-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M7AZcBgknFiTfr4UnmJGQkhsXGucIqLMOFKE5GaaHpDTdEooDWu50Nf1Pxck57EF gF6igVKsuINrK0e0YETGsw== 0000950123-97-001462.txt : 19970222 0000950123-97-001462.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950123-97-001462 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 19970218 SROS: NONE GROUP MEMBERS: INO ACQUISITION CORP. GROUP MEMBERS: JOHNSON & JOHNSON SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INNOTECH INC CENTRAL INDEX KEY: 0000050587 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 541560349 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-49429 FILM NUMBER: 97536768 BUSINESS ADDRESS: STREET 1: 5568 AIRPORT RD CITY: ROANOKE STATE: VA ZIP: 24012-1311 BUSINESS PHONE: 5403262020 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INNOTECH INC CENTRAL INDEX KEY: 0000050587 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 541560349 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-49429 FILM NUMBER: 97536769 BUSINESS ADDRESS: STREET 1: 5568 AIRPORT RD CITY: ROANOKE STATE: VA ZIP: 24012-1311 BUSINESS PHONE: 5403262020 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JOHNSON & JOHNSON CENTRAL INDEX KEY: 0000200406 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221024240 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: ONE JOHNSON & JOHNSON PLZ CITY: NEW BRUNSWICK STATE: NJ ZIP: 08933 BUSINESS PHONE: 9085240400 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JOHNSON & JOHNSON CENTRAL INDEX KEY: 0000200406 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 221024240 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: ONE JOHNSON & JOHNSON PLZ CITY: NEW BRUNSWICK STATE: NJ ZIP: 08933 BUSINESS PHONE: 9085240400 SC 14D1 1 JOHNSON & JOHNSON / INNOTECH, INC. 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ INNOTECH, INC. (NAME OF SUBJECT COMPANY) ------------------------ INO ACQUISITION CORP. JOHNSON & JOHNSON (BIDDERS) ------------------------ COMMON STOCK, PAR VALUE $0.001 PER SHARE (TITLE OF CLASS OF SECURITIES) ------------------------ 45766M 10 0 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------------ JAMES R. HILTON, ESQ. INO ACQUISITION CORP. C/O JOHNSON & JOHNSON ONE JOHNSON & JOHNSON PLAZA NEW BRUNSWICK, NEW JERSEY 08933 (908) 524-2450 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) ------------------------ COPIES TO: ROBERT A. KINDLER, ESQ. CRAVATH, SWAINE & MOORE WORLDWIDE PLAZA 825 EIGHTH AVENUE NEW YORK, NEW YORK 10019 (212) 474-1000 ------------------------ FEBRUARY 10, 1997 (DATE OF EVENT WHICH REQUIRES FILING STATEMENT ON SCHEDULE 13D) ------------------------ CALCULATION OF FILING FEE
===================================================================================================== TRANSACTION VALUATION* AMOUNT OF FILING FEE - ------------------------------------------------------------------------------------------------------- $146,510,856...................................................................... $29,302 =====================================================================================================
* For purposes of calculating amount of filing fee only. The amount assumes the purchase of 10,655,355 shares of Common Stock, par value $0.001 per share (the "Shares"), at a price per Share of $13.75 in cash. Such number of shares represents all the Shares outstanding as of February 10, 1997, plus the number of Shares issuable upon the exercise of all existing options and warrants. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: None Filing Party: N/A Form or Registration No.: N/A Date Filed: N/A
Page 1 of 8 pages. Exhibit Index on page 8. ================================================================================ 2 CUSIP No. 45766M 10 0 14D-1 AND 13D Page 2 of 8 Pages - --------------------------------------------------------------------------------------------- 1. Name of Reporting Persons S.S. or I.R.S. Identification Nos. of Above Persons INO ACQUISITION CORP. - --------------------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of Group (a) [ ] (b) [ ] - --------------------------------------------------------------------------------------------- 3. SEC Use only - --------------------------------------------------------------------------------------------- 4. Sources of Funds AF - --------------------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - --------------------------------------------------------------------------------------------- 6. Citizen or Place of Organization Delaware - --------------------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Each Reporting Person 4,522,979* - --------------------------------------------------------------------------------------------- 8. Check if the Aggregate Amount if Row (7) Excludes Certain Shares [ ] - --------------------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row (7) Approximately 46.8% of the Shares outstanding as of February 13, 1997 - --------------------------------------------------------------------------------------------- 10. Type of Reporting Person CO - ---------------------------------------------------------------------------------------------
* See footnote on following page. 2 3 CUSIP No. 45766M 10 0 14D-1 AND 13D Page 3 of 8 Pages - --------------------------------------------------------------------------------------------- 1. Name of Reporting Persons S.S. or I.R.S. Identification Nos. of Above Persons Johnson & Johnson (22-01024240) - --------------------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of Group (a) [ ] (b) [ ] - --------------------------------------------------------------------------------------------- 3. SEC Use only - --------------------------------------------------------------------------------------------- 4. Sources of Funds WC - --------------------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings is Required Pursuant to Item 2(d) or 2(e) [ ] - --------------------------------------------------------------------------------------------- 6. Citizen or Place of Organization New Jersey - --------------------------------------------------------------------------------------------- 7. Aggregate Amount Beneficially Owned by Each Reporting Person 4,522,979* - --------------------------------------------------------------------------------------------- 8. Check if the Aggregate Amount if Row (7) Excludes Certain Shares [ ] - --------------------------------------------------------------------------------------------- 9. Percent of Class Represented by Amount in Row (7) Approximately 46.8% of the Shares Outstanding as of February 10, 1997 - --------------------------------------------------------------------------------------------- 10. Type of Reporting Person CO - ---------------------------------------------------------------------------------------------
* On February 10, 1997, Johnson & Johnson ("Parent") and INO Acquisition Corp., a wholly owned subsidiary of Parent (the "Purchaser"), entered into a Stockholder Agreement (the "Stockholder Agreement") with Chase Venture Capital Associates, L.P., CIBC Wood Gundy Ventures, Inc. and Ronald D. Blum, O.D., Chairman, Chief Executive Officer and Secretary of Innotech, Inc. (collectively, the "Selling Stockholders"), pursuant to which the Selling Stockholders have agreed with Parent and the Purchaser to tender to the Purchaser, pursuant to the Offer (as defined below), or sell to the Purchaser simultaneously therewith, in each case, at a price of $13.75 per Share, all the Shares owned by them (representing an aggregate of 3,331,608 Shares, or approximately 37% of the Shares outstanding as of February 10, 1997). In addition, any Shares that any such Selling Stockholder may subsequently acquire (by exercise of stock options or otherwise) automatically become subject to the provisions of the Stockholder Agreement. As of February 10, 1997, Dr. Blum owned 879,992 options to purchase Shares, 716,856 of which he is entitled to exercise within 60 days of February 10, 1997 (without giving effect to acceleration of options in connection with the Offer and the Merger). The Purchaser's right to purchase the Shares subject to the Stockholder Agreement is reflected in Rows 7 and 9 of each of the tables above. If the Purchaser accepts for payment and pays for any Shares tendered under the Offer and the Minimum Condition (as defined in the Offer) is satisfied, the Purchaser must exercise such purchase option at the same time as such payment (unless all the Shares subject to the Stockholder Agreement have been tendered by the Selling Stockholders and accepted for payment by the Purchaser under the Offer). Pursuant to the Stockholder Agreement, each Selling Stockholder has also delivered a proxy to the Purchaser to vote, or grant a consent or approval in respect of, the Shares subject to the Stockholder Agreement against any transaction with a third party other than the transactions contemplated by the Offer and the Merger (as defined in the Offer). The Stockholder Agreement is described more fully in Section 12 ("Purpose of the Offer; The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase dated February 18, 1997 (the "Offer to Purchase"). Parent has been informed that the Selling Stockholders intend jointly to file a Schedule 13D with respect to the Shares subject to the Stockholder Agreement on or about February 18, 1997. 3 4 This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement on Schedule 13D with respect to the acquisition by the Purchaser and Parent of beneficial ownership of the Shares subject to the Stockholder Agreement. The item numbers and responses thereto below are in accordance with the requirements of Schedule 14D-1. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Innotech, Inc., a Delaware corporation (the "Company"), which has its principal executive offices at 5568 Airport Road, Roanoke, VA 24012. (b) This Schedule 14D-1 relates to the offer by the Purchaser to purchase all outstanding Shares at a price of $13.75 per Share, net to the seller in cash (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. Information concerning the number of outstanding Shares is set forth in the "Introduction" of the Offer to Purchase and is incorporated herein by reference. (c) Information concerning the principal market in which the Shares are traded and the high and low sales prices of Shares for each quarterly period during the past two years during which the Shares were publicly traded is set forth in Section 6 ("Price Range of the Shares; Dividends on the Shares") of the Offer to Purchase and is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Schedule 14D-1 is being filed by the Purchaser, a Delaware corporation, and Parent, a New Jersey corporation. The Purchaser is a wholly owned subsidiary of Parent. Information concerning the principal business and the address of the principal offices of the Purchaser and Parent is set forth in Section 9 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase and is incorporated herein by reference. The names, business addresses, present principal occupations or employment, material occupations, positions, offices or employments during the last five years and citizenship of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I to the Offer to Purchase and are incorporated herein by reference. (e) and (f) The information set forth in Section 9 ("Certain Information Concerning the Purchaser and Parent") and Section 15 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) and (b) The information set forth in Section 11 ("Contacts with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) and (b) The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in Section 12 ("Purpose of the Offer; The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase is incorporated herein by reference. 4 5 (f) and (g) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares; Stock Quotation and Exchange Act Registration") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth in "Introduction", Section 9 ("Certain Information Concerning the Purchaser and Parent") and Section 12 ("Purpose of the Offer; The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in "Introduction", Section 9 ("Certain Information Concerning the Purchaser and Parent"), Section 11 ("Contacts with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "Introduction" and in Section 16 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 9 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in Section 12 ("Purpose of the Offer; The Merger Agreement and The Stockholder Agreement") of the Offer to Purchase is incorporated herein by reference. (b) and (c) The information set forth in Section 15 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. (d) Not applicable. (e) None. (f) The information set forth in the Offer to Purchase, the Letter of Transmittal, the Agreement and Plan of Merger dated as of February 10, 1997, among the Purchaser, Parent and the Company and the Stockholder Agreement, copies of which are attached hereto as Exhibits (a)(1), (a)(2), (c)(1) and (c)(2), respectively, is incorporated herein by reference. 5 6 ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Summary Advertisement dated February 18, 1997. (a)(8) Text of Press Release dated February 11, 1997, issued by the Company and Parent. (b) None. (c)(1) Agreement and Plan of Merger dated as of February 10, 1997, among the Purchaser, Parent and the Company. (c)(2) Stockholder Agreement dated as of February 10, 1997, among Parent, the Purchaser, Chase Venture Capital Associates, L.P., CIBC Wood Gundy Ventures, Inc., and Ronald D. Blum, O.D. (d) None. (e) Not applicable. (f) None.
6 7 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: February 18, 1997 INO ACQUISITION CORP. By: /s/ JAMES R. UTASKI ------------------------------------ Name: James R. Utaski Title: President JOHNSON & JOHNSON By: /s/ JAMES R. UTASKI ------------------------------------ Name: James R. Utaski Title: Vice President, Business Development 7 8 EXHIBIT INDEX
EXHIBIT PAGE NUMBER EXHIBIT NAME NUMBER - ----------- ------------------------------------------------------------------- ------ (a)(1)..... Offer to Purchase. (a)(2)..... Letter of Transmittal. (a)(3)..... Notice of Guaranteed Delivery. (a)(4)..... Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(5)..... Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(6)..... Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7)..... Form of Summary Advertisement dated February 18, 1997. (a)(8)..... Text of Press Release dated February 11, 1997, issued by the Company and Parent. (b)........ None. (c)(1)..... Agreement and Plan of Merger dated as of February 10, 1997, among the Purchaser, Parent and the Company. (c)(2)..... Stockholder Agreement dated as of February 10, 1997, among Parent, the Purchaser, Chase Venture Capital Associates, L.P., CIBC Wood Gundy Ventures, Inc., and Ronald D. Blum, O.D. (d)........ None. (e)........ Not applicable. (f)........ None.
8 EX-99.A1 2 OFFER TO PURCHASE 1 EXHIBIT (a)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF INNOTECH, INC. AT $13.75 NET PER SHARE BY INO ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF JOHNSON & JOHNSON ------------------------ THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 17, 1997, UNLESS EXTENDED ------------------------ THE BOARD OF DIRECTORS OF INNOTECH, INC. HAS, BY UNANIMOUS VOTE, APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES WHICH, TOGETHER WITH THE SHARES SUBJECT TO THE STOCKHOLDER AGREEMENT REFERRED TO HEREIN THAT SHALL NOT HAVE BEEN SO TENDERED, WOULD REPRESENT AT LEAST A MAJORITY OF ALL SHARES DETERMINED ON A FULLY DILUTED BASIS. ------------------------ IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares should either (1) complete and sign the Letter of Transmittal or a facsimile copy thereof in accordance with the instructions in the Letter of Transmittal, have such stockholder's signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal or such facsimile and any other required documents to the Depositary and either deliver the certificates for such Shares to the Depositary along with the Letter of Transmittal or facsimile or deliver such Shares pursuant to the procedure for book-entry transfer set forth in Section 2 or (2) request such stockholder's broker, dealer, bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder having Shares registered in the name of a broker, dealer, bank, trust company or other nominee must contact such broker, dealer, bank, trust company or other nominee if such stockholder desires to tender such Shares. A stockholder who desires to tender Shares and whose certificates for such Shares are not immediately available or who cannot comply in a timely manner with the procedure for book-entry transfer, or who cannot deliver all required documents to the Depositary prior to the expiration of the Offer, may tender such Shares by following the procedure for guaranteed delivery set forth in Section 2. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent at its address and telephone number set forth on the back cover of this Offer to Purchase or to brokers, dealers, commercial banks and trust companies. ------------------------ THE INFORMATION AGENT FOR THE OFFER IS: [GEORGESON & COMPANY INC. LOGO] February 18, 1997 2 TABLE OF CONTENTS
PAGE ---- Introduction.......................................................................... 1 1. Terms of the Offer................................................................ 2 2. Procedure for Tendering Shares.................................................... 4 3. Withdrawal Rights................................................................. 7 4. Acceptance for Payment and Payment................................................ 7 5. Certain Federal Income Tax Consequences........................................... 8 6. Price Range of the Shares; Dividends on the Shares................................ 9 7. Effect of the Offer on the Market for the Shares; Stock Quotation and Exchange Act Registration...................................................................... 9 8. Certain Information Concerning the Company........................................ 10 9. Certain Information Concerning the Purchaser and Parent........................... 12 10. Source and Amount of Funds........................................................ 13 11. Contacts with the Company; Background of the Offer................................ 13 12. Purpose of the Offer; The Merger Agreement and The Stockholder Agreement.......... 14 13. Dividends and Distributions....................................................... 22 14. Certain Conditions of the Offer................................................... 23 15. Certain Legal Matters............................................................. 24 16. Fees and Expenses................................................................. 26 17. Miscellaneous..................................................................... 26 Schedule I -- Directors and Executive Officers........................................ 28
3 To the Holders of Common Stock of Innotech, Inc. INTRODUCTION INO Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Johnson & Johnson, a New Jersey corporation ("Parent"), hereby offers to purchase all outstanding shares (the "Shares") of Common Stock, par value $0.001 per share, of Innotech, Inc., a Delaware corporation (the "Company") at $13.75 per Share (the "Offer Price"), net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses of First Chicago Trust Company of New York, which is acting as the Depositary (the "Depositary") and Georgeson & Company Inc., which is acting as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. The Board of Directors of the Company has, by unanimous vote, approved the Offer and the Merger (as defined below) and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company and recommends that stockholders of the Company accept the Offer and tender their Shares. Prudential Securities Incorporated, the Company's financial advisor ("Prudential Securities"), has delivered to the Board of Directors of the Company its written opinion dated February 10, 1997 that, as of such date and based upon and subject to the matters set forth therein, the cash consideration to be received by the holders of the Shares in the Offer and the Merger is fair from a financial point of view to such holders. Such opinion is set forth in full as an exhibit to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to stockholders of the Company concurrently herewith. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined in Section 1) (x) that number of Shares which, together with the Shares subject to the Stockholder Agreement (as defined below) that shall not have been so tendered, would represent at least a majority of all outstanding Shares (for purposes of this clause (x) only, "Shares" shall be deemed to refer only to Shares outstanding as of the date of the Merger Agreement) and (y) that number of Shares which, together with the Shares subject to the Stockholder Agreement that shall not have been so tendered, would represent at least a majority of the fully diluted Shares as of the date of determination (determined on a fully diluted basis for all outstanding stock options, warrants and any other rights to acquire Shares) (the conditions in (x) and (y) collectively, the "Minimum Condition"). The minimum number of Shares that would satisfy the Minimum Condition (subject to clause (x) above) shall be referred to as the "Minimum Number of Shares." The Purchaser reserves the right (subject to obtaining the express written consent of the Company and the applicable rules and regulations of the Securities and Exchange Commission (the "Commission")), which it presently has no intention of exercising, to waive or reduce the Minimum Condition and to elect to purchase, pursuant to the Offer, less than the Minimum Number of Shares. See Sections 1 and 14. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of February 10, 1997 (the "Merger Agreement"), among Parent, the Purchaser and the Company pursuant to which, following the consummation of the Offer and the satisfaction of certain conditions, the Purchaser will be merged with and into the Company, with the Company surviving the merger (as such, the "Surviving Corporation") to be a wholly owned subsidiary of Parent (the "Merger"). In the Merger, each outstanding Share not tendered in the Offer (other than Shares owned by the Company as treasury stock or by Parent, the Purchaser or any other direct or indirect wholly owned subsidiary of Parent or by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law) will be converted into the right to receive the per Share price paid in the Offer in cash, without interest (the "Merger Consideration"). See Section 12. 1 4 The Merger is subject to a number of other conditions, including approval by stockholders of the Company, if such approval is required by applicable law. In the event the Purchaser acquires 90% or more of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser would be able to effect the Merger pursuant to the short-form merger provisions of the Delaware General Corporation Law (the "DGCL"), without prior notice to, or any action by, any other stockholder of the Company. In such event, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. See Section 12. In connection with the execution of the Merger Agreement, the Purchaser and Parent entered into a Stockholder Agreement, dated as of February 10, 1997 (the "Stockholder Agreement"), with Chase Venture Capital Associates, L.P., CIBC Wood Gundy Ventures, Inc. and Ronald D. Blum, O.D., Chairman, Chief Executive Officer and Secretary of the Company (collectively, the "Selling Stockholders"), pursuant to which such Selling Stockholders have agreed to sell to Purchaser, and Purchaser has agreed to purchase, all 3,331,608 outstanding Shares beneficially owned by them, representing approximately 37.2% of the outstanding Shares (31.3% of the Shares on a fully diluted basis), as well as any Shares subsequently acquired by a Selling Stockholder through the exercise of options or otherwise, at a price per Share equal to the price paid in the Offer, provided that such obligation to sell and such obligation to purchase are subject to the Purchaser having accepted Shares for payment under the Offer and the Minimum Condition having been satisfied. As of February 10, 1997, Dr. Blum owned 879,992 options to purchase Shares, 716,856 of which he is entitled to exercise within 60 days of February 10, 1997 (without giving effect to the acceleration of options in connection with the Offer and the Merger). Pursuant to the terms of the Stockholder Agreement, the Purchaser has the right (which it intends to exercise) to require the Selling Stockholders to tender the Shares subject to the Stockholder Agreement into the Offer. Pursuant to the Stockholder Agreement, each Selling Stockholder has also executed and delivered a proxy for the benefit of the Purchaser with respect to the Shares subject to the Stockholder Agreement owned by such Selling Stockholder to vote such Shares against certain competing transactions, as more fully described below under Section 12. The Company has informed the Purchaser that, as of February 14, 1997, there were 8,956,096 Shares issued and outstanding and 1,697,895 Shares reserved for issuance upon the exercise of outstanding employee stock options and warrants. Based upon the foregoing, the Purchaser believes that approximately 5,326,996 Shares constitutes a majority of the fully diluted Shares. Johnson & Johnson Development Corporation ("JJDC"), an affiliate of the Purchaser, beneficially owns 474,515 Shares, or approximately 5.3% of the outstanding Shares (4.5% of the Shares on a fully diluted basis). Accordingly, the Minimum Condition will be satisfied if at least 1,520,873 Shares (other than the outstanding Shares currently subject to the Stockholder Agreement or owned by JJDC), or approximately 17.0% of the outstanding Shares (14.3% of the Shares on a fully diluted basis), are validly tendered and not withdrawn prior to the Expiration Date. If the Minimum Condition is satisfied and the Purchaser accepts for payment Shares tendered pursuant to the Offer, including the Shares subject to the Stockholder Agreement sold pursuant to such agreement or tendered by the Selling Stockholders pursuant to the Offer, the Purchaser will be able to elect a majority of the members of the Company's Board of Directors and to effect the Merger without the affirmative vote of any other stockholder of the Company. The Merger Agreement and the Stockholder Agreement are more fully described in Section 12. Certain Federal income tax consequences of the sale of Shares pursuant to the Offer and the exchange of Shares for the Merger Consideration pursuant to the Merger are described in Section 5. 1. TERMS OF THE OFFER Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 3. The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, March 17, 1997, unless and until the Purchaser shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. 2 5 Subject to the terms of the Merger Agreement and the applicable rules and regulations of the Commission, the Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events set forth in Section 14 hereof shall have occurred or shall have been determined by the Purchaser to have occurred, to (a) extend the period of time during which the Offer is open, and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (b) amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. THE PURCHASER SHALL NOT HAVE ANY OBLIGATION TO PAY INTEREST ON THE PURCHASE PRICE FOR TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER. If by 12:00 Midnight, New York City time, on Monday, March 17, 1997 (or any other date or time then set as the Expiration Date), any or all conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the Commission, to (1) terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering stockholders, (2) waive all the unsatisfied conditions (other than the Minimum Condition and the condition with respect to the HSR Act (as hereinafter defined)) and, subject to complying with the terms of the Merger Agreement and the applicable rules and regulations of the Commission, accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (3) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (4) amend the Offer. There can be no assurance that the Purchaser will exercise its right to extend the Offer (other than as required by the Merger Agreement). Any extension, waiver, amendment or termination will be followed as promptly as practicable by public announcement. In the case of an extension, Rule 14e-l(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires that the announcement be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change), and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. In the Merger Agreement the Purchaser has agreed that it will not, without the prior consent of the Company, extend the Offer, except that, without the consent of the Company, the Purchaser may extend the Offer (1) if at the Expiration Date any of the conditions to the Purchaser's obligations to accept Shares for payment are not satisfied or waived, until such time as such conditions are satisfied or waived, but in no event to a date more than 90 calendar days from the commencement of the Offer, (2) for any period required by any rule, regulation, interpretation or position of the Commission or the staff thereof, (3) for a period of up to five business days to permit the Purchaser to decide whether to modify the Offer in the event of certain competing proposals, and (4) for an aggregate period of not more than five business days beyond the latest expiration date that would otherwise be permitted under the terms of the Merger Agreement as described in this sentence; provided that the aggregate period of all such extentions may not extend the Expiration Date to a date more than 90 calendar days from the commencement of the Offer. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. In addition, the Purchaser has agreed in the Merger Agreement that it will not, without the consent of the Company, (1) reduce the number of Shares subject to the Offer, (2) reduce the Offer Price, (3) add to or modify the conditions set forth in Section 14, (4) extend the Offer, except as provided above, (5) change the form of consideration payable in the Offer or (6) otherwise amend or alter the Offer in any manner adverse to the Company's stockholders. 3 6 If the Purchaser extends the Offer or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its acceptance for payment of or payment for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in Section 3. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including, with the Company's consent, a waiver of the Minimum Condition), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-l under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in the percentage of securities sought or any dealer solicitation fee, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days is generally required to allow for adequate dissemination to stockholders. Consummation of the Offer is conditioned upon satisfaction of the Minimum Condition, the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR Act") and the other conditions set forth in Section 14. Subject to the terms and conditions contained in the Merger Agreement, the Purchaser reserves the right (but shall not be obligated) to waive any or all such conditions. The Company has provided the Purchaser with the Company's stockholder lists and security position listings for the purpose of disseminating the Offer to holders of the Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and will be furnished by the Purchaser to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. PROCEDURE FOR TENDERING SHARES Valid Tender. For a stockholder validly to tender Shares pursuant to the Offer, either (1) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedure for book-entry transfer set forth below (and a Book-Entry Confirmation (as defined below) received by the Depositary), in each case prior to the Expiration Date, or (2) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. The Depositary will establish an account with respect to the Shares at The Depository Trust Company and the Philadelphia Depository Trust Company (the "Book Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in any of the Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with such Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other required documents, must, in any case, be transmitted to, and received by, 4 7 the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at a Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation". DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal if (1) the Letter of Transmittal is signed by the registered holder of Shares (which term, for purposes of this Section, includes any participant in any of the Book-Entry Transfer Facilities' systems whose name appears on a security position listing as the owner of the Shares) tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (2) such Shares are tendered for the account of a firm that is a participant in the Security Transfer Agents Medallion Program or the New York Stock Exchange Guarantee Program or the Stock Exchange Medallion Program or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-15 under the Exchange Act (each, an "Eligible Institution"). In all other cases, all signatures on the Letters of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be issued to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (1) such tender is made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser is received by the Depositary, as provided below, prior to the Expiration Date; and (3) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to such Shares), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal, are received by the Depositary within five trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the New York Stock Exchange, Inc. (the "NYSE") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (1) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (2) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and (3) any other documents 5 8 required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. Appointment. By executing a Letter of Transmittal as set forth above, the tendering stockholder will irrevocably appoint designees of the Purchaser as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after February 10, 1997. All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such acceptance for payment, all prior powers of attorney and proxies given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney and proxies may be given (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares or other securities or rights in respect of any annual, special or adjourned meeting of the Company's stockholders, or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting and other rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders then scheduled. Determination of Validity. All questions as to the validity, form, eligibility, (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in any tender with respect to any particular Shares, whether or not similar defects or irregularities are waived in the case of other Shares. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Backup Withholding. In order to avoid "backup withholding" of Federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalty of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. If a stockholder does not provide its correct TIN or fails to provide the certifications described above, the Internal Revenue Service ("IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter or Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 to the Letter of Transmittal. 6 9 3. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 3, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after April 18, 1997. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for any purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 3 promptly after the Expiration Date. Any determination concerning the satisfaction of such terms and conditions will be within the sole discretion of the Purchaser, and such determination will be final and binding on all tendering stockholders. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law, including, without limitation, the HSR Act. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer). Parent will file a Notification and Report Form with respect to the Offer under the HSR Act. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th day after the date such form is filed, unless early termination of the waiting period is granted. In addition, the Antitrust Division of the Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") may extend the waiting period by requesting additional information or documentary material from Parent. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the 10th day after substantial compliance by Parent with such request. See Section 15 hereof for additional information concerning the HSR Act and the applicability of the antitrust laws to the Offer. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) certificates for such Shares (or timely Book-Entry Confirmation of a transfer of such Shares as described in Section 2), (2) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and (3) any other documents required by the Letter of Transmittal. The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other stockholder pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives 7 10 oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares. Payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If the Purchaser is delayed in its acceptance for payment of or payment for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after the termination or withdrawal of a tender offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, any such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. If any tendered Shares are not purchased pursuant to the Offer because of an invalid tender or otherwise, certificates for any such Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in Section 2, such Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to one or more direct or indirect wholly owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to the Offer. but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES Sales of Shares pursuant to the Offer (and the receipt of the right to receive cash by stockholders of the Company pursuant to the Merger) will be taxable transactions for Federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be taxable transactions under applicable state, local, foreign and other tax laws. For Federal income tax purposes, a tendering stockholder will generally recognize gain or loss equal to the difference between the amount of cash received by the stockholder pursuant to the Offer (or to be received pursuant to the Merger) and the aggregate tax basis in the Shares tendered by the stockholder and purchased pursuant to the Offer (or cancelled pursuant to the Merger). Gain or loss will be calculated separately for each block of Shares tendered and purchased pursuant to the Offer (or cancelled pursuant to the Merger). If tendered Shares are held by a tendering stockholder as capital assets, gain or loss recognized by the tendering stockholder will be capital gain or loss, which will be long-term capital gain or loss if the tendering stockholder's holding period for the Shares exceeds one year. Under present law, long-term capital gains recognized by a tendering individual stockholder will generally be taxed at a maximum Federal marginal tax rate of 28%, and long-term capital gains recognized by a tendering corporate stockholder will be taxed at a maximum Federal marginal tax rate of 35%. A stockholder (other than certain exempt stockholders including, among others, all corporations and certain foreign individuals) that tenders Shares may be subject to 31% backup withholding unless the stockholder provides its TIN and certifies that such number is correct or properly certifies that it is awaiting a TIN. A stockholder that does not furnish its TIN may be subject to a penalty imposed by the IRS. Each stockholder should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding. If backup withholding applies to a stockholder, the Depositary is required to withhold 31% from payments to such stockholder. Backup withholding is not an additional tax. Rather, the amount of the backup 8 11 withholding can be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF ITS INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER. 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES The Shares are traded in the over-the-counter market and prices are quoted on The Nasdaq National Market under the symbol "IIII". The following table sets forth, for each of the periods indicated, the high and low last reported sales prices per Share as reported by The Nasdaq National Market and the Dow Jones News Retrieval Service.
SALES PRICE ------------------ HIGH LOW ------- ------ 1996 First Quarter (March 14, 1996 - March 31, 1996)................. $10.250 $8.000 Second Quarter.................................................. 11.750 8.125 Third Quarter................................................... 11.375 7.375 Fourth Quarter.................................................. 10.500 7.750 1997 First Quarter (through February 14, 1997)....................... 13.563 8.125
On February 10, 1997, the last full day of trading before the public announcement of the execution of the Merger Agreement, the reported closing sale price of the Shares on The Nasdaq National Market was $8.875 per Share. On February 14, 1997, the last full day of trading before the commencement of the Offer, the reported closing sale price of the Shares on The Nasdaq National Market was $13.563 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. According to the Company's Registration Statement on Form S-1 dated March 14, 1996 (the "Company Registration Statement"), since inception the Company has not declared or paid any dividends on shares of its capital stock. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK QUOTATION AND EXCHANGE ACT REGISTRATION The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the National Association of Securities Dealers, Inc. ("NASD") for continued inclusion in The Nasdaq National Market (the top tier market of The Nasdaq Stock Market), which requires that an issuer have at least 200,000 publicly held shares, held by at least 400 shareholders or 300 shareholders of round lots, with a market value of $1,000,000, and have net tangible assets of at least either $1,000,000, $2,000,000 (depending on profitability levels in two of the issuer's three most recent fiscal years) or $4,000,000 (depending on profitability levels during three of the issuer's four most recent fiscal years). If these standards are not met, the Shares might nevertheless continue to be included in The Nasdaq Stock Market with quotations published in the Nasdaq "additional list" or in one of the "local lists", but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 100,000 or 9 12 there were not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for Nasdaq reporting and Nasdaq would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. According to the Company, as of February 14, 1997, there were approximately 168 holders of record of Shares and 8,956,096 Shares were outstanding. If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the requirements of the NASD for continued inclusion in The Nasdaq Stock Market or The Nasdaq National Market, as the case may be, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the NASD for quotation through Nasdaq and the Shares are no longer included in The Nasdaq Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interests in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would, subject to Section 15(d) of the Exchange Act, substantially reduce the information required to be furnished by the Company to its stockholders and to the Commission and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the shortswing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy or information statement pursuant to Section 14(a) or (c) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended, may be impaired or eliminated. The Purchaser intends to seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If registration of the Shares is not terminated prior to the Merger, then the Shares will cease to be reported on The Nasdaq Stock Market and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for Nasdaq reporting. 8. CERTAIN INFORMATION CONCERNING THE COMPANY The Company is a Delaware corporation with its principal executive offices at 5568 Airport Road, Roanoke, VA 24012, telephone no. (540) 362-2020. According to the Company Registration Statement, the Company develops, manufactures and sells lens products and desktop lens fabrication systems for plastic eyeglass lenses. The Company's fabrication system is comprised of equipment, which includes a curing chamber, glass molds and accessories, and proprietary plastic single vision optics and polymerizable resins. Set forth below is certain selected consolidated financial information with respect to the Company and its subsidiaries excerpted or derived from the information contained in the Company Registration Statement, as 10 13 well as the Company's Quarterly Report on Form 10-Q for the nine months ended September 30, 1996 which are incorporated by reference herein. More comprehensive financial information is included in such reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information". INNOTECH, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ------------------------------ ---------------------------------------- 1996 1995 1995 1994 1993 ---------------- ----------- ------------ ----------- ----------- (UNAUDITED) STATEMENT OF EARNINGS DATA: Net sales.................. $ 7,419,564 $ 4,520,187 $ 6,438,202 $ 4,104,571 $ 4,019,428 Operating loss............. (8,310,271) (5,840,971) (8,890,022) (7,918,645) (4,528,651) Net loss................... (8,063,630) (7,276,452) (10,592,772) (8,167,733) (4,538,315)
AT DECEMBER 31, -------------------------- 1995 1994 AT SEPTEMBER 30, ------------ ----------- ---------------- 1996 ---------------- (UNAUDITED) BALANCE SHEET DATA: Current assets............. $ 27,166,408 $ 9,948,694 $ 3,014,186 Total assets............... 31,765,038 13,527,103 5,922,398 Current liabilities........ 3,002,912 4,763,721 4,552,614 Stockholders' equity (deficit)............... $ 25,255,943 $ 5,982,152 $(2,664,865)
Recent Developments. On August 28, 1996, the Company entered into a Letter of Intent with Prism Ophthalmics, L.L.C. ("Prism") and its equity owners providing for, among other things, the purchase by the Company of a warrant to acquire 150,000 units of Prism and the purchase of an option to purchase all of the outstanding equity interests of Prism. Prism is a recently formed Virginia limited liability company which owns a United States patent and has filed United States patent applications for lenses which are surgically implanted in the eye and are designed to improve central field loss, a leading cause of blindness. For further information regarding the provisions of the Letter of Intent, see the Company's Current Report on Form 8-K, dated October 10, 1996, which is incorporated herein by reference. Available Information. The Company is subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Certain information as of particular dates concerning the Company's directors and officers, their remuneration, Company Stock Options (as defined below) granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located in the Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies should be obtainable, by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a World Wide Web site on the internet at http://www.sec.gov that contains reports and certain other information regarding registrants that file electronically with the Commission. Such information should also be on file at The Nasdaq National Market, 1735 K Street, N.W., Washington, D.C. 20006. 11 14 Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or based upon publicly available documents on file with the Commission and other publicly available information. Although the Purchaser and Parent do not have any knowledge that any such information is untrue, neither the Purchaser nor Parent takes any responsibility for the accuracy or completeness of such information or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information. 9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT The Purchaser, a Delaware corporation and a wholly owned subsidiary of Parent, was organized to acquire the Company and has not conducted any unrelated activities since its organization. The principal offices of the Purchaser are located at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. All outstanding shares of capital stock of the Purchaser are owned by Parent. Parent's principal line of business is the manufacture and sale of a broad range of products in the health care field. Parent is a New Jersey corporation with its principal office located at One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. Financial information with respect to Parent and its subsidiaries is included in Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, which is incorporated herein by reference, and other documents filed by Parent with the Commission. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information". Except as described in this Offer to Purchase, neither the Purchaser nor Parent (together, the "Corporate Entities") or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I or any associate or majority-owned subsidiary, of the Corporate Entities or any of the persons so listed, beneficially owns any equity security of the Company, and none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. Except as described in this Offer to Purchase, (1) there have not been any contacts, transactions or negotiations between the Corporate Entities, any of their respective subsidiaries or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I, on the one hand, and the Company or any of its directors, officers or affiliates, on the other hand, that are required to be disclosed pursuant to the rules and regulations of the Commission and (2) none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I has any contract, arrangement, understanding or relationship with any person with respect to any securities of the Company. Except as described in this Offer to Purchase, during the last five years, none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I (a) has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or (b) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, Federal or state securities laws or finding any violation of such laws. The name, business address, present principal occupation or employment, five year employment history and citizenship of each of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I. Available Information. Parent is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning Parent's directors and officers, their remuneration, options granted to them, the principal holders of Parent's securities and any material interest of such persons in transactions with Parent is disclosed in proxy statements distributed to Parent's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the Commission, and copies thereof should be obtainable from the Commission, in the same manner as set forth with respect to information concerning the Company in 12 15 Section 8. Such material should also be available for inspection at the library of the NYSE, 20 Broad Street, New York, New York 10005. 10. SOURCE AND AMOUNT OF FUNDS The total amount of funds required by the Purchaser to purchase all outstanding Shares pursuant to the Offer and to pay fees and expenses related to the Offer and the Merger is estimated to be approximately $130 million. The Purchaser plans to obtain all funds needed for the Offer and the Merger through a capital contribution which will be made by Parent to the Purchaser. Parent will fund such contribution from available working capital. The Purchaser therefore has not conditioned the Offer on obtaining financing. 11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER Since February 1993, Parent and the Company have from time to time engaged in discussions and exchanges of information in an effort to examine possible business arrangements. In August 1995, as part of a series of transactions aimed at providing the Company with necessary financing, JJDC purchased $1,500,000 of preferred stock in the Company. In addition, concurrently therewith, Parent acquired an option (the "Option") to purchase all of the outstanding capital stock of the Company at a net aggregate exercise price of approximately $85 million. Parent paid the Company $1,500,000 in consideration for the grant of the Option. Due to certain business considerations, Parent did not exercise the Option, and pursuant to its terms, the Option terminated on March 14, 1996, and Parent was issued additional preferred stock in lieu thereof. Parent conducted due diligence investigations of the Company during the fall and winter of 1995-1996 in connection with the Option, and Parent, Johnson & Johnson Vision Products, Inc. and the Company entered into a Confidentiality Agreement (the "Confidentiality Agreement") in connection therewith on November 27, 1995. As a result of the transactions immediately preceding the Company's initial public offering on March 14, 1996, the equity securities owned by Parent and its subsidiaries were converted into an aggregate of 474,515 Shares. On August 1, 1996 and January 31, 1997, the Confidentiality Agreement was restated and amended, and Parent conducted a new due diligence review of the Company in contemplation of a possible business arrangement. During January, 1997, Parent decided to propose a transaction to the Company whereby Parent would acquire all the outstanding capital stock of the Company for cash. On January 29, 1997, James R. Utaski, Vice President, Corporate Development of Parent, W. Ben Deibler, Vice President, New Business Development, Worldwide Vistakon Franchise, a division of a subsidiary of Parent and James R. Hilton, Assistant General Counsel of Parent, met in New York with Ronald D. Blum, O.D., Chairman, Chief Executive Officer and Secretary of the Company, Damion E. Wicker, M.D., a director of the Company and a general partner of the general partner of Chase Venture Capital Associates, L.P., Ian M. Kidson, a director of the Company and a Managing Director of CIBC Wood Gundy Securities Inc., and counsel to the Company. At the meeting, Messrs. Utaski, Deibler and Hilton expressed Parent's serious interest in exploring an acquisition of the Company and proposed general parameters pursuant to which Parent would be willing to proceed with such a transaction. The representatives of the Company expressed the Company's interest in proceeding with discussions. On January 30, 1997, the same parties continued negotiations by telephone conference. On February 2, 1997, the same parties other than Mr. Hilton met again in New York. Mr. Deibler indicated that Parent was prepared to proceed with an acquisition of the Company valued between approximately $130 and $134 million, subject to the accuracy of certain assumptions (including the amount of cash and equivalents and usable net operating loss carryforwards) and subject to completion of due diligence and the negotiation of definitive agreements. On this basis, Dr. Blum agreed on behalf of the Company to move forward to consider whether to effect a transaction with Parent. 13 16 Following the February 2, 1997, meeting, Parent began a new extensive due diligence review of the Company. Also, on February 2, 1997, the Company's Board of Directors resolved to create a Special Committee to explore various strategic alternatives for the Company, including a possible transaction with Parent. On February 5, 1997, Messrs. Utaski and Deibler met in New York with counsel for Parent and the Company, Michael B. Packard and Gregory J. Forrest, each a director of the Company and a member of its Special Committee, counsel to the Special Committee and representatives of Prudential Securities. Parent's representatives confirmed that it was a condition to Parent's willingness to enter into an agreement to acquire the Company that there be an agreement along the lines of the Stockholder Agreement and that there be certain other provisions in the event of the termination of the Merger Agreement by the Company in connection with a competing transaction. The members of the Special Committee and their representatives discussed with Parent and its representatives the details of such provisions as well as certain other provisions of the draft documents that had been circulated. Between February 5, 1997, and February 10, 1997, Parent, the Company, the Special Committee and their respective representatives had several internal discussions and continued negotiations with respect to the price, the amount and terms of the Termination Fee and other details of the transaction. On February 9, 1997, the Special Committee met with its counsel, representatives of Prudential Securities and Company counsel and reviewed and discussed the proposed transaction, including drafts of the Merger Agreement and related documents. After various proposals and counterproposals, these negotiations culminated in the Special Committee recommending to the Company's Board of Directors during its Board Meeting on February 10, 1997, Parent's proposed price of $13.75 per Share and forms of definitive agreements, and the Company and Parent agreeing on such price and documentation. The Company's full Board of Directors met midday on Monday, February 10, 1997. Following a presentation of Prudential Securities, the Company's receipt of the fairness opinion from Prudential Securities and discussions with counsel to the Company and to its Special Committee concerning the terms of the Offer and the Merger and the fiduciary duties of the Company's directors, the Special Committee met separately and determined to recommend to the full Board approval of the proposed transaction. Thereafter, the full Board reconvened and, after receiving the Special Committee's recommendation, approved the transaction. Parent's Board of Directors also met Monday, February 10, 1997, during which meeting the transactions contemplated by the Merger Agreement and Stockholder Agreement were approved. Following these approvals, the Merger Agreement and Stockholder Agreement were executed, and the transaction was publicly announced before financial markets opened on February 11, 1997. 12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENT Purpose. The purpose of the Offer is to acquire control of and the entire equity interest in the Company. Following the Offer, the Purchaser and Parent intend to acquire any remaining equity interest in the Company not acquired in the Offer by consummating the Merger. The Merger Agreement. The Merger Agreement provides that following the satisfaction of the conditions described below under "Conditions to the Merger", the Purchaser will be merged with and into the Company, and each then outstanding Share (other than Shares owned by the Company as treasury stock or by Parent, the Purchaser or any other direct or indirect wholly owned subsidiary of Parent or by stockholders, if any, who are entitled to and who property exercise dissenters' rights under Delaware law), will be converted into the right to receive an amount in cash equal to the price per Share paid pursuant to the Offer. VOTE REQUIRED TO APPROVE MERGER. The DGCL requires, among other things, that the adoption of any plan of merger or consolidation of the Company must be approved by the Board of Directors and generally by the holders of the Company's outstanding voting securities. The Board of Directors of the Company has approved the Offer and the Merger; consequently, the only additional action of the Company that may be necessary to effect the Merger is approval by such stockholders if the "short-form" merger procedure described below is not available. Under the DGCL, the affirmative vote of holders of a majority of the outstanding Shares (including any Shares owned by the Purchaser), is generally required to approve the Merger. If the Purchaser acquires, through the Offer or otherwise, voting power with respect to at least a majority of the outstanding Shares (which would be the case if the Minimum Condition were satisfied and the Purchaser were to accept for payment Shares tendered pursuant to the Offer, including the Shares subject to 14 17 the Stockholder Agreement sold pursuant to the Stockholder Agreement or tendered by the Selling Purchaser were to accept for payment Shares tendered pursuant to the Offer, including the Shares subject to the Stockholder Agreement sold pursuant to the Stockholder Agreement or tendered by the Selling Stockholders pursuant to the Offer), it would have sufficient voting power to effect the Merger without the vote of any other stockholder of the Company. However, the DGCL also provides that if a parent company owns at least 90% of each class of stock of a subsidiary, the parent company can effect a short-form merger with that subsidiary without the action of the other stockholders of the subsidiary. Accordingly, if, as a result of the Offer or otherwise, the Purchaser acquires or controls the voting power of at least 90% of the outstanding Shares, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. CONDITIONS TO THE MERGER. The Merger Agreement provides that the Merger is subject to the satisfaction of certain conditions, including the following: (1) if applicable, the Merger Agreement having been approved and adopted by the affirmative vote of the Company's stockholders by the requisite vote in accordance with applicable law and the Company's certificate of incorporation and (2) no statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger being in effect; provided, however, that each of the Company, the Purchaser and Parent has used reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any injunction or other order that may be entered. TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval by the stockholders of the Company, (1) by mutual written consent of the Company and Parent, (2) by either the Company or Parent if (a)(i) as a result of any of the conditions to the Offer not being satisfied, the Offer shall have been terminated or expired in accordance with its terms without the Purchaser having accepted for payment any Shares pursuant to the Offer or (ii) the Purchaser shall not have accepted for payment any Shares pursuant to the Offer by May 31, 1997, unless the failure of any condition to such acceptance results from the failure by the party seeking to terminate the Merger Agreement to perform any of its obligations under the Merger Agreement from facts or circumstances that constitute a material breach of representation or warranty under the Merger Agreement by such party unless such breach was not willful or intentional; or (b) if any Federal, state or local government or any court, tribunal, administrative agency or commission or other regulatory authority or agency, domestic, foreign or supranational (a "Governmental Entity"), shall have issued an order, decree or ruling or taken any action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of or payment for Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action has become final and nonappealable, (3) by Parent or the Purchaser prior to the Purchaser's obligation to accept Shares for payment pursuant to the Offer, in the event of a breach by the Company of any representation, warranty, covenant or other agreement contained in the Merger Agreement which (i) would give rise to the failure of a condition set forth in paragraph (d) or (e) under Section 14 and (ii) cannot be or has not been cured within 20 days after the giving of written notice to the Company, (4) by Parent or the Company if, prior to the obligation of the Purchaser to accept Shares for payment pursuant to the Offer, the Board of Directors of the Company determines that a Takeover Proposal (as hereinafter defined) constitutes a Superior Proposal (as hereinafter defined), provided it has complied with certain additional provisions as described in the second paragraph under "Takeover Proposals", including in the case of a termination by the Company, making payment of the Expenses and Termination Fee (each as defined below under "Fees and Expenses"), and (5) by the Company if Parent or the Purchaser shall have (A) failed to commence the Offer within five business days of the date of the Merger Agreement, (B) failed to pay for Shares pursuant to the Offer in accordance with the terms of the Merger Agreement or (C) breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in the Merger Agreement, which failure to perform in respect of clause (C) is incapable of being cured or has not been cured within 20 days after the giving of written notice to Parent or the Purchaser, except in any case under clause (C), such failures which are not reasonably likely to affect adversely Parent's or the Purchaser's ability to complete the Offer or the Merger. 15 18 TAKEOVER PROPOSALS. The Merger Agreement provides that the Company shall not, and shall not authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal or (ii) participate in any discussions or negotiations regarding any Takeover Proposal; provided, however, that if, at any time prior to the acceptance for payment of Shares pursuant to and subject to the conditions (including the Minimum Condition) of the Offer, the Board of Directors of the Company (or its Special Committee) determines in good faith, after consultation with outside counsel, that failure to do so would create a substantial risk of liability for breach of its fiduciary duties to the Company's stockholders under applicable law, the Company may, in response to a Takeover Proposal that was unsolicited, and subject to compliance with the notification provisions discussed below, (x) furnish information with respect to the Company to any person pursuant to a customary and reasonable confidentiality agreement and (y) participate in negotiations regarding such Takeover Proposal. The Merger Agreement defines "Takeover Proposal" as any proposal or offer from any person relating to any direct or indirect acquisition or purchase of 20% or more of the assets of the Company or 20% or more of any class of outstanding equity securities of the Company, any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of any class of equity securities of the Company or any merger, consolidation, business combination, sale of substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company, other than the transactions contemplated by Merger Agreement. The Merger Agreement provides further that unless the Board of Directors of the Company shall have terminated the Merger Agreement as described below, neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent, the approval or recommendation by such Board of Directors or any such committee of the Offer, the Merger Agreement or the Merger, (ii) approve or recommend, or propose to approve or recommend, any Takeover Proposal or (iii) enter into any letter of intent, agreement in principle, acquisition agreement or other agreement (an "Acquisition Agreement") with respect to any Takeover Proposal. Notwithstanding the foregoing, the Board of Directors of the Company or any committee thereof may take any such action if, prior to the obligation of the Purchaser to accept Shares for payment pursuant to the Offer, (x) the Board of Directors of the Company determines that a Takeover Proposal constitutes a Superior Proposal (as defined below) and (y) the Board of Directors of the Company terminates the Merger Agreement; provided, however, that the Company may not terminate the Merger Agreement pursuant to this provision unless and until five business days have elapsed following delivery to Parent of a written notice of such determination by the Board of Directors of the Company and during such five business day period the Company (i) informs Parent of the terms and conditions of the Takeover Proposal and the identity of the person making the Takeover Proposal and (ii) otherwise cooperates with Parent with respect thereto (subject, in the case of this clause (ii), to the condition that the Board of Directors of the Company shall not be required to take any action that it believes, after consultation with outside legal counsel, would present a substantial risk of liability for violating its obligations to the Company or the Company's stockholders under applicable law) with the intent of enabling Parent to agree to a modification of the terms and conditions of the Merger Agreement so that the transactions contemplated hereby may be effected; provided, further, that the Company may not terminate the Merger Agreement pursuant to such provision unless at the end of such five business day period the Board of Directors of the Company continues to believe that the Takeover Proposal constitutes a Superior Proposal and no later than two days thereafter the Company pays to Parent the Expenses and the Termination Fee; and provided, further, that in the event the determination of the Board of Directors of the Company that a Takeover Proposal constitutes a Superior Proposal is made less than ten business days prior to the scheduled expiration of the Offer, Parent and the Purchaser will either (x) reduce the five business day period or (y) extend the Offer, in either case such that the five business day period described above will end no later than five business days prior to the expiration of the Offer. The Merger Agreement defines a "Superior Proposal" to be any bona fide proposal made by a third party to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the voting power of the Shares of or all or substantially all the assets of the Company and otherwise on terms which the Board of Directors of the Company determines in its good faith 16 19 judgment (based on the written opinion of a financial advisor of nationally recognized reputation (which opinion shall be provided to Parent)) to be more favorable to the Company's stockholders than the Offer and the Merger and for which financing, to the extent required, is then committed or which, in the good faith judgment of the Board of Directors of the Company, is capable of being obtained by such third party. In addition to the obligations of the Company set forth in the preceding paragraph, the Merger Agreement provides that the Company shall immediately advise Parent orally and in writing of any request for information or of any Takeover Proposal or any inquiry regarding the making of a Takeover Proposal, the material terms and conditions of such request, Takeover Proposal or inquiry, and the identity of the person making any such Takeover Proposal or inquiry. The Company is further required under the terms of the Merger Agreement to keep Parent fully informed of the status and details (including amendments or proposed amendments) of any such request, Takeover Proposal or inquiry. The Merger Agreement provides that nothing contained therein shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders if, in the opinion of the Board of Directors of the Company, after consultation with counsel, failure to so disclose would be inconsistent with its fiduciary duties to the Company's stockholders under applicable law; provided that the Company does not, except as permitted by the Merger Agreement, withdraw or modify, or propose to withdraw or modify, its position with respect to the Offer or the Merger or approve or recommend, or propose to approve or recommend, a Takeover Proposal; provided, further, that the taking of a position by the Company pursuant to Rule 14e-2(a)(2) or (3) of the Exchange Act in respect of a Takeover Proposal shall not be deemed a withdrawal, a modification or a proposal to do either, of its position with respect to the Offer or the Merger for purposes thereof. FEES AND EXPENSES. The Merger Agreement provides that in the event that the Merger Agreement is terminated by any party thereto pursuant to the procedures described in the second paragraph under "Takeover Proposals", the Company shall promptly, but in no event later than two days after the date of such termination, pay Parent a fee equal to $6.25 million in immediately available funds (the "Termination Fee") and all Expenses (as defined below). The Merger Agreement further provides that if, at the time of any other termination of the Merger Agreement (with certain exceptions as set forth in the Merger Agreement), a Takeover Proposal shall have been made (other than a Takeover Proposal made solely to a Selling Stockholder unless and until such Takeover Proposal becomes known to the Company (other than knowledge imputed to the Company by virtue of a direct relationship of such Stockholder with an officer or director of the Company) or becomes publicly known) and prior to December 31, 1997 the Company shall either (x) consummate a Trigger Takeover Proposal (as hereinafter defined) or (y) enter into an Acquisition Agreement providing for a Trigger Takeover Proposal, then the Company shall pay the Termination Fee and all Expenses in the case of clause (x) concurrently with the consummation of such Trigger Takeover Proposal or in the case of clause (y) concurrently with the consummation of the transaction subject to such Acquisition Agreement (whether or not such transaction is consummated prior to December 31, 1997); provided, however, that no Termination Fee and no Expenses will be payable pursuant to this sentence if the Offer is terminated prior to its scheduled expiration date (without giving effect to any voluntary or required extensions thereof) or if at the time the Merger Agreement is terminated, the Minimum Condition shall have been satisfied but any of the other conditions to the Offer shall not have been satisfied. The Merger Agreement defines "Trigger Takeover Proposal" to be a Takeover Proposal except that references to "20%" in the definition of "Takeover Proposal" shall be deemed to be references to "40%" and a Trigger Takeover Proposal may only be in the form of a single transaction or a series of related transactions. The Merger Agreement defines "Expenses" to be all out-of-pocket expenses incurred by Parent and the Purchaser in connection with the Merger Agreement, the Stockholder Agreement and the transactions contemplated thereby in an amount not to exceed $500,000, payable in immediately available funds. CONDUCT OF BUSINESS BY THE COMPANY. The Merger Agreement provides that during the term of the Merger Agreement, the Company shall carry on its business in the ordinary course and use all reasonable efforts to preserve intact its current business organization, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others having business dealings with it. The Merger Agreement further provides that, except as otherwise expressly 17 20 contemplated by the Merger Agreement, the Company shall not (without Parent's prior written consent) (1) (a) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (b) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (c) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (2) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than the issuance of Shares upon the exercise of employee stock options outstanding on the date of the Merger Agreement in accordance with their present terms); (3) amend its certificate of incorporation or by-laws; (4)(a) acquire or agree to acquire (i) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division thereof or (ii) any assets that are material, individually or in the aggregate, to the Company except purchases of inventory in the ordinary course of business consistent with past practice or (b) exercise its option to acquire units of Prism Ophthalmics, L.L.C.; (5) sell, lease, license, mortgage or otherwise encumber or subject to any lien or otherwise dispose of any of its properties or assets, except sales of inventory or sales or licenses of immaterial assets, in each case in the ordinary course of business consistent with past practice; (6) (a) incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing or (b) make any loans, advances or capital contributions to, or investments in, any other person, other than advances to employees in the ordinary course of business consistent with past practice; (7) make any tax election or settle or compromise any income tax liability; (8) pay, discharge, settle or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge, settlement or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in any report of the Company filed with the Commission since March 14, 1996 and publicly available prior to the date of the Merger Agreement or incurred in the ordinary course of business consistent with past practice, or waive the benefits of, or agree to modify in any manner, any confidentiality, standstill or similar agreement to which the Company is a party, (9) except in the ordinary course of business, modify, amend or terminate any material contract or agreement to which the Company is a party or waive, release or assign any material rights or claims; (10) make or agree to make any new capital expenditure or expenditures with respect to property, plant or equipment which, individually, is in excess of $50,000 or, in the aggregate, are in excess of $200,000; (11) enter into any contracts, agreements, arrangements or understandings relating to the distribution, sale or marketing by third parties of the Company's products or products licensed by the Company; (12) except as required to comply with applicable law, (A) adopt, enter into, terminate or amend any benefit plan or other arrangement for the benefit or welfare of any director, officer or current or former employee, (B) increase in any manner the compensation or fringe benefits of, or pay any bonus to, any director, officer or employee (except for normal increases or bonuses, in the ordinary course of business consistent with past practice), (C) pay any benefit not provided for under any benefit plan, (D) except as permitted in clause (B), grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or benefit plan (including the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock, or the removal of existing restrictions in any benefit plans or agreement or awards made thereunder) or (E) take any action other than in the ordinary course of business to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or benefit plan; or (13) authorize any of, or commit or agree to take any of, the foregoing actions. Pursuant to the Merger Agreement, the Company shall not take any action that could reasonably be expected to result in (1) any of its representations and warranties set forth in the Merger Agreement that are qualified as to materiality becoming untrue, (2) any of such representations and warranties that are not so 18 21 qualified becoming untrue in any material respect or (3) except as otherwise permitted by the provisions of the Merger Agreement described above under "Takeover Proposals", any of the conditions to the Offer or to the Merger not being satisfied. BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the acceptance for payment of, and payment for, any Shares by the Purchaser pursuant to the Offer, the Purchaser shall be entitled to designate such number of the directors on the Board of Directors of the Company such that the Purchaser, subject to compliance with Section 14(f) of the Exchange Act, will control a majority of such directors, and the Company and its Board of Directors shall, at such time, take all such action needed to cause the Purchaser's designees to be appointed to the Company's Board of Directors. Subject to applicable law, the Company has agreed to take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, which Information Statement is attached as Schedule I to the Schedule 14D-9. STOCK OPTIONS. The Merger Agreement provides that as soon as practicable following the date of the Merger Agreement but in no event later than the consummation of the Offer, the Company (or, if appropriate, the Board of Directors of the Company or any committee administering the Stock Option Plans (as defined below)) shall (including by adopting resolutions or taking any other actions) ensure that, with certain exceptions, each outstanding option to purchase Shares (a "Company Stock Option") granted under any stock option, stock appreciation rights or stock purchase plan, program or arrangement of the Company (collectively, the "Stock Option Plans") and each outstanding warrant to purchase Shares (a "Warrant") in each case outstanding immediately prior to the consummation of the Offer, whether or not then exercisable, shall either (x) be cancelled immediately prior to the effective time of the Merger (the "Effective Time") in exchange for an amount in cash, payable at the time of such cancellation, equal to the product of (y) the number of Shares subject to such Company Stock Option or Warrant immediately prior to the Effective Time and (z) the excess of the price per Share to be paid in the Offer over the per Share exercise price of such Company Stock Option or Warrant (the "Net Amount") or (y) be converted immediately prior to the Effective Time into the right solely to receive the Net Amount; provided, however, that no such cash payment has been made. The Merger Agreement further provides that the Company (or, if appropriate, the Board of Directors of the Company or any committee administering the Stock Option Plans) shall use its reasonable best efforts to ensure that immediately prior to the Effective Time the Company Stock Options and Warrants remaining are cancelled or converted as set forth above. The Company shall not make, or agree to make, any payment of any kind to any holder of a Company Stock Option or a Warrant (except for the payment described above) without the consent of Parent (which consent will not be unreasonably withheld). The Merger Agreement provides further that subject to the provisions set forth above, all Stock Option Plans shall terminate as of the Effective Time and the provisions in any other benefit plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be deleted as of the Effective Time. The Merger Agreement provides that the Company shall ensure that following the consummation of the Offer (with certain exceptions), no holder of a Company Stock Option or Warrant or any participant in any Stock Option Plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation, and that the Company shall use its reasonable best efforts to ensure that following the Effective Time, no holder of any remaining Company Stock Option or Warrant or any participant in any Stock Option Plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation. The Merger Agreement also provides that the Surviving Corporation shall continue to be obligated to pay the Net Amount to holders of any Company Stock Options or Warrants converted in accordance with clause (y) of the immediately preceding paragraph. BENEFIT PLANS. Parent has agreed in the Merger Agreement to cause the Surviving Corporation to take such actions as are necessary so that, for a period of not less than one year after the Effective Time, employees of the Company who continue their employment after the Effective Time will be provided employee benefits which in the aggregate are at least generally comparable to those provided to such employees in effect on the date of the Merger Agreement. The Merger Agreement also provides that it is Parent's current intention, 19 22 following the first anniversary of the Effective Time, to provide employee benefit plans, programs, arrangements and policies for the benefit of employees of the Company which are generally comparable in the aggregate to the employee benefit plans, programs arrangements and policies provided for the benefit of other similarly situated employees of Parent and its subsidiaries. INDEMNIFICATION, EXCULPATION AND INSURANCE. Parent has agreed in the Merger Agreement that all rights to indemnification and exculpation (including the advancement of expenses) from liabilities for acts or omissions occurring at or prior to the Effective Time (including with respect to the transactions contemplated by the Merger Agreement) existing now or at the Effective Time in favor of the current or former directors or officers of the Company as provided in its certificate of incorporation, its by-laws (each as in effect on the date of the Merger Agreement) and reasonable indemnification agreements shall be assumed by the Surviving Corporation in the Merger, without further action, as of the Effective Time and shall survive the Merger and shall continue in full force and effect without amendment, modification or repeal in accordance with their terms for a period of not less than six years after the Effective Time; provided however, that if any claims are asserted or made within such six year period, all rights to indemnification (and to advancement of expenses) hereunder in respect of any such claims shall continue, without diminution, until disposition of any and all such claims. The Merger Agreement provides that, unless Parent agrees to guarantee the indemnification obligations described in the preceding paragraph, for a period of six years from the Effective Time, Parent shall provide officers' and directors' liability insurance in respect of acts or omissions occurring at or prior to the Effective Time, including but not limited to the transactions contemplated by, the Merger Agreement, covering each person currently covered by the Company's officers' and directors' liability insurance policy, or who becomes covered by such policy prior to the Effective Time, on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof, provided that in satisfying such obligation Parent shall not be obligated to pay premiums in excess of 200% of the amount per annum the Company paid in its last full fiscal year (which the Company has represented to Parent and the Purchaser to be $129,000), and provided further that Parent shall nevertheless be obligated to provide such coverage as may be obtained for such 200% amount. The Merger Agreement provides that in the event Parent, the Surviving Corporation or any of their successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then and in each such case, proper provisions shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, shall assume the obligations set forth in the preceding paragraphs. The Merger Agreement also provides that, in the event the Surviving Corporation transfers any material portion of its assets, in a single transaction or in a series of transactions, Parent will either guarantee the indemnification obligations set forth in the preceding paragraphs or take such other action to ensure that the ability of the Surviving Corporation to satisfy such indemnification obligations will not be diminished in any material respect. REASONABLE EFFORTS. The Merger Agreement provides that, on the terms and subject to the conditions of the Merger Agreement, each of the parties will use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer and the Merger and the other transactions contemplated by the Merger Agreement and the Stockholder Agreement. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary representations and warranties. PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. The Merger Agreement provides that in the event the Purchaser's designees are appointed or elected to the Board of Directors of the Company as described above under "Board of Directors", after the acceptance for payment of Shares pursuant to the Offer and prior to the Effective Time of the Merger, the affirmative vote of the directors of the Company not designated by Parent or the Purchaser is required for the Company to amend or terminate the Merger Agreement, exercise or waive any of its rights or remedies under the Merger Agreement, extend the time for 20 23 performance of the Purchaser's and Parent's respective obligations under the Merger Agreement or take any action to amend or otherwise modify the Company's certificate of incorporation or by-laws. Stockholder Agreement. The Stockholder Agreement provides that each Selling Stockholder will sell, and the Purchaser will purchase, all Shares beneficially owned by such Selling Stockholder, at a price per Share equal to $13.75. Such obligations to sell and to purchase are subject to the Purchaser having accepted Shares for payment under the Offer and the Minimum Condition having been satisfied. The Stockholder Agreement also provides that each Selling Stockholder may, and at the request of Parent shall, tender its Shares subject to the Stockholder Agreement in the Offer. Any Shares of any Selling Stockholder not purchased in the Offer will be purchased at the same time as payment is made pursuant to the Offer. Each of the Selling Stockholders has agreed, until the Stockholder Agreement has terminated, among other things, not to: (i) sell, transfer, give, pledge or otherwise dispose of, or enter into any contract, option or other arrangement with respect to the sale, transfer, pledge, assignment or other disposition of, the Shares subject to the Stockholder Agreement owned by such Selling Stockholder other than pursuant to the terms of the Offer or the Merger; (ii) enter into any voting arrangement, whether by proxy, voting agreement or otherwise, in connection with, directly or indirectly, any Takeover Proposal; (iii) directly or indirectly solicit, initiate or encourage the submission of, any Takeover Proposal; or (iv) directly or indirectly participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal; provided, that clause (iv) will not be deemed to have been violated if in response to an unsolicited inquiry, the Selling Stockholder states that it or he is subject to the provisions of the Stockholder Agreement. Each of the Selling Stockholders has also agreed until the Stockholder Agreement has terminated, and the Stockholder Agreement includes an irrevocable proxy provision for the benefit of the Purchaser with respect to the Shares subject to the Stockholder Agreement owned by each Selling Stockholder, (i) to vote such Shares at any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement; and (ii) to vote such Shares at any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which a Selling Stockholder's vote, consent or other approval is sought, against (x) any Takeover Proposal or (y) any amendment of the Company's certificate of incorporation or by-laws or other proposal or transaction involving the Company, which amendment or other proposal or transaction would be reasonably likely to impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement or change in any manner the voting rights of each class of the Company's common stock. The Stockholder Agreement provides that in the event that the Merger Agreement shall have been terminated under circumstances where Parent is or may become entitled to receive the Termination Fee, each Stockholder shall pay to Parent on demand an amount equal to the difference between the consideration received by such Stockholder from the consummation of any transaction which gives rise to the Company's obligation to pay the Termination Fee pursuant to the Merger Agreement and the consideration such Stockholder would have received had he or it tendered his Shares pursuant to the Offer (without taking into account any modifications to the Offer as in effect on the date hereof), as determined in accordance with the Stockholder Agreement. In addition, in the event that (x) prior to the Effective Time, a Takeover Proposal shall have been made and (y) the Effective Time shall have occurred and Parent for any reason shall have increased the amount of Merger Consideration payable over that set forth in the Merger Agreement in effect on the date thereof (the "Original Merger Consideration"), each Selling Stockholder agrees in the Stockholder Agreement to pay to Parent on demand an amount in cash equal to the product of (i) the number of Shares of such Selling Stockholder subject to the Stockholder Agreement and (ii) 100% of the excess, if any, of (A) the per Share 21 24 cash consideration or the per Share fair market value of any noncash consideration, as the case may be, received by such Selling Stockholder as a result of the Merger, as amended, determined as of the Effective Time, over (B) the amount of the Original Merger Consideration determined as of the time of the first increase in the amount of the Original Merger Consideration. Appraisal Rights. Holders of Shares do not have dissenters' rights as a result of the Offer. However, if the Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Section 262 of the DGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. If the statutory procedures were complied with, such rights could lead to a judicial determination of the fair value required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than or in addition to the Offer Price or the market value of the Shares, including asset values and the investment value of the Shares. The value so determined could be more or less than the Offer Price or the Merger Consideration. If any stockholder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his right to appraisal, as provided in the DGCL, the Shares of such stockholder will be converted into the Merger Consideration in accordance with the Merger Agreement. A stockholder may withdraw his demand for appraisal by delivery to Parent of a written withdrawal of his demand for appraisal and acceptance of the Merger. The foregoing discussion is not a complete statement of law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL. FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. Going Private Transactions. The Merger would have to comply with any applicable Federal law operative at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger unless the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger and the consideration offered to minority shareholders be filed with the Commission and disclosed to minority shareholders prior to consummation of the Merger. Other Matters. Except as otherwise described in this Offer to Purchase, the Purchaser and Parent have no current plans or proposals that would relate to, or result in, any extraordinary corporate transaction involving the Company, such as a merger, reorganization or liquidation involving the Company, a sale or transfer of a material amount of assets of the Company, any change in the Company's capitalization or dividend policy or any other material change in the Company's business, corporate structure or personnel. 13. DIVIDENDS AND DISTRIBUTIONS Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the succeeding paragraph, and nothing herein shall constitute a waiver by the Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. If, on or after the date of the Merger Agreement, the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares or (c) issue or sell additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, other than Shares issued pursuant to the exercise of outstanding employee stock options, then, subject to the provisions of Section 14 below, the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. 22 25 If, on or after the date of the Merger Agreement, the Company should declare or pay any cash dividend on the Shares or other distribution on the Shares, or issue with respect to the Shares any additional Shares, shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to the Purchaser or its nominee or transferee on the Company's stock transfer records, then, subject to the provisions of Section 14 below, (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering stockholders will (i) be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer price or deduct from the Offer price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other term of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless (i) the Minimum Condition shall have been satisfied and (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated. Furthermore, notwithstanding any other term of the Offer, the Purchaser shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate the Offer if, at any time on or after the date of the Merger Agreement and before the acceptance of such Shares for payment or the payment therefor, any of the following conditions exists (other than as a result of any action or inaction of Parent or any of its subsidiaries that constitutes a breach of the Merger Agreement): (a) there shall be instituted or pending by any person or Governmental Entity any suit, action or proceeding (i) challenging the acquisition by Parent or the Purchaser of any Shares under the Offer or pursuant to the Stockholder Agreement, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Merger Agreement or the Stockholder Agreement (including the voting provision thereunder), or seeking to obtain from the Company, Parent or the Purchaser any damages in connection with the aforesaid transactions that are material in relation to the Company, (ii) seeking to prohibit or materially limit the ownership or operation by the Company, Parent or any of their respective subsidiaries of a material portion of the business or assets of the Company or Parent and its subsidiaries, taken as a whole, or to compel the Company or Parent to dispose of or hold separate any material portion of the business or assets of the Company, or Parent and its subsidiaries, taken as a whole, as a result of the Offer or any of the other transactions contemplated by the Merger Agreement or the Stockholder Agreement, (iii) seeking to impose material limitations on the ability of Parent or the Purchaser to acquire or hold, or exercise full rights of ownership of, any Shares to be accepted for payment pursuant to the Offer or purchased under the Stockholder Agreement including, without limitation, the right to vote such Shares on all matters properly presented to the stockholders of the Company, (iv) seeking to prohibit Parent or any of its subsidiaries from effectively controlling in any material respect any material portion of the business or operations of the Company or (v) which otherwise is reasonably likely to have a material adverse effect on the Company; (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any 23 26 Governmental Entity or court, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; provided, however, that each of Parent and the Purchaser shall have used reasonable efforts to prevent the entry of any such injunction or other court order and to appeal as promptly as possible any injunction or other court order that may be entered; (c) there shall have occurred any material adverse change with respect to the Company; (d) any of the representations and warranties of the Company set forth in the Merger Agreement (without giving effect to any materiality or similar qualifications contained therein) shall not be true and correct at the date of the Merger Agreement and at the scheduled or extended expiration of the Offer except (i) for changes specifically permitted by the Merger Agreement and (ii) in any case where such failing to be true and correct could not, in the aggregate, be reasonably expected to have a material adverse effect on the Company; (e) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement; or (f) the Merger Agreement shall have been terminated in accordance with its terms; which, in the judgment of the Purchaser in any such case, and regardless of the circumstances (including any action or omission by the Purchaser) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payments. The Merger Agreement provides that the foregoing conditions in paragraphs (a) through (f) are for the sole benefit of the Purchaser and Parent and may, subject to the terms of the Merger Agreement, be waived by the Purchaser and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 15. CERTAIN LEGAL MATTERS Based on a review of publicly available filings made by the Company with the Commission and other publicly available information concerning the Company, neither the Purchaser nor Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action, except as otherwise described in this Section 15, by any Governmental Entity that would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser and Parent currently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws". While, except as otherwise expressly described in this Section 15, the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could, subject to the terms and conditions of the Merger Agreement, decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer. State Takeover Laws. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are 24 27 incorporated or have assets, stockholders, executive offices or places or business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law, and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders; provided that such laws were applicable only under certain conditions. Subsequently, a number of Federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment. Section 203 of the DGCL limits the ability of a Delaware corporation to engage in business combinations with "interested stockholders" (defined generally as any beneficial owner of 15% or more of the outstanding voting stock of the corporation) for a period of three years from the time such interested stockholders became the holders of 15% or more of such Shares unless, among other things, the corporation's board of directors has given its prior approval to either the business combination or the transaction which resulted in the stockholder becoming an "interested stockholder". The Company's Board of Directors has approved the Merger Agreement, the Stockholder Agreement and the Purchaser's acquisition of Shares pursuant to the Offer and, therefore, Section 203 of DGCL is inapplicable to the Merger. Based on information supplied by the Company and its own review, the Purchaser does not believe that any state takeover statutes purport to apply to the Offer or the Merger. Neither the Purchaser nor Parent has currently complied with any state takeover statute or regulation. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, the Purchaser may not be obliged to accept payment or pay for any Shares tendered pursuant to the Offer. Antitrust. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares under the Offer may be consummated following the expiration of a 15-calendar day waiting period following the filing by Parent of a Notification and Report Form with respect to the Offer, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. Parent is in the process of making such filing. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or material from Parent concerning the Offer, the waiting period will be extended and would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Parent with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. The provisions of the HSR Act would similarly apply to any purchase of the Shares subject to the Stockholder Agreement pursuant to the Stockholder Agreement (other than purchases effected through a tender pursuant to the Offer), except that the initial waiting period would expire 30 days following the filing of HSR Act Notification Forms by Parent and the Company and a request for additional information or material from Parent or the Company during the initial 30-day waiting period would extend the waiting period until 11:59 p.m., New York City time, on the 20th day after the date of substantial compliance by Parent and the Company with such request. Parent and the Company are in the process of filing HSR Notification Forms 25 28 with respect to the Stockholder Agreement. If, as is expected, the purchase of Shares permitted by the Stockholder Agreement is effected through a tender of such Shares pursuant to the Offer, the HSR requirements applicable to the Offer described in the prior paragraph would apply rather than the requirements described in this paragraph. The Merger would not require an additional filing under the HSR Act if the Purchaser owns 50% or more of the outstanding Shares at the time of the Merger or if the Merger occurs within one year after the HSR Act waiting period applicable to the Offer expires or is terminated. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's purchase of Shares pursuant to the Offer, the Antitrust Division or FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of Parent or its subsidiaries, or the Company or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the results thereof. 16. FEES AND EXPENSES The Purchaser has retained Georgeson & Company Inc. to act as the Information Agent and First Chicago Trust Company of New York to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the Federal securities laws. Neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Neither of the Purchaser or Parent is aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. To the extent the Purchaser or Parent becomes aware of any state law that would limit the class of offerees in the Offer, the Purchaser will amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. In any jurisdiction the securities, blue sky or other laws of which require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by the Information Agent or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. 26 29 The Purchaser or Parent has filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer. In addition, the Company has filed with the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act setting forth its recommendation with respect to the Offer and the reasons for such recommendation and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Sections 8 and 9 (except that they will not be available at the regional offices of the Commission). INO ACQUISITION CORP. February 18, 1997 27 30 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Parent are set forth below. Unless otherwise indicated, the business address of each such director and each such executive officer is One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. Unless otherwise indicated below, each occupation set forth opposite an individual's name refers to employment with Parent. All directors and executive officers listed below are citizens of the United States except for Sir James Black and Arnold G. Langbo, who are citizens of the United Kingdom and Canada, respectively.
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- James W. Black, M.D. .............. Director of Parent since 1989; Chairman, Science and The James Black Foundation Technology Advisory Committee; Consultant. Professor of 68 Half Moon Lane Analytical Pharmacology at the Rayne Institute, King's Dulwich, London SE249JE College School of Medicine since 1984. Chairman of the England James Black Foundation. Gerard N. Burrow, M.D. ............ Director of Parent since 1993. Member, Benefits Yale University School of Medicine Committee and Science and Technology Advisory Committee. 333 Cedar Street Dean of the Yale University School of Medicine since New Haven, CT 06520-8055 1992. Vice Chancellor for health sciences and Dean of the University of California, San Diego School of Medicine from 1988 to 1992. Member, the Institute of Medicine of the National Academy of Sciences and the Society for Clinical Investigation; Fellow, the American Association for the Advancement of Science. Joan Ganz Cooney................... Director of Parent since 1978; Member, Compensation Children's Television Workshop Committee and Benefits Committee. Chairman, Executive One Lincoln Plaza Committee of Children's Television Workshop since 1990; New York, NY 10023 Chairman-CEO from 1988 to 1990. Director of Metropolitan Life Insurance Company, the Museum of Television and Radio and the Columbia Presbyterian Medical Center of New York; Trustee, the Educational Broadcasting Corporation (Channel 13/WNET, New York City) and the National Child Labor Committee. James G. Cullen.................... Director of Parent since 1995; Member, Compensation Bell Atlantic Corporation Committee and Audit Committee. Vice Chairman, Bell 1310 N. Court House Road Atlantic Corporation since 1995; President from 1993 to Arlington, VA 22201 1995; President and CEO of Bell Atlantic -- New Jersey, Inc. from 1989 to 1993. Director of Prudential Life Insurance Company. Russell C. Deyo.................... Member, Executive Committee and Vice President, Administration since 1996; Associate General Counsel from 1991 to 1996. Member, Management Compensation Committee; Member Pension Committee and Public Policy Advisory Committee. Roger S. Fine...................... Member, Executive Committee; Vice President and General Counsel since October 1996; Vice President, Administration of Parent from 1991 to 1996; Associate general counsel from 1984 to 1991. Member, Board of Trustees of the Foundation of the University of Medicine and Dentistry of New Jersey; Vice President of the National Ramah Commission.
28 31
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- Ronald G. Gelbman.................. Member, Executive Committee and Worldwide Chairman, Pharmaceuticals and Diagnostics since 1994. Company Group Chairman from 1987 to 1994. Philip M. Hawley................... Director of Parent since 1988; Member, Compensation Suite 1900 Committee and Benefits Committee. Chairman and Chief 400 South Hope Street Executive Officer of Carter Hawley Hale Stores, Inc. Los Angeles, CA 90071 from 1983 to December 31, 1992, Chairman until March, 1993. Chairman of the Board and CEO, Krause Furniture Inc. since 1996. Director, Atlantic Richfield Company, and Weyerhaeuser Company. Senior Member, the Conference Board; Member of The Business Counsel. JoAnn H. Heisen.................... Member, Executive Committee and Vice President, Chief Information Officer since January, 1997. Assistant Treasurer, Investor Relations from 1989 to 1991; Treasurer from 1991 to 1995; Controller from 1995 to 1997. Clark H. Johnson................... Member, Executive Committee and Vice President, Finance of Parent since 1988. Trustee, Fairleigh Dickinson University; President-elect of the Institute of Management Accountants. Chairman, Institute of Ceritifed Management Accountants; Trustee, Financial Accounting Foundation. Ann Dibble Jordan.................. Director of Parent since 1981; Member, Audit Committee and Public Policy Advisory Committee. Consultant and previously Field Work Assistant Professor, School of Social Service Administration, University of Chicago from 1970 to 1987. Director, Automatic Data Processing, the Hechinger Company, Salant Corporation and Travelers Inc.; Director, The Phillips Collection, The Child Welfare League and the National Symphony Orchestra. Christian A. Koffmann.............. Member, Executive Committee and Worldwide Chairman, Consumer and Personal Care Group since 1995. Company Group Chairman from 1989 to 1995. Arnold G. Langbo................... Director of Parent since 1991; Member, Audit Committee; One Kellogg Square Member, Compensation Committee. Chairman of the Board Battle Creek, MI 49016-3599 and Chief Executive Officer of Kellogg Company since January of 1992; President and Chief Operating Officer from December, 1990 to January, 1992; President of Kellogg International from 1986 to 1992; Director of Kellogg Company and Whirlpool Corporation. Member, Advisory Board of J.L. Kellogg Graduate School of Management, Northwestern University. Chairman, Board of Trustees of Albion College. Ralph S. Larsen.................... Chairman, Board of Directors and Chief Executive Officer, Chairman, Executive Committee of Parent since 1989. Director, Xerox Corporation, The New York Stock Exchange and AT&T Corp. Member, The Business Council and the Policy Committee of the Business Roundtable. Board of United Way of Tri-State.
29 32
POSITION WITH PARENT; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- James T. Lenehan................... Member, Executive Committee and Worldwide Chairman, Consumer, Pharmaceuticals and Professional Group since 1994. Company Group Chairman from 1993 to 1994. President, McNeil Consumer Products Company from 1990 to 1993. Dr. John S. Mayo................... Director of Parent since 1986; Member, Science and AT&T Bell Laboratories, Inc. Technology Advisory Committee; Chairman, Public Policy 600 Mountain Avenue Advisory Committee. President AT&T Bell Laboratories Murray Hill, NJ 07974 1991 to 1995; Executive Vice President of Network Systems and Network Services from 1989 to 1991; previously served as Director of the Ocean Systems Laboratory, Executive Director of the Ocean Systems Division, Executive Director of the Toll Electronic Switching Division, Vice President of Electronics Technology. Member, National Academy of Engineering; Fellow, Institute of Electrical and Electronic Engineers; Member, Boards of Trustees of Polytechnic University (Emeritus), Chairman, the Liberty Science Center, the Kenan Institute for Engineering, Technology and Science; served on the Board of Overseers for the New Jersey Institute of Technology and the Board of Directors of the National Engineering Consortorium, Inc. Thomas S. Murphy................... Director of Parent since 1980; Chairman of the ABC, Inc. Compensation Committee. Chief Executive Officer of 77 West 66th Street Capital Cities/ABC, Inc. since February 1994 and from New York, NY 10023-6298 1966 to June 1990; Chairman of the Board since 1966. Director, The Walt Disney Company, and Texaco Inc. Chairman, New York University Medical Center Board; Member, Board of Overseers of Harvard University. Paul J. Rizzo...................... Director of Parent since 1982; Chairman, Benefits Franklin Street Partners Committee; Member, Audit Committee. Vice Chairman of 6330 Quadrangle Drive, Suite 200 International Business Machines Corporation 1993 to Chapel Hill, NC 27514 1994. Dean of the Kenan- Flagler Business School at the University of North Carolina-Chapel Hill from 1987 to 1992. Became a partner in Franklin Street Partners, a Chapel Hill, North Carolina investment firm in 1992. Director of McGraw-Hill Companies, Inc., Ryder Systems, Inc. and the Morgan Stanely Group. Maxine F. Singer................... Director of Parent since 1991; Member, Science and Technology Advisory Committee; Member, Public Policy Advisory Committee. President, Carnegie Institution of Washington since 1988; Member, National Academy of Sciences, the American Philosophical Society, the Pontifical Academy of Sciences, the Governing Board of the Weizmann Institute of Science. Roger B. Smith..................... Director of Parent since 1985; Chairman, Audit Committee; Member, Benefits Committee. Retired as Chairman of General Motors Corporation in 1990. Member, the Business Council; Trustee, Alfred P. Sloan Foundation; Member, Board of Directors of International Paper Company. Robert N. Wilson................... Vice Chairman, Board of Directors of Parent since 1989; Chairman of the Pharmaceutical/Diagnostics Sector since 1985; Member, Executive Committee since 1983. Director, U.S. Trust Corporation and Amerada Hess Corporation.
30 33 2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser are set forth below. The business address of each such director and executive officer is One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933. Unless otherwise indicated below, each occupation set forth opposite an individual's name refers to employment with Parent. All such directors and executive officers listed below are citizens of the United States.
POSITION WITH THE PURCHASER; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME 5-YEAR EMPLOYMENT HISTORY - ----------------------------------- -------------------------------------------------------- Peter S. Galloway.................. Director and Vice President of Purchaser since February 1997. Associate General Counsel of Parent since 1988; Secretary of Parent since 1994. James R. Hilton.................... Director, Vice President, Secretary and Treasurer of Purchaser since February 1997. Assistant General Counsel of Parent since 1990. James R. Utaski.................... Director and President of the Purchaser since February, 1997; Corporate Vice President, Business Development of Parent since 1990; Company Group Chairman from 1986 to 1990.
31 34 Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: FIRST CHICAGO TRUST COMPANY OF NEW YORK By Mail: By Overnight: By Hand: Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges P.O. Box 2569 14 Wall Street, 8th Floor c/o The Depository Trust Company Suite 4660 Suite 4680 -- INT 55 Water Street, DTC TAD Jersey City, NJ 07303-2569 New York, NY 10005 Vietnam Veterans Memorial Plaza New York, NY 10041
Facsimile Transmission (for Eligible Institutions only): (201) 222-4720 or (201) 222-4721 Confirm Receipt of Notice of Guaranteed Delivery by Telephone: (201) 222-4707 Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent at the telephone numbers and locations listed below. You may also contact your broker, dealer, bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: [GEORGESON & COMPANY INC. LOGO] Wall Street Plaza New York, NY 10005 Banks and Brokers Call Collect: (212) 440-9800 All Others Call Toll-Free: 800-223-2064 EX-99.A2 3 LETTER OF TRANSMITTAL 1 EXHIBIT (a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF INNOTECH, INC. PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 18, 1997 BY INO ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF JOHNSON & JOHNSON THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 17, 1997, UNLESS EXTENDED. The Depositary: FIRST CHICAGO TRUST COMPANY OF NEW YORK By Mail: By Overnight: By Hand: Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges P.O. Box 2569 14 Wall Street, 8th Floor c/o The Depository Trust Company Suite 4660 Suite 4680-INT 55 Water Street, DTC TAD Jersey City, NJ 07303-2569 New York, NY 10005 Vietnam Veterans Memorial Plaza New York, NY 10041
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used either if certificates are to be forwarded herewith or if delivery of Shares (as defined below) is to be made by book-entry transfer to an account maintained by the Depositary at either The Depository Trust Company or Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 2 of the Offer to Purchase. Stockholders who deliver Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders" and other stockholders are referred to herein as "Certificate Stockholders". Stockholders whose certificates for Shares are not immediately available or who cannot deliver either the certificates for, or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase) with respect to, their Shares and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares in accordance with the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. 2 [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution ---------------------------------------- Check Box of Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number ------------------------------------------------------- Transaction Code Number ---------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s) --------------------------------------- Window Ticket Number (if any) ---------------------------------------- Date of Execution of Notice of Guaranteed Delivery ------------------- Name of Institution that Guaranteed Delivery ------------------------- If delivered by Book-Entry Transfer check box of Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number ------------------------------------------------------- Transaction Code Number ---------------------------------------------- - -------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) ------------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2) --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- TOTAL SHARES ------------------------------------------------------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders. (2) Unless otherwise indicated, it will be assumed that all Shares described herein are being tendered. See Instruction 4. ================================================================================ 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to INO Acquisition Corp., a Delaware corporation (the "Purchaser"), and a wholly owned subsidiary of Johnson & Johnson, a New Jersey corporation ("Parent"), the above-described shares of common stock, par value $.001 per share (the "Shares"), of Innotech, Inc., a Delaware corporation (the "Company"), pursuant to the Purchaser's offer to purchase all outstanding Shares at a price of $13.75 per Share, net to the seller in cash, in accordance with the terms and conditions of the Purchaser's Offer to Purchase dated February 18, 1997 (the "Offer to Purchase"), and this Letter of Transmittal (which, together with any amendments or supplements thereto or hereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged. Upon the terms of the Offer, subject to, and effective upon, acceptance for payment of, and payment for, the Shares tendered herewith in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities or rights issued or issuable in respect thereof on or after February 10, 1997), and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any such other Shares or securities or rights), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares (and any such other Shares or securities or rights) or transfer ownership of such Shares (and any such other Shares or securities or rights) on the account books maintained by a Book-Entry Transfer Facility together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, the Purchaser, (b) present such Shares (and any such other Shares or securities or rights) for transfer on the Company's books and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any such other Shares or securities or rights), all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares (and any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after February 10, 1997) and, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good title thereto, free and clear of all liens, restrictions, claims and encumbrances. The undersigned will, upon request, execute any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares (and any and all such other Shares or securities or rights). All authority conferred or agreed to be conferred pursuant to this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints James R. Utaski, James R. Hilton and Peter S. Galloway, in their respective capacities as officers of Parent, and any individual who shall hereafter succeed to any such office of Parent, and each of them, and any other designees of the Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of the Company's stockholders or otherwise in such manner as each such attorney and proxy or his substitute shall in his sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney and proxy or his substitute shall in his sole discretion deem proper with respect to, and to otherwise act as each such attorney and proxy or his substitute shall in his sole discretion deem proper with respect to, all the Shares tendered hereby that have been accepted for payment by the Purchaser prior to the time any such action is taken and with respect to which the undersigned is entitled to vote (and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after February 10, 1997). This appointment is effective when, and only to the extent that, the Purchaser accepts for payment such Shares as provided in the Offer to Purchase. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall, without further action, revoke all prior powers of attorney and proxies appointed by the undersigned at any time with respect to such Shares (and any such other Shares or securities or rights) and no subsequent powers of attorney or proxies will be appointed by the undersigned, or be effective, with respect thereto. The undersigned understands that the valid tender of Shares pursuant to any of the procedures described in Section 2 of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. 4 Unless otherwise indicated herein under "Special Payment Instructions", please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered". Similarly, unless otherwise indicated under "Special Delivery Instructions", please mail the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered". In the event that both Special Delivery Instructions and Special Payment Instructions are completed, please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and any accompanying documents, as appropriate) in the name of, and deliver such check and/or return such certificates (and any accompanying documents, as appropriate) to, the person or persons so indicated. The undersigned recognizes that the Purchaser has no obligation pursuant to Special Payment Instructions to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. 5 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned. Issue check and/or certificate(s) to: Name ------------------------------------------------------------------------ (PLEASE PRINT) Address --------------------------------------------------------------------- ------------------------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------------------------ (EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) ============================================================ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that above. Mail check and/or certificate(s) to: Name ------------------------------------------------------------------------ (PLEASE PRINT) Address --------------------------------------------------------------------- - ------------------------------------------------------------------------------- (INCLUDE ZIP CODE) - ------------------------------------------------------------------------------- 6 SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF STOCKHOLDER(S)) Dated: , 1997 ------------------ (Must be signed by registered holder(s) as name(s) appear(s) on the certificate(s) for the Shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s) -------------------------------------------------------------------- ---------------------------------------------------------------------------- (PLEASE PRINT) Capacity (Full Title) ------------------------------------------------------ Address -------------------------------------------------------------------- ---------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No. ------------------------------------------------ Employer Identification or Social Security Number ----------------------------------------------------- GUARANTEE OF SIGNATURE(S) IF REQUIRED -- (SEE INSTRUCTIONS 1 AND 5) Authorized Signature ------------------------------------------------------ Name --------------------------------------------------------------------- ---------------------------------------------------------------------------- (PLEASE PRINT) Name of Firm ------------------------------------------------------------ Address ------------------------------------------------------------------ (INCLUDE ZIP CODE) Area Code and Telephone No. --------------------------------------------- Dated: , 1997 ------------------ 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signature. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loans associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program or the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (an "Eligible Institution"). No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of the Shares) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the reverse hereof, or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. Requirements of Tender. This Letter of Transmittal is to be completed by stockholders either if certificates are to be forwarded herewith or if delivery of Shares is to be made pursuant to the procedures for book-entry transfer set forth in Section 2 of the Offer to Purchase. For a stockholder validly to tender Shares pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees and any other required documents, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date and either (i) certificates for tendered Shares must be received by the Depositary at one of such addresses prior to the Expiration Date or (ii) Shares must be delivered pursuant to the procedures for book-entry transfer set forth herein and a Book-Entry Confirmation must be received by the Depositary prior to the Expiration Date or (b) the tendering stockholder must comply with the guaranteed delivery procedures set forth below and in Section 2 of the Offer to Purchase. Stockholders whose certificates for Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such procedures, (a) such tender must be made by or through an Eligible Institution, (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser must be received by the Depositary prior to the Expiration Date and (c) the certificates for all physically delivered Shares or a Book-Entry Confirmation with respect to all tendered Shares, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Depositary within five New York Stock Exchange, Inc. trading days after the date of execution of the Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate schedule attached hereto. 4. Partial Tenders (Applicable to Certificate Stockholders Only). If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered". In any such case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal as soon as practicable after the expiration of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder of the Shares tendered hereby, the signature must correspond with the name as written on the face of the certificate(s) without any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. 8 When this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to, or certificates for Shares not tendered or accepted for payment are to be issued to, a person other than the registered owner(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificates listed, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. The Purchaser will pay any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or accepted for payment are to be registered in the name of, any person(s) other than the registered owner(s), or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. Special Payment and Delivery Instructions. If a check is to be issued in the name of and/or certificates for Shares not tendered or not accepted for payment are to be returned to, a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal must be completed. Any stockholder(s) delivering Shares by book-entry transfer may request that Shares not accepted for payment be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder(s) may designate. 8. Waiver of Conditions. Subject to the terms of the Offer, the Purchaser reserves the absolute right in its sole discretion to waive any of the specified conditions of the Offer, in whole or in part, in the case of any Shares tendered. 9. 31% Backup Withholding. Under U.S. Federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Depositary is not provided with the correct TIN or an adequate basis for exemption, the Internal Revenue Service may subject the stockholder or other payee to a $50 penalty. In addition, payments that are made to such stockholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to a 31% backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Depositary is required to withhold 31% of any such payments made to the stockholder or other payee. Backup withholding is not an additional income tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld, provided that the required information is given to the Internal Revenue Service. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% on all payments made prior to the time a properly certified TIN is provided to the Depositary. However, such amounts will be refunded to such stockholder if a TIN is provided to the Depositary within 60 days. The stockholder is required to give Depositary the TIN (e.g., social security number or employer identification number) of the record owner of the Shares or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 10. Requests for Assistance or Additional Copies. Requests for additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 should be directed to the Information Agent at its addresses set forth below. Questions or requests for assistance may be directed to the Information Agent. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES FOR, OR A BOOK-ENTRY CONFIRMATION WITH RESPECT TO, TENDERED SHARES WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, PRIOR TO THE EXPIRATION DATE. 9 - -------------------------------------------------------------------------------- PAYOR'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK - --------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT ---------------------------- FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW Social Security Number(s) OR ---------------------------- Employer Identification Number -------------------------------------------------------------------------------------------------------- PART 2--CERTIFICATES--UNDER PENALTIES OF PART 3-- PERJURY, I CERTIFY THAT: Awaiting TIN [ ] (1) THE NUMBER SHOWN ON THIS FORM IS MY CORRECT TAXPAYER IDENTIFICATION NUMBER (OR I AM WAITING FOR A NUMBER TO BE ISSUED FOR ME), AND (2) I AM NOT SUBJECT TO BACKUP WITHHOLDING BECAUSE: (A) I AM EXEMPT FROM BACKUP WITHHOLDING, OR (B) I HAVE NOT BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE (THE "IRS") THAT I AM SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE TO REPORT ALL INTEREST OR DIVIDENDS, OR (C) THE IRS HAS NOTIFIED ME THAT I AM NO LONGER SUBJECT TO BACKUP WITHHOLDING. ------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have DEPARTMENT OF THE been notified by the IRS that you are currently subject to backup withholding TREASURY because of underreporting interest or dividends on your tax returns. However, INTERNAL REVENUE SERVICE if after being notified by the IRS that you are subject to backup withholding, you received another notification from the IRS stating that you PAYOR'S REQUEST FOR are no longer subject to backup withholding, do not cross out such item (2). TAXPAYER IDENTIFICATION NUMBER SIGNATURE _____________________________________ ("TIN") DATE ____________________________________, 1997 - ---------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalty of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. Signature Date --------------------------------------------- --------------- Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal and other tender offer materials may be directed to the Information Agent or as set forth below. The Information Agent for the Offer is: GEORGESON & COMPANY INC. Wall Street Plaza New York, NY 10005 Banks and Brokers Call Collect: (212) 440-9800 All Others Call Toll Free: 1-800-223-2064 (Call Toll Free) EX-99.A3 4 NOTICE OF GUARANTEED DELIVERY 1 EXHIBIT (a)(3) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF INNOTECH, INC. (NOT TO BE USED FOR SIGNATURE GUARANTEES) As set forth in Section 2 of the Offer to Purchase (as defined below), this form or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates representing shares of common stock, par value $.001 per share (the "Shares"), of Innotech, Inc., a Delaware corporation (the "Company"), are not immediately available or if the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). Such form may be delivered by hand or transmitted by telegram or facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution (as defined in Section 2 of the Offer to Purchase). See Section 2 of the Offer to Purchase. The Depositary: FIRST CHICAGO TRUST COMPANY OF NEW YORK By Mail: By Overnight: By Hand: Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges P.O. Box 2569 14 Wall Street, 8th Floor c/o The Depository Trust Company Suite 4660 Suite 4680 -- INT 55 Water Street, DTC TAD Jersey City, NJ 07303-2569 New York, NY 10005 Vietnam Veterans Memorial Plaza New York, NY 10041 Facsimile Transmission (for Eligible Institutions only): (201) 222-4720 or (201) 222-4721 Confirm Receipt of Notice of Guaranteed Delivery by Telephone: (201) 222-4707
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 2 Ladies and Gentlemen: The undersigned hereby tenders to INO Acquisition Corp., a Delaware corporation (the "Purchaser"), and a wholly owned subsidiary of Johnson & Johnson, a New Jersey corporation, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase, dated February 18, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged, Shares pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Number of Shares - -------------------------------------------------------------------------------- Name(s) of Record Holder(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Certificate Nos. (if available): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Address(es): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Zip Code Area Code and Tel. No.: ------------------------------------------------------- (Check one box if Shares will be tendered by book-entry transfer) [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Signature(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Account Number: ---------------------------------------------------------------- Dated: ------------------------------------- 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution", as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Depositary either the certificates representing the Shares tendered hereby, in proper form for transfer, or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase) of a transfer of such Shares, in any such case together with a properly completed and duly executed Letter of Transmittal, or a manually signed facsimile thereof, with any required signature guarantees, and any other documents required by the Letter of Transmittal within five New York Stock Exchange, Inc. trading days after the date hereof. Name of Firm: ------------------------------------------------------------------ ------------------------------------------------------------------ (AUTHORIZED SIGNATURE) Address: ----------------------------------------------------------------------- Zip Code Title: ------------------------------------------------------------------------- Area Code and Tel. No.: ---------------------------------------------------------------------- Dated: --------------------------------- NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.A4 5 LETTER TO BROKERS, DEALERS 1 EXHIBIT (a)(4) GEORGESON & COMPANY INC. WALL STREET PLAZA NEW YORK, NEW YORK 10260 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK INNOTECH, INC. AT $13.75 NET PER SHARE BY INO ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF JOHNSON & JOHNSON THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 17, 1997, UNLESS EXTENDED. February 18, 1997 To Brokers, Dealers, Banks, Trust Companies and Other Nominees: We have been appointed by INO Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Johnson & Johnson, a New Jersey corporation ("Parent"), to act as Information Agent in connection with the Purchaser's offer to purchase all outstanding shares of common stock, par value $.001 per share (the "Shares"), of Innotech, Inc., a Delaware corporation (the "Company"), at $13.75 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated February 18, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"). Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares registered in your name or in the name of your nominee. Enclosed herewith are copies of the following documents: 1. Offer to Purchase; 2. Letter of Transmittal to be used by stockholders of the Company accepting the Offer; 3. The Letter to Stockholders of the Company from the Chairman and Chief Executive Officer of the Company accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9; 4. A printed form of letter that may be sent to your clients for whose account you hold Shares in your name or in the name of a nominee, with space provided for obtaining such client's instructions with regard to the Offer; 5. Notice of Guaranteed Delivery; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope address to the Depositary. 2 WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 17, 1997, UNLESS EXTENDED. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which, together with the Shares subject to the Stockholder Agreement referred to in the Offer to Purchase that shall not have been so tendered, would represent at least a majority of all Shares determined on a fully diluted basis. The Board of Directors of the Company has, by unanimous vote, approved the Offer and the Merger (as defined below) and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company and recommends that stockholders of the Company accept the Offer and tender their Shares. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of February 10, 1997 (the "Merger Agreement"), among Parent, the Purchaser and the Company pursuant to which, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent (the "Merger"). In the Merger, each outstanding Share (other than Shares owned by the Company as treasury stock or by Parent, the Purchaser or any other subsidiary of Parent or by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law) will be converted into the right to receive $13.75 per Share, without interest, as set forth in the Merger Agreement and described in the Offer to Purchase. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or timely Book-Entry Confirmation of a transfer of such Shares as described in Section 2 of the Offer to Purchase), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by the Letter of Transmittal. Neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Information Agent as described in the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. You will be reimbursed upon request for customary mailing and handling expenses incurred by you in forwarding the enclosed offering materials to your customers. Questions and requests for additional copies of the enclosed material may be directed to the Information Agent at the address and telephone number set forth on the back cover of the enclosed Offer to Purchase. Very truly yours, GEORGESON & COMPANY INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE THEREOF OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENT CONTAINED THEREIN. EX-99.A5 6 LETTER TO CLIENTS 1 EXHIBIT (a)(5) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK INNOTECH, INC. AT $13.75 NET PER SHARE BY INO ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF JOHNSON & JOHNSON THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 17, 1997, UNLESS EXTENDED. February 18, 1997 To Our Clients: Enclosed for your consideration is an Offer to Purchase dated February 18, 1997 (the "Offer to Purchase"), and a related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to an offer by INO Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Johnson & Johnson, a New Jersey corporation ("Parent"), to purchase shares of Common Stock, par value $.001 per share (the "Shares"), of Innotech Inc., a Delaware corporation (the "Company"), at $13.75 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. Also enclosed is the Letter to Stockholders of the Company from the Chairman and Chief Executive Officer of the Company accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9. WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to tender any of or all the Shares held by us for your account, pursuant to the terms and conditions set forth in the Offer. Your attention is invited to the following: 1. The tender price is $13.75 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. 2. The Board of Directors of the Company has, by unanimous vote, approved the Offer and the Merger (as defined below) and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company and recommends that the stockholders of the Company accept the Offer and tender their Shares. 3. The Offer is being made for all outstanding Shares. 4. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of February 10, 1997 (the "Merger Agreement"), among Parent, the Purchaser and the Company pursuant to which, following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of Parent (the "Merger"). In the Merger, each outstanding Share (other than Shares owned by the Company as treasury stock or by Parent, the Purchaser or any other subsidiary of Parent or by stockholders, if any, who are entitled to and who properly exercise dissenters' rights under Delaware law) will be converted into the right to receive $13.75 per Share, without interest, as set forth in the Merger Agreement and described in the Offer to Purchase. 2 5. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which, together with the Shares subject to the Stockholder Agreement referred to in the Offer to Purchase that shall not have been so tendered, would represent at least a majority of all Shares on a fully diluted basis. 6. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Monday, March 17, 1997, unless the Offer is extended by the Purchaser. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of certificates for such Shares (or timely Book-Entry Confirmation of a transfer of such Shares as described in Section 2 of the Offer to Purchase), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and any other documents required by the Letter of Transmittal. 7. The Purchaser will pay any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer, except as otherwise provided in Instruction 6 of the Letter of Transmittal. If you wish to have us tender any of or all your Shares, please so instruct us by completing, executing, detaching and returning to us the instruction form set forth below. An envelope to return your instructions to us is enclosed. If you authorize tender of your Shares, all such Shares will be tendered unless otherwise specified below. Your instructions to us should be forwarded promptly to permit us to submit a tender on your behalf prior to the expiration of the Offer. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction. Tear Here Tear Here ................................................................................ INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE ALL OUTSTANDING SHARES OF COMMON STOCK OF INNOTECH, INC. The undersigned acknowledges receipt of your letter enclosing the Offer to Purchase, dated February 18, 1997, of INO Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Johnson & Johnson, a New Jersey corporation, and the related Letter of Transmittal, relating to shares of Common Stock, par value $.001 per share of Innotech, Inc., a Delaware corporation (the "Shares"). This will instruct you to tender the number of Shares indicated below held by you for the account of the undersigned on the terms and conditions set forth in such Offer to Purchase and the related Letter of Transmittal. Dated: 1997 ----------------------------------- Number of Shares to be Tendered* Shares --------------- - ------------------------------------------------------ - ------------------------------------------------------ Signature(s) - ------------------------------------------------------ - ------------------------------------------------------ Please print name(s) Address --------------------------------------------- - ------------------------------------------------------ (Include Zip Code) Area Code and Telephone No. ------ Taxpayer Identification or Social Security No. ----------------------------- * Unless otherwise indicated, it will be assumed that all your Shares are to be tendered. EX-99.A6 7 TAX GUIDELINES (FORM W-9) 1 EXHIBIT (a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.
- --------------------------------------------------------- GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- - --------------------------------------------------------- 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, any one of the individuals(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable savings The grantor- trust account (grantor is trustee(1) also trustee) b. So-called trust account that The actual owner(1) is not a legal or valid trust under State law 5. Sole proprietorship account The Owner(3) 6. A valid trust, estate, or The legal entity pension trust (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(4) 7. Corporate account The corporation 8. Religious, charitable, or The organization educational organization account 9. Partnership The partnership 10. Association, club, or other The organization tax-exempt organization 11. A broker or registered nominee The broker or nominee 12. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
============================================================ (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Show the name of the owner. You may also enter your business name. You may use your Social Security Number or Employer Identification Number. (4) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.A7 8 FORM OF SUMMARY ADVERTISEMENT 1 EXHIBIT (a)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase dated February 14, 1997 and the related Letter of Transmittal and is not being made to nor will tenders be accepted from or on behalf of holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction the securities laws of which require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed made on behalf of the Purchaser by the Information Agent or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF INNOTECH, INC. AT $13.75 NET PER SHARE BY INO ACQUISITION CORP. A WHOLLY OWNED SUBSIDIARY OF JOHNSON & JOHNSON INO Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Johnson & Johnson, a New Jersey corporation ("Parent"), is offering to purchase all outstanding shares of Common Stock, par value $.001 per share (the "Shares"), of Innotech, Inc., a Delaware corporation (the "Company"), at $13.75 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 18, 1997 and in the related Letter of Transmittal (which together constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 17, 1997, UNLESS EXTENDED. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to Monday, March 17, 1997 (x) that number of Shares which, together with the Shares subject to the Stockholder Agreement (as defined below) that shall not have been so tendered, would represent at least a majority of all outstanding Shares (for purposes of this clause (x) only, "Shares" shall be deemed to refer only to Shares outstanding as of the date of the Merger Agreement (as defined below)) and (y) that number of Shares which, together with the Shares subject to the Stockholder Agreement that shall not have been so tendered, would represent at least a majority of the fully diluted Shares as of the date of determination (determined on a fully diluted basis for all outstanding stock options and any other rights to acquire Shares) (the conditions in (x) and (y) collectively, the "Minimum Condition"). The Offer is being made pursuant to an Agreement and Plan of Merger dated as of February 10, 1997 (the "Merger Agreement"), among Parent, the Purchaser and the Company pursuant to which, following the consummation of the Offer, the Purchaser will be merged with and into the Company (the "Merger"). On the effective date of the Merger, each outstanding Share (other than Shares owned by Parent, the Purchaser or any other subsidiary of Parent or by stockholders, if any, who are entitled to and who properly exercise 2 dissenters' rights under Delaware law) will be converted into the right to receive $13.75 in cash, without interest. The Board of Directors of the Company has approved the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company, and recommends that stockholders of the Company accept the Offer and tender their Shares. The Purchaser and Parent have also entered into a Stockholder Agreement dated as of February 10, 1997 (the "Stockholder Agreement") with certain stockholders of the Company who beneficially own 3,331,608 outstanding Shares in the aggregate. Under the Stockholder Agreement, those stockholders have agreed to sell all such Shares to the Purchaser for $13.75 per Share in cash if the Minimum Condition is satisfied and the Purchaser shall have accepted Shares for payment under the Offer. Such stockholders may, and at the request of the Purchaser shall, tender their Shares into the Offer. In addition, such stockholders have agreed to vote their Shares in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement, and have agreed to vote against any transactions pertaining to such Shares with any person other than pursuant to the terms of the Merger. For purposes of the Offer, the Purchaser shall be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares. Upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for such Shares or timely confirmation of book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility (as defined in the Offer to Purchase) pursuant to the procedures set forth in Section 2 of the Offer to Purchase, (b) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and (c) any other documents required by the Letter of Transmittal. Under no circumstances will interest be paid by the Purchaser on the purchase price of the Shares, regardless of any delay in making such payment. The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, March 17, 1997 unless and until the Purchaser, in its sole discretion but subject to the terms of the Merger Agreement, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date on which the Offer, as so extended by the Purchaser, shall expire. The Purchaser expressly reserves the right, in its sole discretion (but subject to the terms of the Merger Agreement), at any time or from time to time, and regardless of whether or not any of the events set forth in Section 14 of the Offer to Purchase shall have occurred, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary. The Purchaser shall not have any obligation to pay interest on the purchase price for tendered Shares in the event the Purchaser exercises its right to extend the period of time during which the Offer is open. There can be no assurance that the Purchaser will exercise its right to extend the Offer (other than as required by applicable law). Any such extension will be followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering stockholder to withdraw such stockholder's Shares. Except as otherwise provided below, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to 12:00 Midnight, New York City time, on Monday, March 17, 1997, or, if the Purchaser shall have extended the period of time during which the Offer is open, the latest time and date at which the Offer, as so extended by the Purchaser, shall expire and, unless theretofore accepted for payment, may also be withdrawn at any time after April 17, 1997. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of 2 EX-99.A8 9 TEXT OF PRESS RELEASE 1 EXHIBIT (a)(8) Contact: Jeffrey J. Leebaw-Media Steve Bennington Johnson & Johnson Innotech, Inc. (908) 524-3350 (540) 362-2020 Michael J. Foley-Investor Brian Gill-Analysts Relations Deanne Eagle-Media Johnson & Johnson Financial Relations Board (908) 524-3922 (212) 661-8030
FOR IMMEDIATE RELEASE JOHNSON & JOHNSON TO ACQUIRE INNOTECH, INC. FOR $13.75 PER SHARE IN CASH New Brunswick, NJ (February 11, 1997) -- Johnson & Johnson (NYSE: JNJ) and Innotech, Inc. (Nasdaq: IIII) today jointly announced that they have entered into a definitive agreement whereby Innotech, Inc. will be acquired by Johnson & Johnson for $13.75 per share in cash. Innotech, Inc. is a Roanoke, VA-based company which develops, manufactures and sells lens products, desktop lens casting systems and related consumables that enable eye care professionals and optical retailers to custom fabricate high quality prescription eyeglass lenses at the point of sale. Under the terms of the agreement, Johnson & Johnson is to begin a cash tender offer for all outstanding shares of Innotech, Inc. for $13.75 per share. Any shares not purchased in the offer will be acquired for the same price in cash, in a second-step merger. Innotech has approximately 9 million shares outstanding. The boards of directors of both companies have given approval to the acquisition. "This acquisition represents an important step in the growth of our vision care franchise," said Ralph S. Larsen, Chairman and Chief Executive Officer of Johnson & Johnson. "The Excalibur SurfaceCasting System possesses unique technological advantages and has the potential to change the multifocal spectacle lens industry." Johnson & Johnson was the pioneer in the establishment of disposable contact lenses and is the worldwide leader in that market with its ACUVUE, 1-Day ACUVUE and SUREVUE brands. Dr. Ronald D. Blum, O.D., Chairman and Chief Executive Officer of Innotech commented: "We are extremely pleased to join forces with the global leader in health care. Johnson & Johnson's established presence in the worldwide vision care market, combined with Innotech's unique SurfaceCasting technology, provides a strong platform for future growth." Steve Bennington, Innotech's president and chief operating officer, stated: "The resources that Johnson & Johnson brings to bear, including but not limited to financial, manufacturing and operational, as well as the high credibility associated with the Johnson & Johnson name, will greatly assist Innotech in penetrating the global market for our products. The offer and merger are subject to the purchase of a majority of the outstanding shares of Innotech common stock, as well as other customary conditions including clearance under the Hart-Scott-Rodino Anti-Trust Improvements Act. The offer will begin within 5 business days and remain open for a minimum of 20 business days. A shareholder group consisting of Chase Venture Capital Associates, L.P., CIBC Wood Gundy Ventures, Inc. and Dr. Ronald D. Blum, O.D., holders collectively of approximately 3.3 million shares outstanding have agreed to tender all of their shares in the offer. Innotech options and warrants to purchase approximately 850,000 shares will be cashed out in connection with the merger. Prudential Securities Incorporated has provided financial advisory services to Innotech's board of directors and has issued a fairness opinion on this transaction. In the event that an unsolicited, alternative transaction is agreed to by Innotech, there would be a total fee payable to Johnson & Johnson of $6.75 million. Innotech, Inc. was founded in 1990 and completed a $30 million Initial Public Offering (IPO) in March 1996. For the nine months ended September 30, 1996, the company reported sales of $7.4 million and a net loss of $8.1 million or $1.15 per share. 2 Johnson & Johnson, with approximately 89,300 employees, is the world's largest and most comprehensive manufacturer of health care products serving the consumer, pharmaceutical, diagnostics and professional markets with a focus on research-based, technology-driven products. The company reported 1996 sales of $21.6 billion. Johnson & Johnson was the winner of the 1996 National Medal of Technology, the nation's highest technology honor. Johnson & Johnson has more than 170 operating companies in 50 countries around the world, selling products in more than 175 countries. 2 EX-99.C1 10 AGREEMENT AND PLAN OF MERGER 1 EXHIBIT (c)(1) EXECUTION COPY ================================================================================ AGREEMENT AND PLAN OF MERGER among JOHNSON & JOHNSON, INO ACQUISITION CORP. and INNOTECH, INC. Dated as of February 10, 1997 ================================================================================ 2 TABLE OF CONTENTS AGREEMENT AND PLAN OF MERGER ARTICLE I THE OFFER
Page ---- Section 1.01 The Offer..................................................... 2 Section 1.02 Company Actions............................................... 4 ARTICLE II THE MERGER Section 2.01 The Merger.................................................... 6 Section 2.02 Closing....................................................... 7 Section 2.03 Effective Time................................................ 7 Section 2.04 Effects of the Merger......................................... 7 Section 2.05 Certificate of Incorporation and By-laws...................... 7 Section 2.06 Directors..................................................... 7 Section 2.07 Officers...................................................... 8 ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES Section 3.01 Effect on Capital Stock....................................... 8 Section 3.02 Exchange of Certificates...................................... 9
3 3 ARTICLE IV REPRESENTATIONS & WARRANTIES OF THE COMPANY Section 4.01 Organization................................................. 11 Section 4.02 Subsidiaries................................................. 12 Section 4.03 Capitalization............................................... 12 Section 4.04 Authority.................................................... 13 Section 4.05 Consent and Approvals; No Violations......................... 13 Section 4.06 SEC Documents; Financial Statements.......................... 14 Section 4.07 Information Supplied......................................... 15 Section 4.08 Absence of Certain Changes or Events......................... 16 Section 4.09 Litigation................................................... 16 Section 4.10 Contracts.................................................... 17 Section 4.11 Compliance with Laws......................................... 17 Section 4.12 Environmental Matters........................................ 18 Section 4.13 Absence of Changes in Benefit Plans; Labor Relations............................................... 19 Section 4.14 ERISA Compliance............................................. 19 Section 4.15 Taxes........................................................ 21 Section 4.16 No Excess Parachute Payments................................. 22 Section 4.17 Title to Properties.......................................... 22 Section 4.18 Intellectual Property........................................ 23 Section 4.19 Distribution Agreements...................................... 24 Section 4.20 Voting Requirements.......................................... 24 Section 4.21 State Takeover Statutes...................................... 24 Section 4.22 Brokers; Schedule of Fees and Expenses....................... 24 Section 4.23 Opinion of Financial Advisor................................. 25 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Section 5.01 Organization................................................. 25 Section 5.02 Authority.................................................... 26 Section 5.03 Consents and Approvals; No Violations........................ 26 Section 5.04 Information Supplied......................................... 27 Section 5.05 Interim Operations of Sub.................................... 27 Section 5.06 Brokers...................................................... 28
4 4 Section 5.07 Financing.................................................... 27 Section 5.08 State Takeover Statutes...................................... 28 ARTICLE VI COVENANTS Section 6.01 Conduct of Business.......................................... 28 Section 6.02 No Solicitation.............................................. 31 Section 6.03 Certain Tax Matters.......................................... 33 Section 6.04 Other Actions................................................ 34 Section 6.05 Advice of Changes; Filings................................... 34 ARTICLE VII ADDITIONAL AGREEMENTS Section 7.01 Stockholder Approval; Preparation of Proxy Statement............................................... 34 Section 7.02 Access to Information; Confidentiality....................... 35 Section 7.03 Reasonable Efforts; Notification............................. 36 Section 7.04 Stock Option Plans and Warrants.............................. 37 Section 7.05 Indemnification, Exculpation and Insurance................... 38 Section 7.06 Directors.................................................... 40 Section 7.07 Fees and Expenses............................................ 40 Section 7.08 Public Announcements......................................... 42 Section 7.09 Continuation of Benefits..................................... 42 Section 7.10 Stop Transfer................................................ 42 ARTICLE VIII CONDITIONS Section 8.01 Conditions to Each Party's Obligation to Effect the Merger.............................................. 43
5 5 ARTICLE IX TERMINATION AND AMENDMENT Section 9.01 Termination.................................................. 44 Section 9.02 Effect of Termination........................................ 46 Section 9.03 Amendment.................................................... 46 Section 9.04 Extention; Waiver............................................ 47 Section 9.05 Procedure for Termination, Amendment, Extention or Waiver..................................... 47 ARTICLE X MISCELLANEOUS Section 10.01 Nonsurvival of Representations, Warranties and Agreements.......................................... 48 Section 10.02 Notices...................................................... 48 Section 10.03 Interpertation............................................... 49 Section 10.04 Counterparts................................................. 50 Section 10.05 Entire Agreement; Third Party Beneficiaries.................. 50 Section 10.06 Governing Law................................................ 50 Section 10.07 Publicity.................................................... 50 Section 10.08 Assignment................................................... 50 Section 10.09 Enforcement.................................................. 51 EXHIBIT A Conditions of the Offer......................................
6 EXECUTION COPY AGREEMENT AND PLAN OF MERGER dated as of February 10, 1997, among JOHNSON & JOHNSON, a New Jersey corporation ("Parent"), INO ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and INNOTECH, INC., a Delaware corporation (the "Company"). WHEREAS the respective Boards of Directors of Parent, Sub and the Company have approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement; WHEREAS, in furtherance of such acquisition, Parent proposes to cause Sub to make a tender offer to purchase all the outstanding shares of Common Stock, par value $0.001 per share, of the Company (the "Company Common Stock"; all the outstanding shares of Company Common Stock being hereinafter collectively referred to as the "Shares") at a purchase price of $13.75 per Share (the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Agreement (as it may be amended from time to time as permitted under this Agreement, the "Offer"); and the Board of Directors of the Company has adopted resolutions approving the Offer and the Merger (as defined below), recommending that the Company's stockholders accept the Offer and approving the acquisition of Shares by Sub pursuant to the Offer and the Stockholder Agreement (as defined below); WHEREAS the respective Boards of Directors of Parent, Sub and the Company have each approved the merger of Sub into the Company (the "Merger"), upon the terms and subject to the conditions set forth in this Agreement, whereby each Share, other than Shares owned directly or indirectly by Parent or the Company and Dissenting Shares (as defined in Section 3.01(d)), will be converted into the right to receive the price per share paid in the Offer; WHEREAS, concurrently with the execution of this Agreement and as an inducement to Parent to enter into this Agreement, Parent, Sub and certain stockholders of the Company are entering into a Stockholder Agreement (the "Stockholder Agreement") pursuant to which such stockholders have, among other things, agreed to sell all such stockholders' Shares to Sub at a cash price per Share equal 7 2 to the Offer Price, or such higher price per Share as may be offered by Sub in the Offer, upon the terms and subject to the conditions set forth in the Stockholder Agreement; WHEREAS, concurrently with the execution of this Agreement and as an inducement to Parent to enter into this Agreement, Parent and certain stockholders of the Company who are employed by the Company are entering into Noncompetition Agreements (the "Noncompetition Agreements") pursuant to which such stockholders have, among other things, agreed to not have any Relationship (as defined in the Noncompetition Agreements) with certain third parties during the Noncompetition Period (as defined in the Noncompetition Agreements); and WHEREAS Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Sub and the Company hereby agree as follows: ARTICLE I The Offer SECTION 1.01. The Offer. (a) Provided that none of the conditions set forth on Exhibit A hereto shall have occurred and be continuing, as promptly as practicable but in no event later than five business days after the date of the public announcement (on the date hereof or the following day) by Parent and the Company of this Agreement, Sub shall, and Parent shall cause Sub to, commence (within the meaning of Rule 14d-2 under the Exchange Act (as hereinafter defined)) the Offer. The obligation of Sub to, and of Parent to cause Sub to, commence the Offer, conduct and consummate the Offer and accept for payment, and pay for, any Shares tendered and not withdrawn pursuant to the Offer shall be subject only to the conditions set forth in Exhibit A (the "Offer Conditions") (any of which (other than the condition as to HSR Act (as hereinafter defined) compliance) may be waived in whole or in part by Sub in its 8 3 sole discretion, provided that, without the express written consent of the Company, Sub may not waive the Minimum Condition (as defined in Exhibit A)). Sub expressly reserves the right, subject to compliance with the Exchange Act, to modify the terms of the Offer, except that, without the express written consent of the Company, Sub shall not (i) reduce the number of Shares subject to the Offer, (ii) reduce the Offer Price, (iii) add to or modify the Offer Conditions, (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer or (vi) amend or alter any other term of the Offer in any manner adverse to the holders of the Shares. Notwithstanding the foregoing, Sub may, without the consent of the Company, (A) extend the Offer for a specified period, if at the scheduled or any extended expiration date of the Offer any of the Offer Conditions shall not be satisfied or waived, until such time as such conditions are satisfied or waived, but in no event to a date more than 90 calendar days from the commencement of the Offer, (B) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer, (C) extend the Offer pursuant to Section 9.01(d) and (D) extend the Offer for any reason on one or more occasions for an aggregate period of not more than 5 business days beyond the latest expiration date that would otherwise be permitted under clause (A), (B) or (C) of this sentence; provided, however, that the aggregate period of all extensions under clauses (A), (B), (C) and (D) may not extend the expiration date of the Offer to a date more than 90 calendar days from the commencement of the Offer. Subject to the terms and conditions of the Offer and this Section 1.01(a), Sub shall, and Parent shall cause Sub to, accept for payment, and pay for, all Shares validly tendered and not withdrawn pursuant to the Offer that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer as soon as practicable after the expiration of the Offer. (b) On the date of commencement of the Offer, Parent and Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and summary advertisement (such Schedule 14D-1 and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "Offer Documents"). Parent and Sub agree that the Offer 9 4 Documents shall comply as to form in all material respects with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder, and the Offer Documents, on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by Parent or Sub with respect to written information supplied by the Company or any of its stockholders specifically for inclusion or incorporation by reference in the Offer Documents. Parent, Sub and the Company each agrees promptly to correct any written information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and Parent and Sub further agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to holders of Shares, in each case as and to the extent required by applicable Federal securities laws. The Company and its counsel shall be given reasonable opportunity to review and comment upon the Offer Documents prior to their filing with the SEC or dissemination to the stockholders of the Company. Parent and Sub agree to provide the Company and its counsel any comments Parent, Sub or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments. (c) Parent shall provide or cause to be provided to Sub on a timely basis the funds sufficient to accept for payment, and pay for, any and all Shares that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer. SECTION 1.02. Company Actions. (a) The Company hereby approves of and consents to the Offer and represents that the Board of Directors of the Company, at a meeting duly called and held, duly and unanimously adopted resolutions approving this Agreement and the Stockholder Agreement, the Offer and the Merger, determining that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company's stockholders and recommending that the Company's stockholders accept the Offer, tender their Shares pursuant to the Offer and approve and adopt this Agreement (if required). The Company 10 5 represents that its Board of Directors has received the opinion dated February 10, 1997 of Prudential Securities Incorporated ("Prudential Securities") that, as of such date and based upon and subject to the matters set forth therein, the cash consideration to be received by the holders of Shares pursuant to the Offer and the Merger was fair from a financial point of view to such holders, and a complete and correct signed copy of such opinion has been delivered by the Company to Parent. (b) On the date the Offer Documents are filed with the SEC, or promptly thereafter, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9") containing the recommendation described in paragraph 1.02(a) and shall mail the Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9 shall comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation or warranty is made by the Company with respect to written information supplied by Parent or Sub specifically for inclusion in the Schedule 14D-9. Each of the Company, Parent and Sub agrees promptly to correct any written information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the Company's stockholders, in each case as and to the extent required by applicable Federal securities laws. Parent and its counsel shall be given reasonable opportunity to review and comment upon the Schedule 14D-9 prior to its filing with the SEC or dissemination to stockholders of the Company. The Company agrees to provide Parent and its counsel any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments. 11 6 (c) In connection with the Offer and the Merger, the Company shall cause its transfer agent to furnish Sub promptly with mailing labels containing the names and addresses of the record holders of Shares as of a recent date and of those persons becoming record holders subsequent to such date, together with copies of all lists of stockholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Shares, and shall furnish to Sub such information and assistance (including updated lists of stockholders, security position listings and computer files) as Parent may reasonably request in communicating the Offer to the Company's stockholders. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Parent and Sub and their agents shall hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, will, upon request, promptly deliver, and will use their best efforts to cause their agents promptly to deliver, to the Company all copies of such information then in their possession or control. ARTICLE II The Merger SECTION 2.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective Time (as defined in Section 2.03). Following the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Sub in accordance with the DGCL. Notwithstanding the foregoing, Parent may elect at any time prior to the Merger, instead of merging Sub into the Company as provided above, to merge the Company with and into Sub. In such event, the parties agree to execute an appropriate amendment to this Agreement in order to reflect the foregoing and, where appropriate, to provide that the Sub shall be the Surviving Corporation and will continue under the name "Innotech, Inc." At the election of Parent, any direct or indirect wholly owned 12 7 subsidiary (as defined in Section 10.03) of Parent may be substituted for Sub as a constituent corporation in the Merger. In such event, the parties agree to execute an appropriate amendment to this Agreement in order to reflect the foregoing. SECTION 2.02. Closing. The closing of the Merger will take place at 10:00 a.m. (New York City time) on a date to be specified by Parent or Sub, which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Article VIII (the "Closing Date"), at the offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, unless another date, time or place is agreed to in writing by the parties hereto. SECTION 2.03. Effective Time. Subject to the provisions of this Agreement, as soon as practicable on or after the Closing Date, the parties shall file a certificate of merger or other appropriate documents (in any such case, 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 and other applicable law. 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 specified in the Certificate of Merger as Sub and the Company shall agree (the time the Merger becomes effective being hereinafter referred to as the "Effective Time"). SECTION 2.04. Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL. SECTION 2.05. Certificate of Incorporation and By-laws. (a) The Second Amended and Restated Certificate of Incorporation of the Company (the "Certificate of Incorporation"), as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The by-laws of the Company (the "By-laws") as in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable law. SECTION 2.06. Directors. The directors of Sub immediately prior to the Effective Time shall be the 13 8 directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. SECTION 2.07. Officers. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. ARTICLE III Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates SECTION 3.01. Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Shares or any shares of capital stock of Sub: (a) Capital Stock of Sub. Each issued and outstanding share of capital stock of Sub shall be converted into and become one fully paid and nonassessable share of Common Stock, par value $.001 per share, of the Surviving Corporation. (b) Cancelation of Treasury Stock and Parent Owned Stock. Each Share that is owned by the Company and each Share that is owned by Parent, Sub or any other direct or indirect wholly owned subsidiary of Parent shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Company Common Stock. Subject to Section 3.01(d), each issued and outstanding Share (other than Shares to be canceled in accordance with Section 3.01(b)) shall be converted into the right to receive from the Surviving Corporation in cash, without interest, the price actually paid in the Offer (the "Merger Consideration"). As of the Effective Time, all such Shares shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with 14 9 respect thereto, except the right to receive the Merger Consideration, without interest. (d) Shares of Dissenting Stockholders. Notwithstanding anything in this Agreement to the contrary, any issued and outstanding Shares held by a person (a "Dissenting Stockholder") who has neither voted in favor of the Merger nor consented in writing thereto and otherwise complies with all the applicable provisions of the DGCL concerning the right of holders of Company Common Stock to dissent from the Merger and require appraisal of their Shares ("Dissenting Shares") shall not be converted as described in Section 3.01(c) but shall become the right to receive such consideration as may be determined to be due to such Dissenting Stockholder pursuant to the laws of the State of Delaware. If, after the Effective Time, such Dissenting Stockholder withdraws his demand for appraisal or fails to perfect or otherwise loses his right of appraisal, in any case pursuant to the DGCL, his Shares shall be deemed to be converted as of the Effective Time into the right to receive the Merger Consideration. The Company shall give Parent (i) prompt notice of any demands for appraisal of Shares received by the Company and (ii) if and after Sub shall have accepted for payment Shares pursuant to and subject to the conditions of the Offer (including the Minimum Condition) the opportunity to participate in and direct all negotiations and proceedings with respect to any such demands. The Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle, offer to settle or otherwise negotiate, any such demands. SECTION 3.02. Exchange of Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall designate a substantial bank or trust company to act as paying agent in the Merger (the "Paying Agent"). Parent shall cause the Surviving Corporation to deposit with the Paying Agent in separate trust for holders of the Certificates (as hereinafter defined) immediately available funds in an amount sufficient for the payment of the aggregate Merger Consideration for the shares converted pursuant to Section 3.01(c) (it being understood that any and all interest earned on funds made available to the Paying Agent pursuant to this Agreement shall be turned over to Parent). 15 10 (b) Exchange Procedure. As soon as reasonably practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented Shares (the "Certificates"), (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancelation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor, and the Paying Agent shall pay pursuant to irrevocable instructions given by Sub or Parent, the amount of cash into which the Shares theretofore represented by such Certificate shall have been converted pursuant to Section 3.01, and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, payment may be made to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered as contemplated by this Section 3.02, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the Shares theretofore represented by such Certificate shall have been converted pursuant to Section 3.01. No interest will be paid or will accrue on the cash payable upon the surrender of any Certificate. (c) No Further Ownership Rights in Company Common Stock. All cash paid upon the surrender of Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formerly represented by such Certificates. At the Effective Time, the stock transfer 16 11 books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for any reason except notation thereon that a stockholder has elected to exercise his right to appraisal pursuant to the DGCL they shall be canceled and exchanged as provided in this Article III. (d) No Liability. Any funds deposited with the Paying Agent that remain unclaimed by the former stockholders of the Company for six (6) months after the Effective Time shall be paid to the Surviving Corporation upon demand, and any former stockholders of the Company who have not theretofore complied with the instructions for exchanging their Certificates provided herein shall thereafter look only to the Surviving Corporation for payment of their claims for the Merger Consideration set forth in Section 3.01 hereof for each Share held by such stockholder, without any interest thereon. None of Parent, Sub, the Company or the Paying Agent shall be liable to any person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered prior to seven years after the Effective Time (or immediately prior to such earlier date on which any payment pursuant to this Article III would otherwise escheat to or become the property of any Governmental Entity (as defined in Section 4.05)), the cash payment in respect of such Certificate shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interests of any person previously entitled thereto. ARTICLE IV Representations and Warranties of the Company The Company represents and warrants to Parent and Sub as follows: SECTION 4.01. Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its 17 12 business as now being conducted. The Company is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing could not reasonably be expected to have a material adverse effect (as defined in Section 10.03) on the Company or prevent or materially delay the consummation of the Offer and/or the Merger. The Company has made available to Parent complete and correct copies of its Certificate of Incorporation and By-laws, as amended to the date of this Agreement. SECTION 4.02. Subsidiaries. The Company has no subsidiaries. SECTION 4.03. Capitalization. The authorized capital stock of the Company consists of 70,000,000 Shares and 5,000,000 shares of preferred stock, par value $0.001 per share ("Company Preferred Stock"). At the close of business on December 31, 1996, (i) 8,955,603 Shares were issued and outstanding, (ii) 0 Shares were held by the Company in its treasury, (iii) 1,597,250 Shares were reserved for issuance upon exercise of outstanding Company Stock Options (as defined in Section 7.04), (iv) 102,482 Shares were issuable upon the exercise of outstanding warrants and (v) no shares of Company Preferred Stock were issued and outstanding. Except as set forth above, since December 31, 1996 no shares of capital stock or other voting securities of the Company were issued, reserved for issuance, issuable or outstanding. All outstanding Shares are, and all Shares which may be issued will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth above, as of the date of this Agreement, there are not any securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company is a party or by which any of them is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of the Company or obligating the Company to issue, grant, extend or enter into any such security, 18 13 option, warrant, call, right, commitment, agreement, arrangement or undertaking. As of the date of this Agreement, there are not any outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of the Company. SECTION 4.04. Authority. The Company has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby (other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the Shares (the "Company Stockholder Approval")). The execution, delivery and performance of this Agreement and the consummation by the Company of the Merger and of the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (in each case, other than, with respect to the Merger, the Company Stockholder Approval). This Agreement has been duly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of Parent and Sub, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms. SECTION 4.05. Consents and Approvals; No Violations. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act (including the filing with the SEC of the Schedule 14D-9 and a proxy or information statement relating to any required approval by or meeting of the Company's stockholders of this Agreement (the "Proxy Statement")), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the DGCL, the laws of other states in which the Company is qualified to do or is doing business, state takeover laws and foreign laws, neither the execution, delivery or performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-laws of the Company, (ii) require any filing with, or permit, authorization, consent or approval of, any Federal, state or local government or any court, tribunal, administrative agency or commission or other governmental or other 19 14 regulatory authority or agency, domestic, foreign or supranational (a "Governmental Entity") (except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not have a material adverse effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger), (iii) except as set forth on Schedule 4.05, result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancelation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company is a party or by which it or any of its properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its properties or assets, except in the case of clauses (iii) or (iv) for violations, breaches or defaults that could not reasonably be expected to have a material adverse effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger. SECTION 4.06. SEC Documents; Financial Statements. The Company has filed with the SEC all reports, forms, schedules and statements and other documents required to be filed by it since March 14, 1996 (the "SEC Documents"). As of their respective filing dates, (i) the SEC Documents complied in all material respects with the requirements of the Securities Act of 1933 (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and (ii) none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present, in all material respects, the consolidated financial position of the Company as of the 20 15 dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the SEC Documents filed and publicly available prior to the date of this Agreement, and except for liabilities and obligations incurred in the ordinary course of business consistent with past practice since the date of the most recent consolidated balance sheet included in the SEC Documents filed and publicly available prior to the date of this Agreement and liabilities and obligations that would not, individually or in the aggregate, have a material adverse effect on the Company, the Company does not have any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by generally accepted accounting principles to be set forth on a balance sheet of the Company or in the notes thereto. SECTION 4.07. Information Supplied. None of the information supplied or to be supplied by the Company in writing for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the information to be filed by the Company in connection with the Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the "Information Statement") or (iv) the Proxy Statement, will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's stockholders, or in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's stockholders or at the time of the Stockholders Meeting (as defined in Section 7.01), as such Proxy Statement may be amended or supplemented, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Schedule 14D-9, the Information Statement and the Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Sub specifically for inclusion or incorporation by reference therein. 21 16 SECTION 4.08. Absence of Certain Changes or Events. Except as disclosed in the SEC Documents (including exhibits thereto) filed and publicly available prior to the date of this Agreement (the "Filed SEC Documents"), and except as set forth on Schedule 4.08 hereto, since the date of the most recent audited financial statements included in the Filed SEC Documents, the Company has conducted its business only in the ordinary course, and there has not been (i) any material adverse change in the Company, (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any of the Company's capital stock, (iii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iv) (x) any granting by the Company to any officer of the Company of any increase in compensation, except in the ordinary course of business consistent with prior practice or as was required under employment agreements in effect as of the date of the most recent audited financial statements included in the Filed SEC Documents, (y) any granting by the Company to any officer of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of the date of the most recent audited financial statements included in the Filed SEC Documents or (z) any entry by the Company into any employment, severance or termination agreement with any officer, (v) any damage, destruction or loss to property, whether or not covered by insurance, that has or could reasonably be expected to have a material adverse effect on the Company, or (vi) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities or business, except insofar as may have been required by a change in generally accepted accounting principles. SECTION 4.09. Litigation. Except as disclosed in the Filed SEC Documents and except as disclosed on Schedule 4.09 hereto, there is no suit, action or proceeding pending or, to the knowledge of the Company, threatened against or affecting the Company that, individually or in the aggregate, could reasonably be expected to have a material adverse effect on the Company, or prevent or materially delay the consummation of the Offer and/or the Merger, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator 22 17 outstanding against the Company having, or which could reasonably be expected to have, any such effect. SECTION 4.10. Contracts. Except as disclosed in the Filed SEC Documents or set forth on Schedule 4.10 and delivered or made available to Parent, there are no contracts or agreements that are material to the business, financial condition or results of operations of the Company. The Company is not in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice or both would cause such a violation of or default under) any lease, permit, concession, franchise, license or any other contract, agreement, arrangement or understanding, to which it is a party or by which it or any of its properties or assets is bound, except for violations or defaults that could not, individually or in the aggregate, reasonably be expected to result in a material adverse affect on the Company. SECTION 4.11. Compliance with Laws. Except as disclosed in the Filed SEC Documents, the Company is in compliance with all applicable statutes, laws, ordinances, regulations, rules, judgments, decrees and orders of any Governmental Entity applicable to its business or operations, except for instances of actual or possible noncompliance that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger. The Company has in effect all Federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights, including all authorizations under Environmental Laws (as defined below) ("Permits"), necessary for it to own, lease or operate its properties and assets and to carry on its business as now conducted, except for the failure to have such Permits that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the Company. There has occurred no default under any Permit, except for defaults under Permits that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the Company. As of the date of this Agreement, no investigation or review by any Governmental Entity with respect to the Company is pending or, to the best knowledge of the Company, threatened, nor has any Governmental Entity indicated an intention to conduct any investigation or review, other than, in each case, those the outcome of which could not be reasonably 23 18 expected to have a material adverse effect on the Company or prevent or materially delay the consummation of the Offer and/or the Merger. SECTION 4.12. Environmental Matters. Except as set forth in Schedule 4.12: (i) the Company is, and has been, in compliance with all applicable Environmental Laws (as defined below), except for actual or possible noncompliance which individually or in the aggregate could not reasonably be expected to have a material adverse effect on the Company. The term "Environmental Laws" means any Federal, state, provincial, regional, municipal, local or foreign judgment, order, decree, statute, law, ordinance, rule, regulation, code, permit, consent, approval, license, writ, decree, directive, injunction or other enforceable requirement, including any registration requirement, relating to: (A) Releases (as defined below) or threatened Releases of Hazardous Materials (as defined below) into the environment; (B) the generation, treatment, storage, disposal, use, handling, manufacturing, transportation or shipment of Hazardous Materials; or (C) otherwise relating to pollution or protection of health or safety or the environment; (ii) there has been no Release or threatened Release of Hazardous Materials, in, on, under or affecting any property now or previously owned, leased or operated by the Company or, to the knowledge of the Company, any adjacent site, except in each case for those Releases which individually or in the aggregate could not be reasonably expected to have a material adverse effect on the Company. The term "Release" has the meaning set forth in 42 U.S.C. Section 9601(22). The term "Hazardous Materials" means any pollutant, contaminant, hazardous, radioactive or toxic substance, material, constituent or waste, or any other waste, substance, chemical or material regulated under any Environmental Law, including (1) petroleum, crude oil and any fractions thereof, (2) natural gas, synthetic gas and any mixtures thereof, (3) asbestos and/or asbestos-containing material, (4) radon and (5) polychlorinated biphenyls ("PCBs"), or materials or fluids containing PCBs; (iii) the Company has not received any written or, to the knowledge of any of the Company's senior executive officers, oral, notice of a pending or threatened action, demand, investigation or inquiry by any Governmental Entity or other person relating to any actual or potential 24 19 violations of Environmental Law or any actual or potential obligation to investigate or remediate a Release or threatened Release of any Hazardous Materials; and (iv) the Company has not assumed, whether by contract or, to the Company's knowledge, operation of law, any liabilities or obligations arising under Environmental Laws in connection with formerly owned, leased or operated properties or facilities or in connection with any formerly owned divisions, subsidiaries, companies or other entities, except in each case for those which individually or in the aggregate could not reasonably be expected to have a material adverse effect on the Company. SECTION 4.13. Absence of Changes in Benefit Plans; Labor Relations. Except as disclosed in the Filed SEC Documents and except as disclosed on Schedule 4.13 hereto, since the date of the most recent audited financial statements included in the Filed SEC Documents, there has not been any adoption or amendment in any material respect by the Company of any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan or arrangement providing benefits to any current or former employee, officer or director of the Company. Except as set forth in Schedule 4.13 or as disclosed in the Filed SEC Documents, there exist no employment, consulting, severance, termination or indemnification agreements or arrangements between the Company and any current or former employee, officer or director of the Company. There are no collective bargaining or other labor union agreements to which the Company is a party or by which it is bound. To the best knowledge of the Company, since January 1, 1994, the Company has not encountered any labor union organizing activity, or had any actual or threatened employee strikes, work stoppages, slowdowns or lockouts. SECTION 4.14. ERISA Compliance. (i) Schedule 4.14(i) contains a list and brief description of all "employee pension benefit plans" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes referred to herein as "Pension Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA) and all other benefit plans maintained or contributed to by the Company or any 25 20 other person or entity that, together with the Company, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (the Company and each such other person or entity, a "Commonly Controlled Entity") for the benefit of any current or former employees, officers or directors of the Company (collectively, "Benefit Plans"). The Company has delivered or made available to Parent true, complete and correct copies of (1) each Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions thereof), (2) the most recent annual report on Form 5500 filed with the Internal Revenue Service with respect to each Benefit Plan (if any such report was required), (3) the most recent summary plan description for each Benefit Plan for which such summary plan description is required and (4) each trust agreement and group annuity contract relating to any Benefit Plan. Each Benefit Plan has been administered in all material respects in accordance with its terms. The Company and all the Benefit Plans are all in compliance in all material respects with applicable provisions of ERISA and the Code (as defined below). (ii) Except as disclosed in Schedule 4.14(ii), all Pension Plans intended to qualify under Section 401(a) of the Code have been the subject of determination letters from the Internal Revenue Service to the effect that such Pension Plans are qualified and exempt from Federal income taxes under Section 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor has any such Pension Plan been amended since the date of its most recent determination letter or application therefor in any respect that would adversely affect its qualification or materially increase its costs. All amendments to Pension Plans required under ERISA and the Code to be adopted by the Company by December 31, 1994, have been adopted. (iii) No Commonly Controlled Entity has within the five year period immediately preceding the date of this Agreement maintained, contributed to or been obligated to contribute to any Benefit Plan that is subject to Title IV of ERISA. No Commonly Controlled Entity is required to contribute to any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from any multiemployer plan where such withdrawal has resulted or would result in any "withdrawal liability" (within the meaning of Section 4201 of ERISA) that has not been fully paid. 26 21 (iv) With respect to any Benefit Plan that is an employee welfare benefit plan, except as disclosed in Schedule 4.14(iv), (1) no such Benefit Plan (excluding severance plans) is unfunded or funded through a "welfare benefits fund", as such term is defined in Section 419(e) of the Code, (2) each such Benefit Plan that is a "group health plan", as such term is defined in Section 5000(b)(1) of the Code, complies substantially with the applicable requirements of Section 4980B(f) of the Code and (3) except as provided in writing in such plan, there are no understandings, agreements or undertakings, written or oral, that would prevent any such plan (including any such plan covering retirees or other former employees) from being amended or terminated without material liability to the Company on or at any time after the Effective Time. (v) Schedule 4.14(v) lists all outstanding Stock Options as of December 31, 1996, showing for each such Option: (1) the number of Shares issuable, (2) the number of vested Shares, (3) the date of grant and (4) the exercise price. (vi) Except as set forth on Schedule 4.14(vi) and except with respect to the Stock Options, no employee of the Company will be entitled to any additional compensation or benefits or any acceleration of the time of payment or vesting of any compensation or benefits under any Benefit Plan as a result of the transactions contemplated by this Agreement. It shall be assumed for purposes of the preceding sentence that no payments will be received by, or accelerated to, any such employee as a result of the termination of such individual's employment by the Surviving Corporation after the Effective Time. SECTION 4.15. Taxes. The Company has filed all tax returns and reports required to be filed by it and, except with respect to state sales taxes, has paid all material taxes due and required to be paid by it and, except with respect to state sales taxes, the most recent financial statements contained in the Filed SEC Documents reflect an adequate reserve for all taxes payable by the Company for all taxable periods and portions thereof through the date of such financial statements. No deficiencies for any taxes which remain outstanding have been proposed, asserted or assessed against the Company, and no requests for waivers of the time to assess any such taxes are pending. None of the Federal income tax returns of the Company have been examined by the United States Internal Revenue Service. As of 27 22 December 31, 1995, the Company had Federal net operating loss carryforwards (the "NOL Carryforwards") totalling $21,670,941. The Company had an additional loss for book purposes of $10,822,452 for 1996. Schedule 4.15 sets forth the periods during which the NOL Carryforwards arose and the expiration dates of the NOL Carryforwards, identifies which amounts are currently limited under Section 382 of the Code or the "separate return limitation year" ("SRLY") rules of the consolidated return regulations, and, in the case of NOL Carryforwards currently limited under Section 382 of the Code, the relevant Section 382 limitation (within the meaning of Section 382(b)(1) of the Code). As used in this Agreement, "taxes" shall mean all Federal, state, local and foreign income, property, sales, excise and other taxes, tariffs or other governmental charges in the nature of a tax as well as any interest, penalties and additions to tax. SECTION 4.16. No Excess Parachute Payments. Except as set forth on Schedule 4.16 and as contained in documents delivered to Parent or its representatives, no amount that could be received pursuant to the Benefit Plans or any executed and delivered agreements between the Company and any officer thereof in effect as of the date of this Agreement (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of the Company who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Benefit Plan currently in effect would be an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). It shall be assumed for purposes of the preceding sentence that no payments will be received by, or accelerated to, any such disqualified individual as a result of the termination of such individual's employment by the Surviving Corporation after the Effective Time. To the best knowledge of the Company, no disqualified individual is entitled to receive any additional payment from the Company, the Surviving Corporation, or any other person referred to in Q&A 10 under proposed Treasury Regulation Section 1.280G-1 (a "Parachute Gross-Up Payment") in the event that the 20 per cent parachute excise tax of Section 4999(a) of the Code is imposed on such person. The Board of Directors of the Company has not during the six months prior to the date of this Agreement granted to any officer, director or employee 28 23 of the Company any right to receive any Parachute Gross-Up Payment. SECTION 4.17. Title to Properties. (i) Except as set forth in Schedule 4.17, the Company has good and marketable title to, or valid leasehold interests in or valid rights to, all its material properties and assets except for such as are no longer used or useful in the conduct of its businesses or as have been disposed of in the ordinary course of business and except for defects in title, easements, restrictive covenants and similar encumbrances that, in the aggregate, do not materially interfere with its ability to conduct its business as currently conducted. All such material assets and properties, other than assets and properties in which the Company has a leasehold interest, are free and clear of all Liens other than those set forth in Schedule 4.17 and except for Liens that, in the aggregate, do not materially interfere with the ability of the Company to conduct its business as currently conducted. (ii) Except as set forth in Schedule 4.17, the Company has complied in all material respects with the terms of all material leases to which it is a party and under which it is in occupancy, and all such leases are in full force and effect. The Company enjoys peaceful and undisturbed possession under all such material leases, except for failures to do so that could not in the aggregate be reasonably expected to have a material adverse effect on the Company. SECTION 4.18. Intellectual Property. The Company owns, or is validly licensed or otherwise has the right to use, without any obligation to make any fixed or contingent payments, including any royalty payments, all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service marks, service mark rights, copyrights and other proprietary intellectual property rights and computer programs (certain of which computer programs may require royalty payments) that are material to the conduct of the business of the Company as now operated (collectively, "Intellectual Property Rights"). Schedule 4.18 sets forth a description of all patents, trademarks and copyrights and applications therefor owned by or licensed to the Company that are material to the conduct of the business of the Company as now operated. Except as set forth in Schedule 4.18, no claims are pending or, to the knowledge of the Company, threatened that the Company is infringing or otherwise adversely affecting the rights of 29 24 any person with regard to any Intellectual Property Right. To the knowledge of the Company, except as set forth in Schedule 4.18, no person is infringing the rights of the Company with respect to any Intellectual Property Right. The Company has not licensed, or otherwise granted, to any third party, any rights in or to any Intellectual Property Rights. SECTION 4.19. Distribution Agreements. Schedule 4.19 is a complete list of all contracts or agreements and such Schedule contains a true and complete description of any oral arrangements or understandings, to which the Company is a party relating to the distribution, sale or marketing by third parties of the Company's products or products licensed by the Company. The Company has made available to Parent and its representatives true and correct copies of all contracts and agreements to which the Company is a party relating to the distribution, sale or marketing by third parties of the Company's products or products licensed by the Company. SECTION 4.20. Voting Requirements. The affirmative vote of the holders of a majority of the outstanding Shares is the only vote of the holders of any class or series of the Company's capital stock necessary to approve this Agreement and the transactions contemplated by this Agreement. SECTION 4.21. State Takeover Statutes. The Board of Directors of the Company has approved the Merger, this Agreement and the Stockholder Agreement, and such approval is sufficient to render inapplicable to the Merger, this Agreement, the Stockholder Agreement, and the transactions contemplated by this Agreement and the Stockholder Agreement, the provisions of Section 203 of the DGCL to the extent, if any, such Section is applicable to the Merger, this Agreement, the Stockholder Agreement and the transactions contemplated by this Agreement and the Stockholder Agreement. To the best of the Company's knowledge, no other state takeover statute or similar statute or regulation applies or purports to apply to the Merger, this Agreement, the Stockholder Agreement or the transactions contemplated by this Agreement or the Stockholder Agreement. SECTION 4.22. Brokers; Schedule of Fees and Expenses. No broker, investment banker, financial advisor or other person, other than Prudential, the fees and 30 25 expenses of which will be paid by the Company, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. The fees and expenses incurred and to be incurred in connection with this Agreement and the transactions contemplated by this Agreement (other than printing and mailing costs and expenses), including, without limitation, the fees and expenses of Prudential Securities and the fees and expenses of the Company's legal counsel (including any counsel retained by the independent committee of the Board of Directors of the Company or any other counsel retained to represent the interests of the Company or its shareholders), shall be as set forth on Schedule 4.22. SECTION 4.23. Opinion of Financial Advisor. The Board of Directors of the Company has received the opinion dated February 10, 1997 of Prudential, that, as of such date and based upon and subject to the matters set forth therein, the cash consideration to be received by holders of Shares pursuant to the Offer and the Merger was fair from a financial point of view to such holders, a signed copy of which opinion has been delivered to Parent. ARTICLE V Representations and Warranties of Parent and Sub Parent and Sub represent and warrant to the Company as follows: SECTION 5.01. Organization. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now being conducted. Each of Parent and Sub is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualifications or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed (individually or in the aggregate) could not be reasonably expected to prevent or materially delay the consummation of the Offer and/or the Merger. Parent has delivered to the Company complete and 31 26 correct copies of its certificate of incorporation and by-laws and the certificate of incorporation and by-laws of Sub, in each case as amended to the date of this Agreement. SECTION 5.02. Authority. Parent and Sub have requisite corporate power and authority to execute and deliver this Agreement and the Stockholder Agreement, and to consummate the transactions contemplated by this Agreement and the Stockholder Agreement. The execution, delivery and performance of this Agreement and the Stockholder Agreement, and the consummation of the transactions contemplated by this Agreement and the Stockholder Agreement, have been duly authorized by all necessary corporate action on the part of Parent and Sub and no other corporate proceedings on the part of Parent and Sub are necessary to authorize this Agreement or the Stockholder Agreement or to consummate the transactions contemplated hereby or thereby. No vote of Parent shareholders is required to approve this Agreement or the Stockholder Agreement or the transactions contemplated hereby or thereby. Each of this Agreement and the Stockholder Agreement has been duly executed and delivered by Parent and Sub, and, assuming such Agreement constitutes a valid and binding obligation of the other parties thereto, constitutes a valid and binding obligation of Parent and Sub enforceable against Parent and Sub in accordance with its terms. SECTION 5.03. Consents and Approvals; No Violations. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act (including the filing with the SEC of the Offer Documents), the HSR Act, the DGCL, the laws of other states in which Parent is qualified to do or is doing business, state takeover laws and foreign laws, neither the execution, delivery or performance of this Agreement or the Stockholder Agreement by Parent and Sub, nor the consummation by Parent and Sub of the transactions contemplated hereby or thereby will (i) conflict with or result in any breach of any provision of the respective certificate of incorporation or by-laws of Parent and Sub, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity (except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not reasonably be expected to prevent or materially delay the consummation of the Offer and/or the Merger), (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or 32 27 both) a default (or give rise to any right of termination, amendment, cancelation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which Parent or any of its subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent, any of its subsidiaries or any of their properties or assets, except in the case of clauses (iii) and (iv) for violations, breaches or defaults which could not, individually or in the aggregate, be reasonably expected to prevent or materially delay the consummation of the Offer and/or the Merger. SECTION 5.04. Information Supplied. None of the information supplied or to be supplied by Parent or Sub specifically for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the Information Statement or (iv) the Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and the Information Statement, at the respective times the Offer Documents, the Schedule 14D-9 and the Information Statement are filed with the SEC or first published, sent or given to the Company's stockholders, or, in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's stockholders or at the time of the Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation or warranty is made by Parent or Sub with respect to statements made or incorporated by reference therein based on information supplied by the Company specifically for inclusion or incorporation by reference therein. SECTION 5.05. Interim Operations of Sub. Sub (and any other wholly owned subsidiary of Parent which may be used to effect the Offer and the Merger pursuant to Section 2.01) was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. 33 28 SECTION 5.06. Brokers. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Sub. SECTION 5.07. Financing. Parent has sufficient funds readily available to purchase, or to cause Sub to purchase, all the Shares pursuant to the Offer and the Merger and to pay all fees and expenses payable by Parent or Sub related to the transactions contemplated by this Agreement. SECTION 5.08. State Takeover Statutes. To the best of Parent's knowledge, no state takeover statute (other than Section 203 of the DGCL) or similar statute or regulation applies or purports to apply to the Merger, this Agreement, the Stockholder Agreement or the transactions contemplated by this Agreement or the Stockholder Agreement. ARTICLE VI Covenants SECTION 6.01. Conduct of Business. During the period from the date of this Agreement to the Effective Time or termination of this Agreement pursuant to Section 9.01 hereof, except as otherwise contemplated hereby or to the extent that Parent shall otherwise consent in writing, the Company shall carry on its business in the ordinary course consistent with the manner as heretofore conducted and, to the extent consistent therewith, use reasonable efforts to preserve intact its current business organization, keep available the services of its current officers and employees and preserve its relationships with customers, suppliers, licensors, licensees, distributors and others having significant business dealings with it. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, the Company shall not (except as expressly contemplated or permitted by this Agreement, or to the extent that Parent shall otherwise consent in writing): (i) (x) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (y) split, combine or reclassify 34 29 any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for Shares of its capital stock, or (z) purchase, redeem or otherwise acquire any Shares of capital stock of the Company or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than the issuance of Shares upon the exercise of Company Stock Options or warrants to purchase Shares outstanding on the date of this Agreement in accordance with their present terms) or as provided for herein; (iii) amend its Certificate of Incorporation or By-laws or other comparable charter or organizational documents; (iv) (x) acquire or agree to acquire (A) by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, joint venture, association or other business organization or division therefor or (B) except as set forth on Schedule 6.01(iv), any assets that are material, individually or in the aggregate, to the Company, except purchases of inventory in the ordinary course of business consistent with past practice; or (y) exercise its options to acquire units of Prism Ophthalmics, L.L.C. ("Prism"), or materially amend, modify or otherwise alter the terms of such option, or increase its ownership or control of Prism, through the purchase of equity securities, any contract or other agreement or otherwise; (v) sell, lease, license, mortgage or otherwise encumber or subject to any Lien or otherwise dispose of any of its properties or assets, except sales of inventory or sales or licenses of immaterial assets, in each case in the ordinary course of business consistent with past practice; (vi) (y) incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, 35 30 issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings incurred in the ordinary course of business consistent with past practice, or (z) make any loans, advances (other than to employees of the Company in the ordinary course of business) or capital contributions to, or investments in, any other person; (vii) except for the items listed on Schedule 6.01(vii), make or agree to make any new capital expenditure or expenditures with respect to property, plant or equipment which, individually, is in excess of $50,000 or, in the aggregate, are in excess of $200,000; (viii) make any material tax election or settle or compromise any material income tax liability; (ix) pay, discharge, settle or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in the Filed SEC Documents or incurred thereafter in the ordinary course of business consistent with past practice, or waive any material benefits of, or agree to modify in any material respect, any confidentiality, standstill or similar agreements to which the Company is a party; (x) except in the ordinary course of business, modify, amend or terminate any material contract or agreement to which the Company is a party, or waive, release or assign any material rights or claims; (xi) enter into any contracts, agreements, arrangements or understandings relating to the distribution, sale or marketing by third parties of the Company's products or products licensed by the Company; 36 31 (xii) except as required to comply with applicable law, (A) adopt, enter into, terminate or amend any Benefit Plan or other arrangement for the benefit or welfare of any director, officer or current or former employee, (B) except as set forth on Schedule 6.01(xii), increase in any manner the compensation or fringe benefits of, or pay any bonus to, any director, officer or employee (except for normal increases or bonuses, including under the Management Incentive Compensation Plan, in the ordinary course of business consistent with past practice), (C) pay any benefit not provided for under any Benefit Plan, (D) except as permitted in clause (B), grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or Benefit Plan (including the grant of stock options, stock appreciation rights, stock based or stock related awards, performance units or restricted stock, or the removal of existing restrictions in any Benefit Plans or agreement or awards made thereunder) or (E) take any action other than in the ordinary course of business to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement or Benefit Plan; or (xiii) authorize any of, or commit or agree to take any of, the foregoing actions. SECTION 6.02. No Solicitation. (a) The Company shall, and shall direct and use reasonable efforts to cause its officers, directors, employees, representatives and agents to, immediately cease any discussions or negotiations with any parties other than Parent and Sub that may be ongoing with respect to a Takeover Proposal (as hereinafter defined). The Company shall not, and shall not authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by it to, directly or indirectly, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal or (ii) participate in any discussions or negotiations regarding any Takeover Proposal; provided, however, that if, at any time prior to the acceptance for payment of Shares pursuant to and subject to the conditions (including the Minimum Condition) of the Offer, the Board of Directors of the Company (or its Special Committee) 37 32 determines in good faith, after consultation with outside counsel, that failure to do so would create a substantial risk of liability for breach of its fiduciary duties to the Company's stockholders under applicable law, the Company may, in response to a Takeover Proposal that was unsolicited or that did not otherwise result from a breach of this Section 6.02(a), and subject to compliance with Section 6.02(c), (x) furnish information with respect to the Company to any person pursuant to a customary and reasonable confidentiality agreement and (y) participate in negotiations regarding such Takeover Proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any director or officer of the Company or any investment banker, financial advisor, attorney, accountant or other representative of the Company's, acting on behalf of the Company, shall be deemed to be a breach of this Section 6.02(a) by the Company. For purposes of this Agreement, "Takeover Proposal" means any proposal or offer from any person relating to any direct or indirect acquisition or purchase of 20% or more of the assets of the Company or 20% or more of any class of outstanding equity securities of the Company, any tender offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of any class of equity securities of the Company or any merger, consolidation, business combination, sale of substantially all the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company, other than the transactions contemplated by this Agreement. (b) Neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent, the approval or recommendation by such Board of Directors or such committee of the Offer, this Agreement or the Merger, (ii) approve or recommend, or propose to approve or recommend, any Takeover Proposal or (iii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement (an "Acquisition Agreement") with respect to any Takeover Proposal unless the Board of Directors of the Company shall have terminated this Agreement pursuant to Section 9.01(d). (c) In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 6.02, the Company shall immediately advise Parent orally and in writing of any request for information or of any Takeover Proposal or any inquiry regarding the making of a Takeover 38 33 Proposal, the material terms and conditions of such request, Takeover Proposal or inquiry and the identity of the person making such request, Takeover Proposal or inquiry. The Company will, to the extent reasonably practicable, keep Parent fully informed of the status and details (including amendments or proposed amendments) of any such request, Takeover Proposal or inquiry. (d) Nothing contained in this Section 6.02 shall prohibit the Company from at any time taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders if, in the good faith judgment of the Board of Directors of the Company (or its Special Committee), after consultation with outside counsel, failure so to disclose would create a substantial risk of liability for breach of its fiduciary duties to the Company's stockholders under applicable law; provided, however, neither the Company nor its Board of Directors nor any committee thereof shall, except as permitted by Section 6.02(b), withdraw or modify, or propose to withdraw or modify, its position with respect to the Offer, the Merger or this Agreement or approve or recommend, or propose to approve or recommend, a Takeover Proposal; provided, further, that the taking of a position by the Company pursuant to Rule 14e-2(a)(2) or (3) of the Exchange Act in respect of a Takeover Proposal shall not be deemed a withdrawal, a modification or a proposal to do either, of its position with respect to the Offer or the Merger for purposes hereof. SECTION 6.03. Certain Tax Matters. From the date hereof until the Effective Time, (i) the Company will file all tax returns and reports ("Post-Signing Returns") required to be filed; (ii) the Company will timely pay all taxes shown as due and payable on the Company's Post-Signing Returns that are so filed; (iii) the Company will make provision for all taxes payable by the Company for which no Post-Signing Return is due prior to the Effective Time; and (iv) the Company will promptly notify Parent of any action, suit, proceeding, claim or audit pending against or with respect to the Company in respect of any tax where there is a reasonable possibility of a determination or decision which would reasonably be expected to have a significant adverse effect on the Company's tax liabilities or tax attributes. 39 34 SECTION 6.04. Other Actions. The Company shall not take any action that could reasonably be expected to result in (i) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality becoming untrue, (ii) any of such representations and warranties that are not so qualified becoming untrue in any material respect or (iii) any of the Offer Conditions not being satisfied (subject to the Company's right to take actions specifically permitted by Section 6.02 or 9.01). SECTION 6.05. Advice of Changes; Filings. The Company shall confer with Parent on a regular and frequent basis as reasonably requested by Parent, report on operational matters and promptly advise Parent orally and, if requested by Parent, in writing of any material adverse change with respect to the Company. The Company shall promptly provide to Parent (or its counsel) copies of all filings made by the Company with any Governmental Entity in connection with this Agreement and the transactions contemplated hereby. ARTICLE VII Additional Agreements SECTION 7.01. Stockholder Approval; Preparation of Proxy Statement. (a) If the Company Stockholder Approval is required by law, the Company will, as soon as practicable following the acceptance for payment of, and payment for, Shares by Sub pursuant to and subject to the conditions (including the Minimum Condition) of the Offer, duly call, give notice of, convene and hold a meeting of its stockholders (the "Stockholders Meeting") for the purpose of obtaining the Company Stockholder Approval. The Company will, through its Board of Directors, recommend to its stockholders that the Company Stockholder Approval be given. Notwithstanding the foregoing, if Sub or any other subsidiary of Parent shall acquire at least 90% of the outstanding Shares, the parties shall, at the request of Parent, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a Stockholders Meeting in accordance with Section 253 of the DGCL. (b) If the Company Stockholder Approval is required by law, the Company will, at Parent's request, as 40 35 soon as practicable following the expiration of the Offer, prepare and file a preliminary Proxy Statement with the SEC and will use its best efforts to respond to any comments of the SEC or its staff and to cause the Proxy Statement to be mailed to the Company's stockholders as promptly as practicable after responding to all such comments to the satisfaction of the staff. The Company will notify Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and will supply Parent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement or the Merger. If at any time prior to the Stockholders Meeting there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company will promptly prepare and mail to its stockholders such an amendment or supplement. The Company will not mail any Proxy Statement, or any amendment or supplement thereto, to which Parent reasonably objects; provided, that Parent shall identify its objections and fully cooperate with the Company to create a mutually satisfactory Proxy Statement. (c) Parent agrees to cause all Shares purchased pursuant to the Offer and all other Shares owned by Parent or any subsidiary of Parent to be voted in favor of the Company Stockholder Approval. SECTION 7.02. Access to Information; Confidentiality. The Company shall afford to Parent, and to Parent's officers, employees, accountants, counsel, financial advisers and other representatives, reasonable access during normal business hours during the period prior to the Effective Time or termination of this Agreement pursuant to Section 9.01 hereof to all their respective properties, books, contracts, commitments, personnel and records and, during such period, the Company shall furnish promptly to Parent (a) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of Federal or state securities laws and (b) all other information concerning its business, properties and personnel as Parent may reasonably request. Except as required by law, Parent will hold, and will cause its officers, employees, accountants, counsel, financial advisers and other representatives and affiliates to hold, any and all information received from the Company, directly or indirectly, in confidence, according to the 41 36 terms of the confidentiality agreement dated as of November 27, 1995, among the Company, Parent and Johnson & Johnson Vision Products, as amended on August 1, 1996 and January 31, 1997 (as amended, the "Confidentiality Agreement"). SECTION 7.03. Reasonable Efforts; Notification. (a) Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Offer and the Merger, and the other transactions contemplated by this Agreement, including (i) the obtaining of all necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings (including filings with Governmental Entities, if any) and the taking of all reasonable steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of all necessary consents, approvals or waivers from this parties, (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of any of the transactions contemplated by this Agreement, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Entity vacated or reversed and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. In connection with and without limiting the foregoing, the Company and its Board of Directors shall (i) take all action necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to the Offer, the Merger, this Agreement, the Stockholder Agreement or any of the other transactions contemplated by this Agreement or the Stockholder Agreement and (ii) if any state takeover statute or similar statute or regulation becomes applicable to the Offer, the Merger, this Agreement, the Stockholder Agreement or any other transaction contemplated by this Agreement or the Stockholder Agreement, at Parent's sole cost take all action reasonably necessary to ensure that the Offer, the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms 42 37 contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation on the Offer, the Merger, this Agreement, the Stockholder Agreement and the other transactions contemplated by this Agreement or the Stockholder Agreement. Nothing in this Agreement shall be deemed to require Parent to dispose of any significant asset or collection of assets. (b) The Company shall give prompt notice to Parent of (i) any representation or warranty made by it contained in this Agreement that it qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be compiled with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreement of the parties or the conditions to the obligations of the parties under this Agreement. SECTION 7.04. Stock Option Plans and Warrants. (a) As soon as practicable following the date of this Agreement but in no event later than the consummation of the Offer, the Company (or, if appropriate, the Board of Directors of the Company or any committee administering the Stock Option Plans (as defined below)) shall (including by adopting resolutions or taking any other actions) ensure that, except as set forth on Schedule 7.04(a), each outstanding option to purchase Shares (a "Company Stock Option") heretofore granted under any stock option, stock appreciation rights or stock purchase plan, program or arrangement of the Company (collectively, the "Stock Option Plans") and each outstanding warrant to purchase Shares (a "Warrant") in each case outstanding immediately prior to the consummation of the Offer, whether or not then exercisable, shall either (x) be cancelled immediately prior to the Effective Time in exchange for an amount in cash, payable at the time of such cancellation, equal to the product of (y) the number of Shares subject to such Company Stock Option or Warrant immediately prior to the Effective Time and (z) the excess of the price per Share to be paid in the Offer over the per Share exercise price of such Company Stock Option or Warrant (the "Net Amount") or (y) be converted immediately prior to the Effective Time into the right solely to receive the Net Amount; provided, however, that no such cash payment has been made. The Company (or, 43 38 if appropriate, the Board of Directors of the Company or any committee administering the Stock Option Plans) shall use its reasonable best efforts to ensure that immediately prior to the Effective Time the Company Stock Options and Warrants set forth on Schedule 7.04(a) are cancelled or converted as set forth above. The Company shall not make, or agree to make, any payment of any kind to any holder of a Company Stock Option or a Warrant (except for the payment described above) without the consent of Parent (which consent will not be unreasonably withheld). (b) Subject to Section 7.04(a), all Stock Option Plans shall terminate as of the Effective Time and the provisions in any other Benefit Plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be deleted as of the Effective Time. The Company shall ensure that following the consummation of the Offer, other than with respect to the Company Stock Options and Warrants set forth on Schedule 7.04(a), no holder of a Company Stock Option or Warrant or any participant in any Stock Option Plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation, and the Company shall use its reasonable best efforts to ensure that following the Effective Time, no holder of a Company Stock Option or Warrant set forth on Schedule 7.04(a) or any participant in any Stock Option Plan shall have any right thereunder to acquire any capital stock of the Company, Parent or the Surviving Corporation. (c) The Surviving Corporation shall continue to be obligated to pay the Net Amount to holders of any Company Stock Options or Warrants converted in accordance with clause (y) of Section 7.04(a). SECTION 7.05. Indemnification, Exculpation and Insurance. (a) Parent agrees that all rights to indemnification and exculpation (including the advancement of expenses) from liabilities for acts or omissions occurring at or prior to the Effective Time (including with respect to the transactions contemplated by this Agreement) existing now or at the Effective Time in favor of the current or former directors or officers of the Company as provided in its Certificate of Incorporation, its By-laws (each as in effect on the date hereof) and reasonable indemnification agreements shall be assumed by the Surviving Corporation in the Merger, without further action, as of the Effective Time and shall survive the Merger and shall 44 39 continue in full force and effect without amendment, modification or repeal in accordance with their terms for a period of not less than six years after the Effective Time; provided however, that if any claims are asserted or made within such six year period, all rights to indemnification (and to advancement of expenses) hereunder in respect of any such claims shall continue, without diminution, until disposition of any and all such claims. (b) In the event that Parent, the Surviving Corporation or any of their successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, proper provision will be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 7.05. In the event the Surviving Corporation transfers any material portion of its assets, in a single transaction or in a series of transactions, Parent will either guarantee the indemnification obligations referred to in Section 7.05(a) or take such other action to insure that the ability of the Surviving Corporation, legal and financial, to satisfy such indemnification obligations will not be diminished in any material respect. (c) For six years after the Effective Time, Parent shall, unless Parent agrees in writing to guarantee the indemnification obligations set forth in Section 7.05(a), provide officers' and directors' liability insurance in respect of acts or omissions occurring at or prior to the Effective Time, including but not limited to the transactions contemplated by this Agreement, covering each person currently covered by the Company's officers' and directors' liability insurance policy, or who becomes covered by such policy prior to the Effective Time, on terms with respect to coverage and amount no less favorable than those of such policy in effect on the date hereof, provided that in satisfying its obligation under this Section Parent shall not be obligated to pay premiums in excess of 200% of the amount per annum the Company paid in its last full fiscal year (which the Company represents to be $129,000), and provided further that Parent shall nevertheless be obligated to provide such coverage as may be obtained for such 200% amount. 45 40 (d) The provisions of this Section 7.05 (i) are intended to be for the benefit of, and will be enforceable by, each indemnified party, his or her heirs and his or her representatives and (ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such person may have by contract or otherwise. SECTION 7.06. Directors. Promptly upon the acceptance for payment of, and payment for, any Shares by Sub pursuant to and subject to the conditions (including the Minimum Condition) of the Offer, Sub shall be entitled to designate such number of directors on the Board of Directors of the Company as will give Sub, subject to compliance with Section 14(f) of the Exchange Act, a majority of such directors, and the Company shall, at such time, cause Sub's designees to be so elected by its existing Board of Directors. Subject to applicable law, the Company shall take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the Information Statement containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company agrees to make such mailing with the mailing of the Schedule 14D-9 (provided that Sub shall have provided to the Company on a timely basis in writing all information required to be included in the Information Statement with respect to Sub's designees). In connection with the foregoing, the Company will promptly, at the option of Parent, either increase the size of the Company's Board of Directors and/or obtain the resignation of such number of its current directors as is necessary to enable Sub's designees to be elected or appointed to, and to constitute a majority of, the Company's Board of Directors as provided above. SECTION 7.07. Fees and Expenses. (a) Except as otherwise provided herein and as provided below in this Section 7.07, all fees and expenses incurred in connection with the Offer, the Merger, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Offer or the Merger is consummated, except that printing and mailing costs and expenses shall be shared equally by Parent and the Company. (b) In the event that this Agreement is terminated by any party hereto pursuant to Section 9.01(d), the Company shall promptly, but in no event later than two days after 46 41 the date of such termination, pay Parent a fee equal to $6.25 million in immediately available funds (the "Termination Fee") and all Expenses (as defined below). If, at the time of any other termination of this Agreement (other than pursuant to Section 9.01(a) or Section 9.01(b)(ii) or by the Company pursuant to Section 9.01(e)), a Takeover Proposal shall have been made (other than a Takeover Proposal made solely to a Stockholder (as defined in the Stockholder Agreement) unless and until such Takeover Proposal becomes known to the Company (other than knowledge imputed to the Company by virtue of a direct relationship of such Stockholder with an officer or director of the Company) or becomes publicly known) and prior to December 31, 1997 the Company shall either (x) consummate a Trigger Takeover Proposal or (y) enter into an Acquisition Agreement providing for a Trigger Takeover Proposal, then the Company shall pay the Termination Fee and all Expenses in the case of clause (x) concurrently with the consummation of such Trigger Takeover Proposal or in the case of clause (y) concurrently with the consummation of the transaction subject to such Acquisition Agreement (whether or not such transaction is consummated prior to December 31, 1997); provided, however, that no Termination Fee and no Expenses will be payable pursuant to this sentence if the Offer is terminated prior to its scheduled expiration date (without giving effect to any voluntary or required extensions thereof) or if at the time this Agreement is terminated, the Minimum Condition shall have been satisfied but any of the other conditions to the Offer shall not have been satisfied. The Company acknowledges that the agreements contained in this Section 7.07(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Parent would not enter into this Agreement; accordingly, if the Company fails promptly to pay the amount due pursuant to this Section 7.07(b), and, in order to obtain such payment, Parent commences a suit which results in a judgment against the Company for the fee set forth in this Section 7.07(b), the Company shall pay to Parent its reasonable costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amount of the fee at the prime rate of Chase Manhattan Bank, N.A. in effect on the date such payment was required to be made. A "Trigger Takeover Proposal" shall have the meaning assigned to the term "Takeover Proposal" in Section 6.02(a) except that references to "20%" in such definition shall be deemed to be references to "40%" and a Trigger Takeover Proposal may only be in the form of a single transaction or a series of 47 42 related transactions. "Expenses" shall mean all out-of-pocket expenses incurred by Parent and Sub in connection with this Agreement, the Stockholder Agreement and the transactions contemplated hereby and thereby in an amount not to exceed $500,000, payable in immediately available funds. SECTION 7.08. Public Announcements. Parent and Sub, on the one hand, and the Company, on the other hand, will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Offer and the Merger, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties. SECTION 7.09. Continuation of Benefits. Parent shall cause the Surviving Corporation to take such actions as are necessary so that, for a period of not less than one year after the Effective Time, employees of the Company who continue their employment after the Effective Time will be provided employee benefits which in the aggregate are at least generally comparable in the aggregate to those provided to such employees as of the date hereof. It is Parent's current intention that, following the first anniversary of the Effective Time, Parent will provide employee benefit plans, programs, arrangements and policies for the benefit of such employees of the Company which are generally comparable in the aggregate to the employee benefit plans, programs, arrangements and policies for the benefit of other similarly situated employees of Parent and its subsidiaries. SECTION 7.10. Stop Transfer. The Company shall not register the transfer of any certificate representing any Subject Shares (as defined in the Stockholder Agreement), unless such transfer is made to Parent or Sub or otherwise in compliance with the Stockholder Agreement. The Company will inscribe upon any certificates representing Subject Shares tendered by a Stockholder (as defined in the Stockholder Agreement) for such purpose the following 48 43 legend: "The shares of Common Stock, $.001 par value of Innotech, Inc. represented by this certificate are subject to a Stockholders Agreement dated as of February 10, 1997, and may not be sold or otherwise transferred, except in accordance therewith. Copies of such Agreement may be obtained at the principal executive offices of Innotech, Inc." ARTICLE VIII Conditions SECTION 8.01. Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of each party to effect the Merger shall be subject to the satisfaction prior to the Closing Date of the following conditions: (a) Company Stockholder Approval. If required by applicable law, the Company Stockholder Approval shall have been obtained; provided that Parent and Sub shall vote all their Shares in favor of the Merger. (b) No Injunctions or Restraints. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other Governmental Entity or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect; provided, however, that each of the parties shall have used reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any injunction or other order that may be entered. (c) Purchase of Shares. Sub shall have previously accepted for payment and paid for Shares pursuant to and subject to the conditions (including the Minimum Condition) of the Offer. (d) HSR Act. Any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. 49 44 ARTICLE IX Termination and Amendment SECTION 9.01. Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the terms of this Agreement by the stockholders of the Company: (a) by mutual written consent of Parent and the Company; (b) by either Parent or the Company: (i) if (x) as a result of the failure of any of the Offer Conditions the Offer shall have terminated or expired in accordance with its terms without Sub having accepted for payment Shares pursuant to and subject to the conditions (including the Minimum Condition) of the Offer or (y) Sub shall not have accepted for payment Shares pursuant to the Offer prior to May 31, 1997; provided, however, that the right to terminate this Agreement pursuant to this Section 9.01(b)(i) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of any such condition or if the failure of such condition results from facts or circumstances that constitute a material breach of representation or warranty under this Agreement by such party unless such breach was not willful or intentional; or (ii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree or ruling or other action shall have become final and nonappealable; (c) by Parent or Sub prior to Sub's obligation to accept Shares for payment pursuant to the Offer in the event of a breach by the Company of any representation, warranty, covenant or other agreement contained in this Agreement which (i) would give rise to the failure of a condition set forth in paragraph (d) or (e) of 50 45 Exhibit A and (ii) cannot be or has not been cured within 20 days after the giving of written notice to the Company; (d) by either Parent or the Company if, prior to the obligation of Sub to accept Shares for payment pursuant to the Offer, the Board of Directors of the Company determines that a Takeover Proposal constitutes a Superior Proposal (as defined below); provided, however, that the Company may not terminate this Agreement pursuant to this Section 9.01(d) unless and until five business days have elapsed following delivery to Parent of a written notice of such determination by the Board of Directors of the Company and during such five business day period the Company (i) informs Parent of the terms and conditions of the Takeover Proposal and the identity of the person making the Takeover Proposal and (ii) otherwise cooperates with Parent with respect thereto (subject, in the case of this clause (ii), to the condition that the Board of Directors of the Company shall not be required to take any action that it believes, after consultation with outside legal counsel, would present a substantial risk of liability for violating its obligations to the Company or the Company's stockholders under applicable law) with the intent of enabling Parent to agree to a modification of the terms and conditions of this Agreement so that the transactions contemplated hereby may be effected; provided, further, that the Company may not terminate this Agreement pursuant to this Section 9.01(d) unless at the end of such five business day period the Board of Directors of the Company continues to believe that the Takeover Proposal constitutes a Superior Proposal and no later than two days thereafter the Company pays to Parent the amount specified under Section 7.07(b) pursuant to the terms of such Section 7.07(b); and provided, further, that in the event the determination of the Board of Directors of the Company that a Takeover Proposal constitutes a Superior Proposal is made less than ten business days prior to the scheduled expiration of the Offer, Parent and Sub will either (x) reduce the period described in the first proviso of this Section 9.01(d) or (y) extend the Offer, in either case such that the period described in the first proviso of this Section 9.01(d) will end no later than five business days prior to the expiration of the Offer. For purposes of this Agreement, a "Superior Proposal" means any bona fide 51 46 proposal made by a third party to acquire, directly or indirectly, for consideration consisting of cash and/or securities, more than 50% of the voting power of the Shares of or all or substantially all the assets of the Company and otherwise on terms which the Board of Directors of the Company determines in its good faith judgment (based on the written opinion of a financial advisor of nationally recognized reputation (which opinion shall be provided to Parent)) to be more favorable to the Company's stockholders than the Offer and the Merger and for which financing, to the extent required, is then committed or which, in the good faith judgment of the Board of Directors of the Company, is capable of being obtained by such third party; or (e) by the Company, if Sub or Parent shall have (A) failed to commence the Offer within five business days of the date hereof, (B) failed to pay for Shares pursuant to the Offer in accordance with Section 1.01(a) hereof or (C) breached in any material respect any of their respective representations, warranties, other covenants or other agreements contained in this Agreement, which breach or failure to perform in respect of clause (C) is incapable of being cured or has not been cured within 20 days after the giving of written notice to Parent or Sub, as applicable, except, in any case under clause (C), such breaches and failures which are not reasonably likely to affect adversely Parent's or Sub's ability to complete the Offer or the Merger subject to the terms and conditions of this Agreement. SECTION 9.02. Effect of Termination. In the event of a termination of this Agreement by either the Company or Parent as provided in Section 9.01, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Sub or the Company or their respective officers or directors, except with respect to the last sentence of Section 1.02(c), Section 5.06, the last sentence of Section 7.02, Section 7.07, Section 9.01, this Section 9.02 and Article X; provided, however, that nothing herein shall relieve any party for liability for any breach hereof. SECTION 9.03. Amendment. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after obtaining the Company Stockholder Approval (if 52 47 required by law), but, after any such approval, no amendment shall be made which by law requires further approval by such shareholders without obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. SECTION 9.04. Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto or (iii) subject to Section 9.03, waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. SECTION 9.05. Procedure for Termination, Amendment, Extension or Waiver. A termination of this Agreement pursuant to Section 9.01, an amendment of this Agreement pursuant to Section 9.03 or an extension or waiver pursuant to Section 9.04 shall, in order to be effective, require in the case of Parent, Sub or the Company, action by its Board of Directors or the duly authorized designee of its Board of Directors; provided, however, that in the event that Sub's designees are appointed or elected to the Board of Directors of the Company as provided in Section 7.06, after the acceptance for payment and payment of Shares pursuant to and subject to the Conditions (including the Minimum Condition) of the Offer and prior to the Effective Time, the affirmative vote of a majority of the directors of the Company that were not designated by Parent or Sub shall be required by the Company to (i) amend or terminate this Agreement by the Company, (ii) exercise or waive any of the Company's rights or remedies under this Agreement, (iii) extend the time for performance of Parent's and Sub's respective obligations under this Agreement or (iv) take any action to amend or otherwise modify the Company's Certificate of Incorporation or By-laws. 53 48 ARTICLE X Miscellaneous SECTION 10.01. Nonsurvival of Representations, Warranties and Agreements. None of the representations, warranties or covenants (subject to the succeeding sentence) in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time or, in the case of the Company, shall survive the acceptance for payment of, and payment for, Shares by Sub pursuant to the Offer. This Section 10.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time of the Merger. SECTION 10.02. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed), sent by overnight courier (providing proof of delivery) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Sub, to Johnson & Johnson One Johnson & Johnson Plaza New Brunswick, NJ 08933 Attention: General Counsel Telecopy No.: (908) 524-2788 with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY 10019 Attention: Robert A. Kindler, Esq. Telecopy No.: (212) 474-3700 and (b) if to the Company, to 54 49 Innotech, Inc. 5568 Airport Road Roanoke, VA 24012 Attention: Ronald D. Blum, O.D. Telecopy No.: (540) 366-5177 with a copy to: Hertzog, Calamari & Gleason 100 Park Avenue New York, NY 10017 Attention: Stephen R. Connoni, Esq. Telecopy No.: (212) 213-1199 Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60606 Attention: Emile Karafiol, Esq. Telecopy No.: (312) 861-2200 SECTION 10.03. Interpretation. When a reference is made in this Agreement to an Article or a Section, such reference shall be to an Article or a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The phrase "made available" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. As used in this Agreement, the term "subsidiary" of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person. As used in this Agreement, "material adverse change" or 55 50 "material adverse effect" means, when used in connection with the Company, any change or effect that, individually or in the aggregate with any such other changes or effects, is materially adverse to the business, financial condition or results of operations of the Company. SECTION 10.04. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. SECTION 10.05. Entire Agreement; Third Party Beneficiaries. This Agreement and the Confidentiality Agreement (including the documents and the instruments referred to herein, but excluding Section 4 of the Confidentiality Agreement which Section shall not survive the date hereof) (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Section 7.04, Section 7.05, Section 7.09 and Articles II and III are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. SECTION 10.06. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware. SECTION 10.07. Publicity. Except as otherwise required by law or the rules of the Nasdaq National Market, for so long as this Agreement is in effect, neither the Company nor Parent shall, or shall permit any of its subsidiaries to, issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by this Agreement without the consent of the other party, which consent shall not be unreasonably withheld. SECTION 10.08. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Sub may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Parent or to any 56 51 direct or indirect wholly owned subsidiary of Parent. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SECTION 10.09. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in a Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit such party to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that such party will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that such party will not bring any action relating to this Agreement or any of the transactions contemplated hereby in any court other than a Federal court sitting in the state of Delaware or a Delaware state court and (iv) waives any right to trial by jury with respect to any claim or proceeding related to or arising out of this Agreement or any of the transactions contemplated hereby. 57 52 IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. JOHNSON & JOHNSON, by _______________________ Name: Title: INO ACQUISITION CORP., by _______________________ Name: Title: INNOTECH, INC., by _______________________ Name: Title: 58 EXHIBIT A CONDITIONS OF THE OFFER Notwithstanding any other term of the Offer, Sub shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Sub's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer (x) such number of Shares that together with Shares subject to the Stockholder Agreement that shall not have been tendered would constitute a majority of the Shares (for purposes of this clause (x) only, "Shares" shall be deemed to refer only to Shares outstanding on the date hereof) and (y) such number of Shares that together with Shares subject to the Stockholder Agreement that shall not have been tendered would constitute a majority of the fully diluted Shares as of the date of determination (determined on a fully diluted basis for all outstanding stock options and any other rights to acquire Shares) (the conditions in (x) and (y) collectively, the "Minimum Condition") and (ii) any waiting period under the HSR Act applicable to the purchase of Shares pursuant to the Offer shall have expired or been terminated. Furthermore, notwithstanding any other term of the Offer, Sub shall not be required to accept for payment or, subject as aforesaid, to pay for any Shares not theretofore accepted for payment or paid for, and may terminate the Offer if, at any time on or after the date of this Agreement and before the acceptance of such Shares for payment or the payment therefor, any of the following conditions exists (other than as a result of any action or inaction of Parent or any of its subsidiaries that constitutes a breach of this Agreement): (a) there shall be instituted or pending by any person or Governmental Entity any suit, action or proceeding (i) challenging the acquisition by Parent or Sub of any Shares under the Offer or pursuant to the Stockholder Agreement, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by this Agreement or the Stockholder Agreement (including the voting provision thereunder), or seeking to obtain from the Company, Parent or Sub any damages in connection with the aforesaid transactions that are material in relation to the 59 2 Company, (ii) seeking to prohibit or materially limit the ownership or operation by the Company, Parent or any of their respective subsidiaries of a material portion of the business or assets of the Company or Parent and its subsidiaries, taken as a whole, or to compel the Company or Parent to dispose of or hold separate any material portion of the business or assets of the Company, or Parent and its subsidiaries, taken as a whole, as a result of the Offer or any of the other transactions contemplated by this Agreement or the Stockholder Agreement, (iii) seeking to impose material limitations on the ability of Parent or Sub to acquire or hold, or exercise full rights of ownership of, any Shares to be accepted for payment pursuant to the Offer or purchased under the Stockholder Agreement including, without limitation, the right to vote such Shares on all matters properly presented to the stockholders of the Company, (iv) seeking to prohibit Parent or any of its subsidiaries from effectively controlling in any material respect any material portion of the business or operations of the Company or (v) which otherwise is reasonably likely to have a material adverse effect on the Company; (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Entity or court, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; provided, however, that each of Parent and Sub shall have used reasonable efforts to prevent the entry of any such injunction or other court order and to appeal as promptly as possible any injunction or other court order that may be entered; (c) there shall have occurred any material adverse change with respect to the Company; (d) any of the representations and warranties of the Company set forth in this Agreement (without giving effect to any materiality or similar qualifications contained therein) shall not be true and correct at the date of this Agreement and at the scheduled or extended expiration of the Offer except (i) for changes 60 3 specifically permitted by the Agreement and (ii) in any case where such failing to be true and correct could not, in the aggregate, be reasonably expected to have a material adverse effect on the Company; (e) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or covenant of the Company to be performed or complied with by it under this Agreement; or (f) this Agreement shall have been terminated in accordance with its terms; which, in the judgment of Sub in any such case, and regardless of the circumstances (including any action or omission by Sub) giving rise to any such condition, makes it inadvisable to proceed with such acceptance for payment or payments. The foregoing conditions in paragraphs (a) through (f) are for the sole benefit of Sub and Parent and may, subject to the terms of this Agreement, be waived by Sub and Parent in whole or in part at any time and from time to time in their sole discretion. The failure by Parent or Sub at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. EX-99.C2 11 STOCKHOLDER AGREEMENT 1 EXHIBIT (c)(2) EXECUTION COPY STOCKHOLDER AGREEMENT dated as of February 10, 1997, among JOHNSON & JOHNSON, a New Jersey corporation ("Parent"), INO ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of Parent ("Sub") and the individuals and other parties listed on Schedule A attached hereto (each, a "Stockholder" and, collectively, the "Stockholders"). WHEREAS Parent, Sub and the Company propose to enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented, the "Merger Agreement") providing for (i) the making of a cash tender offer (as such offer may be amended from time to time as permitted under the Merger Agreement, the "Offer") by Sub for all the outstanding shares of common stock, par value $0.001 per share, of the Company ("Company Common Stock") and (ii) for the merger of Sub with and into the Company (the "Merger"), upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS each Stockholder owns the number of shares of Company Common Stock set forth opposite his or its name on Schedule A attached hereto (such shares of Company Common Stock, together with any other shares of capital stock of the Company acquired by such Stockholders after the date hereof and during the term of this Agreement (including, without limitation, through the exercise of any stock options, warrants or similar instruments), being collectively referred to herein as the "Subject Shares"); and WHEREAS, as a condition to its willingness to enter into the Merger Agreement, Parent has requested that each Stockholder enter into this Agreement; NOW, THEREFORE, to induce Parent to enter into, and in consideration of its entering into, the Merger Agreement, and in consideration of the premises and the 2 representations, warranties and agreements contained herein, the parties agree as follows: 1. Representations and Warranties of each Stockholder. Each Stockholder hereby, severally and not jointly, represents and warrants to Parent as of the date hereof in respect of himself or itself as follows: (a) Authority. The Stockholder has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Stockholder and constitutes a valid and binding obligation of the Stockholder enforceable against such Stockholder in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity). Except for the expiration or termination of the waiting periods under the HSR Act, informational filings with the SEC and the existence of the pledge agreement described in Exhibit I hereto (the "Pledge Agreement"), the execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, (i) conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to the Stockholder or to the Stockholder's property or assets, (ii) require any filing with, or permit, authorization, consent or approval of, any federal, state or local government or any court, tribunal, administrative agency or commission or other governmental or regulatory authority or agency, domestic, foreign or supranational, or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Stockholder or any of the Stockholder's properties or assets, including the Subject Shares. If the Stockholder is a natural person and is married, and the Stockholder's Subject Shares constitute community property or otherwise need spousal or other approval for this Agreement to be legal, valid 3 and binding, this Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, the Stockholder's spouse, enforceable against such spouse in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity). No trust of which such Stockholder is a trustee requires the consent of any beneficiary to the execution and delivery of this Agreement or to the consummation of the transactions contemplated hereby. (b) The Subject Shares. Except with respect to Shares subject to the Pledge Agreement, the Stockholder is the record and beneficial owner of, or is trustee of a trust that is the record holder of, and whose beneficiaries are the beneficial owners of, and has good and marketable title to, the Subject Shares set forth opposite his or its name on Schedule A attached hereto, free and clear of any claims, liens, encumbrances and security interests whatsoever. The Stockholder does not own, of record or beneficially, any shares of capital stock of the Company other than the Subject Shares set forth opposite his or its name on Schedule A attached hereto. The Stockholder has the sole right to vote such Subject Shares, and none of such Subject Shares is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Subject Shares, except as contemplated by this Agreement. 2. Purchase and Sale of Shares. Each Stockholder hereby severally agrees to sell to Sub, and Sub hereby agrees to purchase, all Subject Shares set forth opposite such Stockholder's name on Schedule A hereto, at a price per Share equal to $13.75 per Share; provided that such obligation to sell and such obligation to purchase are subject to Sub having accepted Shares for payment under the Offer and subject to the Minimum Condition having been satisfied. Such Stockholder may tender such Subject Shares into the Offer and Sub may direct that such Stockholder tender such Subject Shares and not withdraw any Subject Shares so tendered. Any Subject Shares not purchased in the Offer will be purchased at the same time as payment is made under the Offer. 4 3. Representation and Warranty of Parent and Sub. Parent and Sub each hereby represents and warrants to each Stockholder that each of them has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of Parent and Sub, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of each of Parent and Sub. This Agreement has been duly executed and delivered by Parent and Sub and constitutes a valid and binding obligation of Parent and Sub enforceable against Parent and Sub in accordance with its terms. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance with the terms hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time or both) under any provision of, the articles of incorporation or by-laws of Parent and Sub, note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation or any judgment, order, notice, decree, statute, law, ordinance, rule or regulation applicable to either Parent or Sub or to Parent or Sub's property or assets. 4. Covenants of Each Stockholder. Until the termination of this Agreement in accordance with Section 10, each Stockholder, severally and not jointly, agrees as follows: (a) At any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, the Stockholder shall vote (or cause to be voted) the Subject Shares in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement. (b) At any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which the Stockholder's vote, consent or other approval is sought, the Stockholder shall vote (or cause to be voted) the Subject Shares (and each class thereof) against (i) any Takeover 5 Proposal as such term is defined in Section 6.02(a) of the Merger Agreement or (ii) any amendment of the Company's certificate of incorporation or by-laws or other proposal or transaction involving the Company, which amendment or other proposal or transaction would be reasonably likely to impede, frustrate, prevent or nullify the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement or change in any manner the voting rights of each class of Company Common Stock. Subject to Section 12, the Stockholder further agrees not to enter into any agreement inconsistent with the foregoing. (c) The Stockholder shall not, prior to the earliest of (A) the Effective Time and (B) the termination of the Merger Agreement in accordance with its terms, (i) sell, transfer, give, pledge, assign or otherwise dispose of (including by gift) (collectively, "Transfer"), consent to any transfer of, any or all of such Subject Shares or any interest therein or enter into any contract, option or other arrangement (including any profit sharing arrangement) with respect to the Transfer of, the Subject Shares to any person other than pursuant to the terms of the Offer or the Merger or (ii) enter into any voting arrangement, whether by proxy, voting agreement or otherwise, in connection with, directly or indirectly, any Takeover Proposal and agrees not to commit or agree to take any of the foregoing actions. (d) Subject to the terms of Section 12, during the term of this Agreement, the Stockholder shall not, nor shall it permit any investment banker or attorney retained by, or any other adviser or representative of, such Stockholder to, (i) directly or indirectly solicit, initiate or encourage the submission of, any Takeover Proposal or (ii) directly or indirectly participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal; provided, that it is understood that this clause (ii) will not be deemed to have been violated if in response to an unsolicited inquiry, the Stockholder states that it or he is subject to the provisions of this Agreement. Without limiting the foregoing, it is understood that any violation of the 6 restrictions set forth in the preceding sentence by an investment banker or attorney retained by, or other adviser or representative of, such Stockholder, whether or not such person is purporting to act on behalf of such Stockholder, shall be deemed to be a violation of this Section 4(d) by such Stockholder. (e) Until after the Merger is consummated or the Merger Agreement is terminated, the Stockholder shall, at the expense of Parent, use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by the Merger Agreement. (f) Such Stockholder, and any beneficiary of a revocable trust for which such Stockholder serves as trustee, shall not take any action to revoke or terminate such trust or take any other action which would restrict, limit or frustrate in any way the transactions contemplated by this Agreement. Each such beneficiary hereby acknowledges and agrees to be bound by the terms of this Agreement applicable to it. (g) (i) In the event that the Merger Agreement shall have been terminated under circumstances where Parent is or may become entitled to receive the Termination Fee, each Stockholder shall pay to Parent on demand an amount equal to all profit determined in accordance with Section 4(g)(ii) of such Stockholder from the consummation of any transaction which gives rise to the Company's obligation to pay the Termination Fee pursuant to the Merger Agreement. (ii) For purposes of this Section 4(g), the profit of any Stockholder from any Takeover Proposal shall equal (A) the aggregate consideration that would have been received by such Stockholder pursuant to such Takeover Proposal if such Stockholder held the same number of Subject Shares at the consummation of such Takeover Proposal as he held at the time the Merger Agreement was terminated (including any consideration that would have been received in respect of any unexercised stock options or warrants or similar instruments held at the time the Merger Agreement was terminated), valuing any noncash consideration 7 (including any residual interest in the Company) at its fair market value on the date of such consummation less (B) the fair market value of the aggregate consideration that would have been issuable or payable to such Stockholder (assuming all stock options, warrants or similar instruments held by such Stockholder were exercised) if he had received the Merger Consideration pursuant to the Merger Agreement as originally executed (without giving effect to any increase in such Merger Consideration). (iii) In the event that (x) prior to the Effective Time, a Takeover Proposal shall have been made and (y) the Effective Time of the Merger shall have occurred and Parent for any reason shall have increased the amount of Merger Consideration payable over that set forth in the Merger Agreement in effect on the date hereof (the "Original Merger Consideration"), each Stockholder shall pay to Parent on demand an amount in cash equal to the product of (i) the number of Subject Shares of such Stockholder and (ii) 100% of the excess, if any, of (A) the per share cash consideration or the per share fair market value of any noncash consideration, as the case may be, received by the Stockholder as a result of the Merger, as amended, determined as of the Effective Time of the Merger, over (B) the amount of the Original Merger Consideration determined as of the time of the first increase in the amount of the Original Merger Consideration. (iv) For purposes of this Section 4(g), the fair market value of any noncash consideration consisting of: (A) securities listed on a national securities exchange or traded on the NASDAQ/NMS shall be equal to the average closing price per share of such security as reported on such exchange or NASDAQ/NMS for the twenty trading days prior to the date of determination; and (B) consideration which is other than cash or securities of the form specified in clause (A) of this Section 4(g)(iv) shall be determined by a nationally recognized independent investment banking firm mutually agreed upon by the parties within 10 business days of the event requiring selection of such banking firm; provided, however, that if the parties are unable to agree within two business days after the date of such event as 8 to the investment banking firm, then the parties shall each select one firm, and those firms shall select a third investment banking firm, which third firm shall make such determination; provided further, that the fees and expenses of such investment banking firm shall be borne by Parent. The determination of the investment banking firm shall be binding upon the parties. (v) Any payment of profit under this Section 4(g) shall (x) if paid in cash, be paid by wire transfer of same day funds to an account designated by Parent and (y) if paid through a transfer of securities (with the method and timing of such transfer to be mutually agreed), be paid as soon as practicable through delivery of such securities, suitably endorsed for transfer; provided that the Stockholder shall be required to pay cash under this Section 4(g) only to the extent the fair market value of the securities transferred pursuant to clause (y) is less than such Stockholders' profit. 5. Covenant of Ronald Blum. Ronald Blum shall have his Shares released from the pledge pursuant to the Pledge Agreement as soon as practicable after the date hereof but in any event within ten business days after the date hereof. 6. Grant of Irrevocable Proxy; Appointment of Proxy. (a) Each Stockholder hereby irrevocably grants to, and appoints, Parent and James R. Utaski and James R. Hilton, in their respective capacities as officers of Parent, and any individual who shall hereafter succeed to any such office of Parent, and each of them individually, such Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote such Stockholder's Subject Shares, or grant a consent or approval in respect of such Subject Shares against (i) any Takeover Proposal or (ii) any amendment of the Company's Articles of Incorporation or By-laws, or other proposal or transaction (including any consent solicitation to remove or elect any directors of the Company) involving the Company which amendment or other proposal or transaction would be reasonably likely to impede, frustrate, prevent or nullify, or result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under or with respect to, the Offer, the Merger, the Merger Agreement or any of 9 the other transactions contemplated by the Merger Agreement. (b) Such Stockholder represents that any proxies heretofore given in respect of such Stockholder's Shares are not irrevocable, and that any such proxies are hereby revoked. (c) Such Stockholder hereby affirms that the irrevocable proxy set forth in this Section 6 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of the Stockholder under this Agreement. Such Stockholder hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked. Such Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law (the "DGCL"). 7. Further Assurances. Each Stockholder will, at Parent's expense, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Parent may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement. 8. Certain Events. (a) Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to such Stockholder's Subject Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Subject Shares shall pass, whether by operation of law or otherwise, including without limitation such Stockholder's heirs, guardians, administrators or successors. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock, or the acquisition of additional shares of Company Common Stock or other voting securities of the Company by any Stockholder, the number of Subject Shares listed in Schedule A beside the name of such Stockholder shall be adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Company Common Stock or other 10 voting securities of the Company issued to or acquired by such Stockholder. (b) Each Stockholder agrees that such Stockholder will tender to the Company, within 10 business days after the date hereof (or, in the event Subject Shares are acquired subsequent to the date hereof within 10 business days after the date of such acquisition), any and all certificates representing such Stockholder's Subject Shares in order that the Company may inscribe upon such certificates the legend in accordance with Section 7.10 of the Merger Agreement. 9. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties without the prior written consent of the other parties, except that (i) Sub may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to any subsidiary of Parent that may be substituted for Sub as contemplated by Section 2.01 of the Merger Agreement, and (ii) Parent may assign, in its sole discretion, any and all of its rights, interests and obligations hereunder to any direct or indirect wholly owned subsidiary of Parent, provided that Parent will remain liable for its obligations hereunder in the event of any assignment pursuant to this clause (ii). Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 10. Termination. This Agreement, and all rights and obligations of the parties hereunder, shall terminate upon the date upon which the Merger Agreement is terminated in accordance with its terms, provided that a Termination Fee has not become, and could not at any time in the future become, payable under the Merger Agreement, in which case Sections 4(g), 7 (as it relates to the other sections of this Agreement that survive such termination), 8, 9, 10, 11, 13 and 14 shall survive until such Termination Fee is paid. 11. General Provisions. (a) Amendments. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. (b) Notice. All notices and other communications hereunder shall be in writing and shall be deemed given 11 if delivered personally or sent by overnight courier (providing proof of delivery) to Parent in accordance with Section 10.02 of the Merger Agreement and to the Stockholders at their respective addresses set forth on Schedule A attached hereto (or at such other address for a party as shall be specified by like notice). (c) Interpretation. When a reference is made in this Agreement to Sections, such reference shall be to a Section to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to them in the Merger Agreement. (d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more of the counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart. (e) Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the documents and instruments referred to herein) (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (f) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof. (g) Voidability. If prior to the execution hereof, the Board of Directors of the Company shall not have duly and validly authorized and approved by all necessary corporate action, this Agreement, the Merger 12 Agreement and the transactions contemplated hereby and thereby, so that by the execution and delivery hereof Parent or Sub would become, or could reasonably be expected to become an "interested stockholder" with whom the Company would be prevented for any period pursuant to Section 203 of the DGCL from engaging in any "business combination" (as such terms are defined in Section 203 of the DGCL), then this Agreement shall be void and unenforceable until such time as such authorization and approval shall have been duly and validly obtained. 12. Stockholder Capacity. No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein in his capacity as such director or officer. Each Stockholder signs solely in his capacity as the record holder and beneficial owner of, or the trustee of a trust whose beneficiaries are the beneficial owners of, such Stockholder's Subject Shares and nothing herein (including, without limitation, the provisions of Section 4(d)) shall limit or affect any actions taken by a Stockholder in his capacity as an officer or director of the Company. 13. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in a Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit such party to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that such party will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that such party will not bring any action relating to this Agreement or the transactions contemplated hereby in any court other than a Federal court sitting in the state of Delaware or a Delaware state court and (iv) waives any right to trial by jury with respect to 13 any claim or proceeding related to or arising out of this Agreement or any of the transactions contemplated hereby. 14. Public Announcements. Each Stockholder will consult with Parent before issuing, and provide Parent with the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Merger Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange. 14 IN WITNESS WHEREOF, Parent, the Company and the Stockholders have caused this Agreement to be duly executed and delivered as of the date first written above. JOHNSON & JOHNSON By:___________________________________ Name: Title: INO ACQUISITION CORP. By:___________________________________ Name: Title: CHASE VENTURE CAPITAL ASSOCIATES, L.P. By Chase Capital Partners, A General Partner By:_____________________________ Name: Title: CIBC WOOD GUNDY VENTURES, INC. By:___________________________________ Name: Title: RONALD D. BLUM, O. D. ______________________________________ 15 SCHEDULE A
Number of Name and Shares of Company Address of Common Stock Stockholder Owned of Record - ----------- --------------- Chase Venture Capital 2,210,323 Associates, L.P. c/o Chase Capital Partners 270 Park Avenue New York, NY 10017 CIBC Wood Gundy Ventures, Inc. 779,007 425 Lexington Avenue New York, NY 10017 Dr. Ronald D. Blum, O.D. 342,278 5320 Silver Fox Road Roanoke, VA 24014
-----END PRIVACY-ENHANCED MESSAGE-----