 

 

14

 

contract
to Buyer if such approvals, consents, and waivers are obtained (whereupon such
contract shall be included in the Assigned Contracts).

 

ARTICLE III

PURCHASE PRICE AND CLOSING

 

Subject
to the terms and conditions of this Agreement, in reliance upon the
representations, warranties, and covenants of Seller set forth in this
Agreement, and in consideration for the purchase and sale of the Assets at
Closing, Buyer shall assume the Assumed Liabilities and pay Seller the Total
Purchase Price as set forth in this Article III.

 

3.1          Total
Purchase Price.  The total purchase price for the Assets (the “Total  Purchase Price”)
shall be the Initial Purchase Price (as adjusted pursuant to Section 3.3)
plus the Deferred Purchase Price.

 

3.2          Initial
Purchase Price, Closing Payments and Share Delivery.

 

(a)           The Initial
Purchase Price for the Assets shall be composed of the following:

 

(i)            $8.5 million in cash plus or minus an amount equal
to 90% of the difference between the Final Month End Assets and the Final Month
End Liabilities (the “Final Month End Net Worth”)
(collectively, the “Closing Cash  Payment”); and

 

(ii)           an amount in cash equal to the outstanding principal
of and interest on the Bridge Notes and the Chase Note as of the Closing Date
(the “Closing  Debt
Repayment”).

 

(b)           At Closing,
Buyer shall:

 

(i)            deliver the Closing Cash Payment by wire transfer of
immediately available funds to an account designated in writing by Seller two
Business Days prior to the Closing Date; and

 

(ii)           deliver the Closing Debt Payment by wire transfer of
immediately available funds to accounts designated in writing by the holders of
the Bridge Notes and the Chase Note two Business Days prior to the Closing
Date.

 

(c)           Within 10
Business Days after the Closing Date:

 

(i)            Seller shall deliver to Parent an amount in cash not
to exceed $5.5 million, an investment letter, duly executed by Seller, in the
form of Exhibit A (the “Seller Investment Letter”),
and a joinder agreement to the Parent Stockholder Agreement, duly executed by
Seller, in the form of Exhibit B (the “Joinder
Agreement”); and

 

15

 

(ii)           Within 10 Business Days after the date on which it
receives the executed Seller Investment Letter, Parent shall deliver a deed of
issuance executed in accordance with the laws of the Netherlands evidencing the
number of Common Shares equal to the Euro equivalent of the amount delivered
under Section 3.2(c)(i) (determined by reference to the applicable
exchange rate as of the date Parent receives the Seller Investment Letter and
the accompanying cash payment contemplated under Section 3.2(c)(i), as reported
in The Wall Street Journal) divided by
€3.5628, rounded to the nearest whole share (the “Initial
Common Shares”).

 

3.3          Net Worth Adjustment.

 

(a)           Following the
Closing, the cash portion of the Initial Purchase Price shall be adjusted as
provided in this Section 3.3 to reflect the difference between (i) the
Closing Date Assets and the Closing Date Liabilities (the “Closing Date
Net Worth”) and (ii) the Final Month End Net Worth.

 

(b)           Within 30 days
following the Closing Date, Buyer shall deliver to Seller a statement setting
forth the Closing Date Net Worth (the “Closing Net Worth
Statement”).

 

(c)           The Closing Net
Worth Statement shall become final and binding upon the parties on the 30th day
following receipt thereof by Seller unless Seller gives a written notice of its
disagreement (a “Notice of Disagreement”) to Buyer
before that date.  The Notice of
Disagreement must set forth in reasonable detail the nature of any disagreement
with the Closing Net Worth Statement.  If
a valid Notice of Disagreement is received by Buyer in a timely manner, then
the Closing Net Worth Statement (as finally determined in accordance with
clause (i) or (ii) below) shall become final and binding upon the
parties on the earlier of (i) the date Buyer and Seller resolve in writing
any differences they have with respect to all matters specified in the Notice
of Disagreement or (ii) the date any disputed matters are finally resolved
in writing by the Arbitrator.

 

(d)           During the
30-day period following the delivery of a Notice of Disagreement, Seller and
Buyer shall seek in good faith to resolve in writing any differences that they
may have with respect to any matter specified in the Notice of
Disagreement.  If, at the end of such
30-day period, Seller and Buyer have not reached agreement on all such matters,
then the matters that remain in dispute shall be promptly submitted to an
independent public accounting firm mutually selected by Buyer and Seller in
writing (the “Arbitrator”) for review and
resolution.  The procedures for the
arbitration shall be determined by the Arbitrator.  The parties shall use commercially reasonable
efforts to cause the Arbitrator to render a decision resolving the matters in
dispute within 30 days following completion of the submissions to the Arbitrator.

 

(e)           Buyer and
Seller shall each pay one half of the fees and expenses of the Arbitrator.  Each party shall pay its own expenses
incurred with respect to any submission to the Arbitrator.

 

16

 

(f)            Buyer shall
give Seller (and its accountants, attorneys, and authorized representatives)
reasonable access during regular business hours to the properties, books,
records, and personnel of Buyer relating to the Assets solely for purposes of
preparing, reviewing, and resolving any disputes relating to the Closing Net
Worth Statement, but only if Seller enters into a customary confidentiality
agreement with respect thereto.

 

(g)           If the Closing
Date Net Worth reduced by the Final Month End Net Worth is a positive number,
then Buyer shall, within two Business Days of the determination thereof, by
wire transfer of immediately available funds, pay to Seller an amount in cash
equal to the excess of the Closing Date Net Worth over the Final Month End Net
Worth.

 

(h)           If the Closing
Date Net Worth reduced by the Final Month End Net Worth is a negative number,
then Seller shall, within two Business Days of the determination thereof, by
wire transfer of immediately available funds, pay to Buyer an amount in cash
equal to the excess of the Final Month End Net Worth over the Closing Date Net
Worth.

 

3.4          Deferred Purchase Price.  Any amounts due and owing by Buyer to Seller
pursuant to this Section 3.4 shall be the “Deferred
Purchase Price.”  The Deferred
Purchase Price shall be payable in two installments as follows:

 

(a)           On or before
the end of the second full month following the Initial Revenue Period, Buyer
shall pay to Seller an amount equal to two times the Revenues generated during
the Initial Revenue Period (the “Initial Revenue Payment”).

 

(b)           On or before
the end of the second full month following the Secondary Revenue Period, Buyer
shall pay to Seller an amount equal to the excess of (i) the Revenues
generated during the Secondary Revenue Period over (ii) the Revenues generated
during the Initial Revenue Period (the “Secondary Revenue Payment”
and, together with the Initial Revenue Payments, the “Revenue
Payments”).

 

(c)           On or before
the end of the second full month following the Initial Revenue Period or the
Secondary Revenue Period, as applicable, Buyer shall deliver to Seller a
calculation of the applicable Revenue Payment, certified by an officer of Buyer
(a “Revenue Payment Statement”).

 

(d)           A Revenue
Payment Statement shall become final and binding upon the parties on the 30th
day following receipt thereof by Seller unless Seller gives a Notice of
Disagreement to Buyer before that date. 
The Notice of Disagreement must set forth in reasonable detail the
nature of any disagreement with the Revenue Payment Statement.  If a valid Notice of Disagreement is received
by Buyer in a timely manner, then the Revenue Payment Statement (as finally
determined in accordance with clause (i) or (ii) below) shall become
final and binding upon the parties on the earlier of (i) the date Buyer
and Seller resolve in writing any differences they have with respect to all
matters specified in the Notice of Disagreement or (ii) the date any
disputed matters are finally resolved in writing by the Arbitrator.

 

(e)           During the
30-day period following the delivery of a Notice of Disagreement, Buyer and
Seller shall seek in good faith to resolve in writing any 

 

17

 

differences
that they may have with respect to any matter specified in the Notice of Disagreement.  If, at the end of such 30-day period, Buyer
and Seller have not reached agreement on all such matters, then the matters
that remain in dispute shall be promptly submitted to the Arbitrator for review
and resolution.  The procedures for the
arbitration shall be determined by the Arbitrator.  The parties shall use commercially reasonable
efforts to cause the Arbitrator to render a decision resolving the matters in
dispute within 30 days following completion of the submissions to the
Arbitrator.

 

(f)            Buyer and
Seller shall each pay one half of the fees and expenses of the Arbitrator.  Each party shall pay its own expenses
incurred with respect to any submission to the Arbitrator.

 

(g)           Buyer shall
give Seller (and its accountants, attorneys, and authorized representatives)
reasonable access during business hours to the properties, books, records, and
personnel of Buyer relating to the Assets solely for purposes of preparing,
reviewing, and resolving any disputes relating to a Revenue Payment Statement,
but only if Seller enters into a customary confidentiality agreement with
respect thereto.

 

(h)           The Revenue
Payments shall be payable as follows:

 

(i)            Following the fatal determination of the amount of
each of the Initial Revenue Payment and the Secondary Revenue Payment, Buyer
shall provide Seller with the report of the investment banking firm engaged to
determine Fair Value as of the last day of the Initial Revenue Period and
Secondary Revenue Period, as applicable. 
Buyer shall use its Best Efforts to engage such investment banking firm
a sufficient time in advance so that the events contemplated by this Section 3.4(h) are
not materially delayed.

 

(ii)           Within five Business Days after the delivery of such
report, Seller shall give Buyer a written notice (a “Share
Purchase Election”) stating the amount of the applicable Revenue
Payment (if any) that it will use to purchase Common Shares (as to a Revenue
Payment, the “Share Portion”), and also
designating the account into which such Revenue Payment is to be deposited.

 

(iii)          Within five Business Days after receipt of a Share
Purchase Election, Buyer shall pay the full amount of the applicable Revenue
Payment as specified in the Share Purchase Election by wire transfer of
immediately available funds into the account designated by Seller for such
purpose in the Share Purchase Election.

 

(iv)          Within 10 Business Days after receipt of a Share
Purchase Election, Parent shall issue to Seller the number of Common Shares
equal to (A) the applicable Share Portion divided by (B) the Fair
Value as of the date of the final determination of the Initial Revenue Payment
or the Secondary Revenue Payment, as applicable, rounded to the nearest whole
share (such quotient, with respect to each Share Purchase Election, the “Subsequent Common Shares”) in exchange for a cash payment
from Seller equal to the applicable Share Portion.

 

18

 

(v)           In the event of a Change of Control, Seller shall be
offered the opportunity to receive any future Initial Revenue Payment or
Secondary Revenue Payment in cash, in voting securities of the surviving or
acquiring entity in a Business Combination giving rise to the Change of Control
(or such entity’s direct or indirect parent), or both in the same proportions
as received by Parent or its shareholders.

 

(i)            Buyer shall not
be obligated to issue any Common Shares pursuant to Section 3.4(h) unless
and until Seller executes and delivers to Buyer a Seller Investment
Letter.  For the avoidance of doubt,
Seller must execute and deliver a Seller Investment Letter for each Revenue
Payment for which it elects to receive any portion of the payment in Common
Shares.

 

3.5          Taxes.

 

(a)           Except as otherwise provided
in this Agreement, (i) Seller shall be responsible for and pay all Taxes
levied and imposed upon, or in connection with, the Assets before the Closing
Date; (ii) Buyer shall be responsible for and pay all Taxes levied or
imposed upon, or in connection with, the Assets on or after the Closing Date;
and (iii) Seller and members of Seller, on the one hand, and Buyer, on the
other hand, will each be responsible for their own income and franchise taxes,
if any, arising from the transactions contemplated by this Agreement.

 

(b)           Seller shall be responsible
for all transfer, sales, use, value added, and other similar Taxes, if any,
arising out of, and all registration or recording fees, if any, applicable to,
the transfer of the Assets to Buyer pursuant to this Agreement (“Transfer Taxes”).

 

(c)           Real and personal ad valorem
property Taxes shall be allocated on the basis of the assessment dates relating
to such Taxes, with the Seller responsible for (i) all such Taxes
attributable to assessment dates that occur in years prior to the calendar year
in which the Closing Date occurs, and (ii) a portion of such Taxes
attributable to assessment dates that occur in the calendar year in which the
Closing Date occurs equal to the amount of such Taxes for the entire assessment
year multiplied by a fraction, the numerator of which is the number of calendar
days in such assessment year prior to the closing Date and the denominator of
which is the number of calendar days in the entire assessment year.  Buyer shall be responsible for (i) the
remaining portion of real and personal ad valorem property Taxes attributable
to assessment dates that occur in the calendar year in which the Closing Date
occurs, and (ii) for such Taxes attributable to assessment dates that
occur in years subsequent to the calendar year in which the Closing Date occurs.

 

3.6          Bulk
Sales Compliance.  Buyer hereby waives, to the fullest extent
permitted by law, compliance by Seller with the provisions of all laws based on
the Uniform Commercial Code relating to bulk transfers in connection with the
sale of the Assets.  Seller shall
indemnify and hold harmless Buyer from and against all Liabilities and expenses
(including reasonable attorneys’ fees) arising out of noncompliance with such
bulk-transfer laws and any Liabilities of Buyer under the Tax laws of any state
or country imposed on Buyer for Seller’s pre-Closing Taxes or as a result of
succeeding to Seller as the owner of the Assets.

 

19

 

3.7          Closing.  The consummation of the purchase and sale of
the Assets and the other transactions contemplated hereby (the “Closing”) shall take place at the offices of Faegre &
Benson LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis,
Minnesota 55402 at 9:00 a.m. (Central Time) on or before the second
Business Day after the satisfaction or waiver of the conditions in Articles
VIII and IX, or at such other time, date, or place as the parties mutually
agree.  The date on which the Closing
occurs is referred to as the “Closing Date.”
The Closing shall be deemed to have occurred at 12:01 a.m. (Central Time)
on the Closing Date.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller
represents and warrants to Buyer, except as set forth in the Disclosure
Schedule, as follows:

 

4.1          Organization of Seller.  Seller is a limited liability company duly
organized and validly existing under the laws of the State of Indiana.  Seller is duly qualified or authorized to
conduct business and is in good standing in each jurisdiction where such qualification
or authorization is required because of the ownership of the Assets or the
operation of its business as currently conducted, except for any jurisdiction
where failure to be so qualified, authorized, or in good standing would not
have a Material Adverse Effect on Seller. 
Seller has full power and authority to carry on its business as
currently conducted and to own and use the Assets, except where the failure to
have such power and authority would not have a Material Adverse Effect on
Seller.  Seller has provided to Buyer
correct and complete copies of its operating agreement (or other organizational
documents), as amended to date.

 

4.2          Authority; Approval by Owners.

 

(a)           Seller has all
necessary organizational power and authority and has taken all actions
necessary to enter into this Agreement and the Transaction Documents to which
it is or will become a party, to consummate the transactions contemplated
hereby and thereby, and to perform its obligations hereunder and
thereunder.  The board of directors and
the requisite members of Seller have authorized Seller to enter into this
Agreement and the Transaction Documents to which it is or will become a party,
to consummate the transactions contemplated hereby and thereby, and to perform
its obligations hereunder or thereunder in accordance with the operating
agreement of Seller and all applicable laws. 
This Agreement and each of the Transaction Documents to which Seller is
or will become a party have been or will be duly and validly executed and delivered
by Seller and constitute or will constitute legal, valid, and binding
obligations of Seller enforceable against Seller in accordance with their terms
except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and other similar laws of general application
affecting enforcement of creditors’ rights generally and (ii) laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, regardless of whether enforcement is sought in a
proceeding at law or in equity (collectively, “Enforcement
Limitations”).

 

(b)           The required
approval of this Agreement, the Transaction Documents to which Seller is or
will become a party, and the transactions contemplated hereby and 

 

20

 

thereby
by the members of Seller is (i) the approval of the board of directors of
Seller, (ii) the approval of at the Class A Holders and the Class B
Holders, acting as a single voting group, holding at least 60% of the aggregate
of the Class A Units and Class B Units.

 

(c)           No additional
proceedings on the part of Seller or its members are necessary to authorize
this Agreement or the Transaction Documents to which Seller is or will become a
party or to consummate the transactions contemplated hereby or thereby.

 

4.3          No Conflicts.  The execution and delivery by Seller of this
Agreement and the Transaction Documents to which Seller is or will become a
party do not, and the performance by Seller of its obligations under this
Agreement, the Transaction Documents to which it is or will become a party, and
the consummation of the transactions contemplated hereby and thereby will not:

 

(a)           conflict with
or violate the operating agreement (or other organizational documents) of
Seller;

 

(b)           conflict with,
or result in a violation or breach of, any provision of any law, Order, Permit,
statute, rule, or regulation applicable to Seller or the Assets;

 

(c)           conflict with,
result (with or without notice or the lapse of time, or both) in a violation or
breach of, or default under (or give rise to right of termination,
cancellation, or acceleration under), require any notice to, or consent of, any
Person under, or impose any penalty or additional payment obligations under,
any note, bond, mortgage, deed of trust, indenture, license, contract,
agreement, lease or other instrument or obligation to which Seller or Assets
may be bound; or

 

(d)           result in an
imposition or creation of any Encumbrance on any Asset.

 

4.4          Governmental Consents, Approvals,
and Filings.  No consent, approval, or action of, filing
with, or notice to, any Governmental Authority on the part of Seller is
required in connection with the execution, delivery, and performance of this
Agreement, the Transaction Documents to which Seller is or will become a party,
or the consummation of the transactions contemplated hereby or thereby.

 

4.5          Capitalization.

 

(a)           Section 4.5(a) of
the Disclosure Schedule contains a true and complete list as of the date hereof
of the holders of the ownership interests in Seller, which are all of the ownership
interests in Seller authorized and outstanding as of the date hereof.

 

(b)           There are no
existing options, warrants, calls, rights, or other contracts or arrangements
of any character to which Seller is a party requiring, and there are no
securities of Seller outstanding that upon conversion or exchange would
require, the issuance of any ownership interest in Seller or other securities
convertible into, exchangeable for, or evidencing the right to subscribe for or
purchase any ownership interest in Seller. 
Neither Seller nor any other Person is a party to any voting trust or 

 

21

 

other
contract or arrangement with respect to the voting, redemption, sale, transfer,
or other disposition of the ownership interests in Seller.

 

4.6          Subsidiaries.  Seller does not have any subsidiaries, nor
does Seller directly or indirectly own outstanding securities or other equity
interests in any entity or organization.

 

4.7          Books and Records.  The Books and Records of Seller are accurate
and adequate for the operation of the business of Seller after Closing
consistent with the historical operations of the business of Seller prior to
Closing.

 

4.8          Financial Statements.  Seller has previously made available to Buyer
the Financial Statements.  The Financial
Statements: (a) were prepared in accordance with the Books and Records of
Seller, (b) present fairly in all material respects the financial
condition and results of operations of Seller as of the dates thereof and for
the periods covered thereby, and (c) have been prepared in accordance with
GAAP applied on a consistent basis with the past practices of Seller throughout
the periods involved.

 

4.9          Absence of Changes.  Since December 31, 2006, Seller has
operated in the Ordinary Course of Business, and there has not been any adverse
change or any event or development that has had a Material Adverse Effect on
Seller.  Without limiting the generality
of the foregoing, since December 31, 2006, Seller has not:

 

(a)           entered into
any transaction except in the Ordinary Course of Business;

 

(b)           sold, leased,
transferred, or assigned any material assets, tangible or intangible (other
than sales of inventory in the Ordinary Course of Business);

 

(c)           entered into
any agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $10,000 individually or
$50,000 in the aggregate;

 

(d)           entered into
any agreement or arrangement with any Affiliate;

 

(e)           accelerated,
terminated, modified, or cancelled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) involving
more than $10,000 individually or in the aggregate;

 

(f)            granted any
Encumbrance of any kind (other than a Permitted Encumbrance) upon any of the
Assets;

 

(g)           made any
capital expenditure (or series of related capital expenditures) involving more
than $50,000 individually or $100,000 in the aggregate;

 

(h)           delayed or
postponed the payment of accounts payable or other liabilities outside the
Ordinary Course of Business, or otherwise changed in any material respect the
practices of Seller with respect to the manner and timing of payment of
accounts payable or the collection of accounts receivable;

 

22

 

(i)            canceled,
compromised, waived, or released any right or claim (or series of related
rights and claims) involving more than $5,000 individually or $10,000 in the
aggregate;

 

(j)            granted any
license, sublicense, or waiver of, or any covenant not to sue based on, any
rights under or with respect to any Intellectual Property, other than licenses
or sublicenses granted under contracts and agreements with customers in the
Ordinary Course of Business;

 

(k)           experienced any
material damage, destruction, or loss (whether or not covered by insurance);

 

(l)            entered into
any employment contract or collective bargaining agreement, written or oral, or
any other legally enforceable oral or written employment-related promise,
except for such employment contracts as may be terminable at will by Seller
upon not more than 30 days’ notice without cost or other obligation, or
modified the terms of any such existing contract or agreement;

 

(m)          granted any
increase in the base compensation or changed any other material term of
employment of any of its employees;

 

(n)           made any Tax
election or settled or compromised any federal, state, local, or foreign income
Tax liability;

 

(o)           paid,
discharged, or satisfied any claims, liabilities, or obligations (absolute,
accrued, asserted or unasserted, contingent, or otherwise) outside of the
Ordinary Course of Business involving more than $10,000 individually or in the
aggregate;

 

(p)           revalued any of
the Assets;

 

(q)           returned any
deposits or received requests to return any deposits in connection with, or any
cancellation or threatened cancellation of, any contract;

 

(r)            changed any
accounting methods or principles;

 

(s)           substantially
changed its number of employees;

 

(t)            adopted any
Employee Benefit Plan, or adopted any amendment to any Employee Benefit Plan,
other than an amendment that was required to maintain the qualified status of
an Employee Benefit Plan under Section 401(a) of the Code (if
applicable); or

 

(u)           agreed to do
any of the things described in the preceding clauses (a) through (t) (other
than agreements with Parent or Buyer regarding the transactions contemplated by
this Agreement).

 

23

 

4.10        No
Undisclosed Liabilities.  Seller has no Liabilities, other than:

 

(a)           Liabilities disclosed on the
Unaudited Balance Sheet;

 

(b)           Liabilities incurred after
the date of the Unaudited Balance Sheet in the Ordinary Course of Business
(none of which results from, arises out of, or relates to any breach of
contract, breach of warranty, tort, infringement, or violation of law, and none
of which has had, or could reasonably be expected to have, a Material Adverse
Effect on Seller);

 

(c)           Liabilities under Assigned
Contracts that constitute Assumed Liabilities; and

 

(d)           the Excluded Liabilities,
which are being retained by Seller.

 

4.11        Assets.

 

(a)           Section 4.11(a) of
the Disclosure Schedule contains a complete and accurate Schedule identifying
and specifying the location of all fixed assets of material value constituting
Assets, including furniture, furnishings, equipment, hardware, motor vehicles,
and other similar fixed assets.  Seller
has good and marketable title to, or, if a leasehold interest is disclosed in
the Disclosure Schedule (or is not required to be disclosed in the Disclosure
Schedule to avoid a misrepresentation hereunder), a valid leasehold interest
in, all of the Assets, free and clear of all Encumbrances, except Permitted
Encumbrances.  The Assets constitute all
property of any nature used in, related to, necessary for, or arising from the
operation of Seller’s business as currently conducted (other than the Excluded
Assets), and the Assigned Contracts are the only contracts and agreements used
in, related to, necessary for, or arising from Seller’s business.  All tangible personal property included in
the Assets is in good operating condition and repair, ordinary wear and tear
excepted, and all such tangible personal property is in the possession of
Seller.

 

(b)           Seller’s inventory consists
of raw materials and supplies, manufactured and purchased parts, goods in
process, and finished goods, all of which is salable, none of which is
obsolete, damaged, or defective, and all but $50,000 of which is not slow
moving.

 

4.12        Employee
Benefit Plans.

 

(a)           Section 4.12(a) of
the Disclosure Schedule contains a true, complete and current list of all
Employee Benefit Plans.  Seller has made
available to Buyer:

 

(i)            a copy of the current version of each Employee
Benefit Plan;

 

(ii)           the current summary plan description for each
Employee Benefit Plan for which a summary plan description is required,
including any summaries of material modifications thereto;

 

(iii)          each trust agreement, insurance policy, or other
instrument associated with an Employee Benefit Plan or relating to the funding
of an Employee Benefit Plan;

 

24

 

(iv)          copies of the most recent determination letter
issued by the Internal Revenue Service with respect to each Employee Benefit
Plan that is intended to be qualified plan under Section 401(a) of
the Code; and

 

(v)           if the Employee Benefit Plan is required to file an
annual report (e.g., Form 5500 Series) with any Governmental Authority,
copies of the annual reports for the three most recent plan years including all
accompanying schedules.

 

(b)           Seller has
never maintained or made any contributions to or been required to make any
contributions to any Employee Benefit Plan that is subject to Title IV of
ERISA, Section 302 of ERISA, or Section 412 of the Code.

 

(c)           Seller has
never maintained or made any contributions to or been required to make any
contributions to any Employee Benefit Plan for Employees in any country other
than the United States.

 

(d)           Seller is not
bound by any collective bargaining or labor agreement, or any individual
employment contract or agreement, to maintain any Employee Benefit Plan.

 

(e)           No Employee
Benefit Plan that is a welfare benefit plan (as defined in Section 3(1) of
ERISA) provides benefits to any former employee of Seller or beneficiaries or
dependents thereof, except as required under Section 4980B of the Code.

 

(f)            Each Employee
Benefit Plan that is intended to be a qualified plan under Section 401(a) of
the Code has received a current favorable determination letter from the
Internal Revenue Service recognizing its tax-favored status, and to the
Knowledge of Seller nothing has occurred, whether by action or failure to act,
that could adversely affect such Employee Benefit Plan’s qualified status.

 

(g)           All
contributions (including all employer contributions and employee salary
reduction contributions, if any) that are due have been made within the time
period required by ERISA and the Code to each Employee Benefit Plan.

 

(h)           Each Employee
Benefit Plan has been maintained, operated and administered in accordance with
its terms and all applicable laws.  There
has been no non-exempt prohibited transaction (as defined in Section 406
of ERISA or Section 4975 of the Code) that has occurred involving any
Employee Benefit Plan.  Since January 1,
2005, each Employee Benefit Plan that is subject to Section 409A of the
Code and each grant, award, or deferral of compensation thereunder has been
operated in compliance with the requirements of Section 409A of the Code
and applicable guidance thereunder based on a good faith reasonable
interpretation of Section 409A of the Code such that no taxes could be
imposed under Section 409A of the Code on any service provider to Seller
or any of its Affiliates.

 

(i)            There are no
pending or, to the Knowledge of Seller, threatened claims by or on behalf of
any Employee Benefit Plan, by any participant or beneficiary covered under any
Employee Benefit Plan (other than routine claims for benefits), or otherwise
involving any Employee Benefit Plan. 
There are no inquiries or proceedings pending or,

 

25

 

to
the Knowledge of the Seller, threatened by the Internal Revenue Service, the
U.S. Department of Labor, or any other Governmental Authority.

 

(j)            Section 4.12(j) of
the Disclosure Schedule lists all obligations that Seller will have to make
severance, deferred compensation, or other payments to employees or former
employees, and all obligations that Seller or any controlled group member will
have to fund or further fund any deferred compensation arrangement that has
previously been unfunded or only partially funded, that arise as a result of
the transaction contemplated by this Agreement.

 

(k)           Section 4.12(k) of
the Disclosure Schedule contains a complete and accurate list of the M&A
Qualified Beneficiaries as of date of this Agreement, and Seller shall supplement
such list to be complete and accurate as of the Closing Date.

 

4.13        Real Property.

 

(a)           Seller does not
own nor has it ever owned any real property. 
Except for the Real Property Leases, there are no leases, subleases, or
other agreements under which Seller uses, occupies, or has the right to use or
occupy, now or in the future, any real property.

 

(b)           Section 4.13
of the Disclosure Schedule contains a complete and accurate description of the
land, buildings, and other improvements covered by the Real Property Leases
(the “Leased Real Property”).

 

(c)           Seller has made
available to Buyer a correct and complete copy of each Real Property Lease and
any amendments, subordinations, estoppels, or other documents relating thereto.

 

(d)           To Seller’s
Knowledge, the use and occupancy by Seller of the Leased Real Property is in
compliance in with all applicable laws, statutes, Orders, ordinances, and
regulations, without reliance on any variance or other special limitation or
conditional or special use permit.

 

4.14        Intellectual Property.

 

(a)           Section 4.14(a) of
the Disclosure Schedule contains a true, complete, and current list of all
Owned Intellectual Property and all Licensed Intellectual Property.  Seller owns all right, title, and interest in
and to each item of Owned Intellectual Property, free and clear of any
Encumbrance (other than Permitted Encumbrances), and without an obligation to
pay any royalties, license fees or other amounts to any Person.  Seller’s ownership of or license to the items
listed or required to be listed in Section 4.14(a) of the Disclosure
Schedule has been properly recorded (including (i) within the time periods
set forth in the applicable laws, rules, or regulations that are required or
recommended for achieving the maximum available benefit to the
assignee/licensee and (ii) for all copyrights, in the manner required to
give constructive notice under 17 U.S.C. § 205(c)) at the relevant patent,
copyright, trademark, or other authority in all applicable jurisdictions).  The Owned Intellectual Property and the
Licensed Intellectual Property 

 

26

 

constitute
all of the Intellectual Property used by Seller in connection with its business
as currently conducted.

 

(b)           Section 4.14(b) of
the Disclosure Schedule lists all proceedings or actions before any court,
tribunal (including the United States Patent and Trademark Office or equivalent
authority anywhere in the world), arbitrator, mediator, or other
dispute-resolving entity related to any Owned Intellectual Property or, to
Seller’s Knowledge, any Licensed Intellectual Property. No Owned Intellectual
Property or product or service of Seller, or, to Seller’s Knowledge, any
Licensed Intellectual Property, is subject to any proceeding (excluding ex
parte proceedings before examiners (i.e., not appeals) involving applications
and rulemaking and similar administrative proceedings broadly applicable to
similar intellectual property) or outstanding decree, order, judgment,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Seller, or that may affect the validity, use, or
enforceability of the Owned Intellectual Property or the Licensed Intellectual
Property.

 

(c)           Each item of
Owned Intellectual Property is, and to Seller’s Knowledge, each item of
Licensed Intellectual Property exclusively licensed to Seller is, valid,
enforceable, and subsisting.  For each
item of Intellectual Property listed or required to be listed in Section 4.14(a) of
the Disclosure Schedule, all necessary registration, prosecution, maintenance,
and renewal fees due and payable within 60 days following the Closing Date have
or will have been made, and all necessary documents and certificates in
connection therewith have or will have been filed with the relevant patent,
copyright, trademark, or other authority in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Intellectual Property.

 

(d)           Except as set
forth in Section 4.14(d) of the Disclosure Schedule, (i) Seller
has the exclusive and protectable right, throughout the United States, to use
each Key Trademark in connection with its business and to prevent all other
Persons from using any confusingly similar marks (except for uses permitted in
accordance with trademark licenses disclosed in Section 4.14(e) of
the Disclosure Schedule), and (ii) to the Knowledge of Seller there are no
limitations, defects or other circumstances or threats, pending or reasonably
foreseeable, that could reasonably be expected to cause the invalidity,
unenforceability or other loss of any Key Trademarks.

 

(e)           To the extent
that any work, invention, data, information, or material has been developed or
created by a third party for Seller, Seller has a written contract with the
third party with respect thereto, and Seller thereby has obtained, throughout
the world, ownership of, and is the exclusive owner of, or has a valid license
to use pursuant to a contract disclosed in Section 4.14(e) of the
Disclosure Schedule, all Intellectual Property in such work, material, data,
information, or invention by such contract, by operation of law, or by valid
assignment.

 

(f)            Section 4.14(f) of
the Disclosure Schedule lists all contracts, licenses, covenants not to sue,
and agreements to which Seller is a party that are currently in effect (i) with
respect to Intellectual Property licensed or offered to any third party or (ii) pursuant
to which a third party has licensed or transferred any Intellectual Property to

 

27

 

Seller
other than non-negotiated licenses of off-the-shelf commercially available
software.  The contracts, licenses,
covenants not to sue, and agreements listed in Section 4.14(f) of the
Disclosure Schedule are in full force and effect.  The consummation of the transactions
contemplated by this Agreement will neither violate nor result in the breach,
modification, cancellation, termination, or suspension of those contracts, licenses,
covenants not to sue, and agreements. 
Seller is in compliance with, and has not breached any term of, any of
those contracts, licenses, covenants not to sue, and agreements and, to the
Knowledge of Seller, all other parties to those contracts, licenses, covenants
not to sue, and agreements are in compliance with, and have not breached any
term of, those contracts, licenses, covenants not to sue, and agreements.  Following the Closing, Buyer will be
permitted to exercise all of Seller’s rights under the contracts, licenses,
covenants not to sue, and agreements listed in Section 4.14(f) of the
Disclosure Schedule to the same extent that Seller would have been able had the
transactions contemplated by this Agreement not occurred and without the
payment of any additional amounts or consideration other than ongoing fees,
royalties, or payments that Seller would otherwise be required to pay.

 

(g)           Section 4.14(g) of
the Disclosure Schedule lists all contracts, licenses, and agreements between
Seller and any third party wherein or whereby Seller has agreed to, or assumed,
any obligation or duty to warrant, indemnify, hold harmless, or otherwise
assume or incur any obligation or liability with respect to the infringement,
misappropriation, or other violation by Seller or such third party of the Intellectual
Property of any third party.

 

(h)           The operation
of Seller’s business as currently conducted does not infringe, misappropriate,
or otherwise violate the Intellectual Property rights of any third party or
constitute unfair competition or unfair trade practices under the laws of any
jurisdiction.  Since January 1,
2000, there have been no allegations, claims, or threats pertaining to any of
the foregoing, any communications from any other Person asserting any of the
foregoing, any communications from any other Person inviting license
discussions regarding any of the foregoing, or any exposure assessments or
opinions performed by or provided to Seller regarding any of the foregoing,
that have made against or that have involved Seller, or to the Knowledge of
Seller that have made against or that have involved any client or customer of
Seller, related to any product or service provided by Seller.

 

(i)            To the
Knowledge of Seller, no Person is infringing, misappropriating, or otherwise
violating any Owned Intellectual Property or any of Seller’s exclusive rights
to any Licensed Intellectual Property. 
Seller has not made any allegations, claims, or threats against any
Person alleging infringement, misappropriation, or other violation of any Owned
Intellectual Property or any of Seller’s exclusive rights to any Licensed
Intellectual Property.  Seller has
complied with the notice and marking requirements for the Intellectual Property
necessary and sufficient for Seller to obtain the benefit of all available
statutory remedies against third parties.

 

(j)            Seller has
taken reasonable steps to protect its rights in its confidential information
and trade secrets included in the Owned Intellectual Property or the Licensed 

 

28

 

Intellectual
Property and any trade secrets or confidential information of third parties
provided to Seller.  Without limiting the
foregoing, Seller has and enforces a policy requiring each partner, employee,
and contractor with access to any Owned Intellectual Property or Licensed
Intellectual Property to execute a proprietary
information/confidentiality/assignment of inventions contracts in Seller’s
standard form, which form has been made available to Buyer (“Employee Agreements”), and all current and former Employees
and contractors of Seller have executed such a contract without exception or
modification.  Seller has vigorously
enforced all Employee Agreements.  No
Seller nor any employee or consultant of Seller has caused any of Seller’s
trade secrets or confidential information included in the Owned Intellectual
Property or the Licensed Intellectual Property to become part of the public
knowledge or literature, nor has Seller or any of the partners, employees, or
consultants of Seller permitted any such trade secrets or confidential
information to be used, divulged or appropriated for the benefit of Persons to
the material detriment of Seller.  Seller’s
records include sufficient documentation of the know-how and trade secrets,
such as manufacturing and engineering plans, blueprints, designs, process
instructions, formulae, quality assurance protocols and procedures and the
like, to enable persons who are reasonably skilled and proficient in the
relevant subject matter to continue the same in the ordinary course of business
without unreasonable delay, expense, or reliance on the memory of any
individual.

 

(k)           Seller does not
use any proprietary computer software developed by or for Seller in its
business as currently conducted.

 

4.15        Litigation;
Disputes.  There are no Actions or Proceedings pending
or to the Knowledge of Seller threatened, and, to the Knowledge of Seller, no
claims have been asserted against or with respect to (a) Seller or the
Assets, (b) the execution or delivery of this Agreement, (c) any
Employee relating to or arising out of the Employee’s work for or employment by
Seller, or (d) the performance of the transactions contemplated by this
Agreement.

 

4.16        Compliance
with Law.  Seller is in material compliance with all
applicable laws, statutes, Orders, ordinances, and regulations, whether
federal, state, local, or foreign. 
Seller has not received notice to the effect that Seller is not in
material compliance with any of such laws, statutes, Orders, ordinances, or
regulations.  Seller is not in default
with respect to any Order, and there are no unsatisfied judgments against
Seller.

 

4.17        Contracts.

 

(a)           Section 4.17
of the Disclosure Schedule sets forth a list of the following contracts and
agreements (whether written or oral) to which, as of the date hereof, Seller is
a party or to which any of the Assets is subject (“Material
Contracts”):

 

(i)            agreement for the sale or license of, or grant of
any third-party interest in, any Assets by Seller;

 

(ii)           non-competition agreement;

 

29

 

(iii)          agreement containing any
provisions requiring Seller to indemnify or act as guarantor for any other
person or to reimburse any maker of a letter of credit or banker’s acceptance;

 

(iv)          note, debenture, mortgage, indenture, deed of trust,
security agreement, purchase money agreement, conditional sales contract,
capital lease or other instrument evidencing or securing indebtedness or any
sale-leaseback arrangement pertaining to any Real Property or to equipment that
is a part of the Assets;

 

(v)           joint venture or similar agreement;

 

(vi)                           Real Estate
Lease or agreement granting any Person any lease, sublease, or other interest,
legal or equitable, in the Leased Real Property;

 

(vii)        agreement with any director,
officer, manager, or Affiliate;

 

(viii)                     agreement with
any supplier for the purchase of inventory, supplies, or products (excluding
any purchase order entered into in the Ordinary Course of Business on an
order-by-order basis, unless the amount thereof exceeds $25,000);

 

(ix)                             agreement,
purchase order, or statement of work for the sale or license of products or
services to any customer, excluding any purchase order or statement of work
entered into in the Ordinary Course of Business on an order-by-order basis,
unless the amount thereof exceeds $50,000;

 

(x)                                leases of
tangible personal property involving expenditures in excess of $25,000 per year
or $100,000 over the term of the lease;

 

(xi)                         agreement for
capital expenditures the unpaid obligations of Seller under which exceed
$50,000 per agreement or $100,000 in the aggregate for all such agreements;

 

(xii)                          contract for
advertising, promotional services, or web site design or hosting;

 

(xiii)                       agreement to
pay or receive any royalty or license fee or to license (either as licensor or
licensee) any Intellectual Property, except for licenses by Seller from another
Person of commercially available off-the-shelf software entered into in the
Ordinary Course of Business;

 

(xiv)                      employment,
severance, or change-of-control agreement or any agreement otherwise providing
for the payment of any cash or other compensation or benefits upon consummation
of the transactions contemplated hereby;

 

30

 

(xv)         agreement pursuant to which Seller purchases
consulting services or engages any independent contractor;

 

(xvi)        agreement containing any form of most-favored
pricing provision;

 

(xvii)       agreement for the acquisition or disposition of a
business; and

 

(xviii)      agreement that was not entered into in the Ordinary
Course of Business.

 

(b)           Seller has made
available to Buyer true and complete copies of each Material Contract (or, to
the extent that a Material Contract is oral, an accurate description of the
terms thereof).  Each Material Contract
is in full force and effect and constitutes a legal, valid, and binding
agreement, enforceable in accordance with its terms (as limited by the
Enforcement Limitations), of each party thereto.  Seller has performed in all material respects
all of its required obligations under, and is not in material violation or
breach of or default under, either or without with the lapse of time, giving or
notice, or both, the Material Contract. 
No other party to any Material Contract is in violation or breach of or
default under, either or without with the lapse of time, giving of notice, or
both, the Material Contract, as the case may be.  Seller has received no prepayments under any
Material Contract for services that have not been fully performed or goods that
have not been supplied.

 

4.18        Environmental
Matters.  Seller operates (and has always operated) in
material compliance with all Environmental Laws, and Seller has no material
unpaid liability under any Environmental Laws. 
Neither the closing of the transaction contemplated by this Agreement
nor the acquisition of the Assets by Buyer will result in the imposition of any
material liability on Buyer pursuant to any Environmental Law.  To the Knowledge of Seller, there are no past
or present actions, activities, circumstances, conditions, events, or incidents
arising from the operation, ownership, or use of any property currently or
formerly owned, operated, or used by Seller (including the release, emission,
discharge, or disposal of any Material into the Environment) that would
reasonably be expected to (a) result in the incurrence of costs under any
Environmental Law or (b) form the basis of any Environmental Notice
against or with respect to Seller, any Assets, or any Person whose liability
for any Environmental Notice may have been retained or assumed by, or could be
imputed or attributed to, Seller or any Assets. 
Seller has made available to Buyer true and complete copies of any
environmental reports in its possession or control related to the operation of its
business or the condition of any of the Leased Real Property.

 

4.19        Accounts
Receivable.  The accounts receivable (and all other
receivables) shown on the Unaudited Balance Sheet and all receivables acquired
or generated since the date of the Unaudited Balance Sheet are bona fide
receivables and represent amounts due with respect to actual, arm’s-length
transactions entered into in the Ordinary Course of Business, and are legal,
valid, and binding obligations of the obligors.

 

4.20        Insurance.  Seller has in force property and casualty
insurance on all Leased Real Property to the extent Seller is obligated to
maintain such insurance under the Real Property 

 

31

 

Leases
and on all tangible personal property constituting Assets and on the operation
of its business, as set forth and summarized in Section 4.20 of the
Disclosure Schedule.  All required
premiums have been paid with respect to such policies.

 

4.21        Tax Matters.

 

(a)           Seller has, or
will have, timely filed with the appropriate federal, state, local, and foreign
taxing authorities all Tax Returns required to be filed before the Closing
Date.  Such Tax Returns are, or will be,
true and complete in all material respects. 
Seller has paid in full, or has made provision in the Unaudited Balance
Sheet for, all Taxes that are due or claimed to be due by any Governmental
Authority.  The reserves for such Taxes
reflected in the Unaudited Balance Sheet are sufficient for payment in full of
all unpaid Taxes (whether or not currently disputed) through the date
thereof.  Seller has incurred no
liability for Taxes other than in the Ordinary Course of Business since the
date of the Unaudited Balance Sheet. 
There are no liens for Taxes upon the Assets.

 

(b)           No claim has
ever been made, orally or in writing, by any Governmental Authority in a
jurisdiction where Seller does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction.

 

(c)           Seller has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any partner, employee, independent
contractor, creditor, or other third party.

 

(d)           Section 4.21(d) of
the Disclosure Schedule lists all federal, state, local, and foreign Tax
Returns filed with respect to Seller for taxable periods ended on or after December 31,
2004, indicating those Tax Returns that have been audited or that currently are
the subject of an audit, action, or proceeding. 
Seller has made available to Buyer correct and complete copies of all
Tax Returns, examination reports, and statements of deficiencies filed, or
assessed against and agreed to, by Seller since December 31, 2004.

 

4.22        Labor and Employment Relations.

 

(a)           No Employee has
expressed any intention not to become an employee of Buyer if offered such
employment.  Seller has not encouraged
any Employee not to work for Buyer or disparaged Buyer to any Employee.

 

(b)           Seller is not a
party to or bound by any collective bargaining agreement with any labor
organization, group, or association covering any of it employees.  To the Knowledge of Seller, no union
representation elections relating to Seller’s employees have been scheduled by
any Governmental Authority, no organizational effort is being made with respect
to any of such employees, and there is no investigation of Seller’s employment
policies or practices by any Governmental Authority pending or threatened.  Seller is not currently involved in, or since
January 1, 2005 has been involved in, labor negotiations with any unit or
group seeking to become the bargaining unit for any employees.  Seller is not experiencing, nor or since January 1,
2005 has experienced, any 

 

32

 

work
stoppages and, to the Knowledge of Seller, no work stoppage has been
threatened or is planned.

 

(c)           Seller has
complied in all material respects with all applicable laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining, discrimination against race, color,
national origin, religious creed, physical or mental disability, sex, age,
ancestry, medical condition, marital status, or sexual orientation, and the
withholding and payment of social security and other Taxes.  There are no pending or, to the Knowledge of
Seller, threatened charges of unfair labor practices or of employment
discrimination, wrongful retaliation, or any other wrongful action with respect
to any aspect of employment of any person employed or formerly employed by
Seller.

 

(d)           No Employee of
Seller is subject to a non-competition restriction limiting such Employee’s
ability to be employed by Buyer in the same capacity as such Employee is
currently employed by Seller.

 

(e)           Seller has not
engaged in any workforce reduction or other action related to any Employee that
has resulted or could result in liability under the Worker Adjustment and
Retraining Notification Act of 1988 or under any comparable law or regulation
of a state or a foreign jurisdiction, and Seller has not issued any notice that
any such action is to occur in the future.

 

4.23        Permits.  Section 4.23 of the Disclosure Schedule
contains a true and complete list of all Permits used in, related to, or
necessary for Seller’s business or the ownership or operation of the
Assets.  All such Permits are currently
effective and valid and have been validly issued.  No additional Permits are necessary to enable
Seller to conduct its business in material compliance with all applicable
federal, state, and local laws, statutes, Orders, and regulations.  Neither the execution, delivery, and
performance of this Agreement nor the mere passage of time will have any effect
on the continued validity or sufficiency of such Permits, nor will any
additional Permits be required by virtue of the execution, delivery, or
performance of this Agreement to enable Buyer to conduct the business of Seller
after the Closing as currently conducted. 
There is no pending or, to the Knowledge of Seller, threatened, Action
or Proceeding by any Governmental Authority that could adversely affect the
Permits.

 

4.24        Material
Customers.  Section 4.24 of the Disclosure Schedule
contains a list of Seller’s top 20 customers from May 1, 2006 through December 31,
2006 (based on revenues for such period). 
Except in connection with the completion of the project or the work
under the applicable arrangement, no such customer has:

 

(a)           canceled or
otherwise terminated, or to the Knowledge of Seller threatened, verbally or in
writing, to cancel or otherwise terminate, its relationship with Seller; or

 

(b)           since May 1,
2006:

 

(i)            decreased materially, or threatened to decrease or
limit materially, its purchase of Seller’s products;

 

33

 

(ii)           notified Seller of any material change in its
arrangements with Seller; or

 

(iii)          notified Seller that it intends to cease purchasing
or significantly reduce its level of business with Seller.

 

4.25        Brokers.  Buyer will have no obligation to pay any of
the fee of any broker, finder, investment banker, or financial adviser in
connection with this Agreement or the transactions contemplated hereby by
reason of any action taken by or on behalf of Seller.

 

4.26        Transactions
with Affiliates.  Except as disclosed in Section 4.26 of
the Disclosure Schedule, and except with respect to any amounts to be repaid or
contracts and agreements to be terminated at the Closing:

 

(a)           Seller has no
liabilities for indebtedness for borrowed money owing to any of its members or
any officer or Affiliate; and

 

(b)           no member of
Seller and no consultant, Employee, or Affiliate of Seller now has, or on the
Closing Date will have, any liability for any indebtedness for borrowed money
owing to any member of Seller.

 

4.27        Powers
of Attorney.  Seller has not granted any power of attorney
to any Person for any reason.

 

4.28        Regulatory
Matters.

 

(a)           There have been
no notices, citations, warnings, or decisions by any Governmental Authority
that any product produced, manufactured, or marketed at any time by Seller
(collectively, the “Products”) is
defective or fails to meet any applicable standards promulgated by such
Governmental Authority.  Seller is in
compliance with the laws, regulations, policies, procedures, and specifications
applicable to it with respect to the design, manufacture, labeling, testing,
and inspection of the Products, and the operation of manufacturing facilities,
promulgated by any Governmental Authority that has jurisdiction over the
design, manufacture, labeling, testing, and inspection of the Products and the
operation of Seller’s manufacturing facilities. 
There have been no recalls, field notifications, or seizures ordered or,
to the Knowledge of Seller, threatened by any Governmental Authority with
respect to any of the Products, and Seller has not independently engaged in
such recalls or field notifications.

 

(b)           Seller has
obtained, in all countries where Seller has marketed the Products, all
applicable Permits required to be obtained by it by Governmental Authorities in
such countries regulating the safety, effectiveness, and market clearance of
the Products.

 

(c)           Neither Seller
nor, to the Knowledge of Seller, any of its Employees or representatives, has
engaged in any activities that are prohibited under federal Medicare and
Medicaid statutes or equivalent state statutes or regulations, including
knowingly and willfully soliciting or receiving any remuneration (including any
kickback, bribe, or 

 

34

 

rebate),
directly or indirectly, in cash or in kind, or offering to pay such
remuneration (i) in return for referring an individual to a Person for the
furnishing or arranging for the furnishing of any item or service for which
payment may be made in whole or in part by Medicare or Medicaid or (ii) in
return for purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service, or item for which
payment may be made in whole or in part by Medicare or Medicaid.

 

4.29        Product
Warranty; Product Liability.

 

(a)           Each Product
has been in conformity with all applicable contractual commitments and all
express and implied warranties, and Seller has no liability (and to the
Knowledge of Seller no claim has been threatened alleging any such liability)
for replacement or repair thereof or other damages in connection
therewith.  Section 4.29(a) of
the Disclosure Schedule includes copies of Seller’s standard terms and
conditions of sale or lease (containing applicable guaranty, warranty, and
indemnity provisions).  No Product is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease set forth in Section 4.29(a) of
the Disclosure Schedule, except as imposed by law.

 

(b)           Seller has no
liability and there is no pending claim (and to the Knowledge of Seller no
claim has been threatened alleging any such liability) arising out of any
injury to the individual or property as a result of the ownership, possession,
or use of any Product.

 

4.30        Accredited
Investor Status.  To Seller’s Knowledge, all members of Seller
are Accredited Investors, as such term is defined in rules and regulations
of the SEC.

 

4.31        Full
Disclosure.  No statements by Seller contained in this
Agreement, in the Disclosure Schedule, or in any Transaction Document to which
Seller is or will become a party contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, when taken as a whole, not misleading
in light of the circumstances under which they were made.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

 

Parent
and Buyer jointly and severally represent and warrant to Seller as follows:

 

5.1          Organization.  Each of Parent and Buyer is an organization
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of organization.  Parent’s
prior legal name was “TMG B.V.,” which was subsequently changed to “Tornier
B.V.” The organizational structure of Parent and its material subsidiaries as
of the date hereof is as set forth in Schedule 5.1.  The Articles of Association of Parent and the
Certificate of Incorporation of Buyer previously provided to Seller are in full
force and effect and have not be amended or rescinded in any respect.  Buyer has no by-laws in effect as of the date
hereof.

 

5.2          Authority.  Each of Parent and Buyer has all necessary
organizational power and authority and has taken all actions necessary to enter
into this Agreement and the Transaction

 

35

 

Documents
to which it is or will become a party, to consummate the transactions
contemplated hereby and thereby, and to perform its obligations hereunder and
thereunder.  No other proceedings on the
part of Parent, Buyer, or any of their stockholders or members are necessary to
authorize this Agreement and the Transaction Documents to which Parent or.  Buyer is or will become a party or to
consummate the transactions contemplated hereby or thereby.  This Agreement and each of the Transaction
Documents to which Parent or Buyer is or will become a party have been or will
be duly and validly executed and delivered by whichever of Parent and Buyer is
or is contemplated hereunder to be a party thereto, and constitutes or will
constitute a legal, valid, and binding obligation of Parent and Buyer, as the
case may be, enforceable against such Person in accordance with their terms
except as limited by the Enforcement Limitations.

 

5.3          No Conflicts.  The execution and delivery by Parent and
Buyer of this Agreement and the Transaction Documents to which Parent or Buyer
is or will become a party, do not, and the performance by Parent and Buyer of
their obligations under this Agreement and such Transaction Documents and the
consummation of the transactions contemplated hereby and thereby will not:

 

(a)           conflict with
or violate the certificate of incorporation or bylaws of Buyer or the
organizational documents of Parent;

 

(b)           conflict with,
or result in a violation or breach of, any provision of any law, Order, Permit,
statute, rule, or regulation applicable to Parent or Buyer; or

 

(c)           conflict with,
result (with or without notice or the lapse of time, or both) in a violation or
breach of, or default under (or give rise to right of termination,
cancellation, or acceleration under), require any notice to, or consent of, any
Person under, or impose any penalty or additional payment obligations under,
any note, bond, mortgage, deed of trust, indenture, license, contract,
agreement, lease or other instrument or obligation to which Parent or Buyer or
any of their material assets may be bound; or

 

(d)           trigger (with
or without notice or the lapse of time, or both) rights or obligations on the
part of any Person with respect to any debt or equity of Parent.

 

5.4          Governmental Consents, Approvals,
and Filings.  No consent, approval, or action of, filing
with, or notice to, any Governmental Authority on the part of Parent or Buyer
is required in connection with the execution, delivery, and performance of this
Agreement or the Transaction Documents to which Parent or Buyer is or will
become a party or the consummation of the transactions contemplated hereby or
thereby.

 

5.5          Capitalization.

 

(a)           The authorized
capital stock of Parent consists of 90,000,000 Common Shares.  As of the close of business on March 1,
2007, (i) 59,546,401 Common Shares were issued and outstanding, (ii) 10,227,885
Common Shares were subject to issuance upon conversion of a convertible note,
and (iii) options to purchase an aggregate of 3,448,000 Common Shares were
issued and outstanding.  All outstanding
Common Shares have been duly authorized and validly issued and are fully paid,
nonassessable, and free of preemptive rights.

 

36

 

(b)           As of the close
of business on March 1, 2007, except as described in Section 5.5(a),
there are no existing options, warrants, calls, rights, or other contracts or
arrangements of any character to which Parent is a party requiring, and there
are no securities of Parent outstanding that upon conversion or exchange would
require, the issuance of any ownership interest in Parent or other securities
convertible into, exchangeable for, or evidencing the right to subscribe for or
purchase, any ownership interest in Parent. 
Except for the Parent Stockholder Agreement and the Articles of
Association of Parent, there will be at the Closing no restrictions applicable
to the transfer of Common Shares by Seller or its members other than those set
forth in the Joinder Agreement (including the form of adherence agreement
attached thereto) to be signed and delivered by Seller prior to issuance of the
Initial Common Shares and other than those imposed by applicable law.

 

(c)           As of the date
hereof, Parent is not in discussions with respect to any acquisition
transaction in which Parent or any of its Affiliates would issue any equity
securities.

 

5.6          Parent Financial Statements.

 

(a)           Parent has
previously made available to Seller the Parent Audited Financial Statements and
the Parent Unaudited Financial Statements.

 

(b)           The Parent
Unaudited Financial Statements were prepared in good faith in accordance with
the Books and Records of Parent and its subsidiaries, but are subject to
year-end audit adjustments.

 

5.7           Compliance
with Law.  Parent and its subsidiaries are in material
compliance with all applicable laws, statutes, Orders, ordinances, and
regulations, whether federal, state, local, or foreign.  Neither Parent nor any of its subsidiaries
has received notice to the effect that any of them is not in material
compliance with any of such laws, statutes, Orders, ordinances, or
regulations.  Neither Parent nor any of
its subsidiaries is in default with respect to any Order, and there are no
unsatisfied judgments against Parent or any of its subsidiaries.

 

5.8          Brokers.  Neither Parent nor Buyer has retained any
broker, finder, investment banker, or financial adviser in connection with the
transactions contemplated hereunder. 
Seller will have no obligation to pay any of the fee of any broker,
finder, investment banker, or financial adviser in connection with this
Agreement or the transactions contemplated hereby by reason of any action taken
by or on behalf of Parent or Buyer.

 

5.9          The Shares.  When issued to Seller, the Initial Common
Shares will be validly issued, fully paid, and non-assessable.  When issued to Seller pursuant to Section 3.4,
any Common Shares issued in exchange for cash in connection with a Share
Purchase Election will be validly issued, fully paid and non-assessable.

 

5.10        Full Disclosure.  No statements by Parent or Buyer contained in
this Agreement or in any Transaction Document to which either of them is or
will become a party contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the 

 

37

 

statements
contained herein or therein, when taken as a whole, not misleading in light of
the circumstances under which they were made.

 

5.11        Litigation; Disputes.  There are no Actions or Proceedings pending
or to the Knowledge of Parent threatened, and, to the Knowledge of Parent, no
claims have been asserted against or with respect to (a) Parent or Buyer, (b) the
execution or delivery of this Agreement, or (c) the performance of the
transactions contemplated by this Agreement that, in the case of clause (a) of
this Section 5.11, would, if decided adversely to Parent or Buyer, have a
Material Adverse Effect on Parent or Buyer.

 

5.12        Intellectual Property.  No Intellectual Property or product or
service of Parent, or, to Parent’s Knowledge, any Intellectual Property
licensed to or by Parent, is subject to any proceeding (excluding ex parte proceedings before examiners (i.e.,
not appeals) involving applications and rulemaking and similar administrative
proceedings broadly applicable to similar intellectual property) or outstanding
decree, order, judgment, agreement, or stipulation restricting in any manner
the use, transfer, or licensing thereof by Parent, or that may affect the
validity, use, or enforceability of the such Intellectual Property or such
licensed Intellectual Property, the aggregate effect of which would have a
Material Adverse Effect upon Parent.  The
operation of Parent’s business as currently conducted does not infringe,
misappropriate, or otherwise violate the Intellectual Property rights of any
third party or constitute unfair competition or unfair trade practices under
the laws of any jurisdiction, the aggregate effect of which would have a
Material Adverse Effect upon Parent.  To
the Knowledge of Parent, no Person is infringing, misappropriating, or
otherwise violating any Intellectual Property of Parent or any of Parent’s
exclusive rights to any such licensed Intellectual Property, the aggregate
effect of which would have a Material Adverse Effect upon Parent.

 

5.13        Regulatory Matters.

 

(a)           There have been
no notices, citations, warnings, or decisions by any Governmental Authority
that any product produced, manufactured, or marketed at any time by Parent
(collectively, the “Parent Products”)
is defective or fails to meet any applicable standards promulgated by such
Governmental Authority which, if true, would have a Material Adverse Effect
upon Parent.  Parent is in compliance
with the laws, regulations, policies, procedures, and specifications applicable
to it with respect to the design, manufacture, labeling, testing, and
inspection of the Products, and the operation of manufacturing facilities,
promulgated by any Governmental Authority that has jurisdiction over the
design, manufacture, labeling, testing, and inspection of the Parent Products
and the operation of Parent’s manufacturing facilities, the non-compliance with
which would in the aggregate have a Material Adverse Effect upon Parent.  There have been no recalls, field
notifications, or seizures ordered or, to the Knowledge of Parent, threatened
by any Governmental Authority with respect to any of the Parent Products, and
Parent has not independently engaged in such recalls or field notifications,
the aggregate effect of which would have a Material Adverse Effect upon Parent.

 

(b)           Parent has
obtained, in all countries where Parent has marketed the Parent Products, all
applicable Permits required to be obtained by it by Governmental Authorities in
such countries regulating the safety, effectiveness, and market clearance of 

 

38

 

the
Parent Products, where the failure to obtain such Permits would in the
aggregate have a Material Adverse Effect upon Parent.

 

5.14        Product
Liability.  Parent has no liability and there is no
pending claim (and to the Knowledge of Parent no claim has been threatened
alleging any such liability) arising out of any injury to the individual or
property as a result of the ownership, possession, or use of any Parent Product,
the aggregate effect of which would have a Material Adverse Effect upon Parent.

 

5.15        Material
Customers.  None of the largest ten customers of Parent
(determined on the basis of the actual 2006 revenue) has (except as would not
have a Material Adverse Effect on Parent):

 

(a)           canceled or
otherwise terminated, or to the Knowledge of Parent threatened, verbally or in
writing, to cancel or otherwise terminate, its relationship with Parent; or

 

(b)           since January 1,
2006:

 

(i)            decreased materially, or threatened to decrease or
limit materially, its purchase of Parent’s products;

 

(ii)           notified Parent of any material change in its
arrangements with Parent; or

 

(iii)          notified Parent that it intends to cease purchasing
or significantly reduce its level of business with Parent.

 

5.16        Tax
Matters.

 

(a)           Parent and
Buyer are associations taxable as corporations under the Code.

 

(b)           Except as would
not have a Material Adverse Effect on Parent:

 

(i)            Parent has, or will have, timely filed with the
appropriate federal, state, local, and foreign taxing authorities all Tax
Returns required to be filed before the Closing Date;

 

(ii)           such Tax Returns are, or will be, true and complete;
and

 

(iii)          Parent has paid in full, or has made provision in
the Parent Unaudited Financial Statements for, all Taxes that are due or
claimed to be due by any Governmental Authority.

 

5.17        Material
Contracts.

 

(a)           Neither Parent
nor any Affiliate has entered into any agreement or understanding pursuant to
which any Person will receive any material payment, other 

 

39

 

than
the issuance of Common Shares on the same basis generally available to all
shareholders of Parent, in connection with any public offering of Parent.

 

(b)           Except as would
not have a Material Adverse Effect on Parent:

 

(i)            each contract to which Parent is a party is in full
force and effect and constitutes a legal, valid, and binding agreement,
enforceable in accordance with its terms (as limited by the Enforcement
Limitations), of each party thereto;

 

(ii)           Parent has performed all of its required obligations
under, and is not in violation or breach of or default under, either or without
with the lapse of time, giving or notice, or both, any contract to which Parent
is a party; and

 

(iii)          to the Knowledge of Parent, no other party to any
contract to which Parent is a party is in violation or breach of or default
under, either with or without the lapse of time, giving of notice, or both, of
such contract.

 

ARTICLE VI

PRE-CLOSING COVENANTS

 

6.1          Access and Investigation.  From the date of this Agreement until the
Closing, Seller, upon reasonable advance notice received from Buyer, shall:

 

(a)         afford Buyer and its employees, attorneys,
accountants, consultants, and financial advisers (the “Buyer
Representatives”) full and free access, during regular business
hours and subject to restrictions under applicable law, to the personnel,
properties, contracts, and Books and Records of Seller, such rights of access
to be exercised in a manner that does not unreasonably interfere with Seller’s
operations and with Buyer Representatives using their reasonable efforts to
minimize any disruption to Seller’s business;

 

(b)        furnish the Buyer Representatives with copies of all
such contracts, Books and Records, and other existing documents and data as
they may reasonably request;

 

(c)         furnish the Buyer Representatives with such
additional financial, operating, and other relevant data and information as
they may reasonably request; and

 

(d)        otherwise cooperate and assist, to the extent
reasonably requested by Buyer, with Buyer’s investigation of the properties,
assets, and financial condition of Seller.

 

6.2          Interim Operations.  Without the prior written consent of Parent,
from the date of this Agreement until the Closing Seller shall:

 

(a)           conduct its
business only in the Ordinary Course of Business;

 

40

 

(b)           use reasonable
efforts to keep available the services of Seller’s Employees and agents and
maintain its relations and good will with suppliers, customers, landlords,
creditors, Employees, agents, and others having business relationships with
Seller;

 

(c)           confer with
Parent before implementing operational decisions of a material nature;

 

(d)           otherwise
report periodically to Parent concerning the status of business, operations,
and finances;

 

(e)           make no
material changes in management personnel, except upon the death, disability, or
voluntary departure of existing management personnel;

 

(f)            subject to
ordinary wear and tear, maintain the Assets in a state of repair and condition
that is consistent with past practices;

 

(g)           to the extent
within its control, keep in full force and effect, without amendment, all
material rights relating to its business;

 

(h)           comply in all
material respects with all contractual obligations;

 

(i)            continue in
full force and effect the insurance coverage under the policies described in Section 4.20
of the Disclosure Schedule or substantially equivalent policies; and

 

(j)            maintain all Books
and Records in the Ordinary Course of Business.

 

6.3          Negative Covenants.  Except as otherwise expressly permitted
herein, from the date of this Agreement until the Closing, Seller may not,
without the prior written consent of Parent:

 

(a)           take any affirmative
action, or fail to take any reasonable action within its control, as a result
of which any of the changes or events listed in Section 4.9 would be
likely to occur;

 

(b)           declare, set
aside, make, or pay any dividend or other distribution in respect of any
securities of Seller (other than any tax distributions made in respect of any
period prior to the Closing Date in accordance with the terms of the operating
agreement of Seller and consistent with past practices), or repurchase, redeem,
or otherwise acquire any ownership interests in, Seller;

 

(c)           make any
modification to any Assigned Contract or Permit, except in the Ordinary Course
of Business;

 

(d)           enter into any
compromise or settlement of any Action or Proceeding; or

 

(e)           enter into or
consummate any merger or consolidation agreement with any Person or any
agreement to acquire any Person or any securities thereof.

 

41

 

6.4          Notification.  From the date of this Agreement until the
Closing:

 

(a)           Seller shall
promptly notify Parent in writing if it becomes aware of (i) any fact or
condition that causes or constitutes a breach of any of Seller’s
representations and warranties or (ii) the occurrence after the date of
this Agreement of any fact or condition that would or be reasonably likely to
(except as expressly contemplated by this Agreement) cause or constitute a
breach of any such representation or warranty had that representation or
warranty been made as of the time of the occurrence of, or Seller’s discovery
of, such fact or condition.

 

(b)           Seller shall
promptly notify Parent of the occurrence of any breach of any covenant of
Seller hereunder or of the occurrence of any event that may make the
satisfaction of the conditions in Article VIII impossible or unlikely.

 

(c)           Seller shall
inform Parent of contracts entered into with customers after the date hereof
and of the termination of contracts with customers.

 

(d)           Parent shall
promptly notify Seller in writing if it becomes aware of (i) any fact or
condition that causes or constitutes a breach of any of Buyer’s or Parent’s
representations and warranties or (ii) the occurrence after the date of
this Agreement of any fact or condition that would or be reasonably likely to
(except as expressly contemplated by this Agreement) cause or constitute a
breach of any such representation or warranty had that representation or
warranty been made as of the time of the occurrence of, or Parent’s discovery
of, such fact or condition.

 

(e)           Parent shall
promptly notify Seller of the occurrence of any breach of any covenant of
Parent or Buyer hereunder or of the occurrence of any event that may make the
satisfaction of the conditions in Article IX impossible or unlikely.

 

(f)            Parent shall
inform Seller of transactions or contracts entered into which affect the
ownership or transfer of the Parent’s Common Shares after the date hereof.

 

6.5          Best Efforts.

 

(a)           Each party
shall use its Best Efforts to cause the conditions in Articles VIII and IX to
be satisfied, including using Best Efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable (subject to any applicable laws) to consummate the transactions
contemplated hereby.

 

(b)           No party shall
take any action after the date of this Agreement to materially delay the
obtaining of, or result in not obtaining, any permission, approval, or consent
from any Governmental Authority necessary to be obtained before the Closing.

 

6.6          Employee Benefit Plans.

 

(a)           Seller shall remain
solely responsible for all liabilities with respect to the Employee Benefit
Plans.  Buyer shall not assume or be
deemed to have assumed any Employee Benefit Plan, nor shall Buyer have any
obligations under, or assume any 

 

42

 

liabilities
with respect to, any Employee Benefit Plans, except as provided under Section 6.6(b).  Without limiting the scope of the preceding
sentence, Buyer shall not assume any of the following:

 

(i)            any obligation or liability to pay any severance,
compensation, deferred compensation, unused vacation or sick pay (whether in
such form or in the form of paid time off or extended illness bank plans), or
other amounts to any person who is not a Hired Employee, whether such payments
became due and payable prior to Closing or as a result of a termination of
employment that occurs in connection with the transaction contemplated by this
Agreement, or any other obligation or liability to any former Employee or
beneficiary of a former Employee, except as provided under Section 6.6(b);

 

(ii)           any obligation or liability for long-term disability
payments to any Employee or former Employee of Seller who does not actively
work for Buyer after Closing; or

 

(iii)          any obligation or liability to make any severance,
compensation, deferred compensation, or other payments to any Employee (even if
he or she is a Hired Employee), or to fund or further fund any deferred
compensation arrangement that has previously been unfunded or only partially
funded, that is triggered by and arises as a result of the transaction
contemplated by this Agreement.

 

(b)           To the extent
that any group health plan (as defined in Section 5000(b)(1) of the
Code) of Seller is subject to the Consolidated Omnibus Budget Reconciliation
Act of 1985 (“COBRA”), Buyer agrees to make
COBRA continuation coverage available to “M&A Qualified
Beneficiaries” with respect to the asset sale (as described in
Treasury Regulation Section 54.4980B-9 Q&A-4(a)) whose qualifying
event occurs as a result of the Closing, beginning on the Closing Date.  Buyer shall not be liable for any COBRA
obligations to M&A Qualified Beneficiaries attributable to periods
occurring prior to the Closing Date.

 

(c)           Nothing in this
Section 6.6 or elsewhere in this Agreement shall be deemed to make any
Employee (or any dependent or beneficiary thereof) a third-party beneficiary of
this Agreement.

 

6.7          No Shopping.  Seller shall not, and Seller shall use its
Best Efforts to cause its members, employees, representatives, advisers, and
agents, officers and directors to not, directly or indirectly, encourage,
solicit, or initiate inquiries or proposals from, or provide any confidential
information to, or participate in any discussions or negotiations with, or
enter into any agreement with, any Person (other than Parent, Buyer, and their
Affiliates, representatives, and agents) in connection with any exchange,
offer, merger, consolidation, sale of material assets, sale of securities,
acquisition of beneficial ownership of, or the right to vote securities,
liquidation, dissolution, or similar transaction involving Seller or the
ownership interests of Seller before the Closing or earlier termination of this
Agreement in accordance with Section 10.1.

 

43

 

6.8          Mutual Confidentiality.  The parties shall ensure that, prior to
Closing:

 

(a)           the parties and
their representatives keep strictly confidential the existence and terms of
this Agreement;

 

(b)           neither party
nor any of its representatives issues or disseminates any press release or
other publicity or otherwise makes any disclosure of any nature to any other
Person regarding any of the transactions contemplated hereby, except to the
extent that any party is required by law to make any such disclosure regarding
such transactions; and

 

(c)           if any party is
required by law to make any disclosure regarding such transactions, the party
anticipating disclosure advises the other party, as promptly as practicable
before making such disclosure, of the nature and content of the intended
disclosure.

 

ARTICLE VII

ADDITIONAL AGREEMENTS

 

7.1          Further Assurances.

 

(a)           If at any time
after the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, each party will take such further action (including
the execution and delivery of such further instruments and documents) as the
other party reasonably may request, at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Article XI).

 

(b)           Seller shall
cooperate with Buyer in Buyer’s efforts to ensure that Intellectual Property
that is conceived, created, developed, first fixed in a tangible medium, made,
first used, or first reduced to practice by any person listed on the Employee
List, any consultant, or any other third party under agreement with Seller, in
each case within one year after the Closing Date, that (i) relates
directly to Seller’s business on the Closing Date or (ii) is based on or
derived from Owned Intellectual Property, shall be conveyed to Buyer.

 

7.2          Employees — Generally.

 

(a)           Seller shall
deliver to Buyer a list (the “Employee List”)
identifying all Employees of Seller as of the date of this Agreement,
specifying with respect to each such person, the person’s:

 

(i)            date of hire;

 

(ii)           status as full-time or part-time, or on disability
or other leave of absence specified on the Employee List;

 

(iii)          current salary or hourly rate of compensation; and

 

44

 

(iv)          accrued but unused vacation, holiday, and sick pay
(whether in the form of paid time off, extended illness bank plans, or some
other form).

 

(b)           Before the
Closing Date, Buyer will offer employment to each Employee of Seller who is
employed by Seller immediately prior to the Closing (other than any such
Employee jointly identified by Seller and Parent as not to be so employed),
with such employment to be effective immediately following, and contingent upon
the occurrence of, the Closing.  Such
offers of employment shall provide for benefits on a basis consistent with the
Parent’s other domestic full-time employees (and, with respect to medical
benefits, shall provide coverage without the imposition of pre-existing
condition, actively-at-work, or other “gaps” in coverage, to the extent
permitted under the plans of Buyer and its domestic Affiliates), and shall
otherwise be on such terms as Buyer may determine in its sole discretion.  Seller will not seek to induce any Employee
to reject any offer of employment from Buyer. 
The Employees who accept such offers of employment from Buyer (the “Hired Employees”) shall become employees of Buyer
immediately following the Closing and shall cease to be employees of Seller.

 

(c)           Nothing in this
Section 7.2 obligates Buyer to continue the employment of any Hired
Employee for any specific period of time following the Closing or prevents
Buyer from reducing the salary, wages and benefits, or modifying the duties or
working conditions, of any Hired Employee following the Closing.

 

(d)           Seller shall
use commercially reasonable efforts, before and after the Closing, to provide
such information as Buyer may reasonably request for purposes of fulfilling its
obligations under this Section 7.2.

 

(e)           If, following
the Closing Date, Seller is obligated to pay severance benefits to the
individual named in Section 4.22(a) of the Disclosure Schedule, Buyer
shall, within five Business Days following a written demand from Seller, pay
Seller an amount equal to the lesser of (i) one-half of such severance
benefits or (ii) $50,000.

 

7.3          Damage to Assets.  To the extent Seller has in force any
policies of property and casualty insurance insuring any of the Assets or
Leased Real Property, any proceeds of insurance payable in respect of any event
that occurs from and after the date of this Agreement and before the Closing
shall be received by Seller in trust for Buyer and, to the extent the damage to
the Assets or Leased Real Property to which the proceeds pertain has not been
repaired or restored before the Closing, shall be paid over to Buyer at the
Closing, or, if no proceeds have been received before the Closing, Seller shall
assign any of its claims thereto to Buyer at the Closing.  In addition to paying over or assigning to
Buyer proceeds of any policy of property and casualty insurance as provided
above, Seller shall pay to Buyer at the Closing any related deductible amount
provided under any such policy of insurance. 
Nothing in this Section 7.3 limits the conditions set forth in
Sections 8.1 and 8.2.

 

7.4          Post-Closing Tax Matters.

 

(a)           Tax Allocation
of Purchase Price.  As promptly
as practicable, but in no event later than 30 days following the Closing Date,
Buyer shall prepare and deliver to

 

45

 

Seller
a statement allocating the Initial Purchase Price and Assumed Liabilities among
the Assets (the “Allocation Statement”).  The Allocation Statement will be consistent
with the provisions of Section 1060 of the Code and the Treasury
Regulations thereunder.  Within 30 days
after Seller’s receipt of the Allocation Statement, Seller shall indicate its
concurrence therewith, or propose to Buyer any changes to the Allocation
Statement.  Seller’s failure to notify
Buyer of any objection to the Allocation Statement within 30 days after receipt
thereof shall constitute Seller’s concurrence therewith.  Seller and Buyer shall negotiate in good
faith to resolve any disputes regarding the Allocation Statement.  If Seller and Buyer are unable to resolve any
disputes regarding the Allocation Statement within 30 days of Buyer’s receipt
of such changes, then the dispute shall be submitted to a mutually acceptable
independent accounting firm for resolution as soon as practicable, but in any
event within 30 days.  The independent
accounting firm shall act as an expert and not as an arbitrator to determine,
based solely on the written submissions of the parties and not by independent
investigation, only the specific items under dispute by the parties.  The independent accounting firm shall deliver
to Seller and Buyer, as promptly as practicable, but in any case no later than
30 days, a determination of the allocation. 
This determination will be binding on the parties and, subject to the
following sentence, all Tax Returns filed by Parent, Buyer, Seller, the members
of Seller, and each of their Affiliates shall be prepared consistently with
such allocation, and neither of them shall take a position on any Tax Return or
other form or statement contrary to such allocation (unless required to do so
by a Governmental Authority).  Upon each
subsequent adjustment of the Initial Purchase Price after the Closing Date to
reflect (i) the difference between the Closing Date Net Worth and the
Final Month End Net Worth, if any, (ii) the Initial Revenue Payment, and (iii) the
Secondary Revenue Payment, Buyer and Seller will each revise their IRS Forms
8594 in accordance with the above procedure. 
Each of the parties agrees to notify the other if the IRS or any other
Governmental Authority proposes a reallocation of amounts allocated pursuant to
this Section 7.4(a).

 

(b)           Cooperation.  Parent and Seller shall, and shall cause
their respective subsidiaries (if any) and Affiliates to, cooperate with
respect to Tax matters.  Parent and
Seller shall provide one another with such information as is reasonably
requested in order to enable the requesting party to complete and file all Tax
Returns that it may be required to file with respect to the ownership or
operation of the Assets, or to respond to audits, inquiries, or other
proceedings by any Governmental Authority and otherwise to satisfy Tax
requirements.  Such cooperation shall
include promptly forwarding copies of appropriate notices, forms, or other communications
received from or sent to any Governmental Authority and promptly providing
reasonably requested copies of all relevant Tax Returns together with
accompanying schedules and related work papers, documents relating to rulings,
audits, or other determinations by any Governmental Authority and records
concerning the ownership and tax basis of property, in each case only to the
extent such materials relate to the ownership or operation of the Assets.

 

(c)           Filing
Responsibility.  Seller
shall prepare and file (i) all Tax Returns with respect to Taxes relating
to the ownership or operation of the Assets prior to the Closing Date and (ii) all
Tax Returns in respect of any Transfer Taxes owing as a result of the transfer
of the Assets as contemplated hereby. 
Parent shall file or cause to be filed all 

 

46

 

Tax
Returns attributable to the ownership or operation of Assets on or after the
Closing Date.  Buyer and Seller shall
discharge all Tax liabilities shown on Tax Returns based on the assumption and
allocation of Tax liabilities provided in this Agreement without regard to the
party that has prepared the Tax Return, and the party responsible for payment
of any amount of Taxes shown due on a Return shall pay such unpaid amount to
the party filing the Tax Return no later than one Business Day prior to the
filing of such Tax Return.

 

(d)                                 Refunds.

 

(i)            Seller shall be entitled to any refunds or credits
of or against any Taxes relating to the ownership or operation of the Assets
prior to the Closing Date (plus any interest received with respect thereto),
and Parent shall file, or cause to be filed, any claims for such refund or
credits reasonably requested by Seller.

 

(ii)           Except to the extent set forth in Section 7.4(d)(i),
Buyer shall be entitled to any refunds or credits of Taxes relating to the
ownership or operation of the Assets on or after the Closing Date (plus any
interest received with respect thereto).

 

(iii)          Buyer shall promptly forward to Seller or reimburse
Seller for any refund of credits due Seller (pursuant to the terms of this Section 7.4(d))
after receipt thereof, and Seller shall promptly forward to Buyer or reimburse
Buyer for any refunds or credits due Buyer (pursuant to the terms of this Section 7.4(d))
after receipt thereof.

 

7.5          Guaranty.  Parent irrevocably guarantees each and every
representation, warranty, covenant, agreement and obligation of Buyer and the
full and timely performance of Buyer’s obligations under this Agreement.

 

7.6          Maintenance of Organization;
Cessation of Business.  Following the Closing, Seller shall:

 

(a)           maintain its
organizational existence until the later of (i) the third anniversary of
the Closing Date or (ii) the date as of which any then-outstanding claims
for indemnification under Section 11.2(a) are resolved;

 

(b)           cease to carry
on its business and engage in only those activities that are necessary to
exercise its rights and to perform its obligations under this Agreement; and

 

(c)           promptly change
its company name to one that is not similar to its current name and that does
not imply a continuation of its business.

 

7.7          Sales Efforts.  From the Closing Date through the Secondary
Revenue Period, Buyer and Parent shall use their Best Efforts to market and
sell the DVO Products.

 

47

 

7.8          Joint Press Release.  Seller, Buyer and Parent shall develop and
release a mutually and reasonably satisfactory press release regarding the
acquisition of Seller.

 

7.9          Information Rights.  From and after the Closing Date, Parent shall
provide Seller with Parent’s periodic financial statements and other
information concerning Parent that Parent distributes to its other shareholders
generally.  Parent shall provide such
financial statements and other information to Seller at the same time they are
distributed to its other shareholders generally.

 

7.10        Share Delivery Obligations.  Following the Closing:

 

(a)           Parent shall
issue the Initial Common Shares in accordance with Section 3.2(c),
provided that Parent shall not be obligated to issue the Initial Common Shares
unless and until Seller provides it with a duly executed Seller Investment
Letter and Joinder Agreement;

 

(b)           Seller shall
not transfer the Initial Common Shares or any Common Shares that it may acquire
pursuant to a Share Purchase Election to any Person other than such Persons who
are members of Seller on the Closing Date (“Permitted
Transferees”), nor shall it attempt to transfer any such shares
unless and until it has delivered or caused to be delivered to Parent from each
Permitted Transferee (i) an investment letter, duly executed and in the
form attached hereto as Exhibit C (the “Member
Investment Letter”), and (ii) a duly executed adherence
agreement, the form of which is attached to the Parent Stockholder Agreement;
and

 

(c)           Parent shall
take commercially reasonable efforts to book transfers to Permitted Transferees
within seven Business Days of receiving a Member Investment Letter duly
executed by a Permitted Transferee, provided that Parent shall be under no
obligation to book any transfer of the Initial Common Shares or any Common
Shares that Seller may acquire pursuant to a Share Purchase Election to any
Person other than a Permitted Transferee for whom a duly executed Member
Investment Letter and an adherence agreement has been provided to Parent.

 

ARTICLE VIII

CLOSING CONDITIONS OF PARENT AND BUYER

 

The
obligation of Parent and Buyer to effect the Closing is subject to the
satisfaction (or waiver by Parent in writing), on or before the Closing Date,
of all of the following conditions:

 

8.1          Representations, Warranties, and
Covenants of Seller.  The
representations and warranties of Seller contained herein shall be true in all
material respects on and as of the Closing Date (except for those
representations that speak as of an earlier date, which shall be true as of
such date), provided that, solely for purposes of this Section 8.1,
any representation or warranty that is qualified as to “materiality” or “Material
Adverse Effect” shall be read as if that qualifier was not present, and Seller
shall have, in all material respects, performed and complied with all of its
agreements and covenants contained herein to be performed on or before the
Closing Date.

 

48

 

8.2          No Material Adverse Effect.  Seller shall not have, since the date of this
Agreement, suffered any business interruption, damage, or destruction of its
properties or assets, or any other incident, occurrence, event, or change in
circumstances that has had or could be reasonably expected to have a Material
Adverse Effect on Seller.

 

8.3          Officers’ Certificate.  Seller shall have delivered to Buyer a
certificate of the Chief Executive Officer and the Chief Financial Officer of
Seller, dated the Closing Date, confirming the satisfaction of the conditions
set forth in Sections 8.1 and 8.2.

 

8.4          Absence of Litigation.  No action or proceeding shall have been
instituted before any Governmental Authority by any Person to restrain or
prohibit, or to obtain damages in respect of, the consummation of the
transactions contemplated by this Agreement. 
No Order of any Governmental Authority of competent jurisdiction shall
be in effect that restricts or prohibits the acquisition of the Assets by
Buyer.

 

8.5          Third-Party Consents.  Seller shall have delivered to Buyer copies
of the third-party consents listed on Schedule 8.5.

 

8.6          Closing Deliveries of Seller.  At the Closing, Seller shall deliver to Buyer
the following:

 

(a)           possession of
the Assets;

 

(b)           a bill of sale
and assignment and assumption agreement, substantially in the form of Exhibit D
(the “Bill of Sale and Assumption Agreement”),
duly executed by Seller;

 

(c)           assignments of
the Owned Intellectual Property, in form and substance reasonably acceptable to
counsel for Buyer, duly executed by Seller and notarized;

 

(d)           a docket sheet
containing all deadlines arising within three months following the Closing Date
covering any actions with respect to the registration, prosecution,
maintenance, or renewal of Owned Intellectual Property (and Licensed
Intellectual Property for which Seller has the right and/or obligation to
handle registration, prosecution, maintenance, or renewal);

 

(e)           an estoppel
certificate by the landlord of each parcel of Leased Real Property, in form and
substance reasonably acceptable to counsel for Buyer, duly executed by such
landlord;

 

(f)            assignments of
each of the Leased Real Property Leases, in form and substance reasonably
acceptable to counsel for Buyer, duly executed by Seller and, if required in order
to complete the assignment, by the landlord of each such Real Property Lease;

 

(g)           a certificate
of the Secretary of Seller, certifying as of the Closing Date (i) a true
and complete copy of the organizational documents of Seller, and (ii) a
true and complete copy of the resolutions of the board of directors of Seller
and the resolutions of 

 

49

 

the
members of Seller, in each case authorizing the execution, delivery, and
performance of this Agreement and the Transaction Documents to which Seller is
or will be a party and the consummation of the transactions contemplated hereby
and thereby;

 

(h)           a certificate
of existence of Seller issued by the Indiana Secretary of State as of a recent
date; and

 

(i)            UCC-3
Termination Statements and any other instruments reasonably required to release
all Encumbrances on the Assets, including those Encumbrances related to the
Bridge Notes and the Chase Note.

 

ARTICLE IX

SELLER’S CLOSING CONDITIONS

 

The
obligation of Seller to effect the Closing is subject to the satisfaction (or
waiver by Seller in writing), on or before the Closing Date, of all of the
following conditions:

 

9.1          Representations, Warranties, and
Covenants of Parent and Buyer.  The representations and warranties of Parent
and Buyer contained herein shall be true in all material respects on and as of
the Closing Date (except for those representations that speak as of an earlier
date, which shall be true as of such date), provided that, solely for
purposes of this Section 9.1, any representation or warranty that is
qualified as to “materiality” or “Material Adverse Effect” shall be read as if
that qualifier was not present, and Parent and Buyer shall have, in all
material respects, performed and complied with all of their agreements and
covenants contained herein to be performed on or before the Closing Date.

 

9.2          Officers’ Certificate.  Parent and Buyer shall have delivered to
Seller a certificate of an authorized officer of Parent, dated the Closing
Date, confirming the satisfaction of the conditions set forth in Section 9.1.

 

9.3          Absence of Litigation.  No action or proceeding shall have been
instituted before any Governmental Authority by any Person to restrain or
prohibit, or to obtain damages in respect of, the consummation of the
transactions contemplated by this Agreement. 
No Order of any Governmental Authority of competent jurisdiction shall
be in effect that restricts or prohibits the acquisition of the Assets by Buyer.

 

9.4          Closing Deliveries of Parent and
Buyer.  At the
Closing, Parent and Buyer shall deliver to Seller the following:

 

(a)           payment of the
Closing Cash Payment by wire transfer in immediately available funds to one or
more accounts designated by Seller at least two Business Days before the Closing
Date;

 

(b)           a certificate
of the Secretary of Buyer, certifying as of the Closing Date (i) a true
and complete copy of the organizational documents of Buyer, and (ii) a
true and complete copy of the resolutions of the board of directors of Buyer
authorizing the execution, delivery, and performance of this Agreement and the
Transaction Documents 

 

50

 

to
which Buyer is or will be a party and the consummation of the transactions
contemplated hereby and thereby;

 

(c)           a certificate
of good standing for Buyer issued by such entity’s jurisdiction of organization
as of a recent date; and

 

(d)           the Bill of
Sale and Assumption Agreement, duly executed by Buyer.

 

ARTICLE X

TERMINATION

 

10.1        Termination.  This Agreement may be terminated at any time
before the Closing as follows:

 

(a)           by the mutual
written consent of Parent and Seller;

 

(b)           by Parent if
there has been a material breach of a representation, warranty, covenant, or
agreement by Seller, unless such breach is cured within 10 days after notice
thereof is given to Seller;

 

(c)           by Seller if
there has been a material breach of a representation, warranty, covenant, or
agreement by Parent or Buyer, unless such breach is cured within 10 days after
notice thereof is given to Parent;

 

(d)           by Parent or
Seller if the Closing has not occurred by June 2, 2007; provided that no
party may terminate this Agreement pursuant to this Section 10.1(d) if
the party’s (or its co-party’s) failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Closing shall not have
occurred on or before that date; or

 

(e)           by Parent or
Seller if there shall be any law or regulation that makes consummation of the
acquisition of the Assets or any other material component of the transactions
contemplated hereby illegal or otherwise prohibited or if any Order enjoining
Parent, Buyer, or Seller from consummating the transactions contemplated hereby
is entered and such Order becomes final and nonappealable.

 

10.2        Effects of Termination.  If this Agreement is terminated pursuant to Section 10.1,
this Agreement shall become void and of no effect with no liability on the part
of any party, except (a) as set forth in Section 11.11, and (b) that
nothing shall relieve any party for liability for any material breach of any
representation, warranty, covenant, or agreement contained in this Agreement.

 

ARTICLE XI

INDEMNIFICATION

 

11.1        Survival.  The representations, warranties, covenants,
and agreements of the parties contained in or made pursuant to this Agreement
or any certificate, document, or instrument delivered pursuant to or in
connection with this Agreement shall survive the 

 

51

 

execution
and delivery of this Agreement and the Closing hereunder until the conclusion
of the Secondary Revenue Period, except for (i) those in Sections 4.2,
4.11(a) (second sentence only), 4.14, 4.18, 4.21 and 4.25, each of which
shall survive the Closing indefinitely (subject to any applicable statute of
limitations), and (ii) those in Sections 4.3 and 4.22, which shall survive
the Closing for a period of three years.

 

11.2        Indemnification.

 

(a)           Seller shall
defend, and hold harmless Parent, Buyer, and their respective officers,
directors, employees, agents, successors, and assigns from and against all
costs, losses (including diminution in value), Liabilities, damages, lawsuits,
deficiencies, claims and expenses, including interest, penalties, costs of
mitigation, lost profits and other losses resulting from any shutdown or
curtailment of operations, attorneys’ fees, and all amounts paid in
investigation, defense, or settlement of any of the foregoing (collectively, “Damages”), incurred in connection with, arising out of,
resulting from, or incident to:

 

(i)            any inaccuracy in, or breach of, any representation
or warranty made by Seller in or pursuant to this Agreement, or in the other
documents delivered in connection with the transactions contemplated in this
Agreement;

 

(ii)           any breach of any covenant or agreement of Seller
contained herein;

 

(iii)          any Liability of Seller that is not an Assumed
Liability (including any such Liability of Seller that becomes a liability of
Buyer under any common-law doctrine of de-facto merger or any doctrine of
successor liability or as a result of any failure of the parties in connection
with the transactions contemplated hereby to comply fully with any applicable
bulk transfer laws or Tax laws relating to obligations of buyers of assets in
bulk transfers); or

 

(iv)          except for Assumed Liabilities, the operation of
Seller’s business or the ownership of the Assets before the Closing Date to the
extent not covered by any matter for which Seller is obligated to indemnify
Buyer or Parent under Section 11.2(a)(i).

 

(b)           Parent and
Buyer shall, jointly and severally, indemnify, defend, and hold harmless Seller
and its officers, employees, agents, successors, and assigns from and against
all Damages incurred in connection with, arising out of, resulting from, or
incident to:

 

(i)            any inaccuracy in, or breach of, any representation
or warranty made by Parent or Buyer in or pursuant to this Agreement, or in the
other documents delivered in connection with the transactions contemplated in
this Agreement;

 

(ii)           any breach of any covenant or agreement of Parent or
Buyer contained herein;

 

52

 

(iii)          any Assumed Liability; or

 

(iv)          the ownership of the Assets on or after the Closing
Date, except Damages for which Parent and Buyer are entitled to be indemnified
by Seller under Section 11.2(a) or would be so entitled to be so
indemnified but for Section 11.2(c), 11.2(d), or 11.2(f).

 

(c)           Seller shall
have no liability under Section 11.2(a)(i) (other than for any
inaccuracy in, or breach of, any representation or warranty set forth in Section 4.2,
4.11(a) (second sentence only), 4.14, 4.18, 4.21, or 4.25, for which
indemnification shall be available on a first-dollar basis) until the aggregate
of all Damages arising out of all matters set forth in Section 11.2(a)(i) exceeds
$100,000, and then only to the extent of the excess.  Further, Seller shall have no liability for
any Damages after all amounts paid by Seller with respect to claims under Section 11.2(a)(i) exceed
$7 million or, in the case of any inaccuracy in, or breach of, any
representation or warranty set forth in Section 4.14, the lesser of $15
million or the Total Purchase Price (the “Indemnification Cap”).

 

(d)           Parent and
Buyer shall have no liability under Section 11.2(b)(i) until the
aggregate of all Damages arising out of all matters set forth in Section 11.2(b)(i) exceeds
$100,000, and then only to the extent of the excess.

 

(e)           For purposes of
calculating the dollar thresholds in Sections 11.2(c) and (d), all
qualifications as to materiality or Material Adverse Effect contained in the
representations and warranties of Seller, Parent, or Buyer, as the case may be,
shall be ignored.

 

(f)            No claim for
indemnity may be made pursuant to Section 11.2(a)(i) or 11.2(b)(i),
unless notice thereof shall have been given to the party from which indemnity
is sought on or before the expiration of the applicable survival period set
forth in Section 11.1

 

11.3        Indemnification Procedures.

 

(a)           If any Action
or Proceeding is filed or initiated against a party for which it is entitled to
the benefit of indemnity hereunder, written notice thereof shall be given to
the other party as promptly as practicable (and in any event within ten days
after the service of the citation or summons); provided, however,
that the failure of a party to give timely notice to the other shall not affect
its rights to indemnification hereunder except to the extent that the other
demonstrates actual damage caused by such failure.

 

(b)           After such
notice, if the indemnifying party acknowledges in writing to the indemnified
party that the indemnifying party is obligated under the terms of its indemnity
hereunder in connection with the Action or Proceeding, then the indemnifying
party will be entitled, if it so elects, to take control of the defense and
investigation of the Action or Proceeding and to employ and engage attorneys of
its own choice to handle and defend the same (such attorneys to be reasonably
satisfactory to the indemnified party), at the indemnifying party’s cost, risk,
and expense (unless (i) the indemnifying party has failed to assume the
defense of the Action or Proceeding within 15 days after receipt of 

 

53

 

notice
thereof or thereafter to diligently pursue such defense or (ii) the named
parties to the Action or Proceeding include both of the indemnifying party and
the indemnified party, and the indemnified party and its counsel determine in
good faith that there may be one or more legal defenses available to the
indemnified party that are different from or additional to those available to
the indemnifying party and that joint representation would be inappropriate),
and to compromise or settle the Action or Proceeding (which compromise or
settlement may be made only with the written consent of the indemnified party,
such consent not to be unreasonably withheld). 
The indemnified party may withhold such consent if the compromise or
settlement would adversely affect the conduct of its business or requires less
than an unconditional release to be obtained.

 

(c)           If (i) the
indemnifying party fails to assume the defense of the Action or Proceeding
within 15 days after receipt of notice thereof or thereafter to diligently
pursue such defense, or (ii) the named parties to the Action or Proceeding
include both the indemnifying party and the indemnified party and the
indemnified party and its counsel determine in good faith that there may be one
or more legal defenses available to the indemnified party that are different from
or additional to those available to the indemnifying party and that joint
representation would be inappropriate, then the indemnified party against which
the Action or Proceeding has been filed or initiated will (upon delivering
notice to that effect to the indemnifying party) have the right to undertake,
at the indemnifying party’s cost and expense, the defense, compromise, or
settlement of the Action or Proceeding on behalf of and for the account and
risk of the indemnifying party; provided, however, that the
Action or Proceeding shall not be compromised or settled without the written
consent of the indemnifying party, which consent may not be unreasonably
withheld.

 

(d)           If the
indemnifying party assumes the defense of the Action or Proceeding, then the
indemnifying party will keep the indemnified party reasonably informed of the
progress of any the defense, compromise, or settlement thereof and will consult
with, when appropriate, and consider any reasonable advice from, the
indemnified party of any such defense, compromise, or settlement.

 

(e)           The
indemnifying party shall be liable for any settlement of any Action or
Proceeding effected pursuant to and in accordance with this Section 11.3
and for any final judgment (subject to any right of appeal), and the
indemnifying party agrees to indemnify and hold harmless the indemnified party
from and against any Damages by reason of such settlement or judgment.

 

(f)            Regardless of
whether the indemnifying party or the indemnified party takes up the defense,
the indemnifying party will pay reasonable costs and expenses in connection
with the defense, compromise, or settlement for any Action or Proceeding under
this Section 11.3.

 

(g)           The indemnified
party shall cooperate in all reasonable respects with the indemnifying party
and its attorneys in the investigation, trial, and defense of the Action or
Proceeding and any appeal arising therefrom; provided, however,
that the indemnified 

 

54

 

party
may, at its own cost, participate in the investigation, trial, and defense of
the Action or Proceeding and any appeal arising therefrom.

 

(h)           A claim for
indemnification for any matter not involving an Action or Proceeding may be
asserted by notice to the party from whom indemnification is sought.

 

11.4        Remedies.  Except with respect to: (a) fraud,
willful misrepresentation and/or willful misconduct and (b) breaches of
any covenant set forth in this Agreement (for each of which the parties shall
have the right to seek any other remedy in law or equity, including an action
for breach of contract, in lieu of or in addition to any remedies provided in
this Article XI), the indemnification remedies and other remedies provided
in this Article XI shall be the exclusive remedy of the parties from and
after the Closing for resolving disputes under this Agreement.

 

11.5        Tax Treatment of Indemnity
Payments.  The parties shall treat any indemnity payment
made pursuant to this Article XI as an adjustment to the cash portion of
the Total Purchase Price for all federal, state, local, and foreign Tax
purposes (unless otherwise required by a Governmental Authority).

 

11.6        Right to Offset.  Subject to the Indemnification Cap, Parent
and Buyer may offset any amounts to which either of them may be entitled under
this Article XI against any Revenue Payment or other amounts otherwise
payable by either of them under this Agreement, whether payable in cash or
Common Shares.  Neither the exercise of,
nor the failure to exercise, such right of offset shall constitute an election
of remedies or limit Parent or Buyer in any manner in the enforcement of any
other remedies that may be available to either of them hereby.  If any amount to which Parent or Buyer claims
that it is entitled under this Article XI is disputed by Seller at the
time a Revenue Payment or other amount is payable to Seller, then Parent or
Buyer shall withhold an amount equal to such disputed amount and shall make the
remainder of such payment to Seller when due. 
Following the resolution of the dispute, the withheld amount shall be
retained by Parent and/or promptly disbursed to Seller, as appropriate.

 

ARTICLE XII

MISCELLANEOUS

 

12.1        Notices.  All notices, requests, and other
communications hereunder must be in writing and will be deemed to have been
duly given only if delivered personally against written receipt or by facsimile
transmission with answer back confirmation or mailed (postage prepaid by
certified or registered mail, return receipt requested) or by overnight courier
to the parties at the following addresses or facsimile numbers:

 

If to Seller, to:

 

DVO
- Extremity Solutions, LLC

720 East Winona Avenue

Warsaw, IN 46580

Fax: 574-268-0861

Attn: Chief Executive Officer

 

55

 

with copies to:

 

Barrett &
McNagny LLP 

215 East Berry Street 

Fort Wayne, IN 46802 

Fax: 260-423-8920

Attn: John Barce

 

If to Buyer, to:

 

Tornier
B.V.

7716 Golden Triangle Drive 

Eden Prairie, MN 55344 

Fax: 952-930-6503

Attn: Chief Executive Officer

 

with copies to:

 

Faegre &
Benson LLP

90 South Seventh Street, Suite 2200 

Minneapolis, MN 55401

Fax: 612-766-1600

Ann: Steven Kennedy

 

All
such notices, requests, and other communications will (a) if delivered
personally to the address as provided in this Section 12.1, be deemed
given upon delivery, (b) if delivered by facsimile transmission to the
facsimile number as provided in this Section 12.1, be deemed given upon
receipt, (c) if delivered by mail in the manner described above to the
address as provided in this Section 12.1, be deemed given three Business
Days after mailing, or (d) if delivered by courier service to the address
as provided in this Section 12.1, be deemed given one Business Day after
deposit with the courier (in each case regardless of whether such notice,
request, or other communication is received by any other Person to whom a copy
of such notice, request, or other communication is to be delivered pursuant to
this Section).  Any party from time to time
may change its address, facsimile number, or other information for the purpose
of notices to that party by giving notice specifying the change to the other
parties.

 

12.2                        Entire
Agreement.  This Agreement (and all Exhibits and
Schedules attached hereto and all other documents delivered in connection
herewith) supersedes all prior discussions and agreements among the parties
with respect to the subject matter hereof and contains the sole and entire
agreement among the parties with respect thereto.

 

12.3                        Waiver.  Any term or condition of this Agreement may
be waived at any time by the party that is entitled to the benefit thereof, but
no such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving the term or condition.  No waiver by any party of any term or
condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.  All
remedies, either under this Agreement or by law or otherwise afforded, will be
cumulative and not alternative.

 

56

 

12.4                        Amendment.  This Agreement may be amended, supplemented,
or modified only by a written instrument duly executed by or on behalf of each
party.

 

12.5                        No
Third-Party Beneficiaries.  The terms and provisions of this Agreement
are intended solely for the benefit of each party and its respective successors
or permitted assigns, and it is not the intention of the parties to confer
third-party beneficiary rights upon any other Person, other than any Person
entitled to indemnity under Article Xl.

 

12.6                        No
Assignment; Binding Effect.  Neither this Agreement nor any right,
interest, or obligation hereunder may be assigned by any party without the
prior written consent of the other parties, and any attempt to do so will be
void (provided that Parent or Buyer may assign to any of its direct or
indirect wholly owned subsidiaries any of its rights and interests under this
Agreement, but no such assignment shall relieve Parent or Buyer from its
obligations under this Agreement).  This
Agreement is binding upon, inures to the benefit of, and is enforceable by the
parties and their respective successors and assigns.

 

12.7                        Headings.  The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.

 

12.8                        Severability.  If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future law, and if
the rights or obligations of any party under this Agreement will not be
materially and adversely affected thereby:

 

(a)           the provision will
be fully severable;

 

(b)           this Agreement will
be construed and enforced as if the provision had never been a part hereof;

 

(c)           the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the provision or by its severance herefrom; and

 

(d)           in lieu of the
provision, there will be added automatically as a part of this Agreement a
legal, valid, and enforceable provision as similar in terms to the illegal,
invalid, or unenforceable provision as may be possible and mutually acceptable
to the parties.

 

12.9                        Governing
Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Minnesota applicable to contracts executed and performed in that
state, without giving effect to conflicts-of-laws principles.

 

12.10                 Consent
to Jurisdiction and Forum Selection.  All actions or proceedings arising in
connection with this Agreement may be initiated and tried in the state and
federal courts located in Kosciusko County in the State of Indiana.  This choice of venue is intended by the
parties to be non-exclusive and permissive in nature.  Each party hereby waives any right it may
have to assert the doctrine of forum non conveniens
or similar doctrine or to object to venue with respect to any proceeding
brought in accordance with this Section 12.10 and stipulates that the
state and federal courts located in Kosciusko County in the State of Indiana
shall have in  personam
jurisdiction and venue over each of them for the purposes of litigating any
dispute, 

 

57

 

controversy,
or proceeding arising out of or related to this Agreement.  Each party hereby authorizes and accepts
service of process sufficient for personal jurisdiction in any action against
it as contemplated by this Section 12.10 by registered or certified mail,
return receipt requested, postage prepaid, to its address for the giving of
notices as set forth in this Agreement, or in any other manner set forth in Section 12.1
of this Agreement for the giving of notice. 
Any final judgment rendered against a party in any action or proceeding shall
be conclusive as to the subject of such final judgment and may be enforced in
other jurisdictions in any manner provided by law.

 

12.11                 Expense.  Except as otherwise provided in this
Agreement, each party shall bear its own expenses and costs incurred in the
preparation of this Agreement and the consummation of the transactions
contemplated hereby.

 

12.12                 Specific
Performance.  Seller hereby acknowledges and agrees that
the Assets are special and unique and that money damages payable to Buyer may
be impossible to ascertain and an inadequate remedy in respect of a breach or
non-performance of this Agreement by Seller. 
Buyer and Parent hereby acknowledge and agree that the Common Shares to
be acquired by Seller pursuant to Article III are special and unique and
that money damages payable by Buyer or Parent may be impossible to ascertain
and an inadequate remedy in respect of a breach or non-performance of this
Agreement by Buyer or Parent. 
Accordingly, it is mutually agreed that, in addition to any other
remedies available to the parties under this Agreement or at law or in equity,
each party shall have, to the fullest extent permitted by law, the right to
require specific performance of this Agreement by the other party and to
enforce this Agreement by injunctive or other equitable relief.

 

12.13                 Counterparts.  This Agreement may be executed in any number
of counterparts (and by facsimile), each of which will be deemed an original,
but all of which together will constitute one and the same instrument.

 

12.14                 Disclosure
Schedule.  Matters reflected in the Disclosure Schedule
are not necessarily limited to matters required by this Agreement to be
reflected therein.  Such additional
matters are set forth for informational purposes and do not necessarily include
other matters of a similar nature that are not required to be reflected
therein.  Matters disclosed pursuant to
any Section of the Disclosure Schedule shall be deemed to be disclosed
with respect to all Sections of the Disclosure Schedule to the extent this
Agreement requires such disclosure and to the extent such disclosure reasonably
relates to such Section of the Disclosure Schedule.  Nothing in the Disclosure Schedule shall be
deemed adequate to disclose any matter, including an exception to a representation
or warranty or covenant made herein, however, unless the Disclosure Schedule
identifies the matter in a manner reasonably sufficient to inform Parent and
Buyer of the nature of the matter.

 

[Signature Page Follows]

 

58

 

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

 

	
   

  	
  DVO —
  EXTREMITY SOLUTIONS, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Rod K. Mayer

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President
  and CEO

  
	
   

  	
   

  
	
   

  	
  DVO
  ACQUISITION, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Douglas W. Kohrs

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President
  and CEO

  
	
   

  	
   

  
	
   

  	
  TORNIER
  B.V.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Douglas W. Kohrs

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President
  and CEO

  

 

 

[Signature Page to
Asset Purchase Agreement]

 

 

DISCLOSURE SCHEDULE

 

of

 

DVO — EXTREMITY SOLUTIONS, LLC, as Seller

 

pursuant to the

 

ASSET PURCHASE AGREEMENT

 

among

 

SELLER,

 

DVO ACQUISITION, INC., as BUYER

 

and

 

TORNIER B.V., as PARENT

 

 

Dated effective as of March 5, 2007

 

 

Exhibit A

 

[FORM OF SELLER INVESTMENT LETTER]

 

                                        ,
200  

 

Tornier
B.V.

7716 Golden Triangle Drive 

Eden Prairie, MN 55344

 

Attention:
Chief Executive Officer

 

Dear
Sir:

 

This
letter (this “Seller Investment Letter”) is
being delivered by the undersigned, DVO Extremity Solutions, LLC, an Indiana
limited liability company (“Seller”), in
connection with the Asset Purchase Agreement, dated March 5, 2007, among
DVO, Tornier B.V., a private company with limited liability organized under the
laws of the Netherlands (“Parent”) and
DVO

 

Acquisition, Inc.,
a Delaware corporation (“Buyer”) and
wholly owned subsidiary of Parent (the “Purchase Agreement”).  Pursuant to the Purchase Agreement, Buyer has
acquired substantially all of the assets of Seller in exchange for cash
consideration.  Subsequent to the Closing
Date and following each of the Initial Revenue Period and the Secondary Revenue
Period, Seller has the option to purchase a number of shares of the common stock,
par value EUR 0.01 per share, of Parent (“Common Shares”)
in exchange for cash, and Seller desires to exercise this option in accordance
with the Purchase Agreement.  Pursuant to
the Purchase Agreement, the delivery of this Seller Investment Letter is a
condition to Parent’s obligation to issue the Common Shares.

 

Seller
hereby certifies that Seller is an accredited investor under Rule 501(a) promulgated
under the Securities Act of 1933, as amended (the “Securities
Act”) based on the criteria checked below:

 

o                                    (1)           A bank, savings and loan association
or similar institution, as defined in the Securities Act, whether acting in its
individual or fiduciary capacity.

 

o                                    (2)           A broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934,
as amended.

 

o                                    (3)           An insurance company as
defined in the Securities Act.

 

o                                    (4)           An investment company
registered under the Investment Company Act of 1940, as amended (the “’40 Act”).

 

o                                    (5)           A business development
company as defined in the ‘40 Act.

 

o                                    (6)           A private business
development company as defined in the Investment Advisors Act of 1940.

 

 

o                                    (7)           A Small Business Investment
Company licensed by the U.S. Small Business Administration under the Small
Business Investment Act of 1958.

 

o                                    (8)           An organization described in
Section 501(c)(3) of the Internal Revenue Code, corporation,
Massachusetts or similar business trust, or partnership, not formed for the
specific purpose of acquiring the securities offered, with total assets in
excess of U.S. $5,000,000.

 

o                                    (9)           A plan established and maintained
by a state, its political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of $5,000,000.

 

o                                    (10)         An employee benefit plan
within the meaning of Title I of the Employment Retirement Income Security Act
of 1974, if the investment decision is made by a plan fiduciary, as defined in
such Act, which is either a bank, savings and loan association, insurance
company, or registered investment advisor, or if the employee benefit plan has
total assets in excess of $5,000,000, or if a self-directed plan, the
investment decisions are made solely by persons that are accredited investors.

 

o                                    (11)         A trust with total assets in
excess of $5,000,000, not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a “sophisticated” person as
defined in the Securities Act.

 

o                                    (12)         An entity in which all of
the equity owners are “accredited investors” as defined in the Securities Act.

 

Seller does hereby further certify as follows:

 

(1)           Seller has been
advised that the Common Shares have not been registered under the Securities
Act or applicable state securities laws, and are “restricted securities” as
that term is defined in Rule 144 under the Securities Act, in reliance on
exemptions from registration which depend, in part, on Seller’s investment
intention; and, accordingly, the truth and accuracy of the representations set
forth in this Seller Investment Letter will be relied upon by Parent to
establish such exemptions.

 

(2)           Seller is
acquiring the Common Shares for investment for Seller’s own account.  Seller agrees not to dispose of any Common
Shares in any manner that would violate the Securities Act or any applicable rule or
regulation promulgated thereunder. 
Seller acknowledges that Parent is not required to recognize any
transfer of the Common Shares if, in the opinion of counsel to Parent, such
transfer would result in a violation of any federal or state law regarding the
offer and sale of securities.

 

(3)           Seller has been
advised that the Common Shares are restricted securities and must be held by
Seller indefinitely unless (i) the disposition of the Common Shares has
been registered under the Securities Act and any applicable state securities
laws, (ii) a sale of such 

 

2

 

Common
Shares is made in conformity with the limitations of Rule 144 or Rule 145
under the Securities Act, as applicable, or (iii) Parent shall have
received an opinion of counsel satisfactory to Parent to the effect that some
other exemption from registration is available with respect to such
disposition.

 

(4)           Seller further
agrees that the certificate or certificates representing such Common Shares,
may bear, to the extent practicable, an appropriate legend restricting the
transfer of such Common Shares under the Securities Act and that stop-transfer
instructions may be filed with respect to such shares with the transfer agent
for the Common Shares.  It is understood
and agreed that the legend shall be removed by delivery of substitute
certificates without such legend if Seller shall have delivered to Parent an
opinion of counsel in form and substance reasonably satisfactory to Parent, to
the effect that such legend is not required for purposes of the Securities Act
or that the sale of Common Shares is in conformity with the provisions of Rule 144
or Rule 145, as applicable, promulgated under the Securities Act.

 

(5)           Seller’s
knowledge and experience in financial and business matters is such that Seller
is capable of evaluating the merits and risks of any investment decision
involved in the making of such agreement. 
Seller’s commitment to investments that are not readily marketable is
not disproportionate to his or her net worth, and an investment in the Common
Shares will not cause such commitment to become excessive.  Seller has adequate means of providing for
its investment in the Common Shares, and can withstand a complete loss of such
investment in the Common Shares.  Seller
also acknowledges that Seller has received or that Parent has made available to
Seller all information necessary to make any such investment decision,
including the information provided pursuant to Section 7.9 of the Purchase
Agreement.  Seller has carefully reviewed
such information and been given the opportunity to ask questions of, and
receive answers from, representatives of Parent with respect to such
information prior to the making of any investment decision.

 

(6)           Seller is an “accredited
investor” within the meaning of Rule 501(a) promulgated under the
Securities Act and Seller has checked the applicable box providing the basis
for such accredited investor status as set forth above.  The information presented in above and
statements made by Seller and any additional information supplied by Seller at
Parent’s request relating to Seller’s income, net worth, investment experience
or other matters, are complete and accurate as of this date or any future date
upon which such information will be supplied, and may be relied upon by Parent
in determining whether to issue the Common Shares to Seller.

 

(7)           Seller agrees
to indemnify and hold Parent harmless from any liability, loss or expense
(including reasonable attorneys’ fees) if Seller, alone or with others,
defaults in any of the foregoing representations or warranties.

 

(8)           Seller
understands that no federal or state agency has made any finding or
determination as to the fairness for investment, nor any recommendation or endorsement,
of the Common Shares.

 

3

 

(9)           Seller has
carefully read this Seller Investment Letter and has discussed the limitations
upon Seller’s ability to dispose of Common Shares with Seller’s counsel, to the
extent Seller has felt necessary.

 

(10)         Execution and
delivery of this Seller Investment Letter by Seller have been duly authorized
by all necessary corporate action, and this Seller Investment Letter has been
duly executed and delivered by a duly authorized representative of Seller.

 

	
   

  	
  Sincerely,

  

 

4

 

Exhibit B

 

JOINDER AGREEMENT

 

This
JOINDER AGREEMENT (this “Agreement”), dated as of this    day
of
                              ,
2007, is entered into by and among Tornier B.V., a private company with limited
liability organized under the laws of the Netherlands, with corporate seat in
Amsterdam (the “Company”), and DVO — Extremity Solutions, LLC, an
Indiana limited liability company (“Stockholder”).

 

WHEREAS,
DVO Acquisition, Inc., a Delaware corporation, and indirect wholly owned
subsidiary of the Company (“Buyer”), purchased substantially all the
assets of Stockholder pursuant to that certain Asset Purchase Agreement, dated
as of March 5, 2007, by and among the Company, Buyer and Stockholder (the “APA”);

 

WHEREAS,
pursuant to the APA, Stockholder has the option, which it now desires to
exercise, to purchase “Initial Common Shares” (as defined in the APA), and
Stockholder has the opportunity and may desire to purchase, at its option and
pursuant to the terms of the APA, “Subsequent Common Shares” (as defined in the
APA) at certain future dates (the Initial Common Shares together with the
Subsequent Common Shares, the “Stock”);

 

WHEREAS,
pursuant to the APA, it is a condition to the Company’s obligation to issue the
Initial Common Shares and the Subsequent Common Shares that Stockholder enter
into and be bound by the terms and conditions of this Agreement; and

 

WHEREAS,
Stockholder desires to enter into and be bound by the terms and conditions of
this Agreement.

 

NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:

 

1.             Joinder to Securityholders
Agreement.  Stockholder
agrees to observe and to be bound by all the terms and conditions of that
certain Securityholders Agreement, dated as of July 18, 2006, by and among
the Investors (as defined therein) and the Company (the “Securityholders
Agreement”) with the intent and effect that Stockholder shall (with effect
from the date on which the Initial Common Shares was issued to Stockholder) be
deemed to be a party to the Securityholders Agreement, with the benefit of, but
subject to, all the terms and conditions thereof (except that Stockholder shall
be permitted to Transfer any Securities to one or more members of Stockholder
who is a member of Stockholder on the Closing Date (as defined in the APA),
provided (a) such transfer is a distribution in accordance with the
operating agreement, as amended, of Stockholder, (b) such transfers are
made in accordance with the terms and conditions of the Securityholders
Agreement, (c) such members agree in writing to be bound by the terms of
this Agreement, and (d) any such members execute an adherence agreement,
the form of which is attached to the Securityholders Agreement, making them
party to the Securityholders Agreement). 
Stockholder further agrees and acknowledges that it will be deemed to be
a “Co-Investor” and the Stock shall be deemed to be “Securities” for the
purposes of the Securityholders Agreement. 
For the purpose of delivery of notices under the Securityholders
Agreement and for service of process, the address of Stockholder is set forth
on 

 

 

Schedule
A to this Agreement.  Except as
expressly modified by this Agreement, all of the terms, covenants, agreements,
conditions and other provisions of the Securityholders Agreement shall remain
in full force and effect in accordance with its terms.

 

2.             “Market
Stand-off”.  Stockholder
agrees, if requested by the Company and an underwriter of equity securities of
the Company, not to lend, offer, pledge, sell, contract to sell, grant any
option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any of the Stock, or enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Stock, during the 180-day period following the
effective date of a registration statement of the Company filed under the
Securities Act of 1933, as amended, or the securities laws of any non-U.S.
jurisdiction. If requested by the underwriters, Stockholder shall execute a
separate agreement to the foregoing effect. 
The Company may impose stop-transfer instructions with respect to the
Stock subject to the foregoing restrictions until the end of said 180-day period.  The provisions of this Section 2 shall
be binding upon any transferee who acquires any of the Stock and concurrently
with any transfer of Stock, the transferee shall agree in writing to be bound
by the terms and conditions of this Section 2.

 

3.             Governing Law and Jurisdiction.  Except for Section 2, which shall be
governed by the laws of the State of New York, this Agreement and the rights
and obligations of the parties hereunder and the persons subject hereto shall
be governed by, and construed and interpreted in accordance with, the laws of
the Netherlands, without giving effect to the choice of law principles thereof.

 

4.             Certain Defined Terms.  Capitalized terms used in this Agreement but
not defined in this Agreement shall have the meaning ascribed to them in the
Securityholders Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

2

 

IN
WITNESS WHEREOF, the undersigned has executed this Joinder Agreement as of the
date first above written.

 

	
   

  	
  TORNIER
  B.V.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Douglas
  W. Kohrs

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DVO —
  EXTREMITY SOLUTIONS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Rod
  Mayer

  
	
   

  	
   

  	
  Title:

  	
  President
  and Chief Executive Officer

  

 

 

[signature page to DVO Joinder Agreement]

 

 

Exhibit C

 

[FORM OF MEMBER INVESTMENT LETTER]

 

                                        ,
200  

 

Tornier
B.V.

7716 Golden Triangle Drive 

Eden Prairie, MN 55344

Attention: Chief Executive Officer

 

Dear
Sir:

 

This
letter (this “Member Investment Letter”) is being
delivered by the undersigned member (“Member”) of DVO
— Extremity Solutions, LLC, an Indiana limited liability company (“Seller”), in connection with the Asset Purchase Agreement,
dated March 5, 2007, among DVO, Tornier B.V., a private company with limited
liability organized under the laws of the Netherlands (“Parent”)
and DVO Acquisition, Inc., a Delaware corporation (“Buyer”)
and wholly owned subsidiary of Parent (the “Purchase
Agreement”).  Pursuant to the
Purchase Agreement, Buyer has acquired substantially all of the assets of
Seller in exchange for cash consideration. 
Subsequent to the Closing Date, Parent issued to Seller a number of
shares of its common stock, par value EUR 0.01 per share, of Parent (“Common Shares”) in exchange for cash.  Pursuant to the Purchase Agreement, Seller
agreed to transfer the Common Shares only to certain Permitted Transferees who
have executed and delivered this Member Investment Letter to Buyer.  Member is delivering this letter in
satisfaction of such condition.

 

Member
hereby certifies that Member is an accredited investor under Rule 501(a) promulgated
under the Securities Act of 1933, as amended (the “Securities
Act”) based on the criteria checked below.

 

A.                                   Member is an
individual (a natural person), and the following criteria (indicated by a
check), if any, apply:

 

o                                    (1)           Individual
income in excess of $200,000 in each of the two most recent years or joint
income (with such Member’s spouse) in excess of $300,000 in each of those years
and a reasonable expectation of reaching the same income level in the current
year.

 

o                                    (2)           Individual net
worth, or joint net worth (with Member’s spouse) in excess of $1,000,000.

 

o                                    (3)           A director or executive
officer of Parent.

 

 

B.                                     Member is a
legal entity (other than a natural person), and the following criteria
(indicated by a check), if any, apply:

 

o                                    (1)           A bank, savings and loan
association or similar institution, as defined in the Securities Act, whether
acting in its individual or fiduciary capacity.

 

o                                    (2)           A broker or dealer
registered pursuant to Section 15 of the Securities Exchange Act of 1934,
as amended.

 

o                                    (3)           An insurance company as
defined in the Securities Act.

 

o                                    (4)           An investment company
registered under the Investment Company Act of 1940, as amended (the “‘40 Act”).

 

o                                    (5)           A business development
company as defined in the ‘40 Act.

 

o                                    (6)           A private business
development company as defined in the Investment Advisors Act of 1940.

 

o                                    (7)           A Small Business Investment
Company licensed by the U.S. Small Business Administration under the Small
Business Investment Act of 1958.

 

o                                    (8)           An organization described in
Section 501(c)(3) of the Internal Revenue Code, corporation,
Massachusetts or similar business trust, or partnership, not formed for the
specific purpose of acquiring the securities offered, with total assets in
excess of U.S. $5,000,000.

 

o                                    (9)           A plan established and
maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of $5,000,000.

 

o                                    (10)         An employee benefit plan
within the meaning of Title I of the Employment Retirement Income Security Act
of 1974, if the investment decision is made by a plan fiduciary, as defined in
such Act, which is either a bank, savings and loan association, insurance
company, or registered investment advisor, or if the employee benefit plan has
total assets in excess of $5,000,000, or if a self-directed plan, the
investment decisions are made solely by persons that are accredited investors.

 

o                                    (11)         A trust with total assets in
excess of $5,000,000, not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a “sophisticated” person as
defined in the Securities Act.

 

o                                    (12)         An entity in which all of
the equity owners are “accredited investors” as defined in the Securities Act.

 

3

 

Member
does hereby further certify as follows:

 

(1)           Member has been
advised that the Common Shares which Member may receive as a distribution or
transfer from Seller, have not been registered under the Securities Act or
applicable state securities laws, and are “restricted securities” as that term
is defined in Rule 144 under the Securities Act, in reliance on exemptions
from registration which depend, in part, on Member’s investment intention; and,
accordingly, the truth and accuracy of the representations set forth in this
Member Investment Letter will be relied upon by Parent to establish such
exemptions.

 

(2)          Member is
acquiring the Common Shares for investment for Member’s own account.  Member agrees not to dispose of any Common
Shares in any manner that would violate the Securities Act or any applicable rule or
regulation promulgated thereunder. 
Member acknowledges that Parent is not required to recognize any
transfer of the Common Shares if, in the opinion of counsel to Parent, such
transfer would result in a violation of any federal or state law regarding the
offer and sale of securities.

 

(3)           Member has been
advised that the Common Shares are restricted securities and must be held by
Member indefinitely unless (i) the disposition of the Common Shares has
been registered under the Securities Act and any applicable state securities laws,
(ii) a sale of such Common Shares is made in conformity with the
limitations of Rule 144 or Rule 145 under the Securities Act, as
applicable, or (iii) Parent shall have received an opinion of counsel
satisfactory to Parent to the effect that some other exemption from
registration is available with respect to such disposition.

 

(4)           Member further
agrees that the certificate or certificates representing such Common Shares,
may bear, to the extent practicable, an appropriate legend restricting the
transfer of such Common Shares under the Securities Act and that stop-transfer
instructions may be filed with respect to such shares with the transfer agent
for the Common Shares.  It is understood
and agreed that the legend shall be removed by delivery of substitute
certificates without such legend if Member shall have delivered to Parent an
opinion of counsel in form and substance reasonably satisfactory to Parent, to
the effect that such legend is not required for purposes of the Securities Act
or that the sale of Common Shares is in conformity with the provisions of Rule 144
or Rule 145, as applicable, promulgated under the Securities Act.

 

(5)           Member’s
knowledge and experience in financial and business matters is such that Member
is capable of evaluating the merits and risks of any investment decision
involved in the making of such agreement. 
Member’s commitment to investments that are not readily marketable is
not disproportionate to his or her net worth, and an investment in the Common
Shares will not cause such commitment to become excessive.  Member has adequate means of providing for
his or her investment in the Common Shares, and can withstand a complete loss 

 

4

 

of
such investment in the Common Shares. 
Member also acknowledges that Member has received or that Parent has
made available to Member all information necessary to make any such investment
decision, including the information provided pursuant to Section 7.9 of
the Purchase Agreement.  Member has carefully
reviewed such information and been given the opportunity to ask questions of,
and receive answers from, representatives of Parent with respect to such
information prior to the making of any investment decision.

 

(6)           Member is an “accredited
investor” within the meaning of Rule 501(a) promulgated under the
Securities Act and Member has checked the applicable box providing the basis
for such accredited investor status as set forth above.  The information presented in above and
statements made by Member and any additional information supplied by Member at
Parent’s request relating to Member’s income, net worth, investment experience
or other matters, are complete and accurate as of this date or any future date
upon which such information will be supplied, and may be relied upon by Parent
in determining whether to permit the transfer of Common Shares from Seller to
Member.

 

(7)           Member has
attained the age of majority (as established in his or her state of domicile),
and in any event, is under no disability with respect to entering into a
contractual relationship with Parent and in executing this Member Investment
Letter.

 

(8)           Member agrees
to indemnify and hold Parent harmless from any liability, loss or expense
(including reasonable attorneys’ fees) if Member, alone or with others,
defaults in any of the foregoing representations or warranties.

 

(9)           Member
understands that no federal or state agency has made any finding or
determination as to the fairness for investment, nor any recommendation or
endorsement, of the Common Shares.

 

(10)         Member has
carefully read this Member Investment Letter and has discussed the limitations
upon Member’s ability to dispose of Common Shares with Member’s counsel, to the
extent Member has felt necessary.

 

(11)         For any Member that
is not a natural person, execution and delivery of this Member Investment
Letter by Member has been duly authorized by all necessary corporate action,
and this Member Investment Letter has been duly executed and delivered by a
duly authorized representative of Member.

 

Member
further agrees to enter into an adherence agreement, the form of which is
attached to that certain Securityholders Agreement, dated as of July 18,
2006, by and among the Investors (as defined therein) and Parent (the “Securityholders Agreement”) with the intent and effect that
Member shall undertake to observe and be bound by all the terms and conditions
of the Securityholders Agreement.

 

Member
further agrees, if requested by Parent and an underwriter of equity securities
of the Parent, not to lend, offer, pledge, sell, contract to sell, grant any
option, right or warrant to 

 

5

 

purchase,
or otherwise transfer or dispose of, directly or indirectly, any of the Common
Shares, or enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of the
Common Shares, during the 180-day period following the effective date of a
registration statement of Parent filed under the Securities Act, or the
securities laws of any non-U.S. jurisdiction. 
If requested by the underwriters, Member shall execute a separate
agreement to the foregoing effect.  Parent
may impose stop-transfer instructions with respect to the Common Shares subject
to the foregoing restrictions until the end of said 180-day period.  The provisions of this paragraph shall be
binding upon any transferee who acquires any of the Common Shares and
concurrently with any transfer of the Common Shares, the transferee shall agree
in writing to be bound by the terms and conditions of this paragraph.  Member agrees that this paragraph shall be
governed by the laws of the State of New York.

 

	
   

  	
  Sincerely,

  

 

6

 

Exhibit D

 

[FORM OF BILL OF SALE AND ASSUMPTION ASSIGNMENT]

 

BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT

 

DVO
— Extremity Solutions, LLC, an Indiana limited liability company (“Seller”), hereby sells, conveys, transfers and assigns to
DVO Acquisition, Inc., a Delaware corporation (“Buyer”)
and wholly owned indirect subsidiary Tornier B.V., a private company with
limited liability organized under the laws of the Netherlands (“Parent”), and Buyer hereby purchases, acquires and accepts
from Seller, Seller’s entire right, title and interest in and to the Assets, as
defined in that certain Asset Purchase Agreement dated as of March , 2007
among Seller, Buyer and Parent (the “Purchase Agreement”),
to have and to hold forever, to Buyer, its successors and assigns.

 

Seller
hereby transfers to Buyer, and Buyer hereby assumes and agrees to pay, perform
and discharge when due, the Assumed Liabilities but does not assume or have any
responsibility or liability for any Excluded Liabilities.

 

This
Bill of Sale, Assignment and Assumption Agreement (the “Agreement”)
is delivered pursuant to the Purchase Agreement and is subject in all respects
to the terms of the Purchase Agreement. 
All capitalized terms used in this Agreement, but not defined in this
Agreement, shall have the meaning assigned to them in the Purchase Agreement.

 

IN
WITNESS WHEREOF, Seller, Buyer and Parent have executed this instrument this
             day of
                    ,
2007.

 

	
   

  	
  DVO —
  EXTREMITY SOLUTIONS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Its

  	
   

  
	
   

  	
   

  
	
   

  	
  DVO
  ACQUISITION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Its

  	
   

  
	
   

  	
   

  
	
   

  	
  TORNIER
  B.V.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  ItsExhibit
10.13

 

MERGER AGREEMENT

 

BY AND AMONG

 

NEXA ORTHOPEDICS, INC.,

 

TORNIER US HOLDINGS, INC.

 

AND

 

NEXA ACQUISITION, INC.

 

Dated as of January 22, 2007

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  THE MERGER

  	
  2

  
	
   

  	
  1.1

  	
  The Merger

  	
  2

  
	
   

  	
  1.2

  	
  The Closing

  	
  2

  
	
   

  	
  1.3

  	
  Effective Time

  	
  2

  
	
   

  	
  1.4

  	
  Effect of the Merger

  	
  2

  
	
   

  	
  1.5

  	
  Effect on Capital Stock

  	
  2

  
	
   

  	
  1.6

  	
  Surrender of Securities; Funding of Payments; Stock
  Transfer Books

  	
  4

  
	
   

  	
  1.7

  	
  Certificate of Incorporation of Surviving Corporation

  	
  6

  
	
   

  	
  1.8

  	
  Bylaws of the Surviving Corporation

  	
  6

  
	
   

  	
  1.9

  	
  Directors and Officers of the Surviving Corporation

  	
  6

  
	
   

  	
  1.10

  	
  Payment of NEXA Indebtedness

  	
  6

  
	
   

  	
  1.11

  	
  Restricted Stock

  	
  7

  
	
   

  	
  1.12

  	
  Additional Actions

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  REPRESENTATIONS AND WARRANTIES OF NEXA

  	
  7

  
	
   

  	
  2.1

  	
  Corporate Organization and Authorization

  	
  7

  
	
   

  	
  2.2

  	
  NEXA Capital Stock

  	
  8

  
	
   

  	
  2.3

  	
  NEXA Subsidiaries

  	
  9

  
	
   

  	
  2.4

  	
  Organization, Existence and Good Standing of NEXA
  Subsidiaries

  	
  9

  
	
   

  	
  2.5

  	
  Noncontravention; Consents

  	
  10

  
	
   

  	
  2.6

  	
  Financial Statements

  	
  10

  
	
   

  	
  2.7

  	
  No Material Adverse Changes; Absence of Undisclosed
  Liabilities

  	
  11

  
	
   

  	
  2.8

  	
  Legal Proceedings

  	
  11

  
	
   

  	
  2.9

  	
  Contracts, etc.

  	
  11

  
	
   

  	
  2.10

  	
  Subsequent Events

  	
  13

  
	
   

  	
  2.11

  	
  Inventories

  	
  15

  
	
   

  	
  2.12

  	
  Taxes

  	
  15

  
	
   

  	
  2.13

  	
  Commissions and Fees

  	
  16

  
	
   

  	
  2.14

  	
  Employee Benefit Plans; Employment Matters

  	
  16

  
	
   

  	
  2.15

  	
  Compliance with Laws in General

  	
  18

  
	
   

  	
  2.16

  	
  Intellectual Property

  	
  18

  
	
   

  	
  2.17

  	
  Insurance

  	
  21

  
	
   

  	
  2.18

  	
  Properties

  	
  21

  
	
   

  	
  2.19

  	
  Environmental Matters

  	
  22

  
	
   

  	
  2.20

  	
  Vote Required

  	
  23

  
	
   

  	
  2.21

  	
  Regulatory; FDA

  	
  24

  
	
   

  	
  2.22

  	
  Sufficiency and Title - NEXA Assets

  	
  26

  
	
   

  	
  2.23

  	
  Customers and Suppliers

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUBSIDIARY
  AND ACQUIROR

  	
  27

  
	
   

  	
  3.1

  	
  Organization, Existence and Capital Stock

  	
  27

  
	
   

  	
  3.2

  	
  Authorization of Agreement

  	
  27

  

 

 

	
   

  	
  3.3

  	
  Non-Contravention; Consents

  	
  28

  
	
   

  	
  3.4

  	
  Commissions and Fees

  	
  29

  
	
   

  	
  3.5

  	
  No Subsidiaries

  	
  29

  
	
   

  	
  3.6

  	
  No Prior Activities

  	
  29

  
	
   

  	
  3.7

  	
  Financing

  	
  29

  
	
   

  	
  3.8

  	
  Legal Proceedings

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  COVENANTS

  	
  29

  
	
   

  	
  4.1

  	
  Preservation of Business

  	
  29

  
	
   

  	
  4.2

  	
  Acquisition Proposals; No Solicitation

  	
  31

  
	
   

  	
  4.3

  	
  Stockholder Notices

  	
  31

  
	
   

  	
  4.4

  	
  Exemption from State Takeover Laws

  	
  32

  
	
   

  	
  4.5

  	
  Access to Information; Confidentiality

  	
  32

  
	
   

  	
  4.6

  	
  Regulatory Compliance

  	
  32

  
	
   

  	
  4.7

  	
  Accounting Methods

  	
  32

  
	
   

  	
  4.8

  	
  No Hire; Non-Solicitation

  	
  32

  
	
   

  	
  4.9

  	
  Public Disclosures

  	
  33

  
	
   

  	
  4.10

  	
  Indemnification of Directors and Officers; Insurance

  	
  33

  
	
   

  	
  4.11

  	
  Representations and Warranties Insurance

  	
  33

  
	
   

  	
  4.12

  	
  Reasonable Efforts

  	
  34

  
	
   

  	
  4.13

  	
  Resignation of NEXA Directors

  	
  34

  
	
   

  	
  4.14

  	
  Notice of Subsequent Events

  	
  34

  
	
   

  	
  4.15

  	
  Employment; Employee Welfare

  	
  34

  
	
   

  	
  4.16

  	
  Guarantee of Acquisition Subsidiary’s Obligations

  	
  35

  
	
   

  	
  4.17

  	
  Form 5471

  	
  35

  
	
   

  	
  4.18

  	
  Accrued Bonuses

  	
  36

  
	
   

  	
  4.19

  	
  Employee Notes Receivable

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  CONDITIONS TO CLOSING; CLOSING DELIVERABLES

  	
  36

  
	
   

  	
  5.1

  	
  Mutual Conditions

  	
  36

  
	
   

  	
  5.2

  	
  Conditions to Obligations of ACQUIROR and Acquisition
  Subsidiary

  	
  36

  
	
   

  	
  5.3

  	
  Conditions to Obligations of NEXA

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  TERMINATION

  	
  38

  
	
   

  	
  6.1

  	
  Termination

  	
  38

  
	
   

  	
  6.2

  	
  Effect of Termination

  	
  39

  
	
   

  	
  6.3

  	
  Procedure for Termination

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  MISCELLANEOUS

  	
  40

  
	
   

  	
  7.1

  	
  Expenses

  	
  40

  
	
   

  	
  7.2

  	
  Amendment

  	
  40

  
	
   

  	
  7.3

  	
  Extension; Waiver

  	
  40

  
	
   

  	
  7.4

  	
  Nonsurvival of Representations and Warranties

  	
  41

  
	
   

  	
  7.5

  	
  Notices

  	
  41

  
	
   

  	
  7.6

  	
  Governing Law; Venue

  	
  42

  
	
   

  	
  7.7

  	
  Certain Definitions

  	
  42

  

 

ii

 

	
   

  	
  7.8

  	
  Captions

  	
  44

  
	
   

  	
  7.9

  	
  Integration of Disclosure Schedules and Exhibits

  	
  44

  
	
   

  	
  7.10

  	
  Entire Agreement; Assignment

  	
  44

  
	
   

  	
  7.11

  	
  Enforcement of the Agreement

  	
  44

  
	
   

  	
  7.12

  	
  Validity

  	
  44

  
	
   

  	
  7.13

  	
  Counterparts

  	
  44

  
	
   

  	
  7.14

  	
  No Rule of Construction

  	
  44

  
	
   

  	
  7.15

  	
  Parties in Interest

  	
  45

  
	
   

  	
  7.16

  	
  Performance By Acquisition Subsidiary

  	
  45

  

 

iii

 

SCHEDULES

 

	
  Schedule
  1.5

  	
   

  	
  Indebtedness

  
	
  Schedule 2.2

  	
   

  	
  NEXA
  Capital Stock

  
	
  Schedule 2.3

  	
   

  	
  NEXA
  Subsidiaries

  
	
  Schedule
  2.4

  	
   

  	
  Organization,
  Existence and Good Standing of NEXA Subsidiaries

  
	
  Schedule 2.5(a)

  	
   

  	
  Noncontravention;
  Consents

  
	
  Schedule
  2.6

  	
   

  	
  Financial
  Statements

  
	
  Schedule 2.7

  	
   

  	
  No
  Material Adverse Changes; No Indebtedness

  
	
  Schedule 2.8

  	
   

  	
  Legal
  Proceedings

  
	
  Schedule 2.9

  	
   

  	
  Contracts

  
	
  Schedule 2.10

  	
   

  	
  Subsequent
  Events

  
	
  Schedule 2.11

  	
   

  	
  Inventories

  
	
  Schedule 2.12

  	
   

  	
  Tax
  Returns

  
	
  Schedule 2.14(a)

  	
   

  	
  Employee
  Benefit Plans; Employment Matters

  
	
  Schedule
  2.15

  	
   

  	
  Compliance
  with Laws in General

  
	
  Schedule 2.16(a) -
  (h)

  	
   

  	
  Intellectual
  Property

  
	
  Schedule 2.17

  	
   

  	
  Insurance

  
	
  Schedule 2.18

  	
   

  	
  Properties

  
	
  Schedule 2.19(a) and
  (b)

  	
   

  	
  Environmental
  Matters

  
	
  Schedule
  2.21

  	
   

  	
  FDA
  and Regulatory

  
	
  Schedule
  2.23

  	
   

  	
  Customers
  and Suppliers

  
	
  Schedule
  4.1

  	
   

  	
  Preservation
  of Business

  
	
  Schedule 4.15

  	
   

  	
  Employment;
  Employee Welfare

  
	
  Schedule
  5.2(i)

  	
   

  	
  Required
  Consents

  

 

EXHIBITS

 

	
  Exhibit A

  	
   

  	
  Certificate
  of Merger

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Amendment
  to Nichols Employment Agreement

  

 

iv

 

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER (the “Agreement”), made and
entered into as of the 22nd day of January, 2007, by and
among TORNIER US HOLDINGS, INC., a
Delaware corporation (“ACQUIROR”), NEXA ACQUISITION, INC.,
a Delaware corporation (“Acquisition Subsidiary”), and NEXA
ORTHOPEDICS, INC., a Delaware corporation (“NEXA”).

 

W I T N E S S E T H:

 

WHEREAS, the Board of Directors of each of ACQUIROR and
NEXA has determined that a business combination between ACQUIROR and NEXA is in
the best interests of their respective companies and stockholders;

 

WHEREAS, the respective Boards of Directors of ACQUIROR,
Acquisition Subsidiary and NEXA believe that a merger of Acquisition Subsidiary
with and into NEXA (the “Merger”), upon the terms and conditions set forth in
this Agreement, whereby each share of Common Stock (as hereinafter defined) and
Preferred Stock (as hereinafter defined) of NEXA (collectively, the “NEXA
Shares”), except Dissenting Shares (as hereinafter defined), will be converted
into the right to receive the Per Preferred Share Price or the Per Common Share
Price (each as hereinafter defined) is in the best interests of their
respective companies;

 

WHEREAS, the Board of Directors of NEXA has unanimously
determined that the Merger is fair to, and in the best interests of, NEXA and
its stockholders, has approved and adopted this Agreement, has approved the
Merger and other transactions contemplated hereby, and has recommended approval
and adoption of this Agreement by the stockholders of NEXA;

 

WHEREAS, HealthpointCapital Partners, L.P. (“HealthpointCapital”),
as a holder of Series A Preferred Stock and Class A Common Stock (as
hereinafter defined) of NEXA, has executed a written consent (the “Written
Consent”) for the purpose of consenting to and approving this Agreement, the
Merger and the transactions contemplated hereby;

 

WHEREAS, the Board of Directors of each of ACQUIROR and
Acquisition Subsidiary has approved and adopted this Agreement, including, in
the case of ACQUIROR, as the sole stockholder of Acquisition Subsidiary, and
the other transactions contemplated hereby; and

 

WHEREAS, each of ACQUIROR, Acquisition Subsidiary and NEXA
desire to make certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various conditions to the
Merger.

 

NOW, THEREFORE, in consideration of the premises, and the
mutual covenants and agreements contained herein, the parties hereto do hereby
agree as follows:

 

 

ARTICLE I

 

THE MERGER

 

1.1          The Merger.  Upon the
terms and conditions set forth in this Agreement, and in accordance with the
Delaware General Corporation Law (the “DGCL”), Acquisition Subsidiary shall be
merged with and into NEXA at the Effective Time (as defined in Section 1.3).  From and after the Effective Time, the
separate corporate existence of Acquisition Subsidiary shall cease and NEXA
shall continue as the surviving corporation (the “Surviving Corporation”) under
the name “Nexa Orthopedics, Inc.” and shall succeed to and assume all the
rights and obligations of Acquisition Subsidiary and NEXA in accordance with
the DGCL.

 

1.2          The Closing.  The
closing of the Merger (the “Closing”) will take place at 10:00 a.m.
Eastern Time at the offices of Willkie Farr & Gallagher LLP, 787
Seventh Avenue, New York, N.Y.  10019, on
the third business day after all the conditions to the obligations of the
parties to consummate the transactions contemplated hereby as set forth in Article V
have been satisfied or waived, or on such other mutually agreeable later date
as soon as practicable after the satisfaction or waiver of all conditions to
the obligations of the parties to consummate the transactions contemplated
hereby as set forth in Article V (the “Closing Date”).

 

1.3          Effective Time. 
Subject to the provisions of this Agreement, on the Closing Date the
parties shall file a certificate of merger substantially in the form attached
hereto as Exhibit A (the “Certificate of Merger”) executed in
accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL as soon as practicable on or
after the Closing Date.  The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Delaware Secretary of State, or at such other time as Acquisition
Subsidiary and NEXA shall agree should be specified in the Certificate of
Merger (the “Effective Time”).

 

1.4          Effect of the Merger.  From
and after the Effective Time, the Surviving Corporation shall possess all the
property, rights, privileges, powers and franchises and be subject to all of
the restrictions, debts, liabilities, disabilities, obligations and duties of
NEXA and Acquisition Subsidiary, and the Merger shall otherwise have the
effects set forth in Section 259 of the DGCL.

 

1.5          Effect on Capital Stock.  As of
the Effective Time, by virtue of the Merger and without any further action on
the part of the ACQUIROR, Acquisition Subsidiary, NEXA, the Surviving Corporation,
any holder of NEXA Shares or any holder of any shares of common stock, $0.01
par value, of Acquisition Subsidiary (the “Acquisition Subsidiary Stock”):

 

(a)           Acquisition Subsidiary Common Stock.  Each share of Acquisition Subsidiary Stock
issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable share of common stock, $0.01
par value, of the Surviving Corporation (the “Surviving Corporation Stock”).

 

(b)           Cancellation of Treasury Stock.  Each NEXA Share that is owned by NEXA or by
any NEXA Subsidiary (as hereinafter defined) shall automatically be 

 

2

 

canceled
and retired and shall cease to exist, and no cash or other consideration shall be
delivered in exchange therefor.

 

(c)           Conversion of
NEXA Shares.   Each issued and outstanding NEXA Share
(other than shares to be canceled in accordance with Section 1.5(b) and
Dissenting Shares (as defined below)) shall be canceled, extinguished and converted
into and become a right to receive the applicable cash amount per NEXA Share,
as described in subsections (ii) and (iii) below, without interest
thereon.

 

(i)            Merger Consideration; Net Merger
Consideration.  “Merger Consideration”
shall mean Seventy-Two Million Five Hundred Thousand Dollars
($72,500,000).  “Net Merger Consideration”
shall mean the Merger Consideration less (A) the
sum of the amount of (1) the Indebtedness of NEXA and the NEXA
Subsidiaries set forth in Schedule 1.5(c) of the NEXA Disclosure
Schedule (provided that the amounts of such Indebtedness set forth in Schedule
1.5(c) shall be adjusted to account for increases and decreases in
such amounts from November 30, 2006 until the Closing Date), (2) any
Distributor Change in Control Payments, (3) any NEXA Fees and Expenses and
(4) any Related Party Fees plus (B) the
sum (the “Additional Sum”) of the amount of (1) Restricted Cash and (2) any
cash on hand of NEXA and the NEXA Subsidiaries on the Closing Date.  Notwithstanding anything in this Agreement to
the contrary, in no event shall the consideration payable by ACQUIROR,
Acquisition Subsidiary or the Surviving Corporation in connection with the
Merger (including, without limitation, any amounts paid pursuant to Section 1.10
of this Agreement) exceed the Merger Consideration plus the Additional Sum on
the Closing Date.

 

(ii)           Preferred Stock.  Subject to Section 1.6(i), each
share of Preferred Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled pursuant to Section 1.5(b) and
Dissenting Shares) shall be converted into and become the right to receive out
of the Net Merger Consideration, without interest, $1,000 (the “Per Preferred
Share Price”).

 

(iii)          Common Stock.  Subject to Section 1.6(i), each
share of Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares to be canceled pursuant to Section 1.5(b) and
Dissenting Shares) shall be converted into and become the right to receive,
without interest, an amount equal to the Net Merger Consideration minus all
amounts payable under Section 1.5(c)(ii) divided by the number
of all of the shares of Common Stock issued and outstanding immediately prior
to the Effective Time (the “Per Common Share Price”).

 

(iv)          Delivery of Estimated Closing
Balance Sheet; Closing Certificate. 
Not more than five (5) days and not less than three (3) days
prior to the anticipated Closing Date, NEXA shall deliver (1) a
consolidated balance sheet of NEXA and the NEXA Subsidiaries estimated as of
the Closing Date, prepared in a manner consistent in all material respects with
the NEXA Balance Sheet (as defined herein) and certified by NEXA’s Chief
Financial Officer (the “Estimated 

 

3

 

Closing
Balance Sheet”) and (2) a statement, duly executed and certified by NEXA’s
Chief Financial Officer, which shall set forth the amount of each of (A) the
Net Merger Consideration, (B) the Indebtedness of NEXA and the NEXA
Subsidiaries set forth in Schedule 1.5(c) (as adjusted pursuant to Section 1.5(c)(i) above
and estimated as of the anticipated Closing Date), (C) the amount of any
Distributor Change in Control Payments, (D) the Per Preferred Share Price,
(E) the Per Common Share Price, (F) the estimated NEXA Fees and
Expenses and (G) the estimated Related Party Fees (the “Closing
Certificate”).

 

(d)           Dissenting Shares. 
Notwithstanding anything in this Agreement to the contrary, NEXA Shares
outstanding immediately prior to the Effective Time held by a holder (if any)
who is entitled to demand, and who properly demands, appraisal for such NEXA
Shares in accordance with Section 262 of the DGCL (“Dissenting Shares”)
shall not be converted into a right to receive the Per Preferred Share Price or
the Per Common Share Price, as applicable pursuant to Section 1.5(c) unless
such holder withdraws, fails to perfect or otherwise loses such holder’s right
to appraisal, if any.  Such stockholders
shall be entitled to receive payment of the appraised value of such NEXA Shares
held by them in accordance with the provisions of such Section 262 of the
DGCL.  If, after the Effective Time of
the Merger, such holder withdraws, fails to perfect or loses any such right to
appraisal, each such NEXA Share shall be treated as if it had been converted as
of the Effective Time into the right to receive the Per Preferred Share Price
or the Per Common Share Price, as applicable pursuant to Section 1.5(c).  NEXA shall give ACQUIROR (i) prompt
notice of any demands for appraisal of NEXA Shares received by NEXA and (ii) the
opportunity to participate in and direct all negotiations and proceedings with
respect to any such demands.  NEXA shall
not, without the prior written consent of ACQUIROR, make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such
demands.

 

1.6          Surrender of Securities; Funding of Payments; Stock
Transfer Books.

 

(a)           Paying Agent. 
Pursuant to a Paying Agent Services Agreement to be entered into among
NEXA, the ACQUIROR and a paying agent mutually acceptable to the parties hereto
(“Paying Agent”), at the Effective Time, the Surviving Corporation or ACQUIROR
shall remit to the Paying Agent an amount equal to the Net Merger Consideration
(including the applicable portion of the Net Merger Consideration for all
Dissenting Shares); which shall be the aggregate consideration necessary to pay
the amounts owed to the holders of the NEXA Shares pursuant to Sections 1.5(c)(ii) and
(iii) (the “Payment Fund”).  The
Payment Fund shall be held and managed by the Paying Agent in accordance with
the terms and conditions set forth in the Paying Agent Services Agreement for
the purpose of paying the Per Preferred Share Price or the Per Common Share
Price to the holders of NEXA Shares, as applicable.  The fees and expenses of the Paying Agent
shall be paid by ACQUIROR.

 

(b)           Payment to Registered Holders.  ACQUIROR agrees that, as soon as practicable
after the Effective Time and in no event later than five business days
thereafter, the Surviving Corporation shall use commercially reasonable efforts
to cause the Paying Agent to distribute to holders of record of the NEXA Shares
(as of the 

 

4

 

Effective
Time) payment out of the Payment Fund the Per Preferred Share Price or the Per
Common Share Price, as applicable, multiplied by the number of Preferred Shares
or Common Shares, as applicable, held by such holders of records, less any
amounts required to be withheld pursuant to Section 1.6(i).  In no event shall the holders of any NEXA
Shares be entitled to receive interest on any of the funds to be received by
such holder.

 

(c)           Payment to Non-Registered Holders.  If any portion of the Net Merger
Consideration is to be paid to a person other than the person who is the holder
of record of the NEXA Shares, it shall be a condition to such payment that the
person requesting such payment shall have paid any transfer and other Taxes
required by reason of such payment in a name other than that of the holder of
record of the NEXA Shares or shall have established to the satisfaction of the
Surviving Corporation and the Paying Agent that such Tax either has been paid
or is not payable.

 

(d)           Stock Transfer Books Closed.  At the Effective Time, the stock transfer
books of NEXA shall be closed and there shall not be any further registration
of transfers of NEXA Shares thereafter on the records of NEXA.

 

(e)           Permitted Investment of Payment Fund.  To the extent not immediately required for
payment on surrendered NEXA Shares, amounts in the Payment Fund shall be
invested by the Paying Agent, as directed by the Surviving Corporation (as long
as such directions do not impair the rights of holders of NEXA Shares), in
direct obligations of the United States of America, obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of principal and interest, commercial paper rated of the highest
investment quality by Moody’s Investors Service, Inc. or
Standard & Poor’s Ratings Group, or certificates of deposit issued by
a commercial bank having at least $5 billion in assets, and any net earnings
with respect thereto shall be paid to the Surviving Corporation as and when
requested by the Surviving Corporation.

 

(f)            No Dividends. 
After the Effective Time, no dividends, interest or other distributions
shall be paid to the holder of any NEXA Shares.

 

(g)           No Further Rights. 
After the Effective Time, holders of NEXA Shares shall cease to have any
rights as stockholders of NEXA, except the right to receive the Per Preferred
Share Price or the Per Common Share Price, as applicable, as provided herein or
under the DGCL.  No interest shall be
paid on any Merger Consideration payable to former holders of NEXA Shares.

 

(h)           Termination of Payment Fund.  Promptly following the six-month anniversary
date of the Effective Date, the Paying Agent shall return to the Surviving
Corporation all of the remaining Payment Fund, and the Exchange Agent’s duties
shall terminate.  Thereafter, each holder
of NEXA Shares may surrender the same to the Surviving Corporation and upon
such surrender (subject to applicable abandoned property, escheat or similar
laws) shall receive the applicable Per Preferred Share Price or Per Common
Share Price, as applicable. 
Notwithstanding the foregoing, neither the

 

5

 

Paying
Agent nor any party hereto shall be liable to any former holder of NEXA Shares
for any amount delivered to a public official pursuant to applicable abandoned
property, escheat or similar law.

 

(i)            Withholding Rights.  Each
of the Surviving Corporation and ACQUIROR shall be entitled to deduct and
withhold from the consideration otherwise payable to any such holder pursuant
to this Article I such amounts as it is required to deduct and withhold with
respect to the making of such payment under any provision of federal, state,
local or foreign Tax law.  If the
Surviving Corporation or ACQUIROR, as the case may be, so withholds amounts,
such amounts shall be treated for all purposes of this Agreement as having been
paid to such holder of NEXA Shares in respect of which the Surviving
Corporation or ACQUIROR, as the case may be, made such deduction and
withholding.

 

1.7          Certificate of Incorporation of Surviving Corporation.  At the
Effective Time, the Certificate of Incorporation of NEXA shall be amended to read
in its entirety as set forth on Schedule A to the Certificate of Merger.  The Certificate of Incorporation of NEXA, as
so amended shall be the Certificate of Incorporation of the Surviving
Corporation from and after the Effective Time and, subject to the limitations
set forth in Section 4.10, until thereafter amended as provided by law.

 

1.8          Bylaws of the Surviving Corporation.  Subject to
Section 4.10, the Bylaws of Acquisition Subsidiary shall be the Bylaws of the
Surviving Corporation from and after the Effective Time and until thereafter
altered, amended or repealed in accordance with the laws of the State of
Delaware and the Certificate of Incorporation of the Surviving Corporation.

 

1.9          Directors and Officers of the Surviving Corporation.  The directors
of Acquisition Subsidiary immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation.  The officers of NEXA immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, each to hold
office in accordance with the laws of the State of Delaware, the Certificate of
Incorporation and Bylaws of the Surviving Corporation.

 

1.10        Payment of NEXA Indebtedness.

 

(a)           Concurrently with the Closing, NEXA shall pay, or shall direct ACQUIROR
to pay on NEXA’s behalf, (i) any and all change in control payments or bonuses
owed to distributors of NEXA or any NEXA Subsidiary that are or will become
payable as a result of the transactions contemplated by this Agreement (“Distributor
Change in Control Payments”), (ii) any NEXA Fees and Expenses and (iii) any and
all Related Party Fees.  Any such
payments made pursuant to the foregoing sentence shall decrease, on a dollar
for dollar basis, the Merger Consideration.

 

(b)           “Indebtedness” of any person or entity shall mean (i) all accrued
interest, principal and other amounts payable for borrowed money, (ii) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services other 

 

6

 

than
trade accounts arising in the ordinary course of business, (iii) all
reimbursement obligations with respect to surety bonds, letters of credit (to
the extent not collateralized with cash or cash equivalents), bankers’
acceptances and similar instruments (in each case, whether or not matured),
(iv) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the
acquisition of property, assets or businesses and (v) all indebtedness
referred to in clauses (i) through (iv) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance upon or in property (including
accounts and contracts rights) owned by such person or entity, even though such
person or entity has not assumed or become liable for the payment of such
Indebtedness.  “Encumbrance” shall mean
any mortgage, pledge, charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership or
encumbrance of any kind.

 

1.11        Restricted Stock.  NEXA shall take all actions necessary and
required to provide that all shares of capital stock of NEXA that are subject
to vesting or repurchase rights, including any such shares held by Cecile Real
and Michel Hassler, shall vest immediately prior to the Effective Time, and
shall otherwise be treated as NEXA Shares for the purposes of this Agreement.

 

1.12        Additional Actions.

 

If,
at any time after the Effective Date, the Surviving Corporation shall consider
or be advised that any deeds, bills of sale, assignments, assurances or any
other actions or things are necessary or desirable to vest, perfect or confirm
of record or otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets of Acquisition
Subsidiary or NEXA or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of Acquisition Subsidiary or NEXA, all such
deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of Acquisition Subsidiary or NEXA, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out this Agreement.

 

ARTICLE II

 

REPRESENTATIONS
AND WARRANTIES OF NEXA

 

NEXA
represents and warrants, as of the date hereof, as follows:

 

2.1          Corporate Organization and Authorization.

 

(a)           NEXA is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.  NEXA has all necessary corporate power and
authority to execute and deliver this Agreement and each instrument 

 

7

 

required
hereby to be executed and delivered by it at the Closing, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.  The execution and delivery
of this Agreement by NEXA and each instrument required hereby to be executed
and delivered by it at the Closing and the consummation by NEXA of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action (including all necessary board and
stockholder approvals), and no other corporate proceedings on the part of NEXA are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the filing and
recordation of the Certificate of Merger as required by the DGCL).  This Agreement has been duly and validly
executed and delivered by NEXA and, assuming the due authorization, execution
and delivery by ACQUIROR and Acquisition Subsidiary, constitutes a legal, valid
and binding obligation of NEXA enforceable against NEXA in accordance with its
terms.

 

(b)           (i)            NEXA has all necessary corporate power and all requisite governmental
authorizations, certificates, licenses, consents and approvals required to own
its properties and assets and carry on its business as presently conducted,
except where the failure to possess such authorizations, certificates,
licenses, consents and approvals would not have a Material Adverse Effect on
NEXA (as defined below).  NEXA is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of the activities conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing
(either in one jurisdiction or in the aggregate) would not have a Material
Adverse Effect on NEXA (as defined below).

 

(ii)           For purposes of this Agreement, “Material Adverse Effect” shall mean with
respect to NEXA and the NEXA Subsidiaries any fact, event, change, circumstance
or effect that is or would reasonably be expected to be materially adverse to
the business, financial condition, operations, results of operations or assets
of NEXA and the NEXA Subsidiaries , taken as a whole, other than any fact,
event, change, circumstance or effect relating to the economy or
securities markets of the United States or any other region in general, except
to the extent that the applicable person or entity is disproportionately
affected relative to similarly situated persons or entities.

 

(c)           True, complete and correct copies of NEXA’s Bylaws, as amended, and
Certificate of Incorporation, as amended, (collectively, the “NEXA
Organizational Documents”) have been provided to ACQUIROR prior to the date of
this Agreement.  The consideration to be
received by the holders of the NEXA Shares pursuant to Section 1.5 of
this Agreement is in accordance with and consistent with the NEXA
Organizational Documents.

 

2.2          NEXA Capital Stock.  The total
number of shares of stock which NEXA has authority to issue is 650,100, of
which 500,100 are common stock, par value $0.001 per share (“Common Stock”),
and 150,000 of which are preferred stock, par value $0.001 per share (“Preferred
Stock”).  500,000 shares of such Common
Stock are designated as “Class A Common Stock”, and 100 shares of such Common
Stock are designated as “Class B Common 

 

8

 

Stock”.  60,000 shares of such Preferred Stock are
designated as “Series A Preferred Stock” and 1,000 shares of such
Preferred Stock are designated as “Series B Preferred Stock”.  408,876 shares of Common Stock, of which
408,776 are Class A Common Stock and 100 are Class B Common Stock (such shares
of which are convertible into 21,515 shares of Class A Common Stock), and
28,041 shares of Preferred Stock, of which 27,266 are Series A Preferred Stock
and 775 are Series B Preferred Stock, are currently issued and outstanding and
are duly authorized and validly issued, and are fully paid and
nonassessable.  The NEXA Shares are all
of the issued and outstanding capital stock of the NEXA.  Schedule 2.2 of the NEXA Disclosure
Schedule sets forth the names of the beneficial and record owners of the Common
Stock and the Preferred Stock and the number and class of shares held by each
such owner. Except as set forth on Schedule 2.2 of the NEXA Disclosure
Schedule, NEXA does not have any (i) outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote with the NEXA
stockholders of any matter or (ii) any securities convertible into or
exchangeable for any shares of capital stock. 
Except as set forth on Schedule 2.2 of the NEXA Disclosure
Schedule,  there are no options,
warrants, calls, preemptive rights, or similar rights granted by NEXA or any
NEXA Subsidiary or any other agreements to which NEXA or any NEXA Subsidiary is
a party providing for the issuance, redemption, repurchase or sale of any
additional securities which would remain in effect after the Effective
Time.  None of the NEXA Shares have been
offered, issued, sold or delivered by NEXA in violation of any applicable
federal or state securities laws.  There
are no accrued but unpaid dividends or distributions in respect of any of the
NEXA Shares.  None of the issued and
outstanding shares of Common Stock or Preferred Stock has been issued in
violation of, or is subject to, any preemptive or subscription rights.  Except for this Agreement, NEXA is not a
party to, and does not otherwise have any knowledge of the current existence
of, any stockholder agreement, voting trust agreement or any other similar
contract, agreement, arrangement, commitment, plan or understanding restricting
or otherwise relating to the voting, dividend, ownership or transfer rights of
any shares of capital stock of NEXA. 
Except as set forth on Schedule 2.2 of the NEXA Disclosure
Schedule, none of the NEXA Shares have been or are currently certificated as
permitted by Section 158 of the DGCL.

 

2.3          NEXA Subsidiaries.  Schedule
2.3 of the NEXA Disclosure Schedule sets forth a list of (a) all
subsidiaries of NEXA (individually, an “NEXA Subsidiary”, and collectively, the
“NEXA Subsidiaries”), the number of issued and outstanding shares of each NEXA
Subsidiary (and the names of the holders thereof) and their states of
incorporation and (b) the name of each other person or entity (other than the
NEXA Subsidiaries) in which NEXA has, or pursuant to any agreement has the
right to acquire, directly or indirectly, any equity interest or
investment.  All of the issued and outstanding
shares of capital stock of each NEXA Subsidiary have been duly authorized and
validly issued, and are fully paid and non-assessable, and are owned of record
and beneficially, directly or indirectly, by NEXA or another NEXA Subsidiary,
free and clear of any Encumbrances. 
There are no outstanding options, warrants, agreements, conversion
rights, preemptive rights or other rights to subscribe for, purchase or
otherwise acquire any issued or unissued shares of capital stock of any NEXA
Subsidiary.

 

2.4          Organization, Existence and Good Standing of NEXA Subsidiaries. 
Except as set forth on Schedule 2.4 of the NEXA Disclosure
Schedule, each NEXA Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its respective state of
incorporation and has all necessary corporate power and all requisite
governmental authorizations, certificates, licenses, consents and approvals to
own its properties 

 

9

 

and
assets and to carry on its business as presently conducted, except where the
failure to be so organized, existing or in good standing, or to have such
power, would not have a Material Adverse Effect on NEXA.

 

2.5          Noncontravention; Consents.

 

(a)           Neither the execution or delivery of this Agreement nor the consummation
of the transactions contemplated hereby does or will:

 

(i)            violate, breach, conflict with, or constitute a default under, the NEXA
Organizational Documents or the organizational documents of any NEXA
Subsidiary;

 

(ii)           result in the creation of any Encumbrance on any assets of NEXA or any
NEXA Subsidiary; or

 

(iii)          assuming that all consents, approvals, orders or authorizations
contemplated by subsection (b) below have been obtained and all filings
described therein have been made, (A) violate any statute or law or any
rule, regulation, order, writ, injunction, judgment or decree of any court or
governmental authority to which NEXA, any NEXA subsidiary or any of their
respective assets or properties is subject, which violation would have a
Material Adverse Effect on NEXA or (B) except as disclosed on Schedule
2.5(a) of the NEXA Disclosure Schedule, result in a violation or breach of,
or constitute (with or without notice or lapse of time or both) a default
under, or give rise to any right of termination, acceleration or modification
of, any note, bond, mortgage, indenture, deed of trust, license, lease or other
agreement, instrument or obligation to which NEXA or any NEXA Subsidiary is a
party or by which it or any of their respective assets or properties is bound,
which default, breach or other action would have a Material Adverse Effect on
NEXA.

 

(b)           Except for (i) the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
“HSR Act”), (ii) the merger control notification pursuant to the German Act
against Restraints of Competition and (iii) the filing and recordation of
a Certificate of Merger as required by the DGCL, there is no other consent,
approval, order or authorization of, or filing with, or any permit from, or any
notice to, any court, arbitral tribunal, administrative agency or commission or
other governmental, regulatory or administrative authority required to be
obtained by NEXA or any NEXA Subsidiary in connection with the execution of
this Agreement and the consummation of the transactions contemplated hereby the
failure of which to obtain would have a Material Adverse Effect on NEXA.

 

2.6          Financial Statements.

 

(a)           (i) The consolidated audited financial statements of NEXA (including
any footnotes thereto) dated December 31, 2005 and for the twelve month period
then ended and (ii) the consolidated unaudited financial statements of
NEXA (including any footnotes thereto) dated November 30, 2006 and for the
eleven month 

 

10

 

period
then ended, in each case as previously provided to ACQUIROR and attached hereto
as Schedule 2.6(a) of the NEXA Disclosure Schedule, (A) have been
prepared from, and are in accordance with, the books and records of NEXA, (B)
have been prepared in accordance with generally accepted accounting principles
in effect in the United States of America applied on a consistent basis during
the periods involved (“GAAP”), (C) except as may be otherwise indicated
therein and fairly and accurately present the consolidated financial position
of NEXA and NEXA Subsidiaries as of the dates thereof and the consolidated
results of operations, changes in stockholders’ equity and cash flows of NEXA
and NEXA Subsidiaries for the periods then ended, except that any unaudited
financial statements contained therein are subject to normal and recurring
year-end adjustments; (D) are complete, correct and in accordance with the
books of account and records of NEXA, (E) can be legitimately reconciled with
the financial statements and the financial records maintained and the
accounting methods applied by NEXA for federal income Tax purposes and (F)
reflect accurately all costs and expenses of NEXA.  The consolidated balance sheet of NEXA at
November 30, 2006 is herein sometimes referred to as the “NEXA Balance Sheet.”

 

2.7          No Material Adverse Changes; Absence of Undisclosed Liabilities.

 

(a)           Since December 31, 2005, except as set forth on Schedule 2.7 of
the NEXA Disclosure Schedule, there has been no change, event, loss or
occurrence in the business of NEXA (including the incurrence of any liability
of any nature, whether accrued, contingent or otherwise) that, taken together
with other events and occurrence with respect to such business would have a
Material Adverse Effect on NEXA.  On the
Closing Date, NEXA shall have a Current Ratio equal to or greater than 1.0.

 

(b)           Except as set forth on Schedule 2.7 of the NEXA Disclosure
Schedule, neither NEXA nor any of the NEXA Subsidiaries has any Indebtedness or
is subject to any liability (including unasserted claims), whether known or
unknown, absolute, contingent, accrued or otherwise, which is not shown or
which is in excess of amounts shown or reserved for on the NEXA Balance Sheet,
other than Indebtedness or liabilities set forth on the NEXA Balance Sheet and
incurred after the date of the NEXA Balance Sheet Date in the ordinary course
of business consistent with past practice which are not, individually and in
the aggregate, material.

 

2.8          Legal Proceedings.  There are
no pending or, to NEXA’s knowledge, threatened litigations, governmental
investigations or other proceedings against NEXA, any NEXA Subsidiary or their
respective directors, officers or Affiliates or the transactions contemplated
by this Agreement.

 

2.9          Contracts, etc.

 

(a)           Schedule 2.9 of the NEXA Disclosure
Schedule sets forth a complete and correct list of the following contracts,
agreements and arrangements and, if such contract, agreement or arrangement is
not in writing, a summary description of such contracts, agreements and
arrangements to which NEXA or any NEXA Subsidiary is a party or to which its
assets are subject (collectively, “NEXA Contracts”):

 

11

 

(i)            any credit agreement, loan agreement, letter of credit, repurchase
agreement, mortgage, security agreement, guarantee, pledge agreement, trust
indenture, promissory note and other document or arrangement relating to
Indebtedness, the borrowing of money or for lines of credit;

 

(ii)           any employment, severance or consulting agreement which (A) provides for
a bonus or commission payment; (B) cannot be terminated on less than sixty (60)
days’ notice without payment by NEXA or any NEXA Subsidiary; or (C) cannot be
terminated without any severance or similar payment by NEXA or any NEXA
Subsidiary;

 

(iii)          any agreement or other arrangement for the sale or purchase of any
assets, property or rights, other than in the ordinary course of business, or
for the grant of any options or preferential rights to purchase any assets,
property or rights;

 

(iv)          any document granting any power of attorney with respect to the affairs
of NEXA or any NEXA Subsidiary;

 

(v)           any suretyship contract, performance bond, working capital maintenance or
other form of guaranty agreement;

 

(vi)          any contract or commitment limiting or restraining NEXA or any NEXA
Subsidiary from engaging or competing in any lines of business or with any
person, firm, or corporation (including any agreements granting exclusive rights
to a third party);

 

(vii)         any
partnership or joint venture agreement to which NEXA or any NEXA stockholder is
a party;

 

(viii)        any
stockholder agreement or agreement relating to the issuance of any securities
of NEXA or any NEXA Subsidiary or the granting of any registrations rights with
respect thereto;

 

(ix)           any license agreement requiring payments by NEXA or any NEXA Subsidiary
of more than $50,000 in any year or with a remaining term of more than five
years;

 

(x)            any agreement requiring payments by NEXA or any NEXA Subsidiary of more
than $250,000 in any year which is not terminable by NEXA or any NEXA
Subsidiary without penalty on less than sixty (60) days’ notice;

 

(xi)           any agreement by and between NEXA or any NEXA Subsidiary, on the one
hand, and any director, officer, stockholder, employee or Affiliate of NEXA or
any NEXA Subsidiary, or any family member or Affiliate of any of the foregoing,
on the other hand;

 

12

 

(xii)          any agreement that requires a payment to be made by NEXA or any NEXA
Subsidiary as a result of the transactions contemplated by this Agreement,
including, without limitation, any change of control or severance payments to
directors, officers, stockholders, employees, customers, suppliers,
distributors or Affiliates of NEXA or any NEXA Subsidiary;

 

(xiii)         any
agreement that requires NEXA or any NEXA Subsidiary to make royalty payments to
any third party or Affiliate of NEXA (including any directors, officers,
stockholders, employees, customers, suppliers, distributors or Affiliates of
NEXA or any NEXA Subsidiary);

 

(xiv)        any
agreement or plan that has resulted or would result, independently or in the
aggregate, in the payments of any “excess parachute payment” within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”);
and

 

(xv)         any
other material agreement not made in the ordinary course of business of NEXA or
a NEXA Subsidiary.

 

(b)           Each NEXA Contract is valid, binding and enforceable against the parties
thereto in accordance with its terms, and in full force and effect on the date
hereof.  Each of NEXA or any NEXA
Subsidiary has performed all obligations required to be performed by it to date
under, and is not in default or delinquent in performance in connection with
any NEXA Contract, and no event has occurred which, with due notice or lapse of
time or both, would constitute such a default, except for such failures to
perform, delinquencies or defaults as would not have a Material Adverse Effect on
NEXA.  To the knowledge of NEXA, no other
party to any NEXA Contract is in default in respect thereof, and no event has
occurred which, with due notice or lapse of time or both, would constitute such
a default, except for such defaults as would not have a Material Adverse Effect
on NEXA.  NEXA has delivered or made
available to ACQUIROR or its representatives true and complete originals or
copies of all NEXA Contracts.

 

2.10        Subsequent Events.  Except as
set forth on Schedule 2.10 of the NEXA Disclosure Schedule, since
December 31, 2005, NEXA has conducted its business in the ordinary course of
business and in conformity with past practice and has not, directly or
indirectly:

 

(a)           Discharged or satisfied any material Encumbrance, or paid or satisfied
any material Indebtedness or liability (absolute, accrued, contingent or
otherwise) other than (i) Indebtedness or liabilities shown or reflected
on the NEXA Balance Sheet or (ii) liabilities incurred since the date of
the NEXA Balance Sheet in the ordinary course of business.

 

(b)           Increased or established any reserve for Taxes or any other liability on
its books or otherwise provided therefor, except as may have been required due
to income or operations of NEXA since the date of the NEXA Balance Sheet.

 

13

 

(c)           Mortgaged, pledged or subjected to any Encumbrance any of the assets,
tangible or intangible, which assets are material to the consolidated business
or financial condition of NEXA.

 

(d)           Sold or transferred any of the assets material to the consolidated
business of NEXA (including, without limitation, any patents, trademarks or
copyrights or any patent, trademark or copyright applications), canceled any
material debts or claims or waived any material rights, except in the ordinary
course of business.

 

(e)           Except for this Agreement and any other agreement executed and delivered
pursuant to this Agreement, entered into any material transaction other than in
the ordinary course of business or permitted under this Agreement.

 

(f)            Issued any stock, bonds or any other debt or equity securities (including
any options or warrants to purchase any such stock, bond or other debt or
equity security), except as disclosed on Schedule 2.2 of the NEXA
Disclosure Schedule.

 

(g)           Incurred any material Indebtedness, obligation or liability (whether
absolute, accrued, contingent or otherwise) except in the ordinary course of
business consistent with past practice.

 

(h)           Failed to discharge or satisfy any liability or Encumbrance or pay or
satisfy any Indebtedness, obligation or liability (whether absolute, accrued,
contingent or otherwise), other than liabilities being contested in good faith
and for which adequate reserves have been provided and liabilities or
Encumbrances arising in the ordinary course of business that do not,
individually or in the aggregate, interfere with the use, operation, enjoyment
or marketability of any of NEXA’s assets, properties or rights.

 

(i)            Made or changed any Tax election, changed an annual accounting period,
adopted or changed any Tax accounting method, filed any amended Tax return,
entered into any closing agreement, settled any Tax claim or assessment
relating to NEXA or any NEXA Subsidiary, or consented to any extension or
waiver of the limitation period applicable to any Tax claim or assessment.

 

(j)            Granted any increase in the compensation or benefits of its employees
other than increases in accordance with past practice in an amount not
exceeding 105% of the compensation paid to such employee in 2005 or entered
into any new, or amended any existing, employment or severance agreement or
arrangement with any of them.

 

(k)           Made any capital expenditure in excess of $25,000, or additions to
property, plant and equipment used in its operations other than ordinary
repairs and maintenance.

 

(l)            Laid off any of its employees or incurred any obligation or liability for
the payment of severance benefits.

 

14

 

(m)          Declared, paid, or set aside for payment any actual, constructive or
deemed dividend or other distribution in respect of shares of its capital stock
or other securities (including the NEXA Shares), or redeemed, purchased or
otherwise acquired, directly or indirectly, any shares of its capital stock or
other securities (including the NEXA Shares), or agreed to do so.

 

(n)           Amended, entered into or terminated any NEXA Contract.

 

(o)           Acquired or purchased any assets or the stock of any other person or
entity, in each case that are material to the consolidated business of NEXA, or
merged with or into any other person or entity.

 

(p)           Adopted any amendments to the NEXA Organizational Documents  or the organizational documents of any NEXA
Subsidiary

 

(q)           Made any material change to its internal control over financial
reporting, or identified or became aware of any fraud or any significant
deficiency or material weakness in internal control over financial reporting.

 

(r)            Settled, released or forgiven any claim or litigation or waived any right
thereto.

 

(s)           Paid any management fees or advisory fees to any stockholder or Affiliate
of NEXA or any NEXA Subsidiary (including, without limitation, any Related
Party Fees).

 

(t)            Entered into any agreement or made any commitment to do any of the
foregoing.

 

2.11        Inventories.  All inventories reflected on
the NEXA Balance Sheet were as of the date thereof, and those existing at the
Effective Time, are (and will be) carried at amounts which reflect valuations
pursuant to NEXA’s normal inventory valuation policy of stating inventory at
standard cost which approximates a first-in-first out basis, all in accordance
with GAAP.  Except as set forth in Schedule
2.11 of the NEXA Disclosure Schedule, since the date of the NEXA Balance
Sheet, no inventory items have been acquired, purchased, sold or disposed of
except through purchases or sales in the ordinary course of business and
consistent with past practice.

 

2.12        Taxes.  NEXA and each NEXA Subsidiary has filed all
Tax Returns required to be filed by it or requests for extensions to file such
Tax Returns or reports have been timely filed and granted and have not expired,
except to the extent that such failures to file would not have a Material
Adverse Effect on NEXA.  The information
contained in such Tax Returns is true, complete and accurate.  Except as disclosed on Schedule 2.12
of the NEXA Disclosure Schedule, NEXA and each NEXA Subsidiary has fully and
timely paid all Taxes required to be paid and has made adequate provision for
any Taxes that are not yet due and payable on its most recent financial
statements.  Except as disclosed on Schedule
2.12 of the NEXA Disclosure Schedule, neither NEXA nor any NEXA Subsidiary
has been notified that any Tax Returns of NEXA are currently under audit by the
Internal Revenue Service or any state, local or non-U.S.

 

15

 

Tax
agency.  Except as set forth on Schedule
2.12, no agreements, consents or waivers have been made by NEXA or any NEXA
Subsidiary for the extension of time or the waiver of the statute of
limitations for the assessment or payment of any federal, state, local or
non-U.S. Tax agency.  There are no
outstanding deficiencies or assessments asserted or proposed against NEXA or
any NEXA Subsidiary that have not been finally settled or paid in full.  NEXA is not, nor has it ever been, a United
States real property holding company, as defined in Section 897(c)(2) of
the Code.  No claim has been made by any
tax authority in a jurisdiction where NEXA or a NEXA Subsidiary does not
currently file Tax Returns that NEXA or such NEXA Subsidiary is subject to Tax
by such jurisdiction, nor is any such assertion threatened.  Neither NEXA nor any NEXA subsidiary has
engaged in any reportable transaction within the meaning of Sections 6111 and
6112 of the Code.  The conversion of the
Convertible Bridge Notes did not result, and is not expected to result, in any
taxable income.

 

2.13        Commissions and Fees.  There
are no valid claims against NEXA or any NEXA Subsidiary for brokerage
commissions, financial advisor fees or finder’s or similar fees in connection
with the transactions contemplated by this Agreement.

 

2.14        Employee Benefit Plans; Employment Matters.

 

(a)           Schedule 2.14(a) of the
NEXA Disclosure Schedule lists all bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock
option, stock ownership, stock appreciation rights, phantom stock, cafeteria,
life, health, accident, disability, welfare or other insurance, severance,
separation or other benefit plan, program, agreement or arrangement of any
kind, including any “employee benefit plan” within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
currently established, sponsored, or maintained by NEXA or any NEXA Subsidiary
or to which NEXA or any NEXA Subsidiary contributes or is required to
contribute or with respect to which NEXA or any NEXA Subsidiary has any current
or potential liability or obligation (each a “Plan” and collectively the “Plans”).

 

(b)           With respect to each Plan:  (i) if intended to qualify under Section 401(a) of
the Code, such Plan has received a determination letter from the Internal
Revenue Service stating that it so qualifies and that its trust is exempt from
taxation under Section 501(a) of the Code, and nothing has occurred
since the date of such determination that could reasonably be expected to
result in the loss of such qualification or exempt status; (ii) such Plan
has been funded, administered and operated in all material respects in
accordance with its terms and applicable law (including ERISA and the Code, and
all rules and regulations promulgated thereunder); (iii) to the
knowledge of NEXA, no fiduciary has any liability for breach of fiduciary duty
or any other failure to act or comply in connection with the administration or
investment of the assets of any such Plan; (iv) no disputes are pending,
or, to the knowledge of NEXA, threatened by any governmental agency or
authority or by any participant or beneficiary against any Plan, the assets of
any trust under any Plan or the Plan sponsor or the Plan administrator, or
against any fiduciary of any of any Plan with respect to the design or
operation of such Plan, other than routine claims for benefits thereunder; (v) to
the knowledge of NEXA, no non-exempt prohibited transaction (within the meaning
of Section 406 of ERISA) has 

 

16

 

occurred
that gives rise to or might reasonably be expected to give rise to material
liability on the part of NEXA or any NEXA Subsidiaries; and (vi) all contributions
required to be made by or under any Plan (or trust or fund established
thereunder or in connection therewith) or any related collective bargaining
agreement as of the date hereof (taking into account any extensions of time for
the making of such contributions) have been made in full or properly accrued.

 

(c)           Except as set forth in Schedule
2.14(c) of the NEXA Disclosure Schedule, neither the Company nor any
NEXA Subsidiary maintains, sponsors, contributes to, or has any current or
potential liability or obligation under or with respect to: (i) any “multiemployer
plan” within the meaning of Sections 3(37) or 4001(a)(3) of ERISA; (ii) any
“defined benefit plan” (as defined in Section 3(35) of ERISA); (iii) any
“multiple employer welfare arrangement” as defined in Section 3(40) of
ERISA; or (iv) any “multiple employer plan” within the meaning of Section 210
of ERISA or Section 413(c) of the Code.

 

(d)           Except as set forth in Schedule
2.14(d) of the NEXA Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will, either by itself or by virtue of a subsequent
event:  (A) result in any payment
becoming due to any current employee or former employee of NEXA, (B) increase
any benefits otherwise payable under any of the Plans, (C) result in any
payment that will not be deductible under Section 280G of the Code or the
payment of any “excess parachute payments” within the meaning of Section 280G
of the Code or (D) result in the acceleration of the time of payment or
vesting of any benefits provided under any of the Plans.

 

(e)           Neither NEXA nor any NEXA Subsidiary
is a party to any labor or collective bargaining agreement and there are no
labor or collective bargaining agreements which pertain to, or cover, employees
of NEXA or any NEXA Subsidiary.  No
employees of NEXA or any NEXA Subsidiary are represented by any labor
organization, and no labor organization or group of employees has made a pending
demand for recognition or certification. 
There are no representation or certification proceedings presently
pending or, to the knowledge of NEXA, threatened to be brought or filed with
the National Labor Relations Board or any other labor relations tribunal or
authority.  There are no strikes, work
stoppages, slowdowns, lockouts, material arbitrations or material grievances or
other material labor disputes pending or, to the knowledge of NEXA, threatened
against or involving NEXA or any NEXA Subsidiary, and there are no unfair labor
practice charges, grievances or complaints pending or threatened in writing by
or on behalf of any employee or group of employees.  Except as set forth on Schedule 2.14(e) of
the NEXA Disclosure Schedule, there are no complaints, charges or claims
against the NEXA or any NEXA Subsidiary pending or, to the knowledge of NEXA,
threatened to be brought or filed with any public or governmental authority,
arbitrator or court based on, arising out of, in connection with, or otherwise
relating to the employment of, or termination of employment by, NEXA or any
NEXA Subsidiary of any individual.  NEXA
and each NEXA Subsidiary (i) have complied in all material respects with
all applicable federal, state, and local legal requirements relating to its
employees, arising from statutes relating to wages, hours, collective
bargaining, 

 

17

 

unemployment
insurance, worker’s compensation, equal employment opportunity, age and
disability discrimination and the payment and withholding of Taxes, and
(ii) have complied with all applicable federal, state and local legal
requirements relating to its employees arising from statutes relating to
immigration and I-9 compliance.

 

2.15        Compliance with Laws in General. 
Except as set forth on Schedule 2.15 of the NEXA Disclosure
Schedule, NEXA and the NEXA Subsidiaries hold all clearances, permits,
licenses, variances, exemptions, orders, registrations and approvals of all
governmental entities which are required for the operation of the business of
NEXA and its NEXA Subsidiaries (collectively, the “NEXA Permits”), except where
the failure to have any such NEXA Permits would not have a Material Adverse
Effect on NEXA.  Each NEXA Permit was
duly obtained and is valid and in full force and effect, and is not subject to
any pending proceeding to revoke, cancel, suspend or declare such NEXA
Permit.  NEXA and the NEXA Subsidiaries
are in compliance with the terms of the NEXA Permits and all applicable
statutes, laws, ordinances, rules and regulations, except where the
failure to so comply would not have a Material Adverse Effect on NEXA.

 

2.16        Intellectual Property.

 

(a)           Except as set forth in Schedule
2.16(a) of NEXA Disclosure Schedule, NEXA owns all legally enforceable
right, title and interest to all Owned Intellectual Property free and clear of
all liens, claims, encumbrances and other restrictions, without an obligation
to pay any royalties, license fees or other amounts to any other person or
entity.  NEXA has not received and NEXA
does not have any knowledge of any notice, claim or allegation from any person
or entity questioning the right of NEXA to use, possess, transfer, convey, or
otherwise dispose of any Intellectual Property (other than the Licensed
Intellectual Property) or questioning the right of NEXA to use any Licensed
Intellectual Property.

 

(b)           Except as set forth in Schedule
2.16(b) of NEXA Disclosure Schedule, each employee, agent, consultant
and contractor, who has contributed to or participated in the conception,
creation or development of the Owned Intellectual Property on behalf of NEXA
has executed a valid written assignment in favor of NEXA as assignee, that has
caused the conveyance to NEXA, all right, title, and interest in, and to all
tangible and intangible property, throughout the world, arising from such
individual’s or entity’s work, or is under an obligation to assign all such
right, title and interest.

 

(c)           Except as set forth in Schedule
2.16(c) of NEXA Disclosure Schedule, NEXA does not have any knowledge
of any unauthorized use, disclosure, infringement, dilution, misappropriation,
or other violation, by any third party (including any employee or former
employee of NEXA) of any Owned Intellectual Property, or of any Licensed
Intellectual Property.  No claims have
been made by NEXA for any unauthorized use, disclosure, infringement, dilution,
misappropriation, or violation of any rights with respect to any third party
Intellectual Property.  To the knowledge
of NEXA, there are no such claims that NEXA may have the right (or a reasonable
basis) to make or assert against any third party for any unauthorized use,
disclosure, infringement, dilution, 

 

18

 

misappropriation
or violation of any Owned Intellectual Property or Licensed Intellectual
Property.

 

(d)           Except as set forth in Schedule
2.16(d) of NEXA Disclosure Schedule, NEXA has not received any
notices, claims, proceedings, actions, suits, hearings, or complaints that NEXA
is or may be infringing, diluting, misappropriating, or otherwise violating the
Intellectual Property of any third party. 
NEXA has not received any communications from any third party containing
any express or implied allegation that NEXA is or may be infringing, diluting, misappropriating,
or otherwise violating any of such third party’s Intellectual Property.  NEXA is not currently evaluating any
Intellectual Property of any third party (and excepts as set forth in Schedule
2.16(d), has not conducted any such evaluations in the past five years) to
determine whether a license thereof is necessary or desirable, or whether such
Intellectual Property may otherwise have a Material Adverse Effect on NEXA’s
business.  To the knowledge of NEXA, NEXA’s
use of the Intellectual Property does not violate, dilute, interfere with, or
infringe upon the rights of any third party. 
Use of Intellectual Property by NEXA has not, and after the Closing will
not constitute a breach of any agreement, obligation, promise or commitment by
which NEXA is bound.

 

(e)           Except as set forth in Schedule
2.16(e) of NEXA Disclosure Schedule, and to the knowledge of NEXA,
NEXA has all rights in Intellectual Property necessary to conduct the business
as it is currently conducted and such rights will not be adversely affected as
a result of or in connection with the execution and delivery of this Agreement,
the Closing or the consummation of any of the transactions contemplated
hereby..

 

(f)            Except as set forth in Schedule
2.16(f) of NEXA Disclosure Schedule, NEXA has taken all actions that a
reasonably prudent person in NEXA business would take to maintain know-how and
trade secrets as confidential and proprietary, and to protect against the loss,
theft or unauthorized use of such know-how and trade secrets.  To the knowledge of NEXA, any such know-how and
trade secrets are not in the public domain and have not been divulged or
appropriated to the detriment of NEXA. 
NEXA’s records include sufficient documentation of the know-how and
trade secrets, including without limitation, manufacturing and engineering
plans, blueprints, designs, process instructions, formulae, customers,
suppliers, product plans, marketing plans, quality assurance protocols and
procedures, to enable persons who are reasonably skilled and proficient in the
relevant subject matter to continue the same in the ordinary course of business
without unreasonable delay, expense, or reliance on the memory of any
individual.

 

(g)           Except as set forth in Schedule
2.16(g) of NEXA Disclosure Schedule, NEXA has not (i) granted any
licenses or other rights, and NEXA has no obligation to grant any licenses or
other rights, with respect to any Owned Intellectual Property or
(ii) entered into any covenant not to compete or contract limiting or
purporting to limit the ability of NEXA to exploit fully any Intellectual
Property necessary in the conduct of the business or to transact business in
any market or geographical area or with any person.  With respect to Third Party Licenses, (i) to
the 

 

19

 

Knowledge
of NEXA, NEXA is not in breach or default with respect thereto and no event has
occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification or acceleration thereunder; (ii) NEXA
has not received any communications, containing any express or implied
allegation, that NEXA is in breach or default with respect thereto; and (iii) NEXA
has not repudiated any provision thereof. 
NEXA has no agreement to indemnify any individual or entity against any
charge of infringement of any Intellectual Property, other than indemnification
provisions normal and usual for NEXA’s industry contained in purchase orders or
license agreements arising in the ordinary course of business.

 

(h)           Except as set forth in Schedule
2.16(h) of NEXA Disclosure Schedule, there is no interference,
opposition, cancellation, reexamination or other contest, proceeding, action,
suit, hearing, investigation, charge, complaint, demand, notice, claim, or
dispute with respect to the Owned Intellectual Property. To the knowledge of
NEXA, all statements and representations made by NEXA in any pending Owned
Intellectual Property applications, filings or registrations were true in all
material respects as of the time they were made.  No registered copyright, registered or
unregistered trademark or service mark, or patent used in the business (other
than in circumstances where NEXA has intentionally allowed registered
copyright, registered or unregistered trademark or service mark, or patent not
material to the business to lapse, expire, become abandoned or be canceled) has
lapsed or is being allowed to lapse, expired or been abandoned, invalidated, or
canceled, in whole or in part, or is subject to any injunction, judgment,
order, decree, ruling or charge or is subject to any pending or, to the
knowledge of NEXA, threatened oppositions, cancellations, interferences or
other proceedings before the United State Patent and Trademark Office, the
Trademark Trials and Appeals Board, the United States Copyright Office or in
any other registration authority in any country.

 

(i)            For the purposes of this Agreement
the following terms shall have the following meanings:

 

“Intellectual Property” means (i)  all classes
or types of patents, design patents, utility patents, including, without
limitation, originals, divisions, continuations, continuations-in-part,
extensions, reexaminations, or reissues, patent applications and invention
disclosures for these classes or types of patent rights (whether or not
patentable and whether or not reduced to practice) in all countries of the
world (collectively “patents”); (ii)  copyrights in both published works
and unpublished works, registrations and applications for copyright and
associated moral rights (collectively “copyrights”); (iii) service marks,
trademarks, trade names, brands, product and service names, logos, other
identifications used or intended for use in commerce, and other indications of
source, endorsement, or sponsorship, whether in connection with products or
services, together with all goodwill related to any of the foregoing
(collectively “trademarks”); (iv) software; (v) all factual knowledge
and information that gives to one the ability to produce or market something
that one otherwise would not have known how to produce or market with the same
accuracy or precision (collectively “know-how”); (vi) any information that
generally facilitates the production, manufacturing, marketing, or sale of
products or services, increases revenues, or provides an advantage over the
competition,

 

20

 

and
is not generally known, whether or not protectable by patent or copyright,
arising under the laws of the United States or any other state, country or
jurisdiction (collectively “trade secrets”); (vii) rights in mask works
(as described in 17 U.S.C. §901 et seq.); and (viii) domain names, uniform
resource locators (URLs), whether common law, statutory or otherwise, domestic
and foreign, and all registrations, registration applications, rights related
to the foregoing.

 

“Licensed Intellectual Property” shall mean
Intellectual Property that NEXA uses or has the right to use pursuant to Third
Party Licenses.

 

“Non-Owned Intellectual Property” shall mean (i) Licensed
Intellectual Property; and (ii) Intellectual Property that is publicly
available for use without restriction or obligation of any kind to any other
person or entity.

 

“Owned Intellectual Property” shall mean
Intellectual Property (i) created, conceived, or developed by employees of
NEXA who have assigned or have an obligation to assign all rights to NEXA; or (ii) to
which NEXA has acquired, by purchase, assignment or other transfer, the
unconditional, unrestricted, exclusive right to control or prevent any and all
use of such Intellectual Property by others, without the consent or approval of
or payment to, any other person.

 

“Third Party Licenses” shall mean all licenses,
agreements, obligations or other commitments under which a person has granted
NEXA a right to use any Intellectual Property in connection with NEXA’s
business, but retains one or more rights to use such Intellectual Property.

 

2.17        Insurance.  Schedule
2.17 of the NEXA Disclosure Schedule sets forth a complete and correct list
of all insurance policies and programs (other than welfare benefit insurance
policies and programs), including self-insurance programs, maintained by
NEXA.  NEXA has furnished a true,
complete and accurate copy of all such policies and programs to ACQUIROR or its
representatives.  All such policies and
programs are in full force and effect, underwritten by financially sound and
reputable insurers and sufficient for all applicable requirements of law and
will not in any way be affected by or terminated or lapsed by reason of the
consummation of the transactions contemplated by this Agreement.  There is no claim by NEXA or any NEXA
Subsidiary pending under any of such policies or programs as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
programs.

 

2.18        Properties.  Neither
NEXA nor any NEXA Subsidiary owns any real property.  Schedule 2.18 of the NEXA Disclosure
Schedule sets forth by location all real property that is held under lease,
sub-lease, license or other occupancy agreement by NEXA or any NEXA Subsidiary
together with a true and complete list of the applicable lease, sublease,
license or other occupancy agreements (the “Leases”).  Except as set forth on Schedule 2.18
of the NEXA Disclosure Schedule, NEXA and the NEXA Subsidiaries have good
title, free and clear of all Encumbrances to all their owned tangible
properties and tangible assets except for (i) Encumbrances for current
Taxes not yet due and payable, (ii) assets disposed of since the date of
the NEXA Balance Sheet in the ordinary course of business,
(iii) Encumbrances imposed by 

 

21

 

law
and incurred in the ordinary course of business for obligations not yet due to
carriers, warehousemen, laborers and materialmen, (iv) Encumbrances in
respect of pledges or deposits under workers’ compensation laws, and
(v) Encumbrances which do not affect marketability of title or the use
being made of such properties or immaterial title defects.  The Leases are in full force and effect, and
NEXA or a NEXA Subsidiary, as applicable, holds a valid existing leasehold
interest under each of the Leases on the terms set forth in such Leases.  NEXA has delivered to ACQUIROR complete and
accurate copies of each of the Leases, and none of the Leases has been modified
in any material respect, except to the extent such modifications are disclosed
by the copies delivered to ACQUIROR and identified on Schedule 2.18 of
the NEXA Disclosure Schedule.  Neither
NEXA nor any NEXA Subsidiary subleases, as sublandlord to any third party, any
of the real property it holds under the Leases, nor have any of the Leases been
assigned, pledged or mortgaged by NEXA or by any NEXA Subsidiary to any third
parties.

 

The
real property lease between NEXA and Sorrento Business & Science Center
LLC, dated May 2, 2005, as amended, was terminated effective January 10,
2007 and NEXA has vacated and surrendered possession of the premises demised
thereby.  There do not exist any
remaining obligations between the parties to such real property lease.

 

2.19        Environmental Matters.

 

(a)           Except as set forth on Schedule
2.19(a) of the NEXA Disclosure Schedule, neither NEXA nor any NEXA
Subsidiary (i) has received written notice of any person, including but
not limited to, a governmental entity, alleging that NEXA or any NEXA
Subsidiary is in violation of any applicable material Environmental Law or
otherwise may be liable under any applicable Environmental Law, including but
not limited to, liability in connection with a Cleanup (as hereinafter defined),
which violation or liability is unresolved or which would have a Material
Adverse Effect to NEXA, (ii) knows of any event or circumstance that
exists which (A) may constitute or result in a violation by NEXA of, or
the failure on the part of NEXA to comply with such Environmental Laws, or
(B) may give rise to any obligation on the part of NEXA to undertake, or
to bear all or any portion of the cost of any Cleanup which, in the case of
clauses (A) or (B), would have a Material Adverse Effect on NEXA.

 

(b)           Except as set forth on Schedule
2.19(b) of the NEXA Disclosure Schedule, to the knowledge of NEXA,
there have been no releases, spills or discharges of Regulated Materials (as
hereinafter defined) on or underneath any location which is owned, leased or
otherwise operated by NEXA (“Properties”), which release, spills or discharges
would have a Material Adverse Effect on NEXA. 
There are no pending or, to the knowledge of NEXA, threatened, claims,
liens, encumbrances or other restrictions of any nature, resulting from
Environmental Laws, with respect to or affecting any of the Properties.

 

(c)           For the purposes of this Agreement
the following terms shall have the following meanings:

 

“Cleanup” means all actions required to:  (a) clean up, remove, treat or remediate
Regulated Materials; (ii) prevent the release of Regulated Materials so
that 

 

22

 

they
do not migrate, endanger or threaten to endanger public health or welfare or
the environment; (iii) perform pre-remedial studies and investigations and
post-remedial monitoring and care; (iv) respond to any government or
private party requests for information or documents in any way relating to
cleanup, removal, treatment or remediation or potential cleanup, removal, treatment
or remediation of Regulated Materials in the environment; or (v) any legal
or administrative proceeding related to items (i) through (iv) including,
but not limited to, actions brought by third parties to recover costs incurred
with respect to Cleanup.

 

“Environmental Laws” shall mean all federal, state,
local laws, statutes, ordinances, codes, rules and regulations related to
the protection of the environment, natural resources, or the handling, use,
recycling, generation, treatment, storage, transportation or disposal of
Regulated Materials.

 

“Regulated Materials” shall mean any pollutants,
contaminants, toxic, hazardous or extremely hazardous substances, materials,
wastes, constituents, compounds, chemicals, natural or man-made elements or
forces that are regulated by, or may now or in the future form the basis of
liability under, any Environmental Laws.

 

2.20        Vote Required.  (a) 
The affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote thereon, and the unanimous approval of all shares of the Series A
Preferred Stock, are the only votes of the holders of any class or series of
NEXA capital stock necessary to approve this Agreement, the Merger and the
transactions contemplated hereby.

 

(b)           The Board of Directors of NEXA has by
the requisite vote of all directors (i) determined that (A) the
Merger is advisable and fair and in the best interests of NEXA and its
stockholders, (B) the Per Preferred Share Price is fair and in the best
interests of the holders of the Preferred Stock, and (C) the Per Common
Share Price is fair and in the best interests of the holders of the Common
Stock and (ii) approved this Agreement and the Merger in accordance with
the applicable provisions of the DGCL.

 

(c)           The Written Consent was executed in
accordance with Section 228 of the DGCL, and pursuant to the Written
Consent, this Agreement and the Merger have been duly authorized and approved
by the stockholders of NEXA in accordance with the Certificate of Incorporation
and the DGCL.

 

(d)           As of the date hereof, no
stockholders of NEXA have exercised any applicable rights of appraisal under
the DGCL with respect to the Merger or delivered notice to NEXA of any
intention to exercise such rights.

 

(e)           The documents, materials and notices
(collectively, the “Disclosure Materials”) prepared or to be prepared by NEXA
pursuant to the DGCL or otherwise in connection with notifying the stockholders
of NEXA of this Agreement and the Merger or otherwise relating to the
transactions contemplated by this Agreement comply or, when prepared by NEXA
and distributed to the stockholders of NEXA, will comply with the DGCL and the
NEXA Organizational Documents and will not, at the 

 

23

 

time
of distribution of the Disclosure Materials or at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.

 

2.21        Regulatory; FDA.

 

(a)           NEXA and the NEXA Subsidiaries are
conducting and have conducted their business and operations in material
compliance with the Federal Food, Drug, and Cosmetic Act (the “FD&C Act”),
21 U.S.C. §301 et. seq., and all applicable regulations promulgated by the
United States Food and Drug Administration (“FDA”) (collectively, “FDA Law and
Regulation”).

 

(b)           Except as set forth on Schedule
2.21(b) of the NEXA Disclosure Schedule, neither NEXA nor any of the
NEXA Subsidiaries has received any notice or communication from the FDA
alleging noncompliance with any applicable FDA Law and Regulation.  NEXA and the NEXA Subsidiaries are not
subject to any enforcement, regulatory or administrative proceedings by the FDA
and, to the knowledge of NEXA, no such proceedings have been threatened.  There is no civil, criminal or administrative
action, suit, demand, claim, complaint, hearing, investigation, demand letter,
warning letter, proceeding or request for information pending against NEXA or
the NEXA Subsidiaries, and, to NEXA’s knowledge, NEXA and the NEXA Subsidiaries
have no liability (whether actual or contingent) for failure to comply with any
FDA Law and Regulation.  There is no act,
omission, event, or circumstance of which NEXA or the NEXA Subsidiaries have
knowledge that would reasonably be expected to give rise to or lead to any such
action, suit, demand, claim, complaint, hearing, investigation, notice, demand
letter, warning letter, proceeding or request for information or any such
liability.  There has not been any
violation of any FDA Law and Regulation by NEXA or the NEXA Subsidiaries in
their product development efforts, submissions, record keeping and reports to FDA
that could reasonably be expected to require or lead to investigation,
corrective action or enforcement, regulatory or administrative action that
would result in a Material Adverse Effect. To the knowledge of NEXA, there are
no civil or criminal proceedings relating to NEXA or the NEXA Subsidiaries or
any NEXA or NEXA Subsidiary employee which involve a matter within or related
to the FDA’s jurisdiction.

 

(c)           To the knowledge of NEXA, no officer,
employee or agent of NEXA or the NEXA Subsidiaries has:  made any untrue statement of material fact or
fraudulent statement to the FDA or any other Governmental Entity; failed to
disclose a material fact required to be disclosed to the FDA or any other
Governmental Entity; or committed an act, made a statement, or failed to make a
statement that would reasonably be expected to provide the basis for the FDA or
any other Governmental Entity to invoke its policy respecting “Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities,” as set forth in
56 Fed.Reg. 46191 (September 10, 1991). 
To the knowledge of NEXA, no officer, employee or agent of NEXA or the
NEXA Subsidiaries, has been convicted of any crime or engaged in any conduct
for which debarment is mandated or permitted by 21 U.S.C. § 335a.  To the knowledge of NEXA, no officer, employee
or agent of NEXA or the NEXA Subsidiaries, has been convicted of any crime or
engaged 

 

24

 

in
any conduct for which such person or entity could be excluded from
participating in the federal health care programs under Section 1128 of
the Social Security Act or any similar law or regulation.

 

(d)           During the period of six calendar
years immediately preceding the date hereof, NEXA and the NEXA Subsidiaries
have not introduced into commercial distribution any products manufactured by
or on behalf of NEXA and the NEXA Subsidiaries or distributed any products on
behalf of another manufacturer (collectively the “FDA Products”) which were
upon their shipment by NEXA or the NEXA Subsidiaries adulterated or misbranded
in violation of 21 U.S.C. § 331.

 

(e)           Schedule 2.21(e) of the
NEXA Disclosure Schedule sets forth a list of all registrations, clearances or
approvals issued under the FD&C Act (“FD&C Permits”) and held
exclusively by NEXA and the NEXA Subsidiaries.  Such listed FD&C Permits are the only
FD&C Permits that are required for NEXA and the NEXA Subsidiaries to
conduct their business in the United States as presently conducted or as
proposed to be conducted.  Each such
FD&C Permit is in full force and effect and, to the knowledge of NEXA, no
suspension, revocation, cancellation or withdrawal of such FD&C Permit is
threatened and there is no basis for believing that such FD&C Permit will
not be renewable upon expiration or will be suspended, revoked, cancelled or
withdrawn.  Each such FD&C Permit
will continue in full force and effect immediately following the Effective
Time.

 

(f)            Each FDA Product in current
commercial distribution in the United States as an FDA regulated medical device
is either a Class I or Class II medical device as defined under 21
U.S.C. §360c(a)(1)(A), (B) and applicable rules and regulations
thereunder and was first marketed under, and is covered by, a premarket
notification owned and held exclusively by NEXA or the NEXA Subsidiaries (or
the manufacturer for whom NEXA and the NEXA Subsidiaries distributes the FDA
Product) and in compliance with 21 U.S.C. §360(k) and the applicable rules and
regulations thereunder, or is exempt from such premarket notification in
accordance with 21 U.S.C. §360(l) or (m) and applicable rules and
regulations thereunder.

 

(g)           Except as set forth on Schedule
2.21(b) of the NEXA Disclosure Schedule and except for noncompliance
that would not have a Material Adverse Effect:

 

(i)            NEXA and the NEXA Subsidiaries and,
to NEXA’s knowledge, their respective contract manufacturers are, and have been
for the past 6 calendar years, in compliance with, and each FDA Product
regulated as a medical device in current commercial distribution is designed,
manufactured, prepared, assembled, packaged, labeled, stored, installed,
serviced, and processed in compliance with, the Quality System Regulation set
forth in 21 C.F.R. Part 820.

 

(ii)           NEXA and the NEXA Subsidiaries are in
material compliance with the written procedures, record-keeping and FDA
reporting

 

25

 

requirements for
Medical Device Reporting set forth in 21 C.F.R. Part 803 and Reports of
Corrections and Removals set forth in 21 C.F.R. Part 806.

 

(h)                                 Those NEXA facilities which, prior to February 23, 2005, were owned
and operated under the name of Futura BioMedical, LLC, and its records relating
to the FDA Products were inspected from January 27, 2003 through January 28,
2003 and from April 18, 2005 through April 19, 2005 by the FDA, and a
Form FDA 483 Notice of Inspectional Observations was issued at the
conclusion of each of these inspections. 
Since April 19, 2005, the FDA has not inspected such premises or
records.

 

(i)                                     All FDA Products are and have been labeled, promoted, and advertised in
accordance with their 510(k) clearance or within the scope of their
exemption from 510(k) clearance.

 

(j)                                     NEXA’s and the NEXA Subsidiaries’ facilities are registered with the FDA
and each FDA Product is listed with the FDA under the applicable FDA
registration and listing regulations for medical devices.

 

(k)                                  NEXA and the
NEXA Subsidiaries have neither
conducted any clinical studies in the United States nor sponsored the conduct
of any clinical research in the United States.

 

2.22                        Sufficiency and Title - NEXA Assets

 

(a)                                  The assets, properties and rights of NEXA and the NEXA Subsidiaries
constitute all of the assets and rights which are used in the operation of the
businesses of NEXA and the NEXA Subsidiaries and which are necessary or
required for the conduct of such businesses as currently conducted.  There are no material assets, properties,
rights or interests of any kind or nature that NEXA or any NEXA Subsidiary has
been using, holding or operating in its businesses that will not be used, held
or owned by NEXA or any NEXA Subsidiary immediately following the Closing.  No director, officer, stockholder, employee
or Affiliate of NEXA or any NEXA Subsidiary has any rights in or to any of the
assets, properties and rights of NEXA or the NEXA Subsidiaries.

 

(b)                                 NEXA and the NEXA Subsidiaries have good and marketable title, free and
clear of any Encumbrances (other than Encumbrances arising in the ordinary
course of business that do not, individually or in the aggregate, interfere
with the use, operation, enjoyment or marketability of any of such assets,
properties or rights), to, or a valid leasehold interest under enforceable
leases in, all of the assets, properties and rights of NEXA and the NEXA
Subsidiaries.

 

2.23                        Customers and Suppliers.  Schedule
2.23 of the NEXA Disclosure Schedule sets forth, as of November 30, 2006,
a complete and correct list of: (a) all customers whose purchases from
NEXA exceeded 5% of the consolidated net sales of NEXA in 2006; and (b) the
ten (10) largest suppliers to NEXA during 2006.  Except as set forth in Schedule 2.23
of the NEXA Disclosure Schedule, none of such customers, suppliers,
distributors or 

 

26

 

representatives
has or, to the knowledge of NEXA, intends to terminate or change significantly
its relationship with NEXA or any NEXA Subsidiary.

 

ARTICLE III

 

REPRESENTATIONS
AND WARRANTIES OF ACQUISITION SUBSIDIARY AND ACQUIROR

 

Each
of Acquisition Subsidiary and ACQUIROR, jointly and severally, represent and
warrant to NEXA, as of the date hereof, as follows:

 

3.1                               Organization, Existence and Capital Stock.

 

(a)                                  ACQUIROR is a corporation duly organized and validly existing and is in
good standing under the laws of Delaware. 
ACQUIROR has all necessary corporate power to own its properties and
assets and to carry on its business as presently conducted except as would not
have a material adverse effect on ACQUIROR’s ability to consummate the
transactions contemplated hereby. 
ACQUIROR is duly qualified to do business and is in good standing in all
jurisdictions in which the character of the property owned, leased or operated
or the nature of the business transacted by it makes qualification necessary
except as would not have a material adverse effect on ACQUIROR’s ability to
consummate the transactions contemplated hereby.

 

(b)                                 Acquisition Subsidiary is a corporation duly organized and validly
existing and is in good standing under the laws of the State of Delaware and
has all necessary corporate power to own its properties and assets and to carry
on its business as presently conducted except as would not have a material
adverse effect on Acquisition Subsidiary’s ability to consummate the
transactions contemplated hereby. 
Acquisition Subsidiary’s authorized capital consists of 1,000 shares of
Common Stock, par value $0.01 per share, all of which shares have been duly
authorized and validly issued and registered in the name of ACQUIROR and are
fully paid and nonassessable.  As of the
date hereof, there are not any outstanding or authorized subscriptions,
options, warrants, calls, rights, commitments or any other agreements of any
character obligating Acquisition Subsidiary to issue any additional shares of
capital stock of Acquisition Subsidiary or any other securities convertible
into or evidencing the right to subscribe for any such shares.

 

3.2                               Authorization of Agreement.  Each
of ACQUIROR and Acquisition Subsidiary has all requisite corporate power and
authority to execute and deliver this Agreement and each instrument required
hereby to be executed and delivered by it at the Closing, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.  The
execution and delivery by each of ACQUIROR and Acquisition Subsidiary of this
Agreement and each instrument required hereby to be executed and delivered by
ACQUIROR and Acquisition Subsidiary at the Closing and the performance of their
respective obligations hereunder and thereunder have been duly and validly
authorized by the Board of Directors of each of ACQUIROR and Acquisition Subsidiary
and by ACQUIROR as the sole stockholder of Acquisition Subsidiary.  Except for filing of the Certificate of
Merger, no 

 

27

 

other
corporate proceedings on the part of ACQUIROR or Acquisition Subsidiary are
necessary to authorize the consummation of the transactions contemplated
hereby.  This Agreement has been duly
executed and delivered by each of ACQUIROR and Acquisition Subsidiary and,
assuming due authorization, execution and delivery hereof by NEXA, constitutes
a legal, valid and binding obligation of each of ACQUIROR and Acquisition
Subsidiary, enforceable against each of ACQUIROR and Acquisition Subsidiary in
accordance with its terms, in each case except that the enforcement thereof may
be limited by (A) bankruptcy, insolvency, reorganization, moratorium or
other similar law now or hereafter in effect relating to creditors’ rights
generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).

 

3.3                               Non-Contravention; Consents.

 

(a)                                  Neither the execution or delivery of this Agreement nor the consummation
of the transactions contemplated hereby does or will:

 

(i)                                     violate, breach, conflict with, or constitute a default under, the Certificate
of Incorporation, as amended, or Bylaws, as amended, of ACQUIROR or Acquisition
Subsidiary; or

 

(ii)                                  assuming that all consents, approvals, orders or authorizations
contemplated by subsection (b) below have been obtained and all filings
described therein have been made, (A) violate any statute or law or any
rule, regulation, order, writ, injunction, judgment or decree of any court or
governmental authority to which ACQUIROR or Acquisition Subsidiary or any of
their respective assets or properties are subject or (B) except as
disclosed on Schedule 3.3 of the ACQUIROR Disclosure Schedule, result in
a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default under, or give rise to any right of termination, acceleration
or modification of, any note, bond, mortgage, indenture, deed of trust,
license, lease or other agreement, instrument or obligation to which ACQUIROR
or Acquisition Subsidiary is a party or by which they or any of their
respective assets or properties may be bound, which default, breach or other
action would have a material adverse effect on ACQUIROR’s ability to consummate
the transactions contemplated hereby.

 

(b)                                 Except for (i) the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
“HSR Act”), (ii) the merger control notification pursuant to the German
Act against Restraints of Competition and (iii) the filing and recordation
of a Certificate of Merger as required by the DGCL, there is no other consent,
approval, order or authorization of, or filing with, or any permit from, or any
notice to, any court, arbitral tribunal, administrative agency or commission or
other governmental, regulatory or administrative authority required to be
obtained by ACQUIROR or Acquisition Subsidiary in connection with the execution
of this Agreement and the consummation of the transactions contemplated hereby,
the failure of which to obtain would have a material adverse effect on ACQUIROR’s
or Acquisition Subsidiary’s ability to consummate the transactions contemplated
hereby.

 

28

 

3.4                               Commissions and Fees.  There are
no claims for brokerage commissions, investment bankers’ fees or finder’s fees against
ACQUIROR or Acquisition Subsidiary in connection with the transaction
contemplated by this Agreement.

 

3.5                               No Subsidiaries. 
Acquisition Subsidiary does not own stock in, and does not control
directly or indirectly, any other corporation, association or business
organization.  Acquisition Subsidiary is
not a party to any joint venture or partnership.

 

3.6                               No Prior Activities.  Other than
the obligations created under this Agreement, Acquisition Subsidiary has
neither incurred any obligation or liability nor engaged in any business
activities of any type or kind whatsoever, and is not obligated under any
contracts, claims, leases, liabilities (contingent or otherwise), loans or
otherwise.

 

3.7                               Financing.  ACQUIROR
and Acquisition Subsidiary either (a) have cash and/or cash equivalents
available in an amount sufficient to fully fund the consummation of this
Agreement or (b) have received binding written commitments from Tornier
B.V. to irrevocably provide funds necessary to consummate this Agreement and
the transactions contemplated thereby, and to pay related fees and expenses,
and will make such funds available to Acquisition Subsidiary.  ACQUIROR has provided NEXA with true and
complete copies of all commitments and agreements from third parties to provide
such financing to ACQUIROR or to Acquisition Subsidiary.

 

3.8                               Legal Proceedings.  As of the
date this Agreement, neither ACQUIROR nor Acquisition Subsidiary has any
knowledge of any pending or threatened litigation, governmental investigation
or other proceeding against either ACQUIROR or Acquisition Subsidiary relating
to this Agreement or the transactions contemplated hereby.

 

ARTICLE IV

 

COVENANTS

 

4.1                               Preservation of Business. 
Except as expressly permitted by this Agreement or as set forth on Schedule
4.1 of the NEXA Disclosure Schedule, during the period from the date of
this Agreement to the Effective Time, NEXA and the NEXA Subsidiaries shall in
all material respects conduct its operations according to its ordinary and
usual course of business and consistent in all material respects with past
practice and NEXA shall use commercially reasonable efforts to preserve intact
in all material respects the business organization of NEXA, keep available the
services of its current officers, and preserve in all material respects the
goodwill of those having advantageous business relationships with it and the
NEXA Subsidiaries.  Without limiting the
generality of the foregoing, and except as contemplated by this Agreement or as
set forth on Schedule 4.1 of the NEXA Disclosure Schedule prior to the
Effective Time, neither NEXA nor any of the NEXA Subsidiaries, as the case may
be, will, directly or indirectly, without the prior written consent of
ACQUIROR:

 

(a)                                  make any material change in the conduct of the businesses of NEXA or the
NEXA Subsidiaries or enter into any transaction other than in the ordinary
course of business;

 

29

 

(b)                                 issue, sell, pledge or encumber or authorize or propose the issuance,
sale, pledge or Encumbrance of, additional shares of its capital stock or
securities convertible into any such shares, or any rights, warrants or options
to acquire any such shares or other convertible securities;

 

(c)                                  split, combine, subdivide, reclassify or redeem, or purchase or otherwise
acquire, or propose to do any of the foregoing with respect to, any of its
outstanding securities or alter in any way its outstanding securities or
corporate structure or make any change in outstanding shares of capital stock
or its corporate structure or the capitalization of NEXA or any NEXA
Subsidiary;

 

(d)                                 declare, set aside, reserve for or pay any actual, constructive or deemed
dividend or distribution on the NEXA Shares;

 

(e)                                  subject to the fiduciary duties of the Board of Directors of NEXA,
purchase or otherwise acquire, sell or otherwise dispose of or encumber (or
enter into any agreement to so purchase or otherwise acquire, sell or otherwise
dispose of or encumber, lease, sublease or license) material properties or
material assets except in the ordinary course of business;

 

(f)                                    adopt any amendments to the NEXA Organizational Documents or the
organizational documents of any NEXA Subsidiary;

 

(g)                                 (i) increase the compensation of any of its directors, officers or
key employees, except pursuant to the terms of agreements or plans currently in
effect; (ii) pay or agree to pay any pension, retirement allowance, bonus,
severance or change in control payment, or other employee benefit not required
by any existing plan, agreement or arrangement to any director, officers or key
employee; (iii) commit itself (other than pursuant to any collective
bargaining agreement) to any additional pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock purchaser, stock option,
stock appreciation right, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or to any employment or
consulting agreement with or for the benefit of any director, officer or key
employee, whether past or present; or (iv) except as required by
applicable law or as reported on Schedule 4.1(f) of the NEXA
Disclosure Schedule, amend any such plan, agreement or arrangement; or

 

(h)                                 except in the ordinary course of business consistent with past practice
(i) incur any Indebtedness or repay or discharge any Indebtedness existing
as of the date of this Agreement, (ii) issue any debt securities or
assume, guarantee or endorse the obligations of any other person;
(iii) make any material loans, advances or capital contributions to, or
investments in, any other person or entity; (iv) pledge or otherwise
encumber shares of capital stock of NEXA or any NEXA Subsidiaries, or
(v) mortgage or pledge any of its assets, tangible or intangible, or
create or suffer to exist any Encumbrance thereupon;

 

(i)                                     fail to keep in full force and effect insurance comparable in amount and
scope to coverage existing as of the date of this Agreement;

 

30

 

(j)                                     take or agree to take any action that would be required to be disclosed
on Schedule 2.10 of the NEXA Disclosure Schedule if such action had been
taken on or prior to the date of this Agreement;

 

(k)                                  accelerate or delay collection of notes or accounts receivable in advance
of or beyond their regular due dates or the dates when the same would have been
collected in the ordinary course of business consistent with past practice or
write off as uncollectible any of their accounts receivable or any portion
thereof not reflected in the NEXA Balance Sheet;

 

(l)                                     accelerate or delay payment of any account payable or other liability of
NEXA beyond or in advance of its due date or the date when such liability would
have been paid in the ordinary course of business consistent with past
practice; or

 

(m)                               commit to do any of the following.

 

4.2                               Acquisition Proposals; No Solicitation.  From
the date hereof until the earlier of the termination of this Agreement or the
Effective Time, NEXA shall not, and will direct each officer, director,
representative and agent of NEXA not to, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with or provide
any information to any corporation, partnership, person or other entity or
group (other than ACQUIROR or an Affiliate or an associate of ACQUIROR)
concerning any offers or proposals for any merger, sale of all or substantially
all of the assets of, or tender offer for NEXA Shares or similar transactions
involving NEXA or any NEXA Subsidiaries.

 

4.3                               Stockholder Notices.

 

(a)                                  In accordance with and in satisfaction of the requirements of Section 262
of the DGCL, NEXA covenants and agrees to cause a written notice to be
delivered on the date hereof to each stockholder of NEXA who did not execute
the Written Consent and to deliver any additional notice or other information
to the stockholders of NEXA as may be required by the DGCL.  NEXA shall cause to be delivered to each
holder of NEXA Shares all notices relating to this Agreement and the Merger
required by the Certificate of Incorporation.

 

(b)                                 NEXA agrees to use commercially reasonable efforts to cause all
stockholders of NEXA (other than those who have previously executed the Written
Consent) approve and adopt this Agreement and the Merger by executing and
joining the Written Consent.  NEXA shall
provide the stockholders of NEXA with the Disclosure Materials as shall be
required by applicable law.

 

(c)                                  NEXA shall submit to ACQUIROR the form of any written notice and other
Disclosure Materials to be transmitted to stockholders pursuant to subsections
(a) and (b) prior to delivery thereof to the
stockholders and shall not transmit to its stockholders any such notice or
Disclosure Material to which ACQUIROR reasonably objects.

 

31

 

4.4                               Exemption from State Takeover Laws.  NEXA
shall take all commercially reasonable steps necessary to exempt NEXA and the
Merger from the requirements of any state takeover statute or other similar
state law which would prevent or impede the consummation of the transactions
contemplated hereby, by action of NEXA’s Board of Directors or otherwise.

 

4.5                               Access to Information; Confidentiality.

 

(a)                                  Subject to applicable law and the agreements set forth in Section 4.5(b),
between the date of this Agreement and the Effective Time, NEXA will
(i) give ACQUIROR and its authorized representatives reasonable access,
during regular business hours upon reasonable written notice, to all of its
facilities, books and records and key employees, (ii) permit ACQUIROR to
make such reasonable inspections of such facilities, book and records, and
(iii) cause its directors, officers, key employees, advisors and
representatives and those of the NEXA Subsidiaries to furnish ACQUIROR with
access to any and all financial and operating data and other information with
respect to the business and assets of NEXA and the NEXA Subsidiaries as
ACQUIROR may from time to time reasonably request.

 

(b)                                 Any and all information obtained by ACQUIROR shall be subject to the
provisions of the confidentiality agreement among ACQUIROR, Warburg Pincus LLC,
The Vertical Group and NEXA dated September 11, 2006 (the “Confidentiality
Agreement”), which agreement remains in full force and effect and is hereby
ratified and affirmed by the parties hereto.

 

4.6                               Regulatory Compliance.  If
required under the HSR Act and the German Act against Restraints of
Competition, ACQUIROR and NEXA shall promptly (but in no event later than
10 days after the date hereof) make their respective filings thereunder
with respect to the Merger and the transactions contemplated hereby, and each
of ACQUIROR and NEXA shall bear their own expense with respect to such
filings.  If so required, ACQUIROR and
NEXA shall use their respective commercially reasonable efforts to promptly make
any additional submissions under the HSR Act and the German Act against
Restraints of Competition and shall use commercially reasonable efforts to take
all actions necessary to obtain approval for consummation of the Merger
thereunder.

 

4.7                               Accounting Methods.  NEXA shall
not change its methods of accounting in effect at its most recent fiscal year
end, except as required by changes in generally accepted accounting principles
as concurred by its independent accountants.

 

4.8                               No Hire; Non-Solicitation.  In the event of the termination of this
Agreement (other than pursuant to Section 6.1(d) or 6.1(e)), neither
ACQUIROR nor Tornier, B.V., nor any of their respective Affiliates, shall,
directly or indirectly, for its own account or jointly with another, or for or
on behalf of any entity, as principal, stockholder, agent or otherwise, for a
period of 12 months after the date of such termination, hire, retain the
services of or solicit for employment or similar services any Key Executive.  ACQUIROR shall be liable for any breach of
this Section 4.8 by ACQUIROR or Tornier B.V., or any of their respective
Affiliates.

 

32

 

4.9                               Public Disclosures.  Prior to
the Effective Time, ACQUIROR and NEXA will consult with each other before
issuing any press release or otherwise making any public statement with respect
to the transactions contemplated by this Agreement, and shall not issue any
such press release or make any such public statement prior to such consultation
and receipt of the prior written consent of the other party.  The parties shall issue a joint press
release, mutually acceptable to ACQUIROR and NEXA, promptly upon the
consummation of the transactions contemplated hereby.

 

4.10                        Indemnification of Directors and Officers; Insurance.

 

(a)                                  Subject to the occurrence of the Effective Date, until the six year
anniversary date of the Effective Date, the ACQUIROR and the Surviving
Corporation agree that all rights to indemnification or exculpation now
existing in favor of each present and former employee (including any employee
who serves or served in a fiduciary capacity of any Plans), agent, director or
officer of NEXA and NEXA Subsidiaries (the “Indemnified Parties”) as provided
in the respective charters or by-laws or otherwise in effect as of the date
hereof shall survive the Effective Date.

 

(b)                                 For a period of six years after the Effective Time, the ACQUIROR shall
cause the Surviving Corporation and the Surviving Corporation shall cause to be
maintained in effect the current policies of directors’ and officers’ liability
insurance maintained by NEXA (or policies of at least the same coverage and
amounts containing terms and conditions which are no less advantageous) with
respect to claims arising from facts or events which occurred before the
Effective Time; provided, however, that the Surviving Corporation
shall not be obligated to make annual premium payments for such insurance to
the extent that such premiums exceed an amount equal to 200% of the annual
premiums paid as of the date hereof by NEXA for such insurance and if such
premiums exceed such amount the Surviving Corporation shall purchase insurance
policies in amounts and with coverage as reasonably can be purchased for such
amount.  Without limiting the foregoing,
the ACQUIROR and the Surviving Corporation shall advance expenses incurred with
respect to the foregoing, as they are incurred, to the fullest extent permitted
under applicable law.

 

(c)                                  In the event ACQUIROR or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii) transfers
or conveys all or substantially all of its properties and assets to any person,
then, and in each such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of ACQUIROR assume the obligations set
forth in this Section 4.9.

 

(d)                                 The provisions of this Section 4.9 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.

 

4.11                        Representations and Warranties Insurance.  If
requested by ACQUIROR, NEXA shall cooperate with ACQUIROR, at ACQUIROR’s
expense, in obtaining 

 

33

 

an
insurance policy covering any breaches of the representations and warranties of
ACQUIROR set forth in this Agreement.

 

4.12                        Reasonable Efforts.  Each of
the parties hereto agrees to use its reasonable efforts to take, or cause to be
taken, all necessary or appropriate action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations or
otherwise to consummate and make effective the transactions contemplated by this
Agreement including, without limitation, the execution of any additional
instruments necessary to consummate the transactions contemplated hereby and
seeking to lift or reverse any legal restraint imposed on the consummation of
the transactions contemplated by this Agreement.  In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall take
all such necessary action.

 

4.13                        Resignation of NEXA Directors.  On or
prior to the Closing Date, NEXA shall deliver to ACQUIROR evidence satisfactory
to ACQUIROR of the resignation of the Directors of NEXA and the NEXA
Subsidiaries, such resignations to be effective at the Effective Time.

 

4.14                        Notice of Subsequent Events.  Each
party hereto shall notify the other parties of any changes, additions or events
which would cause any material change in or material addition to any Disclosure
Schedule delivered by the notifying party under this Agreement, promptly after
the occurrence of the same.

 

4.15                        Employment; Employee Welfare.

 

(a)                                  During the period ending on the first anniversary of the Closing Date,
ACQUIROR will provide, or cause to be provided, to each NEXA Employee a base
salary or hourly wage rate, and a total annual compensation opportunity (other
than with to any special cash bonus arrangements), which is comparable in the
aggregate to such employee’s base salary or hourly wage rate and total annual
compensation opportunity immediately before the Closing Date; provided that the
foregoing shall not be construed as a guaranty of employment for any NEXA
Employee (provided that, if a NEXA Employee’s employment is terminated within
such one-year period, such NEXA Employee shall be provided with severance
benefits that are no less favorable, in the aggregate, to the NEXA Employee
than the severance benefits that would have been provided to such NEXA Employee
under any Plan providing severance benefits had his or her employment been terminated
prior to the Closing Date, the material terms of such Plan are set forth on Schedule
4.15 of the NEXA Disclosure Schedule). 
For purposes of this Agreement, “NEXA  Employee” means any person
who is an active employee of NEXA or any NEXA Subsidiaries at the Closing Date.

 

(b)                                 During the period ending on the first anniversary of the Closing Date,
the ACQUIROR will provide, or cause the Surviving Corporation or a subsidiary
of ACQUIROR to provide, to each NEXA Employee the opportunity to participate in
employee benefit plans, programs and policies which provide benefits that are 

 

34

 

substantially
comparable in the aggregate to the benefits provided to such employee under the
Plans (other than any equity-based Plan).

 

(c)                                  ACQUIROR will grant, or cause the Surviving Corporation or a subsidiary
of ACQUIROR to grant, full credit to each NEXA Employee for his or her
employment with NEXA or any NEXA Subsidiary prior to the Closing Date for
purposes of satisfying any service requirement with respect to participation,
vesting and benefit accrual in any employee benefit plans, programs, policies
and arrangements maintained for the benefit of NEXA Employees or other
similarly situated employees of ACQUIROR from and after the Effective Time by
ACQUIROR, the Surviving Corporation or a subsidiary of ACQUIROR, as applicable
(each, an “ACQUIROR Plan”) to the same extent recognized by NEXA and the NEXA
Subsidiaries under the corresponding Plan (if any) prior to the Effective Time.  In addition, with respect to each ACQUIROR
Plan that is a “welfare benefit plan” (as defined in Section 3(1) of
ERISA), ACQUIROR shall cause or shall cause the Surviving Corporation or a
subsidiary of ACQUIROR, as applicable, to (i) cause there to be waived any
pre-existing condition, exclusions, actively at work requirements,
insuitability requirements or other eligibility limitations and (ii) give
effect, in determining any deductible, co-insurance, and maximum out-of-pocket
limitations, to claims incurred and amounts paid by, and amounts reimbursed to,
NEXA Employees and their dependents under corresponding Plans.

 

(d)                                 From and after the Effective Time, ACQUIROR and the Surviving Corporation
shall assume and honor in accordance with their terms all existing employment
and severance agreements and arrangements set forth on Schedule 4.14(d) of
the NEXA Disclosure Schedule.

 

(e)                                  Nothing contained herein, express or implied: (i) shall be construed
to establish, amend, or modify any benefit plan, program, agreement or
arrangement, (ii) shall alter or limit the ability of NEXA, the NEXA
Subsidiaries, ACQUIROR, the Surviving Corporation, or any of their respective
Affiliates to amend, modify or terminate any benefit plan, program, agreement
or arrangement at any time assumed, established, sponsored or maintained by any
of them, (ii) is intended to confer upon any current or former employee
any right to employment or continued employment for any period of time by
reason of this Agreement, or any right to a particular term or condition of
employment, or (iii) is intended to confer upon any person (including
employees, retirees, or dependents or beneficiaries of employees or retirees)
any right as a third-party beneficiary of this Agreement.

 

4.16                        Guarantee of Acquisition Subsidiary’s Obligations. 
Tornier B.V. hereby unconditionally and irrevocably guarantees to NEXA
the due and timely performance and observance by Acquisition Subsidiary of all
of its representations, warranties, covenants and obligations under this
Agreement.

 

4.17                        Form 5471.  On or prior
to the Closing Date, NEXA shall file or cause to be filed all Forms 8594 and Form 5471
for NEXA’s 2005 taxable year (and any related

 

35

 

documents
including, without limitation, Schedule O) with the U.S. Internal Revenue
Service and all other appropriate Tax authorities.

 

4.18        Accrued Bonuses.  On or prior
to the Closing Date, NEXA shall pay any and all unpaid employee bonuses that
have accrued up to and including the Closing Date (the “Accrued Bonuses”).

 

4.19        Employee Notes Receivable.  On or prior
to the Closing Date, NEXA shall have collected the full amounts owed (including
any accrued interest) on the Employee Notes Receivable.

 

ARTICLE
V

 

CONDITIONS
TO CLOSING; CLOSING DELIVERABLES

 

5.1          Mutual Conditions.  The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction, at or prior to the Closing Date, of the following conditions
(any of which may be waived in writing by ACQUIROR, Acquisition Subsidiary and
NEXA):

 

(a)           No statute, rule, regulation judgment, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by the
government (or any governmental agency) of the United States or any state,
municipality or other political subdivision thereof that shall prohibit,
restrain, enjoin or restrict the consummation of the Merger or otherwise make
it or any other transaction contemplated hereby illegal.

 

(b)           Any waiting period (and any extension thereof) or any approvals
applicable to the consummation of the Merger under the HSR Act and the German
Act against Restraints of Competition shall have expired or been terminated.

 

5.2          Conditions to Obligations of ACQUIROR and Acquisition Subsidiary.  The
obligations of ACQUIROR and Acquisition Subsidiary to consummate the Merger and
the other transactions contemplated hereby shall be subject to the
satisfaction, at or prior to the Closing Date, of the following conditions (any
of which may be waived by ACQUIROR and Acquisition Subsidiary):

 

(a)           Each of the covenants and agreements of NEXA to be performed at or prior
to the Closing Date pursuant to the terms hereof shall have been performed in
all material respects.

 

(b)           The representations and warranties of NEXA and Acquisition Subsidiary set
forth in Article II hereof shall, when taken as a whole, be true and
correct in all material respects when made on the date hereof and shall be true
and correct in all material respects as of the Effective Time as if made as of
the Effective Time, except for representations and warranties made as of a
specific date, which, when taken as a whole, shall be true and correct in all
material respects as of such date.

 

36

 

(c)           NEXA shall have delivered to the ACQUIROR and Acquisition Subsidiary a
certificate of its Chairman or Chief Financial Officer to the effect that each
of the conditions specified in clauses (a), (b), (h), (j), (k), (l) and
(o) of this Section 5.2 has been satisfied.

 

(d)           NEXA shall have delivered to the ACQUIROR the Estimated Closing Balance
Sheet and the Closing Certificate as contemplated by Section 1.5(c)(iv).

 

(e)           During the period from the date hereof to the Closing Date, there shall
not have been any change in the business, financial condition, operations,
results of operations or assets of NEXA that has had or would have a Material
Adverse Effect on NEXA.

 

(f)            There shall have been delivered to ACQUIROR releases by Paul Nichols and
Robert De Vaere of all claims against NEXA (except for compensation and
expenses payable to such officers and directors) for all acts and omissions up
to and including the Closing Date, such releases in form and substance
reasonably acceptable to ACQUIROR.

 

(g)           NEXA shall have delivered evidence of the resignations of the directors
contemplated by Section 4.12, in form and substance reasonably acceptable
to ACQUIROR.

 

(h)           NEXA shall have delivered evidence of repayment of all Indebtedness, in
form and substance reasonably acceptable to ACQUIROR.

 

(i)            NEXA shall have delivered all of the consents, approvals and
authorizations set forth on Schedule 5.2(i) of the NEXA Disclosure
Schedule, duly executed by the applicable governmental entities and third
parties, in form and substance reasonably acceptable to ACQUIROR.

 

(j)            NEXA shall have terminated that certain Registration Rights Agreement,
dated as of February 23, 2005, by and among HPX, Inc. and the other
signatories thereto, and provided ACQUIROR with evidence of such termination in
form and substance reasonably acceptable to ACQUIROR.

 

(k)           NEXA have terminated, or caused the termination of, any agreement by and
between NEXA or any NEXA Subsidiary, on the one hand, and any director,
officer, stockholder, employee or Affiliate of NEXA or any NEXA Subsidiary, or
any family member or Affiliate of any of the foregoing, on the other hand, and
provided ACQUIROR with evidence of such terminations in form and substance
reasonably acceptable to ACQUIROR.

 

(l)            Each share of Class B Common Stock shall have been converted in Class A
Common Stock.

 

37

 

(m)          The Employment Agreement, dated as of July 1, 2004, by and between
NEXA and Paul Nichols shall have been amended pursuant to the Amendment, the
form of which is attached hereto as Exhibit B.

 

(n)           NEXA shall have delivered to ACQUIROR an affidavit dated as of the
Closing Date, made under penalty of perjury and in form and substance required
under the U.S. Treasury Regulations issued pursuant to Section 1445 of the
Code, stating that NEXA is not, nor has it been within five years of the date
of the affidavit, a “United States real property holding corporation” as
defined in Section 897 of the Code.

 

(o)           NEXA shall have paid all of the Accrued Bonuses, and provided ACQUIROR
with evidence of such payment in form and substance reasonably acceptable to
ACQUIROR.

 

5.3          Conditions to Obligations of NEXA.  The
obligations of NEXA to consummate the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions (any of which may be waived by NEXA):

 

(a)           Each of the covenants and agreements of ACQUIROR and Acquisition
Subsidiary to be performed at or prior to the Closing Date pursuant to the
terms hereof shall have been performed in all material respects.

 

(b)           The representations and warranties of ACQUIROR and Acquisition Subsidiary
set forth in Article III hereof shall, when taken as a whole, be true and
correct in all material respects when made on the date hereof and shall be true
and correct in all material respects as of the Effective Time as if made as of
the Effective Time, except for representations and warranties made as of a specific
date, which, when taken as a whole, shall be true and correct in all material
respects as of such date.

 

(c)           Each of ACQUIROR and Acquisition Subsidiary shall have delivered to NEXA
a certificate of its Chairman, President or Chief Financial Officer to the
effect that each of the conditions specified in and clauses (a) and
(b) of this Section 5.3 have been satisfied.

 

ARTICLE
VI

 

TERMINATION

 

6.1          Termination.  This Agreement may be
terminated and the Merger may be abandoned at any time (notwithstanding
approval thereof by the holders of NEXA Shares (except as otherwise set forth
in this Section 6.1)) prior to the Effective Time:

 

(a)           by mutual written consent of the parties duly authorized by the Boards of
Directors of NEXA and ACQUIROR;

 

(b)           by ACQUIROR or NEXA if the Effective Time shall not have occurred on or
before April 2, 2007 (provided that the right to terminate this Agreement 

 

38

 

under
this Section 6.1(b) shall not be available to any party whose failure
to fulfill any obligations under this Agreement has been the cause of or
resulted in the failure of the Effective Time to occur on or before such date);

 

(c)           by ACQUIROR or NEXA if any United States federal or state government,
governmental agency or authority or court shall have issued an order, decree or
ruling, or taken any other action, permanently restraining, enjoining or
otherwise prohibiting the Merger (which the party seeking to terminate this
Agreement shall have used its best efforts to have lifted or reversed) and such
order, decree, ruling or other action shall have become final and
non-appealable;

 

(d)           by ACQUIROR if NEXA shall have failed to comply with any of the covenants
or agreements contained in this Agreement such that the Closing condition set
forth in Section 5.2(a) would not be satisfied; provided,
however, that if such failure or failures are capable of being cured
prior to the Effective Time, such failure, or failures shall not have been
cured within fifteen (15) days of delivery to NEXA of written notice of such
failure or failures;

 

(e)           by ACQUIROR if there exists a breach or breaches of any representation or
warranty of NEXA contained in this Agreement such that the Closing condition
set forth in Section 5.2(b) would not be satisfied; provided,
however, that if such breach or breaches are capable of being cured
prior to the Effective Time, such breach or breaches shall not have been cured
within fifteen (15) days of delivery to NEXA of written notice of such breach
or breaches;

 

(f)            by NEXA if ACQUIROR or Acquisition Subsidiary shall have failed to comply
with any of the covenants or agreements contained in this Agreement such that
the closing condition set forth in Section 5.3(a) would not be
satisfied; provided, however, that if such failure or failures
are capable of being cured prior to the Effective Time, such failure, or
failures shall not have been cured within fifteen (15) days of delivery to the
ACQUIROR of written notice of such failure or failures; and

 

(g)           by NEXA if there exists a breach or breaches of any representation or
warranty of the ACQUIROR or Acquisition Subsidiary contained in this Agreement
such that the Closing condition set forth in Section 5.3(b) would not
be satisfied; provided, however, that if such breach or breaches
are capable of being cured prior to the Effective Time, such breach or breaches
shall not be cured within fifteen (15) days of delivery to ACQUIROR of written
notice of such breach or breaches.

 

6.2          Effect of Termination.  In the event
of termination of this Agreement pursuant to this Article VI, this
Agreement, except for the provisions of Section 4.5
(confidentiality), Section 7.1 (fees and expenses), this Section 6.2
and Article VII, shall forthwith become void and have no effect, without
any liability on the part of any party or its Affiliates, directors, officers
or stockholders.  Notwithstanding the
foregoing sentence, nothing in this Agreement (including this Section 6.2
and Section 7.4 (non-survival of representations and warranties) shall
relieve any party to this Agreement of liability for breach of this Agreement
on or prior to the date of termination.

 

39

 

6.3          Procedure for Termination.  In the
event of termination and abandonment of the Merger by the ACQUIROR or NEXA
pursuant to this Article VI, written notice thereof shall forthwith be
given to the other.

 

ARTICLE
VII

 

MISCELLANEOUS

 

7.1          Expenses.  Subject to Section 6.2, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.  ACQUIROR acknowledges and agrees that NEXA
has disclosed that it is obligated and will become further obligated for legal
and accounting fees and expenses (including fees and expenses of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C., its counsel) incurred by it in
connection with the Merger and the transactions contemplated hereby (“NEXA Fees
and Expenses”).  It is understood and
agreed that certain NEXA Fees and Expenses may have been paid by NEXA prior to
the execution of this Agreement, and ACQUIROR agrees to refrain from taking any
action which would prevent or delay the payment of NEXA Fees and Expenses by
NEXA prior the Closing Date.  NEXA agrees
that all NEXA Fees and Expenses shall be paid by NEXA prior to the Effective
Time or shall be deducted from the Merger Consideration pursuant to Section 1.5(c).  Except as contemplated by Section 1.5(c),
none of ACQUIROR, Acquisition Subsidiary or the Surviving Corporation shall be
liable or responsible for the payment of (a) any NEXA Fees and Expenses or
(b) any fees or expenses paid or payable to any of the NEXA stockholders,
directors or officers or any of their respective directors, officers, employees,
shareholders, members, partners or other Affiliates or any family member or
Affiliate of any of the foregoing, including, without limitation, any fees or
expenses paid or payable to HealthpointCapital or any of its Affiliates or any
brokerage commissions, financial advisor fees or finder’s or similar fees (“Related
Party Fees”).  Any and all NEXA Fees and
Expenses and Related Party Fees shall be the sole obligation of the NEXA
stockholders.  If any NEXA Fees and
Expenses or Related Party Fees are paid by ACQUIROR, Acquisition Subsidiary,
the Surviving Corporation, NEXA or any NEXA Subsidiary on or prior to the
Closing Date, such Related Party Fees shall decrease, dollar for dollar, the
Merger Consideration.

 

7.2          Amendment.  This Agreement may be amended
by the parties at any time before or after any required approval of matters
presented in connection with the Merger by the holders of NEXA Shares; provided,
however, that after any such approval, there shall be made no amendment
that pursuant to Section 251(d) of the DGCL requires further approval
by such stockholders without the further approval of such stockholders.  This Agreement may not be amended except by
an instrument in writing signed on behalf of each of the parties.

 

7.3          Extension; Waiver.  At any
time prior to the Effective Time of the Merger, the parties may (a) extend
the time for the performance of any of the obligations or other acts of the
other parties, (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) waive compliance with any of the agreements or
conditions contained in this Agreement. 
Any agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party.  The failure of any party
to this 

 

40

 

Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.  No
waiver of any breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.

 

7.4          Nonsurvival of Representations and Warranties.  None
of the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time or,
subject to Section 6.2, the termination of this Agreement.

 

7.5          Notices.  Any communications required or desired to be
given hereunder shall be deemed to have been properly given if sent in writing
by hand delivery or by facsimile and overnight courier to the parties hereto at
the following addresses, or at such other address as either party may advise
the other in writing from time to time:

 

If
to ACQUIROR or Acquisition Subsidiary:

 

Tornier B.V.

Fred. Roeskestraat 123

1076
EE Amsterdam, The Netherlands

Facsimile:  (952) 426-7601

Att’n:  Douglas Kohrs

 

with
a copy to:

 

Warburg Pincus LLC

466 Lexington Avenue, 11th Floor

New York, NY 10017

Facsimile: 
(212) 716-5040

Att’n:  Sean
Carney

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 
10019

Facsimile: 
(212) 728-9222

Att’n: 
Steven J. Gartner, Esq.

 

If
to NEXA:

 

NEXA
Orthopedics, Inc.

11035
Roselle Street

San
Diego, CA  92121

Facsimile:  (858) 866-0661

Att’n:  Paul Nichols, President

 

41

 

with
copies to:

 

HealthpointCapital
Partners, L.P.

505
Park Avenue, 12th Floor

New
York, NY  10022

Facsimile:  (212) 935-6878

Att’n:     Mortimer Berkowitz III,
Managing Director

John
J. Chopack, Jr., Director

 

Mintz,
Levin, Cohn, Ferris

   Glovsky and Popeo, P.C.

666
Third Avenue

New
York, N.Y.  10017

Facsimile:  (212) 983-3115

Att’n:  James M. McKnight, Esq.

 

All
such communications shall be deemed to have been delivered on the date of hand
delivery or on the next business day following the deposit of such
communications with the overnight courier.

 

7.6          Governing Law; Venue.  This
Agreement shall be interpreted, construed and enforced in accordance with the
laws of the State of Delaware, applied without giving effect to any
conflicts-of-law principles.  All actions
and proceedings arising out of or relating to this Agreement shall be heard and
determined exclusively in any State of Delaware or federal court.

 

7.7          Certain Definitions.  As used in
this Agreement:

 

(a)           “Affiliate” means “affiliate” as defined in Rule 405 promulgated under the
Securities Act of 1933, as amended.

 

(b)           “Current Ratio”
means, as of any date, current assets of NEXA and the NEXA Subsidiaries
(excluding cash) on such date divided by current liabilities of NEXA and the
NEXA Subsidiaries (excluding any type of Indebtedness set forth in Schedule
1.5(c)) on such date, all as determined in accordance with GAAP.

 

(c)           “Environmental Laws”
means any federal, state or local statute, regulation, rule or ordinance,
and any judicial or administrative interpretation thereof, regulating the use,
generation, handling, storage, transportation, discharge, emission, spillage or
other release of Hazardous Materials or relating to the protection of the
environment.

 

(d)           “Employee Notes Receivable”  means the promissory notes made to NEXA by the holders of shares of
restricted stock of NEXA in payment of the purchase price thereof.

 

42

 

(e)           “Governmental Entity”
means any government, governmental, statutory, regulatory or administrative
authority, agency, body or commission or any court, tribunal or judicial body,
whether federal, state, local or foreign.

 

(f)            “Hazardous Materials”
means any material which has been determined by any applicable governmental
authority to be harmful to the health or safety of human or animal life or
vegetation, regardless of whether such material is found on or below the
surface of the ground, in any surface or underground water, airborne in ambient
air or in the air inside any structure built or located upon or below the
surface of the ground or in building materials or in improvements of any
structures, or in any personal property located or used in any such structure,
including, but not limited to, all hazardous substances, imminently hazardous
substances, hazardous wastes, toxic substances, infectious wastes, pollutants
and contaminants from time to time defined, listed, identified, designated or
classified as such under any Environmental Laws (as defined in Section 7.9)
regardless of the quantity of any such material.

 

(g)           “Including”.  The word “including”, when following any
general statement, term or matter, shall not be construed to limit such
statement, term or matter to the specific terms or matters as provided
immediately following the word “including” or to similar items or matters,
whether or not non-limiting language (such as “without limitation”, “but not
limited to”, or words of similar import) is used with reference to the word “including”
or the similar items or matters, but rather shall be deemed to refer to all
other items or matters that could reasonably fall within the broadest possible
scope of the general statement, term or matter.

 

(h)           “Key Executives”
means Paul K. Nichols, Jr., Robert De Vaere, Jamal Rushdy, Chris Harber,
Michel Hassler, Louise Focht and Cecile Real.

 

(i)            “Knowledge”.  “To the knowledge”, “to the best knowledge,
information and belief”, or any similar phrase shall be deemed to refer to the
conscious awareness (or such conscious awareness that such persons should have
obtained after reasonably prudent inquiry) of Paul K. Nichols, Jr., Robert
De Vaere or Jamal Rushdy of the fact referred to.

 

(j)            “Restricted Cash”
means the certificate of deposit issued by Silicon Valley Bank in the amount of
$88,228, which serves as collateral security for NEXA’s performance under the
11035 Roselle Street lease.

 

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

 

43

 

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

 

7.8          Captions.  The captions or headings in
this Agreement are made for convenience and general reference only and shall
not be construed to describe, define or limit the scope or intent of the
provisions of this Agreement.

 

7.9          Integration of Disclosure Schedules and Exhibits.  All
Disclosure Schedules and Exhibits attached to this Agreement are integral parts
of this Agreement as if fully set forth herein.

 

7.10        Entire Agreement; Assignment.  This
Agreement, together with the Exhibits and Disclosure Schedules hereto,
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, other than the Confidentiality Agreement, among the
parties or any of them with respect to the subject matter hereof.  Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect; provided, however, that the Surviving
Corporation and ACQUIROR may assign any of their respective rights, duties or
obligations to any person or entity that acquires all of the stock or all or
substantially all of the assets of the Surviving Corporation or ACQUIROR after
the Closing Date without such prior written consent.  This Agreement shall inure to the benefit of
and shall be binding upon the successors and permitted assigns of the parties
hereto.

 

7.11        Enforcement of the Agreement.  The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. 
It is accordingly agreed that the parties and other persons entitled to
enforce this Agreement pursuant to this Section 7.11 shall be
entitled to seek an injunction or injunctions to prevent breaches of this
Agreement in any federal or state court located in Delaware (as to which the
parties hereby irrevocably agree to submit to jurisdiction for the purposes of
such action), this being in addition to any other remedy to which they are
entitled at law or in equity.

 

7.12        Validity.  If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.

 

7.13        Counterparts.  This Agreement may be executed
in several counterparts, each of which, when so executed, shall be deemed to be
an original, and such counterparts shall, together, constitute and be one and
the same instrument.

 

7.14        No Rule of Construction.  The
parties acknowledge that this Agreement was initially prepared by NEXA, and
that all parties have read and negotiated the language used

 

44

 

in
this Agreement.  The parties agree that,
because all parties participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes
ambiguous language in favor of or against any party by reason of that party’s
role in drafting this Agreement.

 

7.15        Parties in Interest.  Except as
contemplated by Section 4.9(d) of this Agreement, nothing in this
Agreement is intended to confer any rights or remedies under or by reason of
this Agreement on any person or entity other than parties hereto and their
respective successors and permitted assigns. 
Nothing in this Agreement is intended to relieve or discharge the
obligations or liability of any third persons or entity to NEXA, ACQUIROR or
Acquisition Subsidiary.  No provision of
this Agreement shall give any third parties any right of subrogation or action
over or against NEXA, ACQUIROR or Acquisition Subsidiary.

 

7.16        Performance By Acquisition Subsidiary. 
ACQUIROR hereby agrees to cause Acquisition Subsidiary to comply with
and perform its obligations hereunder and to cause Acquisition Subsidiary to
consummate the Merger as contemplated herein.

 

[Remainder of Page Intentionally Left Blank]

 

45

 

IN WITNESS WHEREOF, ACQUIROR, Acquisition
Subsidiary and NEXA have caused this Agreement and Plan of Merger to be
executed by their respective duly authorized officers, and have caused their
respective corporate seals to be hereunto affixed, all as of the day and year
first above written.

 

 

	
   

  	
  NEXA
  ORTHOPEDICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Paul K. Nichols, Jr.

  
	
   

  	
   

  	
  Name:

  	
  Paul
  K. Nichols, Jr.

  
	
   

  	
   

  	
  Title:

  	
  President

  

 

 

	
   

  	
  TORNIER
  US HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Sean D. Carney

  
	
   

  	
   

  	
  Name:

  	
  Sean
  D. Carney

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

	
   

  	
  NEXA
  ACQUISITION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Sean D. Carney

  
	
   

  	
   

  	
  Name:

  	
  Sean
  D. Carney

  
	
   

  	
   

  	
  Title:

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