-----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, DkWxv6bwvnaZthD8Vgypu2lOwsCRscLkcBT/mXD6X5vgTOX76slfRE6yuHRBtm8H tBEddrdgHgaQyiRnLXyrKg== 0000927016-98-002726.txt : 19980724 0000927016-98-002726.hdr.sgml : 19980724 ACCESSION NUMBER: 0000927016-98-002726 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19980708 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980723 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NITINOL MEDICAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0001017259 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 954090463 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21001 FILM NUMBER: 98670491 BUSINESS ADDRESS: STREET 1: 27 WORMWOOD STREET CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6177370930 MAIL ADDRESS: STREET 1: 27 WORMWOOD STREET CITY: BOSTON STATE: MA ZIP: 02210 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported): July 8, 1998 Nitinol Medical Technologies, Inc. ---------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware 0-21001 95-4090463 - --------------- ------------------------ ------------------- (State or Other (Commission File Number) (I.R.S. Employer Jurisdiction of Identification No.) Incorporation) 27 Wormwood Street, Boston, MA 02210 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (617)737-0930 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Not Applicable - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ITEM 2. Acquisition or Disposition of Assets. On July 8, 1998, Nitinol Medical Technologies, Inc. (the "Company" or the "Registrant") completed its acquisition of the neurosurgical instruments business (the "Business") of Elekta AB (PUBL), a Swedish corporation ("Seller" or "Elekta"), comprised of (i) assets and (ii) all of the outstanding capital stock of certain Elekta affiliates, including Elekta Instruments Ltd., a corporation formed under the laws of the United Kingdom, Elekta Implants S.A., a French corporation, Elekta Instruments SARL, a French corporation, Elekta Holding S.A., a French corporation, Elekta Instruments N.V./S.A., a Belgian corporation, Elekta Instruments S.A., a Spanish corporation, Elekta Instruments B.V., a Netherlands corporation, Cordis Innovasive Systems, Inc., a Florida corporation, Spembly Medical Ltd., a corporation formed under the laws of the United Kingdom, Swedemed AB, a Swedish corporation and Spembly Cryosurgery Limited, a corporation formed under the laws of the United Kingdom, for approximately U.S. $33 million in cash pursuant to a Purchase Agreement, dated as of May 8, 1998 (the "Purchase Agreement"), between the Company and Elekta (the "Purchase"). In addition, the Company assumed substantially all the liabilities of the Business as part of the Purchase. The Purchase Agreement contains customary representations and warranties from Elekta and the Company and post-closing covenants including business support services to be provided by Elekta, non-solicitation and non- hiring of former Elekta employees hired by the Company and indemnification for breach of representations and warranties. The terms of the Purchase were determined on the basis of arm's-length negotiations. Prior to the acquisition, the Business was operated as a division of the Swedish medical technology group of Elekta and derived sales from a broad range of specialty implants and instruments for neurosurgery. The Company currently intends to continue the Business substantially in the manner conducted by Elekta immediately prior to the Acquisition. The acquisition was approved by the Board of Directors of the Company, and by the Board of Directors and the stockholders of Elekta. Prior to the execution of the Purchase Agreement, neither the Company nor any of its affiliates, nor any director or officer of the Company or any associate of any such director of officer, had any material relationship with Elekta. The Purchase was financed with $13 million of the Company's cash and $20 million of subordinated debt from an affiliate of J.H. Whitney & Co., a significant stockholder of the Company. The subordinated debt is secured by substantially all of the assets of the Company and is due September 30, 2003, with interest payable quarterly at 10.101% per annum. A total of 675,000 shares of the Company's common stock were issued to J.H. Whitney & Co., and its affiliates in connection with the transaction. The shares are accompanied by certain demand and "piggy-back" registration rights. The purchase price for the shares was $5.80, representing the closing 2 price of the Company's common stock as reported by the Nasdaq National Market on July 7, 1998, discounted by 20%. Of the 675,000 shares, 113,793 shares were issued to J.H. Whitney & Co. as a transaction fee. In addition, the Company paid J.H. Whitney & Co. a debt placement fee of $600,000. Junewicz & Co. acted as the Company's financial advisor in connection with the Acquisition and the financing and issued fairness opinions with respect thereto. The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference. 3 ITEM 7. Financial Statement, Pro Forma Financial Information and Exhibits. (a) The financial statements of the Business that are required to be filed pursuant to this item will be filed by amendment not later than 60 days following the date hereof in accordance with Item 7(a)(4) hereof. (b) The pro forma financial information required to be filed pursuant to this item will be filed by amendment not later than 60 days following the date hereof in accordance with Item 7(b)(2) hereof. (c) Exhibits: 2.1 Purchase Agreement, dated as of May 8, 1998, between the Registrant and Elekta AB (PUBL) as amended by Amendment No.1 dated as of July 8, 1998. 10.1 Assignment and Assumption Agreement, dated July 8, 1998, by and among Elekta AB (PUBL) and the Registrant. 10.2 Tax Covenant, dated as of July 8, 1998, between Elekta AB (PUBL) and the Registrant. 10.3 Subordinated Note and Common Stock Purchase Agreement by and among the Registrant, Whitney Subordinated Debt Fund, L.P. and, for certain purposes, J.H. Whitney & Co., dated as of July 8, 1998. 10.4 Subordinated Promissory Note of the Registrant dated July 8, 1998. 10.5 Guarantee and Collateral Agreement made by the Registrant and certain of its Subsidiaries in favor of J.H. Whitney & Co., as Agent, dated as of July 8, 1998. 10.6 Agreement and Deed of Pledge of Shares in Yellow Tape B.V. and Nitinol Medical Technologies International B.V. between NMT NeuroSciences (International), Inc., Yellow Tape B.V., the Registrant, Nitinol Medical Technologies International B.V. and J.H. Whitney & Co., as trustee, dated as of July 8, 1998. 10.7 Registration Rights Agreement among the Registrant, Whitney Subordinated Debt Fund, L.P. and J.H. Whitney & Co., dated as of July 8, 1998. 99.1 Press Release dated July 8, 1998. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or similar attachment to Exhibit 2.1. 4 Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: July 23, 1998 NITINOL MEDICAL TECHNOLOGIES, INC. By: /s/ Theodore I. Pincus ------------------------------------ Name: Theodore I. Pincus Title: Executive Vice President and Chief Financial Officer 5 INDEX TO EXHIBITS Exhibit Number Description - -------------- ----------- 2.1 Purchase Agreement, dated as of May 8, 1998, between the Registrant and Elekta AB (PUBL), as amended by Amendment No. 1 dated as of July 8, 1998. 10.1 Assignment and Assumption Agreement, dated July 8, 1998, by and among Elekta AB (PUBL) and the Registrant. 10.2 Tax Covenant, dated as of July 8, 1998, between Elekta AB (PUBL) and the Registrant. 10.3 Subordinated Note and Common Stock Purchase Agreement by and among the Registrant, Whitney Subordinated Debt Fund, L.P. and, for certain purposes, J.H. Whitney & Co., dated as of July 8, 1998. 10.4 Subordinated Promissory Note of the Registrant dated July 8, 1998. 10.5 Guarantee and Collateral Agreement made by the Registrant and certain of its Subsidiaries in favor of J.H. Whitney & Co., as Agent, dated as of July 8, 1998. 10.6 Agreement and Deed of Pledge of Shares in Yellow Tape B.V. and Nitinol Medical Technologies International B.V. between NMT NeuroSciences (International), Inc., Yellow Tape B.V., the Registrant, Nitinol Medical Technologies International B.V. and J.H. Whitney & Co., as trustee, dated as of July 8, 1998. 10.7 Registration Rights Agreement among the Registrant, Whitney Subordinated Debt Fund, L.P. and J.H. Whitney & Co., dated as of July 8, 1998. 99.1 Press Release dated July 8, 1998 EX-2.1 2 PURCHASE AGREEMENT, DATED MAY 8, 1998, AS AMENDED EXHIBIT 2.1 PURCHASE AGREEMENT Between ELEKTA AB (PUBL) and NITINOL MEDICAL TECHNOLOGIES, INC. INDEX -----
Page 1. DEFINITIONS.............................................................. 1 1.1 "Acquired Companies".............................................. l 1.2 "Affiliate"....................................................... 1 1.3 "Affiliate Distribution Business"................................. 1 1.4 "Andover Facility"................................................ 1 1.5 "Andover Real Property"........................................... 1 1.6 "Assets".......................................................... 1 1.7 "Assignment and Assumption Agreement"............................. 2 1.8 "Assumed Liabilities"............................................. 2 1.9 "Authorizations".................................................. 2 1.10 "Balance Sheet" shall mean the balance sheet of the Business as of February 28, 1998 which is attached hereto as Exhibit 3.6. l.11 "Biot Facility"................................................... 2 1.12 "Biot Real Property".............................................. 2 1.13 "Business"........................................................ 2 l.14 "Buyer's Closing Net Worth Amount"................................ 2 1.15 "CIS"............................................................. 2 1.16 "Closing"......................................................... 2 1.l7 "Closing Balance Sheet"........................................... 2 1.18 "Closing Date".................................................... 2 l.19 "Closing Financial Statements".................................... 2 l.20 "Closing Net Worth" shall mean the assets minus the liabilities of the Business as of the Effective Date, as shown on the Closing Balance Sheet. 1.21 "Code"............................................................ 3 1.22 "Companies"....................................................... 3 1.23 "Company Intellectual Property"................................... 3 1.24 "Copyrights"...................................................... 3 1.25 "Critical Contracts".............................................. 3 1.26 "Descriptive Memorandum".......................................... 3 1.27 "EBEL"............................................................ 3 1.28 "EGBH"............................................................ 3 1.29 "EHSA"............................................................ 3 1.30 "EIAL"............................................................ 3 1.31 "EII"............................................................. 3 1.32 "EIL"............................................................. 3 1.33 "EISA"............................................................ 3 1.34 "ENTH"............................................................ 3 1.35 "ESP"............................................................. 3 1.36 "ESRL"............................................................ 3 1.37 "Effective Date".................................................. 4 1.38 "Employee Benefit Plans".......................................... 4 1.39 "Environmental Laws".............................................. 4 l.40 "Excluded Assets"................................................. 4 1.41 "Excluded Environmental Liabilities".............................. 4 l.42 "Hazardous Materials"............................................. 4
(i) 1.43 "Improvements".................................................... 4 l.44 "Intellectual Property"........................................... 4 l.45 "International Accounting Standards".............................. 4 1.46 "Know-How"........................................................ 4 1.47 "Patents"......................................................... 4 1.48 "Products"........................................................ 5 l.49 "Provisional Purchase Price"...................................... 5 1.50 "Purchase Price".................................................. 5 l.5l "Purchase Price Adjustment"....................................... 5 1.52 "Real Property"................................................... 5 1.53 "Release"......................................................... 5 1.54 "SCL"............................................................. 5 1.55 "SEK"............................................................. 5 1.56 "Swedemed"........................................................ 5 1.57 "Spembly"......................................................... 5 1.58 "Target Net Worth"................................................ 5 1.59 "Taxes"........................................................... 5 1.60 "Tax Return"...................................................... 5 1.6l "Tentative Purchase Price"........................................ 6 1.62 "Trademarks"...................................................... 6 1.63 "U.K. Tax Covenant"............................................... 6 1.64 "USD"............................................................. 6 2. Purchase and Sale of Assets.............................................. 6 2.1 Transfer.......................................................... 6 2.2 Determination and Payment of Purchase Price....................... 6 2.3 Assumption of Liabilities......................................... 7 2.4 Instruments of Transfer and Assumption............................ 8 2.5 Consents.......................................................... 8 2.6 Further Assurances................................................ 8 2.7 Sales and Transfer Taxes; Fees.................................... 9 3. Representations and Warranties of Seller................................. 9 3.1 Seller's Organization, Power, Execution........................... 9 3.2 Right to Transfer................................................. 10 3.3 Governmental Compliance........................................... 10 3.4 Notices of Violation.............................................. 10 3.5 Defaults.......................................................... 10 3.6 Balance Sheet and Changes......................................... 10 3.7 Tax Consolidation................................................. ll 3.8 Tax Returns....................................................... 11 3.9 Contracts, Etc.................................................... 12 3.10 Intellectual Property............................................. 12 3.11 Misappropriation of Intellectual Property......................... 13 3.12 Labor Matters..................................................... 13 3.l3 Employee Benefit Plans............................................ l3 3.14 Customers and Suppliers........................................... 15 3.l5 Environmental, Health and Safety Matters.......................... 15 3.16 Insurance......................................................... 15 3.17 Related Party Relationships....................................... 16
(ii) 3.18 Ownership of Tangible Assets and Leases............................ 16 3.19 Brokers--Seller ................................................... 17 3.20 Capitalization of the Acquired Companies........................... 18 3.21 Companies.......................................................... 18 3.22 Descriptive Memorandum............................................. l8 3.23 Litigation......................................................... 18 3.24 Export............................................................. 18 3.25 Product Warranty and Product Liability Claims...................... 19 4. Representations and Warranties of Buyer.................................. 19 4.1 Buyer's Organization, Power, Execution............................. 19 4.2 Brokers--Buyer..................................................... 19 4.3 No Violation....................................................... 19 4.4 Approvals and Consents............................................. 19 5. Covenants of Seller...................................................... 19 5.1 Conduct of the Business............................................ 19 5.2 Certain Changes.................................................... 20 5.3 Employees.......................................................... 21 5.4 Exclusivity........................................................ 21 5.5 Limitations on Employee Solicitation and Competition............... 21 5.6 Intercompany Debt.................................................. 21 5.7 Patent assignments................................................. 22 6. Conditions Precedent to Obligations of Buyer............................. 22 6.1 Representations True at Closing.................................... 22 6.2 Covenants of Seller................................................ 22 6.3 No Injunction, Etc................................................. 22 6.4 Consents, Approvals, and Waivers................................... 22 6.5 Absence of Adverse Changes......................................... 22 6.6 Opinions of Seller's Counsel....................................... 22 7. Conditions Precedent to the Obligations of the Seller to Close........... 23 7.1 Representations True at Closing.................................... 23 7.2 Covenants of Buyer................................................. 23 7.3 No Injunction, Etc................................................. 23 7.4 Consents, Approvals and Waivers.................................... 23 7.5 Opinions of Buyer's Counsel........................................ 23 8. Publicity................................................................ 23 9. Information.............................................................. 23 9.1 Right to Investigate............................................... 23 9.2 Confidentiality.................................................... 24 10. Cooperation.............................................................. 24 11. Termination.............................................................. 24 11.1 Both Parties....................................................... 24 11.2 Buyer.............................................................. 24
(iii) 11.3 Seller............................................................ 24 12. Closing.................................................................. 25 12.1 Time and Place of Closing......................................... 25 12.2 Transactions at Closing........................................... 25 13. Survival of Representations and Warranties and Covenants................. 26 13.1 Survival of Representations and Warranties and Covenants of Seller......................................................... 26 13.2 Survival of Representations and Warranties and Covenants of Buyer.......................................................... 26 14. Indemnification.......................................................... 26 14.1 Indemnification by Seller......................................... 26 14.2 Indemnification by Buyer.......................................... 27 14.3 Limitations on Indemnification For Breach of Representations and Warranties.................................................... 27 14.4 Claims for Indemnification........................................ 27 14.5 Defense by Indemnifying Party..................................... 28 14.6 Payment of Indemnification Obligation............................. 28 14.7 Exclusive Remedy.................................................. 28 15. Post-Closing Actions..................................................... 28 15.1 Services.......................................................... 28 15.2 Change of Names................................................... 28 15.3 Release of Guarantees by Seller................................... 28 15.4 Post-Closing Agreements........................................... 29 16. General.................................................................. 30 16.1 Affiliate Involvement............................................. 30 16.2 Payment of Expenses............................................... 30 16.3 Modifications; Waivers............................................ 31 16.4 Assignability..................................................... 31 16.5 No Other Representations.......................................... 31 16.6 Notices........................................................... 31 16.7 Captions.......................................................... 32 16.8 Counterparts and Attachments...................................... 32 16.9 Knowledge......................................................... 32 16.10 Governing Law..................................................... 32 17. Dispute Resolution....................................................... 32 17.1 Objective......................................................... 32 17.2 No Affiliate Actions.............................................. 32 17.3 Arbitration....................................................... 33 18. Entire Agreement......................................................... 33
(iv) PURCHASE AGREEMENT ------------------ THIS AGREEMENT, executed this day of May, 1998 between ELEKTA AB (PUBL), a Swedish corporation ("Seller") and NITINOL MEDICAL TECHNOLOGIES, INC., a Delaware corporation ("Buyer"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Seller is the ultimate parent of certain Affiliates, which are engaged in the neurosurgical instrument business; WHEREAS, Buyer desires to acquire the Seller's neurosurgical instrument business; and WHEREAS, Seller is willing to cause its Affiliates to sell its neurosurgical instrument business to Buyer and/or its Affiliates, NOW THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained herein, the parties hereto agree as follows: 1. DEFINITIONS. In this Agreement the following terms shall have the meanings ----------- assigned to them below. 1.1 "Acquired Companies" shall mean EIL, EISA, ESRL, EHSA, EBEL, ESP, ENTH, CIS, Spembly, Swedemed and SCL. 1.2 "Affiliate" of a specified person (natural or juridical) shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified. 1.3 "Affiliate Distribution Business" shall mean that part of the Business which is conducted by Affiliates of Seller (other than the Acquired Companies) which are engaged primarily in businesses other than the Business and which act as distributors of the Products. 1.4 "Andover Facility" shall mean the facility of the Business in Andover, England located on the Andover Real Property. 1.5 "Andover Real Property" shall mean the real property described on Exhibit 3.18.2.3A on which the Andover Facility is located, and which is leased by Spembly. 1.6 "Assets" shall mean the property described on the attached Schedule of Assets, but excluding the property described on the attached Schedule of Excluded Assets, with only such changes therein as shall have occurred between the Effective Date and the Closing Date in the ordinary course of business in transactions not inconsistent with any of Seller's representations, warranties, covenants and agreements set forth herein. The Assets shall include without limitation all of the outstanding capital stock of all of the Acquired Companies and shall also be deemed to include all assets of the Acquired Companies which are not Excluded Assets. 1.7 "Assignment and Assumption Agreement" shall have the meaning set forth in Section 2.3 hereof. 1.8 "Assumed Liabilities" shall have the meaning set forth in Section 2.3 hereof. 1.9 "Authorizations" shall have the meaning described in Section 3.3 hereof. 1.10 "Balance Sheet" shall mean the balance sheet of the Business as of February 28, 1998 which is attached hereto as Exhibit 1.10. 1.11 "Biot Facility" shall mean the facility of the Business in Sophia Antipolis (Biot), France located on the Biot Real Property. 1.12 "Biot Real Property" shall mean the real property described on Exhibit 3.18.2.1, on which the Biot facility is located, and which is owned by EISA. 1.13 "Business" shall mean the research, development, manufacturing, marketing, selling and distribution conducted by Seller and its Affiliates (including without limitation the Companies) with respect to the Products. 1.14 "Buyer's Closing Net Worth Amount" shall have the meaning set forth in subsection 2.2(c). 1.15 "CIS" shall mean Cordis Innovasive Systems, Inc., a Florida corporation, which is an indirect, wholly-owned subsidiary of Seller. 1.16 "Closing" shall mean the meeting of the parties at which the sale, assignment, licensing, transfer and delivery of the Assets to Buyer and the payment of the Purchase Price, purchase and acquisition of the Assets and assumption of the Assumed Liabilities by Buyer are completed, which meeting shall be held at the offices of Jones, Day, Reavis & Pogue in London, England, at 10:00a.m. on the later of (a) June 16, 1998, or (b) the second English business day following receipt of the necessary governmental consents referred to in Section 2.5 hereof. 1.17 "Closing Balance Sheet" shall mean the balance sheet described in Section 2.2 hereof. 1.18 "Closing Date" shall mean the date on which the Closing takes place. The Closing shall be effective as of the close of business, English time, on the Closing Date. 1.19 "Closing Financial Statements" shall mean the financial statements described in Section 2.2 hereof. 1.20 "Closing Net Worth" shall mean the "TOTAL ASSETS" minus "Goodwill" minus "TOTAL INTEREST-FREE LIABILITIES" minus "Interest-bearing Loans" (non- group) minus "TOTAL PROVISIONS" of the Business as of the Effective Date, each determined using 2 the corresponding line item on the Closing Balance Sheet, and calculated to be the "Total Adjusted" amount for such item as indicated on the Closing Balance Sheet. An example of the calculation of net worth at February 28, 1998, which is the template for the calculation of Closing Net Worth attached as Exhibit 1.20. 1.21 "Code" shall mean the Internal Revenue Code of 1986, as amended. 1.22 "Companies" shall mean, collectively, the following, and "Company" shall mean each of the following: EIL, EISA, ESRL, EHSA, EBEL, ESP, ENTH, Spembly, Swedemed, SCL, CIS, EIAL, the Seller, and EII; provided, however, the -------- ------- Seller, EII, EGBH and EIAL shall each constitute one of the Companies only in relation to its activities, assets, liabilities, and employees which relate primarily to the Business. 1.23 "Company Intellectual Property" means all Intellectual Property used in the Business as it is currently conducted. 1.24 "Copyrights" shall mean all copyrights, rights to mask works and database rights, and all registrations and applications for registration of any of the foregoing. 1.25 "Critical Contracts" is defined in Section 2.5(c) hereof. 1.26 "Descriptive Memorandum" shall mean the offering memorandum relating to the neurosurgical instrument business of Seller and its Affiliates prepared by Credit Suisse First Boston (Europe) Ltd. and delivered to the Buyer on or about December 15, 1997. 1.27 "EBEL" shall mean Elekta Instruments S.A., a Belgian corporation, which is a wholly-owned subsidiary of Seller. 1.28 "EGBH" shall mean Elekta Instruments GmbH, a German limited liability company, which is a wholly-owned subsidiary of Seller. 1.29 "EHSA" shall mean Elekta Holding S.A., a French corporation, which is a wholly-owned subsidiary of Seller. 1.30 "EIAL" shall mean Elekta Instruments Asia Ltd., a Hong Kong corporation, which is an indirect, wholly-owned subsidiary of Seller. 1.31 "EII" shall mean Elekta Instruments, Inc., a Georgia corporation, which is an indirect, wholly-owned subsidiary of Seller. 1.32 "EIL" shall mean Elekta Instruments Ltd., an English corporation, which is an indirect, wholly-owned subsidiary of Seller. 1.33 "EISA" shall mean Elekta Implants S.A., a French corporation, which is a wholly-owned subsidiary of EHSA. 1.34 "ENTH" shall mean Elekta Instruments B.V., a Netherlands corporation, which is an indirect, wholly-owned subsidiary of Seller 3 1.35 "ESP" shall mean Elekta Instruments S.A., a Spanish corporation, which is a wholly-owned subsidiary of EHSA. 1.36 "ESRL" shall mean Elekta Instruments SARL, a French corporation, which is a wholly-owned subsidiary of EHSA. 1.37 "Effective Date" shall mean April 30, 1998. 1.38 "Employee Benefit Plans" shall mean all pension, retirement, profit sharing, deferred compensation, stock ownership, stock purchase, stock option, restricted stock, bonus, severance or termination pay, cafeteria, medical, hospital, life, health, accident, disability, death, or other material employee benefit plans or arrangements. 1.39 "Environmental Laws" shall mean any applicable law, rule, regulation, permit, administrative order, or decision, common law precedent or other binding determination (whether national, provincial, state or local) pertaining to (1) the use, analysis, generation, manufacture, storage, discharge, release, disposal or transportation of Hazardous Materials, (2) health and safety of employees and the public, (3) environmental regulation, (4) with respect to Hazardous Materials, contamination, clean-up or disclosure, drinking water, groundwater, landfills, open dumps, storage tanks (underground or otherwise), solid waste, waste water, stormwater runoff, emissions, or wells. 1.40 "Excluded Assets" shall mean the property described on the attached Schedule of Excluded Assets. 1.41 "Excluded Environmental Liabilities" is defined in Section 2.3 hereof. 1.42 "Hazardous Materials" shall mean petroleum, including crude oil or any fraction thereof, or any other chemical substance, material, object, condition, waste, pollutant or combination thereof which is hazardous to human health or safety or to the environment due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity, infectiousness or other harmful or potentially harmful properties or effects and all of those chemicals, substances, materials, objects, conditions, wastes, pollutants or combinations thereof which are now listed, defined or regulated by any applicable law or regulation (whether national, provincial, state or local) based upon, directly or indirectly, such properties or effects. 1.43 "Improvements" shall mean, collectively, any and all buildings, fixtures and other improvements located on the Real Property 1.44 "Income Statement" shall mean the income statement of the Business for the ten months ended on February 28, 1998, attached as Exhibit 1.10 hereto. 1.45 "Intellectual Property" shall mean Copyrights, Patents, Know- How, and Trademarks, and all rights vesting in the owner thereof pursuant to the applicable laws of any competent jurisdiction. 1.46 "International Accounting Standards" shall mean International Accounting Standards, as adopted by the International Accounting Standards Committee. 4 1.47 "Know-How" shall mean methods, devices, technology, trade secrets, industrial designs, know-how, technical manuals and documentation and other proprietary information, including, without limitation, proprietary processes and formulae. 1.48 "Patents" shall mean patents and patent applications, all continuations, continuations-in-part, divisions, reissues, reexaminations, extensions and foreign counterparts of such patents and patent applications, and all invention disclosures. 1.49 "Products" shall mean the products described on the attached Schedule of Products. 1.50 "Provisional Purchase Price" is defined in subsection 2.2(d)(i) hereof. 1.51 "Purchase Price" shall mean the Tentative Purchase Price less the Purchase Price Adjustment. 1.52 "Purchase Price Adjustment" shall be determined as follows: (a) If the Closing Net Worth is equal to or greater than the Target Net Worth, the Purchase Price Adjustment shall be zero; or (b) If the Closing Net Worth is less than the Target Net Worth, the Purchase Price Adjustment shall be equal to the excess of the Target Net Worth over the Closing Net Worth, converted from SEK to USD based on the exchange rate equal to 7.733 SEK per USD. 1.53 "Real Property" shall mean the Andover Real Property and the Biot Real Property. 1.54 "Release" shall mean any intentional or accidental spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of any Hazardous Materials (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Materials). 1.55 "SCL" shall mean Spembly Cryosurgery Limited, an English corporation, which is a wholly-owned subsidiary of Spembly. 1.56 "SEK" shall mean Swedish crowns. 1.57 "Swedemed" shall mean Swedemed AB, a Swedish corporation, which is a wholly-owned subsidiary of EIL. 1.58 "Swedish GAAP" shall mean generally accepted accounting principles of Sweden. 1.59 "Spembly" shall mean Spembly Medical Ltd., an English corporation, which is a wholly-owned subsidiary of EIL. 1.60 "Target Net Worth" shall mean the amount of SEK 158,832,000. 5 1.61 "Taxes" shall mean any national, state, or local taxes, assessments, interest, penalties, deficiencies, fees and other governmental charges or impositions, including, without limitation, all income, gross receipts, unemployment compensation, social security, payroll, sales, use, excise, privilege, property, ad valorem, franchise, license, school and any other tax or similar governmental charge or imposition under the laws of any nation or any state or municipal or political subdivision thereof or any other country. 1.62 "Tax Return" shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. 1.63 "Tentative Purchase Price" shall mean the amount of USD 33,000,000. 1.64 "Trademarks" shall mean (a) registered trademarks and registered service marks, applications for registration for trademarks and service marks, renewal registrations and applications for renewal registrations, extensions and foreign counterparts of such registrations and applications for registration; (b) material unregistered trademarks and service marks; (c) corporate names, business names and trade names, whether registered or unregistered; and (d) Internet domain names and associated addresses and URLs. 1.65 "U.K. Tax Covenant" shall mean the covenant in respect of EIL, SCL and Spembly to be entered into at Closing by Buyer and Seller in the agreed form. 1.66 "USD" shall mean United States Dollars. 2. PURCHASE AND SALE OF ASSETS. --------------------------- 2.1 TRANSFER. At the Closing, Seller shall (and/or shall cause its -------- Affiliates to) sell, assign, license, transfer and deliver the Assets to Buyer, and Buyer shall purchase and acquire the Assets and assume the Assumed Liabilities. 2.2 DETERMINATION AND PAYMENT OF PURCHASE PRICE. ------------------------------------------- (a) As soon as practicable after the Effective Date, Seller shall prepare and deliver to Buyer a balance sheet as of the Effective Date (the "Closing Balance Sheet"). The Closing Balance Sheet shall be audited by an internationally recognized certified public accountant firm. The Closing Balance Sheet shall be prepared by Seller (at its expense) accurately and in accordance with International Accounting Standards with amounts expressed in SEK using prevailing exchange rates (as reported by the Swedish Central Bank as of the Effective Date) and, to the extent possible given the difference in audit valuation of individual items between Swedish GAAP and International Accounting Standards, in a manner consistent with, and using the same methodology as, the Balance Sheet, including "Adjustments" and "Group Adjustments" consistent with, and using the same methodology as, the "Adjustments" and "Group Adjustments" in the Balance Sheet. In the event Buyer asserts that the nature or amount of any item reflected on the Closing Balance Sheet which affects the determination of Closing Net Worth is not in accordance with International Accounting Standards or is not determined in a manner consistent with the Balance Sheet (except as provided above), Buyer and Seller shall in good faith attempt to resolve any such dispute with respect to the Closing Balance Sheet. If Buyer and Seller cannot reach agreement with respect to the determination of Closing 6 Net Worth within ten (10) days after the delivery of the Closing Balance Sheet to Buyer, Buyer and Seller shall jointly appoint an internationally recognized certified public accountant firm to determine the proper resolution of the disagreements between Buyer and Seller concerning the determination of Closing Net Worth, whose determination (the cost of which shall be divided equally between Seller and Buyer) shall be made within thirty (30) days and be final and binding on the parties. If Buyer and Seller cannot agree on the appointment of such a certified public accounting firm, such firm shall be selected by arbitration pursuant to Section 17.3 hereof. (b) If the amount determined as the Purchase Price Adjustment pursuant to subsection 1.52 is greater than USD 1,500,000, then: (i) Seller shall have the right to give written notice to Buyer, not later than four (4) days after the final determination of the Purchase Price Adjustment, that Seller desires to terminate this Agreement; and (ii) If Seller gives the notice pursuant to subparagraph (i) above, Buyer may either: (A) Give written notice to Seller not later than midnight Boston time on the fourth full day following receipt by Buyer of the Seller's notice that Buyer elects to fix the Purchase Price Adjustment at USD1,500,000, in which event this Agreement shall not terminate; or (B) Allow this Agreement to terminate pursuant to Seller's notice, which shall occur automatically if Buyer does not give Seller the written notice pursuant to subparagraph (A) above not later than four (4) days after its receipt of Seller's notice, in which event Seller shall pay to Buyer the amount of USD 500,000 as a termination fee. (c) On the Closing Date, Buyer shall divide and pay the Purchase Price to and among Seller and its Affiliates in such portions as Seller may designate, such payments to be made by wire transfers of funds from banks selected by Buyer to banks selected by Seller. Prior to the Closing Date, Buyer and Seller shall use their best efforts to agree on the allocation of the Purchase Price among the Assets. (d) Notwithstanding the provisions of subsection 2.2(c) hereof, if the Closing Net Worth shall not have been finally determined by the Closing Date, the Closing shall nevertheless take place if the amount which Buyer asserts to be the correct amount for the Closing Net Worth (the "Buyer's Closing Net Worth Amount") would result in a Purchase Price Adjustment of no more than USD 1,500,000, and in such event the following rules shall apply: (i) At Closing, Buyer shall pay an amount (the "Provisional Purchase Price") equal to what the Purchase Price would be if the Buyer's Closing Net Worth Amount is the correct amount for the Closing Net Worth; and (ii) Promptly after the Closing Net Worth is finally determined in accordance with subsection 2.2 (a), Buyer shall pay to Seller the amount, if any, by which the Purchase Price exceeds the Provisional Purchase Price. 7 2.3 ASSUMPTION OF LIABILITIES. Buyer shall assume at the Closing (a) the ------------------------- Closing Balance Sheet items listed on Exhibit 2.3 A, (b) the obligations of the Companies under the contracts listed on Exhibit 3.9, all of which shall be assumed pursuant to an assignment of contracts, and assumption of liabilities in the form attached hereto as Exhibit 2.3 (the "Assignment and Assumption Agreement"), and (c) the other obligations and liabilities described on Exhibit 2.3A (collectively the "Assumed Liabilities"). Buyer shall perform all obligations related to the Assumed Liabilities. After Closing, Seller shall have no responsibility to the Buyer or the Acquired Companies for the Assumed Liabilities of the Companies except for any liability attributable to a violation of any Environmental Law(s) by the Business prior to the Closing or the Release of any Hazardous Materials prior to the Closing ("Excluded Environmental Liabilities"). Buyer's assumption of the Assumed Liabilities relating to the Acquired Companies is intended solely for the benefit of Seller and its Affiliates and is not intended to create rights for any other parties. 2.4 INSTRUMENTS OF TRANSFER AND ASSUMPTION. -------------------------------------- (a) Seller shall deliver to Buyer at the Closing such endorsed share certificates, stock transfer forms, bills of sale, assignments of lease, deeds, assignments of lease, licenses and other instruments of assignment and transfer, in form reasonably satisfactory to Buyer, as shall be effective to convey to Buyer all of Seller's right, title and interest in and to each of the Assets. (b) Buyer shall deliver to Seller at the Closing such instruments of assumption, in form reasonably satisfactory to Seller, as shall be effective to assure Seller that Buyer will perform all obligations related to the Assumed Liabilities, including without limitation the Assignment and Assumption Agreement. 2.5 CONSENTS. -------- (a) Buyer and Seller shall cooperate in securing before and after the Closing all consents with respect to the sales and transfers of the Assets from each governmental authority whose consent is necessary to such sales and transfers. (b) The Seller, the Companies and any other relevant Affiliates of Seller shall use their reasonable commercial efforts to obtain the waiver, consent and approval of all non-governmental persons whose waiver, consent or approval (i) is required in order to consummate the transactions contemplated by this Agreement or (ii) is required by any material agreement, lease, mortgage or security instrument, arrangement, judgment, decree, order, permit or license to which Seller or any of the Companies is a party or subject on the Closing Date and (A) which would prohibit, or require the waiver, consent or approval of any person to such transactions or (B) under which, without such waiver, consent or approval, such transactions would constitute an occurrence of default under the provisions thereof, result in the acceleration of any obligation thereunder or give rise to a right of any party thereto to terminate its obligations thereunder. (c) Nothing in this Agreement shall be deemed to constitute or require an assignment or an attempt to assign any contract or other agreement with any third party if the attempted assignment thereof without the consent of any such third party would constitute a breach thereof or adversely affect in any way the rights of Seller and its assignee thereunder. If, 8 after Seller shall have used reasonable efforts to obtain such consents from any such third party, any such consent shall not have been obtained at or prior to the Closing, or the attempted assignment of such contract or agreement without such consent at the Closing would have an adverse effect on such rights or Buyer would not in fact receive such rights, Seller shall cooperate with Buyer, at Buyer's expense, in any reasonable arrangement designed to provide for Buyer the benefits thereunder, including enforcing for the benefit of Buyer any or all rights of Seller against any such third party arising out of the breach or cancellation thereof by any such third party or otherwise. Provided, however, -------- ------- Buyer shall not be obligated to close until Seller has obtained all consents of third parties which are required for the assignment of those contracts listed on Exhibit 2.5 hereto (the "Critical Contracts"). 2.6 FURTHER ASSURANCES. Buyer and Seller shall each, from time to time ------------------ after the Closing, at the request of the other and without further consideration, execute and deliver such further instruments of assignment, transfer, license or assumption and take such further action as the other may reasonably request in order more effectively to transfer, reduce to possession and record title to any of the Assets, or to implement the assumption of the Assumed Liabilities. Reasonable out of pocket expenses incurred in compliance with this Section by one party at the request of the other party shall be promptly reimbursed by the requesting party to the party incurring such expenses. 2.7 SALES AND TRANSFER TAXES; FEES. All applicable sales, transfer, ------------------------------ registration, documentary, use, filing and other taxes (other than income taxes) and other governmental (and notarial) fees that may be levied or are otherwise payable with respect to the sale and transfer of the Business and the Assets hereunder, whether levied on or payable by Seller or Buyer, shall be divided equally between Buyer and Seller, and Buyer and Seller shall each pay one-half (1/2) thereof. 3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to ---------------------------------------- Buyer as follows. 3.1 SELLER'S ORGANIZATION, POWER, EXECUTION. --------------------------------------- (a) Each of Seller and the Companies is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite power and authority (corporate and other) to own its properties, to carry on its business as now being conducted, to execute, and deliver this Agreement and the agreements contemplated herein and to carry out the transactions contemplated hereby and thereby. Each of the Companies is duly qualified to do business and in good standing in all jurisdictions in which its ownership of property or the character of its business requires such qualification, except where the failure to be qualified in the case of any such Company would not have a material adverse effect on the business or assets of such Company. Certified copies of the charter and bylaws or other governing documents of the Seller and each of the Acquired Companies, as amended to date, have been previously delivered to the Buyer, are complete and correct, and no amendments have been made thereto or have been authorized since the date thereof. (b) The execution and delivery of this Agreement and the agreements provided for herein and the consummation of all transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Seller, and this Agreement has been duly executed and delivered by Seller and constitutes, and each other 9 document and instrument required hereby to be executed and delivered to Buyer will when delivered constitute, the valid and legally binding obligation of Seller or its relevant Affiliate enforceable in accordance with its terms, subject to bankruptcy laws and general equitable principles. The execution and delivery of this Agreement and performance of the transactions contemplated hereby will not with or without the giving of notice or the passage of time or both, conflict with, result in a breach, violation or termination of any term or provision by Seller or any of the Companies of, or constitute a default by Seller or any of the Companies under, any agreement, instrument or order to which Seller or any of the Companies is a party or by which Seller or any of the Companies is bound or the corporate charter or by-laws or other governing documents of Seller or any of the Companies, or any statute, judgment, order, award, injunction, decree, regulation or ruling of any court, governmental authority or arbitrator, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of the Seller or any of the Companies pursuant to, any indenture, mortgage, deed of trust or other instrument or agreement to which the Seller or any of the Companies is a party or by which the Seller or any of the Companies or any of their respective properties is or may be bound. 3.2 RIGHT TO TRANSFER. Seller and its Affiliates have the right to ----------------- transfer the Assets to Buyer and/or its Affiliates, subject to the consents referred to in Subsections 2.5(b) and 2.5(c). 3.3 GOVERNMENTAL COMPLIANCE. Each of Seller and the Companies has the ----------------------- corporate power and authority and all licenses and permits: (i) which are required by governmental authorities to own and operate the Business and to carry on the Business as now being conducted and (ii) whose absence would have a material adverse effect on the Business (the "Authorizations"). The Authorizations are in full force and effect. All of the Products comply, and have been manufactured, marketed and sold in compliance, in all material respects with all applicable laws and regulations. None of the Companies have reasonable grounds to believe that any of the Authorizations will not in the ordinary course be renewed or continued. To the knowledge of the Companies, the current operation of the Business is not in material violation of any applicable statute, ordinance, regulation or administrative or judicial order or ruling. 3.4 NOTICES OF VIOLATION. None of the Companies has received any written -------------------- claim or written assertion that there has been any breach of any of the terms or conditions of any Authorizations (or has knowledge of any threat thereof) in such manner (a) as would permit any other party to cancel, terminate or materially amend any Authorization, or (b) that any such breach or breaches singly or in the aggregate could materially and adversely affect the financial condition or results of operations of the Business. None of the Companies has received any written notice requiring the accumulation and submission of substantial clinical data necessary to establish the safety and effectiveness of any Product not previously required or imposing any other material condition or requirement restricting the continued commercial distribution of such Product. 3.5 DEFAULTS. Neither the execution and delivery of this Agreement nor the -------- carrying out of any of the provisions hereof or the transactions contemplated hereby will result in the creation or imposition of any security interest, lien, claim, charge, or other encumbrance of any nature whatsoever upon any of the Assets after the Closing Date. 10 3.6 FINANCIAL STATEMENTS AND CHANGES. -------------------------------- (a) The Balance Sheet was prepared in accordance with Swedish GAAP (insofar as applicable to the description of a portion of a business). The Balance Sheet reflects all liabilities of the Business, whether absolute, contingent, accrued or otherwise existing as of the date thereof which are of a nature required to be reflected in financial statements prepared in accordance with Swedish GAAP. The Income Statement was prepared in accordance with Swedish GAAP (insofar as applicable to the description of a portion of a business). The Balance Sheet and the Income Statement fairly present, in all material respects, the financial condition and results of operations, respectively, of the Business at the date of such Balance Sheet and for the ten month period covered by the Income Statement. If the Balance Sheet and Income Statement had been prepared in accordance with International Accounting Standards instead of Swedish GAAP, they would not be materially different, except for possible differences attributable to: (i) group adjustments for restructuring provisions, acquisition goodwill and consolidation; (ii) treatment of pension plan overfunding or underfunding; and (iii) valuation of intellectual property. Except as reflected in the Balance Sheet or as disclosed on Exhibit 1.10 and Exhibit 3.9, the Companies are not in default with respect to any material liabilities or obligations, and any liabilities incurred or accrued subsequent to the date of the Balance Sheet have been, or are being, paid and discharged in the normal course as they become due, and all such liabilities and obligations were incurred in the ordinary course of business except as indicated on Exhibit 1.10. (b) Since the date of the Balance Sheet, there has been (a) no change in the financial condition, assets, liabilities or business of the Business or the Assets which has had a material adverse effect on the Business; (b) no damage, destruction or loss (whether or not covered by insurance) materially adversely affecting the Business or the Assets; (c) no labor trouble materially adversely affecting the Business or the Assets; (d) no sale or transfer of any Assets, except sales in the ordinary course of business; (e) no imposition of any material lien, charge, encumbrance (which as used herein includes, without limitation, any mortgage, deed of trust, conveyance to secure debt or security interest) or claim upon any of the Assets, except for statutory landlord's liens with respect to rent not yet due and payable and any current year lien with respect to personal or real property taxes not yet due and payable; (f) no default in any liability or obligation which would have a material adverse effect on the Business; (g) no agreement by any of the Companies to any material adverse change in the terms of any material contract or instrument to which it is a party; or (h) no waiver, cancellation or disposal by any of the Companies of, for less than the face amount thereof, any material claim or right which it has against others; (i) no transaction or event which would materially increase the tax liability of any of the Acquired Companies for any prior taxable year or the tax liability of any of the Companies for any prior taxable year for which Purchaser, the Assets, or any of the Acquired Companies would become liable; (j) no payment of any dividend or other distribution to a shareholder by any of the Acquired Companies; or (k) no transaction other than in the ordinary course of business which can be reasonably expected to have a material adverse effect on the Business. 3.7 TAX CONSOLIDATION. None of the Acquired Companies has ever been a ----------------- member of an "affiliated group" of corporations (within the meaning of Section 1504 of the Code), other than the group of which Elekta Holding U.S., Inc. is the common parent and, previously, the groups of which Cordis Corporation and Johnson & Johnson were the common parents. Neither CIS nor any member of any "affiliated group" of which Elekta Holdings U.S., Inc. is the common parent has any outstanding waivers or extensions of any applicable statute of limitations relating to the assessment of Taxes. An election under Treasury Reg. Section 1.1502-20(g) has not been 11 made with respect to CIS by Elekta Holdings U.S., Inc. A basis reduction pursuant to Treasury Reg. Section 1.1502-20(b) or Treasury Reg. Section 1.337(d)-2T(b) has not been required to be made with respect to CIS with respect to any period during which CIS has been a member of the "affiliated group" of which Elekta Holdings U.S., Inc. is the common parent. CIS does not have any actual or potential liability for any Tax obligation of any other taxpayer (including without limitation any affiliated group of corporations or other entities that included CIS during a prior period). 3.8 TAX RETURNS. Each of the Companies has, as of the date hereof, and ----------- will prior to Closing have, timely and accurately filed all Tax Returns required to be filed by it prior to such dates and has timely paid, and will on the Closing Date be current in the payment and remittance of all Taxes. None of the Companies is, or will become, subject to any additional Taxes as a result of the failure to file timely or accurately, as required by applicable law, any Tax Return or to pay timely any amount shown to be due thereon. No written assessments or notices of deficiency or other communications have been received by any of the Companies with respect to any Tax Return which has not been paid or discharged, and no amendments or applications for refund have been filed or are planned with respect to any such Tax Return. There are no agreements between any of the Companies and any taxing authority waiving or extending any statute of limitations with respect to any Tax Return. Save in the ordinary course of their businesses, none of the Companies has incurred with respect to any period ending on or prior to the Closing Date any taxable income or liability for taxes. True and correct copies of the income tax returns for each of the Acquired Companies for the past three years (or for such portion thereof as each Acquired Company may have been in existence and may have been owned by Seller) have heretofore been delivered by Seller to Buyer. None of the Acquired Companies are parties to any tax sharing agreements. The provisions for Taxes shown on the Closing Balance Sheet will be adequate to discharge all Taxes incurred by the Acquired Companies with respect to all periods ending on or before the Effective Date, including as if the taxable year of each of the Acquired Companies ended on the Effective Date. Except as set forth in Exhibit 3.8 hereto, none of the Tax Returns of the Acquired Companies has been audited by any taxing authority within the past three (3) years and no adjustments have been made to any Tax Returns of the Acquired Companies by any taxing authority pursuant to any such audit. CIS has not made or is not obligated to make any payment which will be or may be characterized as an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code. CIS has not flied a consent pursuant to Section 341(f) of the Code nor has CIS agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code). CIS is not and has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. 3.9 CONTRACTS, ETC. --------------- (a) Exhibit 3.9 and Exhibit 3.9(c) hereto (together with the agreements described in Section 3.10(a) below) consists of a true and complete list of all material contracts, agreements and other instruments entered into in respect of the Business); and contemporaneously with or prior to the execution of this Agreement, Seller has provided Buyer access to a true and complete copy of each such contract, agreement or instrument which is in writing. 12 (b) All of the contracts, agreements, policies of insurance or instruments described on the Schedule of Assets or in Exhibit 3.9 hereto and the agreements described in Section 3.10(a) below are, except as disclosed on the Schedule of Assets or Exhibit 3.9 hereto, valid and binding upon the Companies and the other parties thereto and are in full force and effect and enforceable in accordance with their terms, and, except as disclosed in Exhibit 3.9, none of the Companies nor, to the knowledge of the Companies, any other party to any such contract, commitment or arrangement has breached any material provision of, the terms thereof. Except as disclosed in Exhibit 3.9, none of the Companies has received any payment from any contracting party in connection with or as an inducement for entering into any contract, agreement, policy or instrument except for payment for actual services rendered or to be rendered by the Companies consistent with amounts historically charged for such services. (c) Exhibit 3.9(c) is a true and complete list of certain contracts between Seller and/or the Acquired Companies and certain management employees of the Business pursuant to which such management employees will be paid incentive compensation upon the sale of the Business and pursuant to which one management employee is promised certain compensation in the event his employment is terminated under certain circumstances. Except as indicated on Exhibit 3.9(c), Buyer shall not be required to assume any obligations of the Seller under the contracts or arrangements listed on Exhibit 3.9(c). 3.10 INTELLECTUAL PROPERTY. --------------------- (a) The Schedule of Assets sets forth a complete and correct list and summary description of all Company Intellectual Property, together with a complete list of all material agreements relating thereto, including without limitation all licenses granted by or to the Companies with respect to any Company Intellectual Property. Except as disclosed on the Schedule of Assets, all such Company Intellectual Property is beneficially owned and owned of record by the Companies, free and clear of all liens, claims, security interests and encumbrances of any nature whatsoever and constitute all of such items necessary for the lawful conduct of the Business as now conducted. (b) (i) Each Company has, or will have upon Closing, such rights to use, protect, prosecute, sell, transfer, license, dispose of or bring actions for the infringement of its rights in and to, and to exclude others from using the Company Intellectual Property as are established by, the applicable laws of each relevant jurisdiction (and to the extent provided in each agreement under which each Company is licensee) to the sole and exclusive owner of an item of Intellectual Property of such kind; (ii) except as disclosed on the Schedule of Assets, each Company is the sole beneficial and record owner of its intellectual property and the Company Intellectual Property which is registered or the subject of an application for registration (collectively, the "Company Registered Intellectual Property") has been duly maintained in all material respects in accordance with the legal and administrative requirements of the appropriate jurisdictions, and has (except for patents which may have expired on their normal expiration dates) not lapsed, expired, been canceled or been abandoned; (iii) no registration or application for registration of any material item of Company Registered Intellectual Property is the subject of any pending opposition, interference, cancellation or other legal or governmental proceeding filed before any governmental authority in any competent jurisdiction. (c) Except as disclosed on Exhibit 3.10, none of the Companies is currently in receipt of any written notice of any violation of, and, to the knowledge of the Companies, 13 none of Companies (and none of their employees or agents) is infringing, misappropriating, misusing or violating, the rights of others in any Intellectual Property. To Seller's knowledge the business of Spembly, SCL and EIL is not subject to any claim to pay compensation pursuant to Sections 40 and 41 of the Patents Act 1977, and, to the Seller's knowledge, there are not any facts likely to give rise to such a claim. 3.11 MISAPPROPRIATION OF INTELLECTUAL PROPERTY. There has been, to the ----------------------------------------- knowledge of the Companies, no infringement, unauthorized use or disclosure or misappropriation by any third party of any Company Intellectual Property that could reasonably be expected to have a material adverse effect on the Business. 3.12 LABOR MATTERS. ------------- 3.12.1 Within the last three (3) years none of the Companies has been the subject of any labor dispute, nor has there been any strike of any kind called or threatened to be called against either of them. To the knowledge of the Companies, none of the Companies has committed a violation of any applicable law or regulation relating to labor or labor practices which would have a material adverse effect on the Business. 3.12.2 Except as specified on Exhibit 3.12, there are no agreements or arrangements including recognition agreements between any of the Companies and any trade union or other body representing employees. 3.12.3 To Seller's knowledge, no executive of the Business has given or received notice terminating his employment and no such executive or officer will be entitled to give such notice as a result of this Agreement. 3.12.4 To Seller's knowledge, there are no current investigations by any governmental or regulatory body in relation to any employment practice in the Business. 3.13 EMPLOYEE BENEFIT PLANS. ---------------------- 3.13.1 All Employee Benefit Plans have been maintained in substantial compliance with the requirements of all applicable laws and regulations and in the case of The Surgical Technology Group Pension and Life Assurance Scheme ("Pension Scheme") the rules of that Scheme. 3.13.2 None of the Companies maintains, contributes to, or is obligated to contribute to any "multiemployer plan," as defined in Section 3(37) of Employee Retirement Income Security Act of 1974 (as amended). 3.13.3 Attached hereto as Exhibit 3.13.3 is a complete list of all Employee Benefits Plans currently maintained by the Acquired Companies. 3.13.4 No action, investigation or audit (other than routine claims for benefits) is pending or threatened against any Employee Benefit Plan of any of the Acquired Companies. 14 3.13.5 The Balance Sheet reflects an accrual for any unpaid liabilities relating to Employee Benefit Plans which are required to be accrued by International Accounting Standards. 3.13.6 Except pursuant to the contracts listed on Exhibit 3.9(c), no amounts will be paid, or benefits or vesting of benefits accelerated under, any Employee Benefit Plan of any Acquired Company as a result of the transactions provided for in this Agreement. 3.13.7 The Assumed Liabilities do not include any Employee Benefit Plans of EII, EIAL, EGBH or the Seller. 3.13.8 Attached hereto as Exhibit 3.13.8 is a current list of all employees of the Business and their current compensation. 3.13.9 No power under the Pension Scheme to augment benefits or to provide benefits which would not otherwise have been provided has been exercised since the date of its last actuarial valuation. 3.13.10 Only employees of Spembly, SCL and EIL have participated in the Pension Scheme. 3.13.11 All lump sum death in service benefits (other than a refund of the member's contributions with interest where appropriate) payable under the Pension Scheme on death before normal pension age of a member while in an employment to which the Pension Scheme relates are insured fully under a policy with an insurance company of good repute. 3.13.12 All contributions to the Pension Scheme have at all times been made in accordance with the provisions of the Pension Scheme and the recommendations of the actuary to the Pension Scheme. 3.13.13 Save as set out in Exhibit 3.13.13, there has been no increase or decrease in the rate of any contribution to the Pension Scheme by Spembly, SCL or EIL by any member at any time in the three years ending on the date of this Agreement and no such increase or decrease is agreed, or, on the basis of actuarial advice received in respect of the Pension Scheme, proposed or advised. 3.13.14 So far as the Seller is aware there is not in respect of the Pension Scheme or the benefits thereunder any material actions, suits or claims pending or threatened (other than routine claims for benefits). 3.13.15 No "surplus payment" within the meaning of the Pension Scheme Surpluses (Administration) Regulations 1987 (S.I. 1987 No.352) has been made out of the Pension Scheme. 3.14 CUSTOMERS AND SUPPLIERS. None of the Companies has received any ----------------------- written notice that any customer or supplier of the Companies has taken any steps which could disrupt the business relationship of the Companies with such customer or supplier in a way that would result in a material adverse effect on the Business. 15 3.15 ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Except as set forth on ---------------------------------------- Exhibit 3.l5 hereto: 3.15.1 The Companies are and have at all times been in substantial compliance with all applicable Environmental Laws in connection with the leasing, ownership, operation and condition of the Real Property, Assets and the Business. There are no past or pending violations or alleged violations by the Companies of any Environmental Laws asserted by any governmental entity or third party. Set forth on Exhibit 3.15 are all permits, licenses, and approvals necessary to conduct the Business in compliance with Environmental Laws. 3.15.2 There is no past or ongoing Release of Hazardous Materials into the environment on, from or within any real property owned, leased, or utilized by the Business. Any Release of Hazardous Materials into the environment set forth on Exhibit 3.15 has not caused or aggravated any condition or damage which would necessitate response, removal, or other remedial action after the date of this Agreement with respect to any property, regardless of whether the property is owned, leased or otherwise utilized by the Companies. Set forth on Exhibit 3.15 are all environmental assessments, reports, or investigations, whether commissioned by the Companies with respect to any property currently or previously owned, leased, or utilized by the Business. 3.15.3 No employee, invitee, trespasser, or member of the public at large has had his or her health impaired or threatened as the result of the operation of the Business or as the result of the release of Hazardous Materials related to the operation of the Business. 3.15.4 There are no Hazardous Materials located on, contained in, or otherwise part of any property utilized by the Business. The Business has not arranged for the transportation, storage, or disposal of any Hazardous Materials at any property or site not owned or controlled by the Business that has or is reasonably likely to give rise to any liability under any Environmental Law to the Companies. 3.15.5 There are no landfills, lagoons, impoundments, waste piles, drum storage areas, or underground storage tanks on any property previously or currently owned, leased, or utilized by the Business. 3.16 INSURANCE. Seller has obtained insurance for the risks of the Business --------- in amounts and at rates details of which have been provided to Buyer. Since January 1, 1998, there has not been any material adverse change in the Companies' relationship with its insurers or in premiums payable. Attached hereto as Exhibit 3.16 is a list of pending insurance claims relating to the Business and a history of insurance claims relating to the Business for the five (5) years preceding the date of this Agreement (or with respect to parts of the Business owned by Seller for less than five (5) years, for the period of time owned by Seller). 3.17 RELATED PARTY RELATIONSHIPS. No officer or director of the Companies --------------------------- possesses, directly or indirectly, any beneficial interest in, or is a director, officer or employee of, any corporation, partnership, firm, association or business organization which is a client, supplier, customer, lessor, lessee, lender, creditor, borrower, debtor or contracting party with or of the Companies (except as a stockholder holding less than a one percent interest in a corporation whose shares are traded on a national or regional securities exchange or in the over-the-counter market). 16 3.18 OWNERSHIP OF TANGIBLE ASSETS AND LEASES. --------------------------------------- 3.18.1 With respect to Assets other than intellectual property, Real Property and Improvements: 3.18.1.1 Except as disclosed on Exhibit 3.18.1.2 (with respect to leased Assets), the Companies have good title to all of the Assets subject to no mortgage, pledge, lien, security interest, conditional sale agreement, encumbrance, charge or adverse claim whatsoever, except for statutory landlord's liens with respect to rent not yet due and payable and lien for current year's property tax not yet due and payable. 3.18.1.2 Exhibit 3.18.1.2, describes each of the material Assets which has a value in excess of USD 100,000 which are held under any lease, or as conditional vendee under any conditional sale or other title retention agreement. 3.18.1.3 Each of the leases and agreements described in Exhibit 3.18.1.2 is in full force and effect and constitutes a legal, valid and binding obligation of each of the Companies and the other respective parties thereto and is enforceable in accordance with its terms, and there is not under any of such leases or agreements existing any material default of any of the Companies or, to the knowledge of the Companies, of any other parties thereto (or event or condition which, with notice or lapse of time, or both, would constitute a material default). None of the Companies has received any payment from lessor in connection with or as inducement for entering into any such lease except as set forth on Exhibit 3.18.1.2. Any security deposits made under the leases listed in Exhibit 3.18.1.2 is set forth in such exhibit. 3.18.1.4 None of the Assets are leased by any of the Companies to any other person or entity. 3.18.1.5 The Assets include all material assets which are necessary to conduct the Business as presently conducted, except for certain items of shared equipment not currently devoted exclusively to the Business, which consist of office equipment and computer hardware and software necessary for financial reporting and consolidation. 3.18.1.6 To the knowledge of the Companies, all material items of machinery and equipment used in the Business is usable and operable in good working order and is in a reasonable state of repair, subject only to ordinary wear and tear, and has been subject to regular maintenance. 3.18.1.7 Except pursuant to this Agreement and the License and Technology Agreement among EII, Kevin Maughan, Ferenc Schmidt and Florida Hospital Supply, Inc. dated May 10, 1994, none of the Companies is a party to any contract or obligation whereby there has been granted to anyone an absolute or contingent right to purchase, obtain or acquire any rights in any of the Assets. 3.18.2 With respect to the Real Property and Improvements: 3.18.2.1 The Biot Real Property is the only owned real estate used in the Business. 17 3.18.2.2 EISA owns good title to the Biot Real Property and to all of the Improvements on the Biot Real Property, subject to no mortgage, pledge, lien or any other encumbrance, except for: liens for property taxes not yet due and payable, easements and other restrictions of record which do not have a material adverse effect on the use of the Real Property in connection with the Business, restrictions imposed by zoning or planning laws which do not have a material adverse effect on the Business as presently conducted, and an obligation to dispose of the undeveloped portion of the Biot Real Property if certain additional building space is not constructed prior to December 31, 2004. 3.18.2.3 The properties described in Exhibits 3.18.2.3A and 3.18.2.3B constitute the only leased real estate used in the Business in France, the United Kingdom and the United States. The leases described in Exhibits 3.18.2.3A and 3.18.2.3B are in full force and effect and constitute legal, valid and binding obligations of the Companies and the other respective parties thereto and are enforceable in accordance with their terms, subject to bankruptcy laws and general equitable principles. There is not existing under any of such leases any material default of the Companies or, to the knowledge of the Companies, of any other party thereto (or event or condition which, with notice or lapse of time, or both, would constitute a default). None of the Companies has received any payment from a lessor in connection with or as inducement for entry into any such lease except as set forth on Exhibits 3.18.2.3A or 3.18.2.3B. 3.18.2.4 None of the property or part thereof shown on Exhibits 3.18.2.1, 3.18.2.3A or 3.18.2.3B is leased by any of the Companies to any other person or entity. 3.18.2.5 No taxes, assessments, water charges or sewer charges relating to the Real Property or the Improvements are delinquent and there are no special taxes, assessments or charges pending or, to the knowledge of the Companies, threatened against the Real Property or the Improvements. 3.18.2.6 The Real Property and the Improvements are usable and operable in the Business and the Improvements are in good working order and in a reasonable state of repair, subject only to ordinary wear and tear. 3.18.2.7 There are no pending or, to the knowledge of the Companies, threatened or contemplated condemnation proceedings affecting the Real Property or any part thereof. 3.18.2.8 None of EIL, SCL or Spembly is or has been in occupation of or entitled to any estate or interest in land or premises save the property at Andover referred to in Exhibit 3.18.2.3A 3.18.2.9 Save for the deposit of the title deeds of the property at Andover referred to in Exhibit 3.18.2.3A such property and its title deeds are free from any encumbrance or other third party right whether in the nature of security or otherwise. 3.18.2.10 Spembly, in respect of the property at Andover referred to in Exhibit 3.18.2.3A has, to the Seller's knowledge, performed and observed all material covenants affecting such property requiring observance or performance by it and, to Seller's knowledge, no notice of any breach of any such material covenants has been received. 18 3.19 BROKERS-SELLER. None of the Seller, the Companies or any of their -------------- Affiliates have engaged any person which could have any valid claim against Buyer for a finder's fee, brokerage commission or other similar payment nor otherwise acted in such a manner as to give rise to any valid claim against Buyer for a finder's fee, brokerage commission or other similar payment. 3.20 CAPITALIZATION OF THE ACQUIRED COMPANIES. ---------------------------------------- The current capitalization of each of the Acquired Companies and the current shareholder(s) of each of the Acquired Companies is set forth in Exhibit 3.20 hereto. All of the issued and outstanding shares of each Acquired Company have been and on the Closing Date will be duly and validly issued and are, or will be on such date, fully paid and non-assessable. All of the issued and outstanding shares of each Acquired Company are owned by its shareholder(s) listed on Exhibit 3.20 free and clear of all liens, claims, charges and encumbrances of any nature whatsoever, and the authorization or consent of no other person or entity is required in order to consummate the transactions contemplated herein by virtue of any such person or entity having an equitable or beneficial interest in such Acquired Company or the capital stock of such Acquired Company. There are not, and on the Closing Date there will not be, outstanding any options, warrants, or other rights to purchase from any Acquired Company any capital stock of such Acquired Company; any securities or obligations which are convertible into or exchangeable for any shares of capital stock of such Acquired Company; or any other commitments of any kind by any Acquired Company to issue any additional shares of its capital stock to pay any dividends on such shares or to purchase, redeem, or retire any outstanding shares of its capital stock. The number of issued and outstanding shares of each Acquired Company held in the treasury of such Acquired Company is set forth in Exhibit 3.20 hereto. 3.21 COMPANIES. Exhibit 3.20 attached hereto sets forth (i) the --------- jurisdiction of incorporation, capitalization and ownership of each Acquired Company; (ii) the names of the officers and directors of each Acquired Company; (iii) the jurisdictions in which each Acquired Company is qualified or holds licenses to do business as a foreign corporation; and (iv) the name and percentage ownership by each Acquired Company of each corporation, partnership, joint venture or other entity in which such Company has, directly or indirectly, an equity interest representing 50% or more of the capital stock thereof or other equity interests therein. 3.22 DESCRIPTIVE MEMORANDUM. To the knowledge of Seller, the ---------------------- Descriptive Memorandum does not contain any untrue statement of a material fact and does not omit to state a material fact necessary to make the statements contained therein, in light of the circumstances under which they are made, not misleading. Provided, however, Buyer and Seller hereby acknowledge that the -------- ------- financial projections contained in the Descriptive Memorandum are no longer current. 3.23 LITIGATION. Except as otherwise set forth in Exhibits 3.23 or ---------- 3.10 hereto, there is no suit, action, proceeding, claim or investigation pending or, to the knowledge of Seller, threatened against any of the Acquired Companies or against any of the other Companies relating to the Business, including without limitation claims for breach of product warranties. Within the five (5) years preceding the date of this Agreement, there have been no product liability claims asserted in writing against any of the Companies with respect to any of the Products, except as disclosed on Exhibit 3.23 hereto. 19 3.24 EXPORT. Neither the Seller nor any of the other Companies has ------ sold (directly or indirectly) any Products that were manufactured in the United States in or to any of the following countries (or to any party known by Seller to be acting on behalf of any of the following countries): Cuba, Libya, Iran, Iraq, North Korea, Sudan or Syria. 3.25 PRODUCT WARRANTY AND PRODUCT LIABILITY CLAIMS. No Product sold or --------------------------------------------- delivered by any Company is subject to any warranty, guaranty, right of return or other indemnity other than the relevant Company's applicable standard terms and conditions of sale, which are consistent with customary industry practice. Seller has maintained product liability insurance coverage in amounts of not less than SEK 500,000,000 per occurrence and SEK 500,000,000 in the aggregate with respect to products sold by the Companies. Such product liability insurance is on a claims made basis. 4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to --------------------------------------- Seller as follows. 4.1 BUYER'S ORGANIZATION, POWER, EXECUTION. Buyer is a corporation -------------------------------------- duly organized validly existing and in good standing under the laws of Delaware, and has all requisite corporate power and authority to carry out the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Buyer, and this Agreement has been duly executed and delivered by Buyer and constitutes a valid and legally binding obligation of Buyer enforceable in accordance with its terms, subject to bankruptcy laws and general equitable principles. 4.2 BROKERS-BUYER. Buyer has not engaged any person which could have ------------- any valid claim against Seller for a finders fee, brokerage commission or other similar payment. 4.3 NO VIOLATION. Assuming receipt of the approvals referred to in ------------ Section 2.5(a), the execution and delivery of Buyer of this Agreement does not, and the performance by Buyer of its obligations hereunder and the consummation by Buyer of the transactions contemplated hereby will not (i) violate any law or regulation, governmental or court order, judgement or decree applicable to Buyer, or (ii) result in any breach of any contract, agreements, license or permit to which Buyer is a party or by which Buyer is bound. 4.4 APPROVALS AND CONSENTS. Except for the approvals referred to in ---------------------- Section 2.5(a), no consent, approval, authorization or order of, action by filing with or notification to any governmental, regulatory or administrative authority is required for the execution and delivery of this Agreement by Buyer and for the consummation by Buyer of the transactions contemplated hereby. 5. COVENANTS OF SELLER. Seller covenants and agrees as follows. ------------------- 5.1 CONDUCT OF THE BUSINESS. From the date hereof to the Closing ----------------------- Date, except as otherwise permitted by this Agreement or unless the prior written consent of Buyer is obtained (such consent not to be unreasonably withheld or delayed), Seller shall cause the Companies to: (a) carry on the Business in the usual, regular and ordinary course in substantially the same manner as heretofore and use commercially reasonable efforts to preserve intact the present business organization, keep available the services of present employees, and preserve 20 relationships with customers, suppliers and others having dealings with the Business, (b)refrain from making or instituting any unusual or new methods of manufacture, purchase, sale, shipment or delivery, lease, management, accounting or operation, or shipping or delivering any quantity of Products in excess of normal shipment or delivery levels, except as agreed to in writing by the Buyer, (c) except with respect to EGBH, make no sales or other dispositions of assets other than sales in the ordinary course of business, (d) perform each obligation (for which there is no reason to contest) under agreements affecting the Assets or Business, (e) maintain the books of account and records concerning the Business in a regular manner consistent with past practices, (f) maintain the physical assets of the Companies in substantially the same working order and condition as such physical assets are in as of the date of this Agreement, reasonable wear and tear excepted; and (g) continue in effect all insurance of the Business including without limitation the product liability insurance referred to in Section 3.25. All of the property of the Companies shall be used, operated, repaired and maintained in a normal business manner consistent with past practice. 5.2 CERTAIN CHANGES. Between the date hereof and the Closing Date, --------------- except as otherwise specifically permitted by this Agreement or unless the prior written consent of Buyer is obtained (such consent not to be unreasonably withheld or delayed), Seller shall not permit (a) the mortgage, pledge or subjection to any lien, lease, security interest or other charge or encumbrance of any of the Assets except for landlord's liens with respect to rent not yet due and payable and liens for property taxes not yet due and payable and other inchoate liens incurred in the ordinary course of business which do not have a material adverse effect on the Business, (b) the sale, assignment, transfer, abandonment or other disposition of any of the Assets, or any interest therein, otherwise than sales in the ordinary course of business, (c) the merger or consolidation of any of the Companies with any corporation, partnership, association or other business organization or division thereof, unless such transaction specifically excludes the Assets and provides for their sale as contemplated by this Agreement; (d) the modification, amendment, alteration or termination of any of the contracts described on Exhibit 3.9; (e) the declaration or payment of any dividends or other distributions to a shareholder by any of the Acquired Companies or the purchase or redemption of any shares of its capital stock; or (f) any of the Acquired Companies to (i) take any action to amend its charter or bylaws or other governing documents; (ii) issue any stock, bonds or other corporate securities or grant any option or issue any warrant to purchase or subscribe to any of such securities or issue any securities convertible into such securities; (iii) incur any obligation or liability (absolute or contingent), except current liabilities incurred and obligations under contracts entered into in the ordinary course of business; (iv) cancel any debts or claims, except in the ordinary course of business; (v) make, accrue or become liable for any bonus, profit sharing or incentive payment, except for accruals under existing plans, if any, or increase the rate of compensation payable or to become payable by it to any of its officers, directors or employees, other than increases in the ordinary course of business consistent with past practice; (vi) make any election or give any consent under the Code or the tax statutes of any state or other jurisdiction or make any termination, revocation or cancellation of any such election or any consent or compromise or settle any claim for past or present tax due; (vii) waive any rights of material value; (viii) make or permit any act or omission constituting a breach or default under any contract, indenture or agreement by which it or its properties are bound; (ix) enter into any leases, contracts, agreements or understandings other than those entered into in the ordinary course of business calling for payments which in the aggregate do not exceed $100,000 for each such lease, contract, agreement or understanding; (x) engage any employee for a salary in excess of $575,000 per annum; (xi) materially alter the terms, status or 21 funding condition of any Employee Benefit Plan; or (xii) commit or agree to do any of the foregoing in the future. 5.3 EMPLOYEES. Seller agrees to encourage the employees of the --------- Business to continue their employment with Buyer or its Affiliates after Closing. Buyer shall offer (or cause one of its Affiliates to offer) to hire all employees of the Business who are employed by EII, EGBH or EIAL on the Closing Date for substantially the same salary and benefits which they presently have. EII will take all actions necessary to provide any employee of the Business employed by EII (or dependents of such employee) with any health care continuation coverage mandated by Section 4980B of the Code or Part 6 of Title I of the Employee Retirement Income Security Act of 1974 (as amended) as a result of any qualifying event experienced on or before the Closing Date, including delivery of any notices required by such provisions. 5.4 EXCLUSIVITY. Prior to the Closing Date or the date on which this ----------- Agreement is terminated pursuant to Section 11, neither the Seller nor any of its shareholders, officers, directors, representatives, agents or affiliates shall (i) directly, or indirectly through any other party, engage in any discussions or negotiations with, or provide any information to, any other person, firm or corporation with respect to an acquisition transaction involving the Business, or (ii) directly, or indirectly through any other party, solicit any proposal or offer relating to the acquisition of, or other major transaction involving the Business. 5.5 LIMITATIONS ON EMPLOYEE SOLICITATION AND COMPETITION. During the ---------------------------------------------------- period of two (2) years following the Closing Date, Seller and its Affiliates shall not: (a) Offer employment to or employ any individual (other than Mats Ekstrom and Maryse Kergueno) who is/was an employee of the Business at the time of the offer/employment or at any time within six (6) months prior to the offer/employment; (b) Manufacture, market or sell any product which has the same or substantially the same form, function or primary applications as any of the Products (as defined in this Agreement) which are manufactured, marketed or sold by the Buyer. Provided, however, this Section 5.5(b) shall not prohibit Seller -------- ------- or its Affiliates from marketing or selling any surgical instruments or medical devices in conjunction with the Leksell Microstereotactic System, the Leksell Gamma Knife or image guided surgery systems. The parties hereto agree that the duration and geographic scope of the non- competition provision set forth in this Subsection 5.5 are reasonable. In the event that any court determines that the duration or the geographic scope, or both, are unreasonable and that such provision is to that extent unenforceable, the parties hereto agree that the provision shall remain in full force and effect for the greatest time period and in the greater area that would not render it unenforceable. The parties intend that this non-competition provision shall be deemed to be a series of separate covenants, one for each and every county of each and every state of the United States of America and each and every political subdivision of each and every country outside the United States of America where this provision is intended to be effective. The Seller agrees that damages are an inadequate remedy for any breach of this provision and that the Buyer shall, whether or not it is pursuing any potential remedies at law, be entitled to equitable relief in the form of preliminary and permanent injunctions without bond or other security upon any actual or threatened breach of this non-competition provision. 22 5.6 INTERCOMPANY DEBT. Prior to the Closing Date, Seller will, ----------------- effective as of the Effective Date, cause the cancellation of all debt and intercompany accounts owed by any of the Companies, on the one hand, to Seller or any of its Affiliates (other than the Companies), on the other hand, and the cancellation of all debt and intercompany accounts owed by Seller or any of its Affiliates (other than the Companies), on the one hand, to any of the Companies, on the other hand. 5.7 PATENT ASSIGNMENTS. Prior to the Closing Date, to the extent not ------------------ heretofore accomplished, Seller will cause all assignment documents transferring record ownership of all patents and trademarks listed in the Schedule of Assets as being beneficially owned by the Companies to be executed and filed in relevant governmental offices. Provided, however, the covenant set forth in the ----------------- preceding sentence shall not include patents numbered 24 to 32 inclusive in the list entitled "Title to Be Assigned - Patents and Patents Applications", with respect to which Seller shall use its best commercial efforts to fulfill the covenant set forth in the preceding sentence. 5.8 EMPLOYEE NOTIFICATION. Prior to the Closing Date, Seller shall --------------------- cause the Companies to (i) complete all consultations required to be made with their respective worker's committees or works councils regarding the transactions contemplated hereby and (ii) provide all notices required to be given to employees regarding the transactions contemplated hereby. 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. -------------------------------------------- All of the obligations of Buyer to consummate the transactions contemplated by this Agreement shall be contingent upon and subject to the satisfaction, on or before the Closing Date, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by Buyer for purposes of consummating such transactions, but without prejudice to any other right or remedy which Buyer may have hereunder as a result of any misrepresentation by, or breach of any covenant or warranty of, Seller or the Companies contained in this Agreement or any other certificate or instrument furnished by Seller or the Companies hereunder. 6.1 REPRESENTATIONS TRUE AT CLOSING. The representations and ------------------------------- warranties made by Seller to Buyer in Section 3 of this Agreement shall be true and correct in all material respects on the Closing Date with the same force and effect as though such representations and warranties had been made on and as of such time, except for changes contemplated by this Agreement. 6.2 COVENANTS OF SELLER. Seller shall have performed in all material ------------------- respects all of the covenants, acts and undertakings to be performed by it on or prior to the Closing Date, and a duly authorized officer of Seller shall deliver to Buyer a certificate dated as of the Closing Date certifying to the fulfillment of this condition and the condition set forth in Section 6.1 hereof. 6.3 NO INJUNCTION, ETC. No action, proceeding, investigation, ------------------ regulation or legislation shall have been instituted or threatened before any court, governmental agency or legislative body to enjoin, restrain, or prohibit the consummation of the transactions contemplated hereby, if such action, proceeding, investigation, regulation or legislation makes it impracticable to consummate such transactions. 23 6.4 CONSENTS, APPROVALS, AND WAIVERS. Buyer shall have received a -------------------------------- true and correct copy of each and every consent, approval and waiver (a) referred to in Section 2.5(a) hereof, and (b) required for the assignment of Critical Contracts. 6.5 ABSENCE OF ADVERSE CHANGES. Since the date of the Balance Sheet, -------------------------- there shall have been no material adverse change in the assets, liabilities, results of operations or financial condition of the Business. 6.6 OPINIONS OF SELLER'S COUNSEL. Buyer shall have received the legal ---------------------------- opinions described on Exhibit 6.6 hereto. 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER TO CLOSE. -------------------------------------------------------------- All of the obligations of Seller to consummate the transactions contemplated by this Agreement shall be contingent upon and subject to the satisfaction, on or before the Closing Date, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by Seller for purposes of consummating such transactions, but without prejudice to any other right or remedy which it may have hereunder as a result of any misrepresentation by, or breach of any covenant or warranty of Buyer contained in this Agreement, or any certificate or instrument furnished by it hereunder. 7.1 REPRESENTATIONS TRUE AT CLOSING. The representations and ------------------------------- warranties made by Buyer to the Seller in Section 4 of this Agreement shall be true and correct in all material respects on the Closing Date with the same force and effect as though such representations and warranties had been made on and as of such date, except for changes contemplated by this Agreement. 7.2 COVENANTS OF BUYER. Buyer shall have performed in all material ------------------ respects all of the covenants, acts and undertakings to be performed by it on or prior to the Closing Date, and a duly authorized officer of Buyer shall deliver a certificate dated as of the Closing Date certifying to the fulfillment of this condition and the condition set forth under Section 7.1 above. 7.3 NO INJUNCTION, ETC. No action, proceeding, investigation, ------------------ regulation or legislation shall have been instituted or threatened before any court, governmental agency or legislative body to enjoin, restrain, prohibit the consummation of the transactions contemplated hereby, if such action, proceedings, investigation, regulation or legislation makes its impracticable to consummate such transactions. 7.4 CONSENTS, APPROVALS AND WAIVERS. Seller shall have received a ------------------------------- true and correct copy of each and every consent, approval and waiver referred to in Section 2.5(a) hereof. 7.5 OPINIONS OF BUYER'S COUNSEL. Seller shall have received the legal --------------------------- opinions described on Exhibit 7.5 hereto. 8. PUBLICITY. Except as may be required by law or legal authorities or --------- applicable rules of a stock exchange, neither Seller nor Buyer shall release, generate or permit any publicity concerning the transactions contemplated hereby without the express consent of the other, which consent shall not be unreasonably withheld or delayed. The term "publicity" shall not include internal communications by a party directed solely to its employees. 24 9. INFORMATION. ----------- 9.1 RIGHT TO INVESTIGATE. Before and after the Closing, Seller shall -------------------- afford to the authorized representatives of Buyer, including its independent accountants and attorneys, reasonable access to the offices, plants, properties, books and records, management and outside consultants of Seller and the Companies in order that Buyer may have the opportunity to make such investigations as it shall desire of the Assets and the Business, and Seller shall furnish Buyer with such financial and operating data and other information as to the Assets and the Business as Buyer shall from time to time reasonably request. 9.2 CONFIDENTIALITY. Prior to the Closing, Buyer and its --------------- representatives shall hold confidential all information obtained from Seller, the Companies or Seller's other Affiliates in connection herewith and, if the Closing shall be abandoned as provided herein, shall treat such information as confidential and, where such information is in documentary form, return such information to Seller, provided, Buyer may retain one copy of such information for its files. The provisions of this Section 9.2 shall not apply to information which is in the public domain due to no fault of Seller or its representatives. 10. COOPERATION. The parties recognize that in order for control of the ----------- Business to pass from Seller to Buyer in an orderly manner on the Closing Date it will be necessary for the parties to cooperate before and after the Closing on matters relating to the recruiting of Seller's personnel by Buyer, integration of sales force activity, identification of the Assets, ordering of inventory, and preservation of relationships with customers, suppliers and distributors. The parties shall render such cooperation to one another with respect to such matters and with respect to such other matters concerning the transition of control of the Business as reason and commercial prudence dictate should be addressed before and after the Closing. 11. TERMINATION. ----------- 11.1 BOTH PARTIES. This Agreement may be terminated at any time prior ------------ to the Closing: (a) by the mutual consent of Seller and Buyer; (b) by Seller or Buyer if there shall be any action or proceeding (other than an action or proceeding commenced or induced by a party hereto or by a party claiming a successor interest to a party hereto seeking to terminate or restrain performance under this Agreement) instituted by any governmental authority which shall seek to restrain, assess liability in respect of, or prohibit or invalidate the transactions contemplated by this Agreement and which, in the judgment of such party, made in good faith and based upon the advice of its counsel, makes it inadvisable to proceed with the Closing; or (c) by Seller or Buyer if, through no fault of the terminating party, the Closing shall not have occurred by August 31, 1998. 11.2 BUYER. This Agreement may be terminated by Buyer: (a) at any time ----- prior to the Closing, if Seller shall have failed to comply in any material respect with any of its covenants or agreements contained in this Agreement and such failure shall not have been rectified during the period of twenty-eight (28) days after written notification thereof to Seller, (b) at any time prior to the Closing, if there shall be any action or proceeding (other than an action or proceeding commenced or induced by a party hereto or by a party claiming a successor interest to a party hereto seeking to terminate or restrain performance under this Agreement) instituted by or before any court or other governmental body which could reasonably be expected to materially affect 25 the right of Buyer to own, operate or control the Business or the Assets subsequent to the Closing and which makes it impractical to proceed with the Closing; or (c) if any of the conditions precedent to the performance of its obligations at the Closing shall not have been fulfilled by August 31, 1998. 11.3 SELLER. This Agreement may be terminated by Seller: (a) as ------ provided for in subsection 2.2(b)(i); (b)at any time prior to the Closing, if Buyer shall have failed to comply in any material respect with any of its covenants or agreements contained in this Agreement and such failure shall not have been rectified during the period of twenty-eight (28) days after written notification thereof to Buyer; or (c) if any of the conditions precedent to the performance of its obligations at the Closing shall not have been fulfilled by August 31, 1998. 12. CLOSING. ------- 12.1 TIME AND PLACE OF CLOSING. The Closing shall be held at the ------------------------- offices of Jones, Day, Reavis & Pogue, London, England, commencing at 10:00 a.m. local time, on the Closing Date, unless another place or date is agreed to in writing by the parties, but in no event will the Closing be held later than August 31, 1998. 12.2 TRANSACTIONS AT CLOSING. At the Closing, each of the following ----------------------- transactions shall occur: 12.2.1 THE COMPANIES' AND THE SELLER'S PERFORMANCE. At the ------------------------------------------- Closing, Seller shall deliver (and/or cause its Affiliates to deliver) to Buyer the following: (a) the instruments of transfer, endorsed stock certificates (or indemnities in an agreed form in respect of any missing stock certificates) and assumption described in Section 2.4 and the Assignment and Assumption Agreement executed by the Companies and the Seller; (b) the certificate of the authorized officer of Seller described in Section 6.2; (c) copies of the consents and waivers described in Section 2.5(b) and the consents referred to in the last sentence of Section 2.5(c); (d) satisfactory evidences of the approvals described in Section 2.5(a); (e) letters of resignation from each of the directors (except for the Managing Director of EIL) and statutory auditors (if any) of the Acquired Companies, dated as of the Closing Date; (f) such other evidence of the performance of all covenants and satisfaction of all conditions required of the Companies and the Seller by this Agreement, at or prior to the Closing, as Buyer or its counsel may reasonably require; 26 (g) a copy of the resolutions of the directors of the Seller authorizing and approving the Agreement and all other transactions and agreements contemplated hereby; (h) resolutions of the directors and stockholders (if necessary) of the Acquired Companies to the extent required authorizing the transfer of the stock of all of the Acquired Companies, subject to the related stock transfer forms being duly stamped and accepting the resignations referred to in Section 12.2.1(e) above; (i) resolutions of the directors and stockholders of EII, EGBH and EIAL authorizing the transfer of Assets held by each of them; (j) the U.K. Tax Covenant duly executed for and on behalf of Seller; (k) corporate record books of each Acquired Company (except to the extent prohibited by law); (l) the assignment of accounts receivable referred to in subsection 15.4(d)(ii)(D). (m) such other certificates, instruments and other documents reasonably requested by Buyer to effect the transactions contemplated hereby, all of which shall be reasonably satisfactory in form and substance to Buyer. 12.2.2 PERFORMANCE BY BUYER. At the Closing, Buyer shall deliver -------------------- to Seller the following: (a) evidence of the wire transfers of the Purchase Price (or the Provisional Purchase Price in the event subsection 2.2(d) applies); (b) the instruments of transfer and assumption described in Section 2.4 and the Assignment and Assumption Agreement executed by the Buyer; (c) the certificate of the authorized officer of Buyer described in Section 7.2; (d) satisfactory evidence of the approvals described in Section 2.5(a); (e) such other evidence of the performance of all the covenants and satisfaction of all of the conditions required of Buyer by this Agreement at or before the Closing as the Companies and the Seller or their counsel may reasonably require; (f) a copy of the resolutions of the directors of the Buyer authorizing and approving the Agreement and all other transactions and agreements contemplated hereby; and 27 (g) the U.K. Tax Covenant duly executed for and on behalf of Buyer. 13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. -------------------------------------------------------- 13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS OF ----------------------------------------------------------- SELLER. All representations and warranties and covenants made by Seller in this - ------ Agreement or in any document or instrument executed and delivered pursuant hereto shall survive the Closing. 13.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS OF BUYER. ----------------------------------------------------------------- All representations and warranties and covenants made by Buyer in this Agreement or in any document or instrument executed and delivered pursuant hereto shall survive the Closing. 14. INDEMNIFICATION. --------------- 14.1 INDEMNIFICATION BY SELLER. The Seller shall indemnify and hold ------------------------- Buyer harmless from and against all direct damages and liabilities including reasonable attorneys' fees (excluding lost profits and other consequential damages) suffered or incurred by Buyer (and calculated on an after-tax basis) arising from the falsity of any representation or warranty of Seller or breach of any covenant contained in this Agreement by Seller or from any Excluded Environmental Liabilities. 14.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold the ------------------------ Seller harmless from and against all direct damages and liabilities including reasonable attorneys' fees (excluding lost profits and other consequential damages) suffered or incurred by the Seller (and calculated on an after-tax basis) arising from (j) the falsity of any representation or warranty of the Buyer or the breach of any covenant contained in this Agreement by Buyer; and (ii) the Assumed Liabilities except those relating to a breach of a representation and warranty by Seller. 14.3 LIMITATIONS ON INDEMNIFICATION FOR BREACH OF REPRESENTATIONS AND ---------------------------------------------------------------- WARRANTIES. Any claim for indemnification for breach of a representation, - ---------- warranty or covenant under Sections 14.1 or 14.2(i) must be made by giving written notice of such claim to the person from whom indemnity is sought not later than eighteen (18) months after the Closing Date. (Provided, however, the -------- ------- survival period for indemnification based on the falsity of Sections 3.8, 3.18.1.1 or 3.l 8.2.2 shall be seven (7) years from the Closing Date, the survival period for indemnification based on the falsity of Section 3.15 shall be five (5) years from the Closing Date, the survival period for indemnification based on the breach of Section 5.5 shall be two (2) years from the Closing Date, and the survival period for indemnification based on the breach of Section 15.4 shall be three (3) years from the Closing Date.) There shall be no indemnification for any such claim for breach of representation or warranty under Section 14.1 or 14.2(i) or under the U.K. Tax Covenant unless the amount of any such single claim exceeds USD 50,000 (excluding costs and interest claimed) and until the aggregate amount of all claims which each exceed USD 50,000 (excluding costs and interest claimed) made by the party seeking indemnification exceeds an amount equal to one million dollars ($l,000,000), after which time such party shall be fully indemnified for all such claims (to the extent provided in Section 14.1 or 14.2(i) or in the U.K. Tax Covenant, as the case may be) from the first dollar of each such claim (including the amounts used to satisfy the $1,000,000 threshold set forth in this Section 14.3). The cumulative maximum liability (including costs and interest claimed) of Seller for indemnification pursuant 28 to Section 14.1(i) and for claims under the U.K. Tax Covenant shall not exceed the amount of the Purchase Price. 14.4 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for -------------------------- indemnification hereunder, the party seeking indemnification (the "Indemnified Party") shall promptly notify the party from whom indemnification is sought (the "Indemnifying Party") of the claim and, when known, the facts constituting the basis for such claim. For purposes of this Section 14.4, notice shall be deemed to be promptly made if it is given to the Indemnifying Party within ten (10) days of receipt by the Indemnified Party of any written notice of any third party claim. In the event of any claim for indemnification under this Agreement resulting from or in connection with any claim or legal proceedings by a third party, the notice to the Indemnifying Party shall specify, if known, the amount or an estimate of the amount of the liability arising from such claim or legal proceeding. Except as provided in Section 14.5 of this Agreement, the Indemnified Party shall not settle or compromise any claim by a third party for which it may claim indemnification under this Agreement without the prior written consent of the Indemnifying Party. 14.5 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim by an ----------------------------- Indemnified Party resulting from or arising out of any claim or legal proceeding by a person who is not a party to this Agreement, the Indemnifying Party at its sole cost and expense may, upon written notice to the Indemnified Party, assume the defense of any such claim or legal proceeding if it acknowledges to the Indemnified Party in writing its obligation to indemnify the Indemnified Party with respect to all elements of such claim. The Indemnified Party shall be entitled to participate in (but not control) the defense of any such action, with its own counsel and at its own expense. If the Indemnifying Party does not assume the defense of any such claim or litigation resulting therefrom within 30 days after the date of such claim is made, (a) the Indemnified Party may defend against such claim or litigation, in such manner as it may deem appropriate, including, but not limited to, settling such claim or litigation, after giving notice of the same to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate, and (b) the Indemnifying Party shall be entitled to participate in (but not control) the defense of such action, with its own counsel and at its own expense. 14.6 PAYMENT OF INDEMNIFICATION OBLIGATION. All indemnification ------------------------------------- hereunder shall be effected by payment of cash or delivery of a cashier's or certified check in the amount of the indemnification liability. Any indemnification payment by Seller to Buyer hereunder shall be deemed to be a reduction in the Purchase Price. 14.7 EXCLUSIVE REMEDY. The rights of indemnification set forth in this ---------------- Section 14 and in the U.K. Tax Covenant shall be, from and after the Closing Date, the exclusive remedy of each party for the breach by the other party of any representation, warranty, covenant or other term in this Agreement, except for claims based upon fraud and claims for specific performance or other equitable relief. 15. ADDITIONAL ACTIONS. ------------------ 15.1 SERVICES. The parties recognize that in order for Buyer to assume -------- control of the Business in an orderly manner it may be necessary for Seller to assist Buyer in the performance of certain business support functions after the Closing in view of the fact that the Business has not been a freestanding enterprise. Understanding that Seller is not in the business of providing 29 such support services to others and that Buyer must diligently develop the capacity to support the Business as soon as practicable after the Closing Date, the parties shall cooperate during the period from the date hereof to the Closing Date to identify those areas in which the Business will require support and to enter into one or more service agreements providing for the rendering of such support by Seller to Buyer such services to be performed at a reasonable level and at no charge to the Buyer. The services to be provided by Seller and the duration of each service are described in Exhibit 15.1 hereto. 15.2 CHANGE OF NAMES. As soon as practicable (but no later than thirty --------------- (30) days) after Closing, Buyer shall cause the name of each of the Acquired Companies which contains the word "Elekta" to be changed to a name which does not contain the word "Elekta." 15.3 RELEASE OF GUARANTEES BY SELLER. As soon as practicable (but no ------------------------------- later than thirty (30) days) after Closing, Buyer shall use its best efforts to cause to be released all guarantees by Seller of the obligations of any of the Acquired Companies listed on Exhibit 15.3 and pending such release the Buyer shall indemnify and keep Seller indemnified from and against any and all costs, claims, demands or liabilities incurred or arising from any such guarantees. 15.4 ADDITIONAL AGREEMENTS. --------------------- The Seller and Buyer agree that: (a) Proprietary Information. ----------------------- (i) From and after the Closing Date, the Seller shall hold in confidence, and use its best efforts to have all of its officers, directors and personnel and each of the Companies hold in confidence, all knowledge and information of a secret or confidential nature with respect to the Business and shall not disclose, publish or make use of the same without the consent of the Buyer, except to the extent that such information shall have become public knowledge other than by breach of this Agreement by any of the Companies or to the extent required by law. (ii) The Seller agrees that the remedy at law for any breach of this Subsection 15.4 would be inadequate and that the Buyer shall be entitled to injunctive relief in addition to any other remedy it may have upon breach of any provision of this Subsection 15.4. (b) Sharing of Data. --------------- (i) The Seller shall have the right for a period of three years following the Closing Date to have reasonable access to such books, records and accounts, including financial and tax information, correspondence, production records, employment records and other similar information as are transferred to the Buyer pursuant to the terms of this Agreement for the limited purposes of concluding its involvement in the Business prior to the Closing Date and for complying with its obligations under applicable securities, tax, environmental, employment or other laws and regulations. The Buyer shall have the right for a period of three years following the Closing Date to have reasonable access to those books, records and accounts, including financial and tax information, correspondence, production records, employment records and other records which are retained by the Seller pursuant to the terms of this Agreement to the extent that any of the foregoing relates to the Business transferred to the Buyer hereunder or is otherwise 30 needed by the Buyer in order to comply with its obligations under applicable securities, tax, environmental, employment or other laws and regulations. (ii) The Seller and the Buyer agree that from and after the Closing Date they shall cooperate fully with each other to facilitate the transfer of the Assets from the Seller to the Buyer and the operation thereof by the Buyer. (c) Cooperation in Litigation. Each party hereto will fully cooperate ------------------------- with the other in the defense or prosecution of any litigation or proceeding already instituted or which may be instituted hereafter against or by such party relating to or arising out of the conduct of the Business prior to or after the Closing Date (other than litigation arising out the transactions contemplated by this Agreement). The party requesting such cooperation shall pay the out-of- pocket expenses (including legal fees and disbursements) of the party providing such cooperation and of its officers, directors, employees and agents reasonably incurred in connection with providing such cooperation, but shall not be responsible to reimburse the party providing such cooperation for such party's time spent in such cooperation or the salaries or costs of fringe benefits or similar expenses paid by the party providing such cooperation to its officers, directors, employees and agents while assisting in the defense or prosecution of any such litigation or proceeding. (d) Conduct of Business between Effective Date and Closing Date by -------------------------------------------------------------- EII, EIAL, EGBH and Seller - -------------------------- (i) That portion of the Business conducted by EII, EIAL, EGBH and Seller shall, during the period between the Effective Date and the Closing Date, be conducted by EII, EIAL, EQBH and Seller for the account of the Buyer. (ii) In order to effectuate the agreement set forth in subparagraph (i) above, Buyer and Seller agree to implement the following procedure: (A) During the period which begins on the Effective Date and ends on the Closing Date, EII, EIAL, EGBH and Seller shall receive any payments made by customers for Products sold after the Effective Date by EII, EIAL, EGBH and Seller (the total amount thus received being referred to herein as the "Gross Receipts"); (B) During the period which begins on the Effective Date and ends on the Closing Date, EII, EIAL, EGBH and Seller shall continue to make cash expenditures which are properly allocable to the normal operation of the Business in the ordinary course consistent with prior practice (but excluding the cost of providing the services described in Exhibit 15.1) (the total amount thus expended being referred to herein as "Gross Expenditures"); (C) Fifteen (15) days after the Closing Date, Seller shall deliver to Buyer a statement which itemizes the Gross Receipts and the Gross Expenditures in reasonable detail, subject to Buyer's right to review and dispute such statement. If Gross Receipts exceed Gross Expenditures, Seller shall promptly pay to Buyer an amount equal to such excess, or, if Gross Expenditures exceed Gross 31 Receipts, Buyer shall promptly pay to Seller an amount equal to such excess; and (D) On the Closing Date, Seller shall deliver to Buyer an assignment of all unpaid accounts receivable which result from delivery of Products by EII, EIAL, EGBH or Seller after the Effective Date. (e) Open Accounts Receivable. In the event Buyer receives ------------------------ payment on an account receivable which does not constitute part of the Assets, Buyer shall promptly remit such amount to Seller. If Seller receives payment after the Closing Date of an account receivable which constitutes part of the Assets, it shall promptly remit such amounts to Buyer. 16. GENERAL. ------- 16.1 AFFILIATE INVOLVEMENT. It is understood that both Seller and Buyer --------------------- conduct parts of their respective businesses through and in conjunction with Affiliates and are likely to do so in the future. In this Agreement, references to Affiliates are made in certain provisions for the sake of clarity, but some repeated references have been avoided because the terms "Seller" and "Buyer" are intended to encompass the Affiliates of each insofar as that is necessary to give full effect to the rights and obligations of the parties hereunder and to prevent results which are anomalous in the context of the transactions contemplated hereby. The covenant or agreement of a party to do or not to do a thing is also such party's covenant or agreement to cause its relevant Affiliates to do or not to do that thing. A covenant, agreement, representation or warranty for the benefit of a party is also for the benefit of such party's relevant Affiliates. The act, omission or knowledge of a party's relevant Affiliate is attributed to the party. Damages suffered by a relevant Affiliate of a party are also suffered by the party. Buyer shall have the right to require that certain of the Assets be conveyed at Closing to Affiliates of Buyer specified by Buyer. 16.2 PAYMENT OF EXPENSES. Except as specifically set forth elsewhere in ------------------- this Agreement, expenses related to this Agreement and attendant transactions, including the fees of brokers, counsel and accountants, shall be borne by the party incurring such expenses. No transaction expenses shall be borne by the Acquired Companies. 16.3 MODIFICATIONS; WAIVERS. This Agreement may be modified and rights ---------------------- hereunder may be waived only by a writing executed and delivered on behalf of the party against whom such modification or waiver is asserted. 16.4 ASSIGNABILITY. This Agreement and the rights and obligations ------------- hereunder shall be binding upon and inure to the benefit of the parties hereto and their respective successors (including successors by operation of law) and legal representatives. This Agreement shall not be assignable by either party hereto, except that Seller and Buyer may assign its rights and obligations hereunder to one or more of its Affiliates, provided that, the assignor shall ------------- guarantee the performance of such assignees under this Agreement and further provided that if the Affiliate of Buyer to which the Buyer assigns its rights and obligations under this Agreement ceases to be an Affiliate of Buyer, Buyer shall cause such former Affiliate to assign its rights and obligations under this Agreement to Buyer or another Affiliate of Buyer. 32 16.5 NO OTHER REPRESENTATIONS. Each of the parties acknowledges that in ------------------------ entering into this Agreement it has not relied on any representation, warranty, agreement or statement not set out in this Agreement (or in any document, instrument or certificate contemplated hereby), whether express or implied, and that (in the absence of fraud) it will not have any right or remedy arising out of any such representation, warranty, agreement or statement. 16.6 NOTICES. Any communication to be given hereunder by either party to ------- the other party shall be in writing and delivered by messenger, sent by overnight courier, or transmitted by facsimile, to the address or designation of such party set forth below or as changed by such party by notice given hereunder. A communication transmitted by facsimile shall be deemed effective when transmitted; a communication sent by overnight courier shall be deemed effective two days after being sent; and a communication delivered by messenger shall be deemed effective when delivered. SELLER: Elekta AB (publ) P.O. Box 7593 53 Birger Jarlsgatan S-10393 Stockholm, Sweden Attention: Dr. Laurent Leksell, President Fax: 46-8-402-5500 WITH A COPY TO: Jones, Day, Reavis & Pogue 303 Peachtree Street, N.E. 3500 SunTrust Plaza Atlanta, Georgia 30308-3242 Attention: R. Mason Cargill, Esq. Fax: (404) 581-8330 BUYER: Nitinol Medical Technologies, Inc. 27 Wormwood Street Boston, MA 02110-1625 Attention: Mr. Tom Tully, President Fax: (617)737-0924 WITH A COPY TO: Hale and Dorr LLP 60 State Street Boston, MA 02109 Attention: Steven D. Singer, Esq. Fax: (617)526-5000 The foregoing is not intended to be exclusive; any written communication actually received shall be effective when received. 33 16.7 CAPTIONS. The section captions used in this Agreement are for -------- reference and cross-reference purposes only and shall not otherwise affect the meaning or interpretation of this Agreement. 16.8 COUNTERPARTS AND ATTACHMENTS. This Agreement may be executed in two ---------------------------- or more counterparts, each of which shall be deemed to be an original and all of which shall be deemed to constitute the same Agreement. The schedules and other attachments hereto are part of this Agreement. 16.9 KNOWLEDGE. Any statement in this Agreement qualified by the --------- expression "so far as Seller is aware" or "to the knowledge of Seller" or "to the knowledge of the Companies" or any similar expression shall be deemed to include the knowledge of the following individuals (and only the knowledge of such individuals), regardless of the corporation which employs each such individual): Peter Gibson, James St. John, Steve Sinyard, Jacques Le Guillerm and Kent Iverson. 16.10 GOVERNING LAW. This Agreement shall be governed by and construed in ------------- accordance with the law of the State of Georgia. 17. DISPUTE RESOLUTION ------------------ 17.1 OBJECTIVE. This Agreement will be implemented by the parties and --------- their Affiliates in more than one jurisdiction. The negotiations of the parties have focused primarily on the ordinary meaning of the provisions of this Agreement and not on the legal effects those provisions might have under the laws of a particular jurisdiction. One of the purposes of this Section is to minimize the possibility of an unexpected reordering of agreed rights and obligations. 17.2 NO AFFILIATE ACTIONS. Neither party shall permit any of its -------------------- Affiliates to initiate or participate in any legal proceeding in connection with any controversy or claim arising out of or relating to this Agreement or the transactions contemplated hereby; rather, the parties shall settle all such controversies or claims on behalf of their Affiliates by arbitration conducted by the parties in accordance with this Section. The parties shall cause their Affiliates to comply with any award rendered in an arbitration proceeding pursuant hereto. 17.3 ARBITRATION. Any controversy or claim arising out of or relating to ----------- this Agreement or the transactions contemplated hereby shall be finally settled by arbitration in accordance with the Rules of Arbitration of the London Court of Arbitration by an arbitrator or arbitrators appointed in accordance with said rules. Judgment upon the award rendered by the arbitral tribunal may be entered in any court having jurisdiction thereof or application may be made to such court for judicial acceptance of such award and an order of enforcement, as the case may be. The place of arbitration shall be London, England, and the language of the arbitration shall be English. The parties hereby agree that the rendering of an award by the arbitrator or arbitrators shall be a condition precedent to the initiation of any legal proceeding with respect to any dispute arising in connection with this Agreement. Such award shall be final, binding and enforceable. Each of EHSA and EISA expressly waives its rights to the jurisdiction of the French courts. The arbitral tribunal shall apply the substantive laws of the State of Georgia, without regard to the conflicts of laws principles of the State of Georgia. 34 18. ENTIRE AGREEMENT. This Agreement (including the Exhibits and Schedules ---------------- hereto) constitutes the entire agreement among the parties hereto and supersedes and cancels any prior agreements, representations, warranties, or communications, whether oral or written, among the parties hereto relating to the transactions contemplated hereby or the subject matter herein. Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an agreement in writing signed by the party against whom or which the enforcement of such change, waiver, discharge or termination is sought. IN WITNESS WHEREOF, Buyer and Seller have each caused this Agreement to be duly executed in its corporate name by a duly authorized representative as of the date first above written. SELLER: ELEKTA AB (PUBL) By: /s/ Jonas Serlachius ------------------------------- Title: VP. CORP DEV. ------------------------- BUYER: NITINOL MEDICAL TECHNOLOGIES, INC. By: /s/ Thomas M. Tully -------------------------------- Title: CEO ----------------------------- 35 SCHEDULE OF ASSETS All assets and property, tangible and intangible, wherever located, used by Seller and/or its Affiliates (including without limitation the Companies) in the conduct of the Business, including, without limitation, the following significant Assets: (1) The real estate, buildings and equipment which comprise the Biot Facility; (2) The books, records, technical manuals, customer lists and other documents and tangible embodiments of information necessary to the conduct of the Business; (3) The inventory of raw materials, parts and finished and in-process Products; (4) All Company Intellectual Property, including without limitation the patents and patent applications described on the attached lists with the indication "TITLE TO BE ASSIGNED" subject, in the case of those patents with the indication "TO BE LICENSED BACK TO ELEKTA", to a royalty-free, non-exclusive license in favor of Seller and its Affiliates and Johnson & Johnson and its Affiliates to make, have made, use and sell, and to sublicense customers to use, inventions covered by the claims of the U.S. patents (and their foreign equivalents) for products other than neuroscience products; (5) Seller's rights to the patents described on the attached lists with the indication "LICENSED PATENTS WITH ROYALTY BEARING AGREEMENTS and CIS's rights to the patents described on the attached lists with the indication "CORDIS INNOVASIVE SYSTEMS, INC. PATENTS"; (6) The trademarks listed on the attached List of Trademarks, provided -------- that, (a) the right to use the trademark and name CORDIS (whether alone or with - ---- other trademarks or names) shall be limited to (i) use in the promotion and labeling of Products, and (ii) a period ending on October 11, 1998; (b) the right to use the trademark and name HAKIM shall be limited to (i) use until December 18, 2007 in connection with the promotion and labeling of the Products which bear the trademark on the Closing Date, and (ii) subject to (a) above, use in conjunction with a name or trademark (other than CORDIS) in the manner used on the Closing Date; and (c) the right to use each of the trademarks and names ELEKTA and LEKSELL (whether alone or with other trademarks or names) shall be limited to (i) use in the promotion and labeling of Products which bear the corresponding trademark or name on the Closing Date, and (ii) a period ending six (6) months after the Closing Date; the trademarks which contain the name CORDIS or the names ELEKTA or LEKSELL will be licensed to Buyer with the above restrictions, and the other trademarks will be assigned to Buyer; (7) Seller's rights under agreements assumed by Buyer. (8) All outstanding shares of capital stock in the Acquired Companies, as well as the corporate minute book and all corporate records of the Acquired Companies. (9) A perpetual, non-exclusive, royalty-free license (with no right to sublicense other than to an Affiliate of Buyer) to use the computer software used in the Business which is known as MIPOS/DCS, in object code form only, it being understood that Seller is not obligated to provide maintenance services for such software. (10) The licenses referred to in paragraphs (4) and (6) above shall be memorialized in separate license agreements to be executed by Seller and Buyer at Closing. -2- TITLE TO BE ASSIGNED PATENTS AND PATENT APPLICATIONS 1. Fluid heating apparatus for medical use - has controllable infra-red light source emitting radiation to fluid which temperature is monitored by sensor- patent no. GB2312736A. Registered holder - Spembly. 2. Liquid cryogen supply apparatus - has cryogen tank with valveless outlet and inlet supplied with gas at controlled pressure that manages cryogen outflow patent no. WO9630816A. Registered holder - Spembly. 3. Connection apparatus to link instrument to supply source - has two connectors fitted with complementary bayonet locking formations with sleeve on non-sterile side and sleeve displacement formation on sterile side for locking - patent no. GB2289510A. Registered holder - Spembly. 4. Cryosurgical instrument - comprising a metal cooling tip cooled by a flow of cryogenic fluid within the tip and coated in heat-insulated coating - patent no. GB2289414A. Registered holder - Spembly. 5. Cryosurgical instrument for surgical use where living tissues have been destroyed - has cooling tip operable to be cooled to flow having exhaust conduit carrying fluid to atmospheric air vent with purging flow of cool gas supplied from vessel - patent no. GB2289413A. Registered holder - Spembly. 6. Cryosurgical instrument for surgical operative where living tissues have been destroyed - has cooling tip cooled by flow of fluid from transfer chamber having outlet communicating with having air vent having by pass valve - patent no. GB2289412A. Registered holder - Spembly. 7. Cryosurgical probe for cardiac surgery - comprises probe head cooled by expansion of refrigerant gas, handle with gas precooler and flexible catheter linking handle and head - patent no. GB2283678A. Registered holder - Spembly. 8. Ultrasonic surgical instrument - has unitary construction operating tip being of length of at least one quarter wave length of ultrasonic vibrations generated by transducer - patent no. GB2273445A. Registered holder - Spembly. (Lapsed) 9. Cryosurgical probe with cooling element tip - has channel for introducing heat-conducting liquid into cavity, and cooling element with associated thermo couple sensor at tip of probe - patent nos. GB2269107A, EP584930B, GB2269107B and US5403309A. Registered holder - Spembly. (Lapsed) -3- 10. Ultrasonic surgical aspirator with vacuum control - comprises vacuum source, handpiece, handpiece comprising aspiration tip with aperture for communicating with vacuum source - patent no. GB2267828A. Registered holder - Spembly. 11. Coupling assembly for cryogen supply line - has respective rubber O-rings located externally of male and female coupling members, secured together with screw threaded portions - patent no. WO9308870A. Registered holder - Cryogenic Technology Limited (beneficial interest assigned to SCL). 12. Cryosurgical equipment thawing method - involves circulating heated inert gas through equipment circuit via heat exchanger - patent nos. WO9308752A and US5632743A. Registered holder - Cryogenic Technology Limited (beneficial interest assigned to SCL). 13. Cryosurgical probe assembly - has exhaust and cryogen supply passages leading to tip, insulated by air filled or partially evacuated jacket - patent no. WO9308751A. Registered holder - Cryogenic Technology Limited (beneficial interest assigned to SCL). 14. Rapid purge cryosurgical probe - has valve allowing purging gas to pass through supply passages without going through Joule-Thomson nozzle - patent nos. WO9006726A, GB2246710B and US5224943A. Registered holder - Spembly. 15. Cryosurgical probe for percutaneous use in surgery - has steerable catheter connected between probe head and handle for guiding probe with safety and precision along arteries - patent nos. GB2226497A, GB2226497B, US5078713A. Registered holder - Spembly. 16. Pressure monitor - has disc with coded tracks divided into transparent and opaque portions, and rotated to intercept beam of light going to photosensor -patent no. GB2153172A. Registered holder - Spembly. 17. Stainless steel cryosurgical probe - has hollow tip with exhaust passage extending into problem body for removing cooled, expanded gas - patent no. GB2094636A. Registered holder - Spembly. 18. Cryogenic surgical probe for stimulating nerves - has closed end forming point and contg. or forming exposed electrode - patent no. DE2732486A. Registered holder - Spembly. 19. Curved ultrasonic knife for brain or spinal surgery - consists of transducer unit with curved resonance rod located between piezoelectric unit and horn - patent nos. EP305627A, EP305627B and US4974581A. Registered holder - Swedemed. -4- 20. Surgical equipment for removing tissue - has frequency generator driving transducer unit causing tip portion of ultrasonic knife to oscillate - patent no. EP282684A, EP282684B and US4886060A. Registered holders - EIL. 21. Ultrasonic aspirator with tip functioning as knife - has amplitude transformer providing separated maximum longitudinal mode oscillation resonant frequency - patent no. EP229003A, EP229003B and US5062827A. Registered holder - EIL. 22. Surgical heating apparatus for preventing unwanted freezing of tissue adjacent to site of cryogenic surgery - has bag for location adjacent to tissue which provides for entry of liquid at required temperature and circulation of liquid through outer wall of bag - patent no. PCT/GB95/00974 (USA and Japan designated on PCT application). Registered holder - Cryogenic Technology Limited (beneficial interest assigned to SCL). 23. (Not used). 24. Visualization surgical cart design - patent no. 355,257. Registered holder - CIS. 25. Optical shunt cutter system - patent applications:- United States 08/215,130 (registered holder - CIS), Germany 19509606.1 and Japan 61133/95. Registered holder - Nobles - Lai (beneficial interest assigned to CIS). 26. Adjustable arm for instrument holder - provisional (ABN) 60/005,473, application 08/731,502, application PCT US96/16765. Registered holder - Nobles - Lai (beneficial interest assigned to CIS). 27. Control module for controlling a neuroendoscopic visualization system having a plurality of video input sources and method thereof - patent application 08/712,933. Registered holder - CIS. 28. Punch catheter - provisional no. 60/030,929. Registered holder - CIS. 29. Interchangeable handle and surgical tools for endoscopic use - provisional patent application [dated April 14, 1997] [no. ]. Registered holder - CIS. 30. Variable length shunt placement introducer - provisional patent application 60/036,208. Registered holder - CIS. 31. Neuroendoscopic training model - provisional patent application dated February 24, 1997 [no. ]. Registered holder - CIS. 32. Malleable cannula bender - provisional patent application [dated April 11, 1997] [no. ]. Registered holder - CIS. -5- Assignments of the patents numbered 24 to 32 above by Nobles-Lai Engineering, Inc. to CIS have not been completed, hence Nobles-Lai Engineering, Inc. remains the registered owner. The patents numbered 24 to 32 above are also subject to non-exclusive, non-sublicensable, worldwide, royalty-free license granted by CIS is favor of Nobles-Lai Engineering, Inc. 33. Intracranial pressure monitoring catheter (assigned with a royalty-bearing agreement). U.S. patent no. 4,114,603 dated September 19, 1978 Canada - patent no. 1,068,514 dated December 15, 1979 France - patent no. 7724065 dated August 4, 1977 Great Britain - patent no. 1547064 dated August 5, 1977 (expired) Japan - patent no. 1424424 dated August 4, 1977 Netherlands - patent no. 182197 dated July 5, 1977 Sweden - patent no. 429297 dated August 3, 1977 Switzerland - patent no. 615819 dated August 4, 1977 34. Intercranial pressure regulator valve. US - patent no. 4,769,002 dated September 6, 1988 Canada - patent no. 1,248,425 dated January 10, 1989 France - patent no. 117050 dated January 13, 1984 Great Britain - patent no. 117050 dated January 13, 1984 Germany - patent no. P3483539.3 dated January 13, 1984 Italy - patent no. 117050 dated January 13, 1984 Japan - patent no. 1792101 dated February 7, 1984 Netherlands - patent no. 117050 dated January 13, 1984 35. Three stage valve (assigned with a royalty-bearing agreement). US patent no. 4,776,838 dated October 11, 1988 Canada - patent no. 1236749 dated May 17, 1988 France - patent no. 156974 dated December 7, 1984 Great Britain - patent no. 156974 dated December 7, 1984 Germany - patent no. P3479565.0 dated December 7, 1984 Italy - patent no. 156974 dated December 7, 1984 Japan - patent no. 1808729 dated December 8, 1983 Netherlands - patent no. 156974 dated December 7, 1984 36. Three stage intercranial pressure relief valve having single-piece valve stem (assigned with a royalty-bearing agreement). US - patent no. 4,627,832 dated December 9, 1986. -6- France - patent no. 163897 dated April 22, 1985 Great Britain - patent no. 163897 dated April 22, 1985 Germany - patent no. P3563683.1 dated April 22, 1985 Italy - patent no. 163897 dated April 22, 1985 Netherlands - patent no. 163897 dated April 22, 1985 37. Three stage intercranial pressure control valve. U.S. - patent no. 4,714,459 dated December 22, 1987 France - patent no. 233324 dated November 4, 1986 Great Britain - patent no. 233324 dated November 4, 1986 Germany - patent no. P3679541.0 dated November 4, 1986 Italy - patent no. 233324 dated November 4, 1986 Netherlands - patent no. 233324 dated November 4, 1986 38. Three stage implantable pressure relief valve with adjustable valve stem members. U.S. - patent no. 4,729,762 dated March 8, 1988 France - patent no. 233325 dated November 4, 1986 Great Britain - patent no. 233325 dated November 4, 1986 Germany - patent no. P3666350.6 dated November 4, 1986 Italy - patent no. 233325 dated November 4, 1986 Netherlands - patent no. 233325 dated November 4, 1986 39. Hydrocephalus valve. U.S. - patent no. 5,069,663 dated December 3, 1991 Japan - patent application no. 261221/89 filed October 5, 1989 40. Reservoir membrane implantable under the skin of a patient. French patent application no. 8903998 filed March 28, 1989 U.S. patent no. 5,102,389 dated April 7, 1992 European patent no. 399,857 - validated in Germany, Italy, Spain and France Japan patent application no. 277167 filed March 28, 1990 41. Three stage implantable drainage valve for treatment of hydrocephalus. French patent application no. 9115778 filed December 19, 1991 U.S. patent no. 5,336,166 dated August 9, 1994 European patent application no. 93400817.8 filed March 30, 1993 42. Implantable drainage valve for the treatment of hydrocephalus. -7- French patent application no. 9200671 filed January 22, 1992 U.S. patent no. 5,368,556 dated November 29, 1994 European patent application no. 93400818.6 filed March 30, 1993 43. Implantable valve for the treatment of hydrocephaly. French patent application no. 9210972 filed September 1992 U.S. patent no. 5,437,627 dated August 1, 1995 European patent application no. 93401464.8 filed June 9, 1993 44. Dilatation balloon catheter for endoscopy. French patent application no. 9409890 (assigned with a royalty-bearing agreement in favor of Christian Sainte Rose) filed August 10, 1994 U.S. patent no. 5718712. 45. Implantable drainage valve for treatment of hydrocephalus - French patent application no. 9306356 filed June 27, 1993 (Docket 91087). 46. Pressure and anti-gravity regulating valve - French patent application no. 9603721 filed March 26, 1996 (Docket 95103). 47. OSV2 - French Patent application no. 9603726 filed March 26, 1996. 48. Implantable hand-operable dispensers for fluid medicaments U.S. patent no. 4,668,231 dated May 26, 1987. Dutch patent application no. 8400489 filed February 15, 1984 Canada - patent no. 1243913 dated November 1, 1988 France - patent no. 143503 dated November 23, 1984 Great Britain - patent no. 143503 dated November 23, 1984 Germany - patent no. P3476521.2 dated November 23, 1984 Italy - patent no. 143503 dated November 23, 1984 Japan - patent no. 1830123 dated November 24, 1984 Netherlands - patent no. 143503 dated November 23, 1984 49. Pompe multidose. This patent was purchased from Applied Precision Limited and assignment has not been recorded in the U.S. Patent and Trademark Office. French patent no. 2582222 dated May 21, 1985 U.S. patent - no. 4,718,894 dated January 12, 1988 Canada - patent no. 1262851 dated November 14, 1989 EPO - patent no. 202696 dated November 26, 1986 -8- Germany - patent no. P3664259 dated July 12, 1989 50. Manufacture of tubing assembly for drainage catheter - patent no. 4,601,724. Subject to license in favor of Cordis Corporation. 51. Intracranial ventricular catheter assembly - patent no. 4,723,556. Subject to license in favor of Johnson & Johnson and its Affiliates. 52. External drainage antisiphon device - patent no. 4,731,056. Subject to license in favor of Johnson & Johnson and its Affiliates. 53. Porous ventricular catheter - patent no. 4,767,400. Subject to license in favor of Johnson & Johnson and its Affiliates. 54. Cyst puncture catheter assembly - patent no. 5,409,462. Subject to license in favor of Johnson & Johnson and its Affiliates. 55. Catheter introducer (subject to license in favor of Johnson & Johnson and its Affiliates). French patent application no. 8714852 filed October 27, 1987 U.S. patent no. 4,946,443. 56. [Device for a carriage for pallet handling] - patent no. 9616267 dated December 31, 1996. 57. Mechanical arm for a neuroendoscopy device - patent no. 9704060 dated April 3, 1997. 58. Catheter for neurosurgery - patent no. 9704061 dated April 3, 1997. 59. Implantable microinfusion pump system - patent no. 4487603 dated December 11, 1984. 60. Non-invasively adjustable valve - patent no. 4540400 dated September 10, 1985. 61. Implantable manually actuated medication dispensing system - patent no. 4548607 dated October 22, 1985. 62. Cerebrospinal fluid shunt value - patent no. 4551128 dated November 5, 1985. 63. Servo valve - patent no. 4557721 dated December 10, 1985. 64. Fill port for an implantable dispensing system dated December 10, 1985. -9- 65. Self-calibrating differential condition sensor - patent no. 4576035 dated March 18, 1986. 66. Ventricular right angle connector and system - patent no. 4578057 dated March 25, 1986. 67. Telescoping catheter shunt system - patent no. 4583967 dated April 22, 1986. 68. Portable instrument to test pressure/flow of ventricular shunt valves - patent no. 4598579 dated July 8, 1986. 69. Ventricular amniotic shunt and introducer system - patent no. 4631051 dated December 23, 1986. 70. Differential thermal expansion driven pump - patent no. 4636149 dated January 13, 1987. 71. Three stage pressure regulator valve - patent no. 4675003 dated June 23, 1987. 72. Adjustable implantable valve having non-invasive position indicator dated June 30, 1987. 73. Plural valve three stage pressure relief system - patent no. 4681559 dated July 21, 1987. 74. Implantable servo valve having integral pressure sensor - patent no. 4705499 dated October 11, 1987. 75. Three stage valve with flexible valve seat - patent no. 4714458 dated December 22, 1987. 76. Infusion pump - patent no. 4744786 dated May 17, 1988. 77. Three stage implantable pressure relief valve with improved valve stem member - patent no. 4776839 dated October 11, 1988. 78. Three stage implantable flow control valve with improved valve closure member - patent no. 4781672 dated November 1, 1988. 79. Adjustable implantable valve having non-invasic position indication - patent no. 4,676,772 dated June 30, 1987. The patents and patent applications numbered 33 to 79 above were acquired from Johnson & Johnson or its Affiliates as part of the acquisition of the Cordis Neuroscience business dated April 11, 1997. The United States and Canadian patents -10- and patent applications are registered in the name of the Seller. Assignments of the other patents and patent applications numbered 33 to 79 above to the Seller have not been completed hence Johnson & Johnson or its Affiliates remain the registered holder. -11- LICENSED PATENTS WITH ROYALTY BEARING AGREEMENTS 1. COCHRAN - Infusion pump U.S. patent no. 4,561,856 dated December 31, 1985 2. HAKIM - Servo valve U.S. patent no. 4,106,510 dated August 15, 1978 (expired) Canada - patent no. 1080080 dated June 24, 1980 France - patent no. 7735554 dated November 25, 1977 (expired) Great Britain - patent no. 1554100 dated November 24, 1977 Japan - patent no. 1417682 dated November 22, 1977 3. Method and apparatus for the treatment of ascites U.S. patent no. 4,261,341 dated April 14, 1981 Canada - patent no. 1152408 dated August 23, 1983 France - patent no. 8012654 dated June 6, 1980 Germany - patent no. P3020991.7 dated June 3, 1980 Japan - patent no. 1477965 dated June 6, 1980 4. Agreement to transfer a patent license agreement dated January 1, 1990 between (1) Cordis S.A. and (2) Cordis Europa N.V. concerning an implantable drainage device for the treatment of hydrocephalus. 5. Patent license agreement dated December 5, 1994 between (1) Cordis S.A. and (2) Christian Sainte Rose concerning a dilatation balloon catheter for endoscopy. French patent application no. 9409890 dated August 10, 1994 in the name of Cordis S.A. (beneficially assigned to EISA). 6. Patent license agreement dated December 5, 1994 between (1) Cordis S.A. and (2) Christian Sainte Rose concerning a subdural drainage catheter. 7. Patent license agreement dated December 5, 1994 between (1) Cordis S.A. and (2) Christian Sainte Rose concerning an integral drainage device. 8. License and technology agreement dated May 10, 1994 between (1) Kevin Maughan, (2) Ferenc Schmidt, (3) Florida Hospital Supply, Inc. and (4) EII concerning titanium aneurysm clips. US patent no. 5,053,045 and US patent application no. PCT/US93/10054 in the name of Ferenc Schmidt -12- 9. License agreement between (1) Robert F. Spetzler and (2) EII concerning powered surgical instrument/powered clip applier. Patent application no. 07/882,945 in the name of Robert Spetzler. -13- CORDIS INNOVASIVE SYSTEMS, INC. PATENTS
Title Country Patent/Application Date - ----- ------- ------------------ ---- Improved visualization trocar* United States 08/376,759 January 20, 1995 Visualization surgical cart United States D355,257 February 7, 1995 Optical shunt cutter system Germany 19509606.1 March 16, 1995 Optical shunt cutter system Japan 61133/95 March 20, 1995 Optical shunt cutter system United States 08/215,130 March 18, 1994 Adjustable arm for instrument United States 60/005,473 October 16, 1995 holder Suturing device and method United States 60/002,769 August 24, 1995 Trocar for endoscopic surgery* Canada 2,151,926 November 12, 1993 Trocar for endoscopic surgery* EPO 94902247.9 November 12, 1993 Trocar for endoscopic surgery* United States US93/11024 November 12, 1993 Trocar for endoscopic surgery* United States 5,385,572 January 31, 1995 Method and apparatus for Germany P4418263.5 May 25, 1994 replacing a cannula* Method and apparatus for Japan 112963/94 May 26, 1994 replacing a cannula* Method and apparatus for United States 5,437,644 August 1, 1995 replacing a cannula*
* Assigned to Ethicon Endo-Surgery, Inc. with license to Cordis Innovasive Systems, Inc. -14- TRADEMARKS
TRADEMARK COUNTRY REGN/APPLN --------- ------- ---------- 1. ATLAS Benelux 453,921 International Registration 537,063 Denmark 06 986-1990 Finland 112,866 Ireland 130,929 United Kingdom 1,559,120 2. HAWKVISION Benelux 564,550 International Registration 640,757 United Kingdom 2,029,274 3. LIGHTOUCH Benelux 559,395 International Registration 634,240 United Kingdom 2,013,166 4. OMNISHUNT United States 1,602,100 Benelux 476,926 5. ORBIS-SIGMA United States 1,612,836 Benelux 446,700 International Registration 531,693 Canada 395,796 Denmark 08 398-1991 Finland 109,287 Ireland 128,481 Japan 2,571,829 Norway 140,936 Sweden 222,897 United Kingdom 1,355,753 6. SECOR United States 1,416,512 Benelux 402,972 International Registration 492,374 Denmark 0010/86 United Kingdom B123,0202 Norway 127,864
-15-
TRADEMARK COUNTRY REGN/APPLN --------- ------- ---------- Sweden 199,767 7. CORDIS MINIPORT Benelux 460,991 International Registration 543,819 Denmark 7370-1990 Finland 129,956 Norway 144,286 Sweden 230,494 United Kingdom 1,389,454 8. CORDIS MPAP United States 1,625,836 Benelux 461,100 International Registration 543,821 Denmark 7371-1990 Finland 129,955 Norway 144,187 Sweden 230,492 United Kingdom 1,389,453 9. CORDIS Benelux 460,992 MULTIPURPOSE International Registration 543,820 ACCESS PORT Denmark 7372-1990 Finland 129,954 Norway 144,188 Sweden 230,493 United Kingdom 1,389,455 10. CORDIS-SECOR Japan 2,252,933 11. CORDIS-SECOR Japan 2,252,934 (Katakana Characters)
Trade marks and trade mark applications numbered 1 to 11 were acquired from Johnson & Johnson as part of the acquisition of the Cordis Neuroscience business dated April 11, 1997. Numbers 1 to 11 are registered in the name of Cordis Europa N.V. save that the US trade marks set out in numbers 4 to 6 and 8 are registered in the name of Seller and the Canadian trade mark set out in number 5 is registered in the name of Cordis Corporation. Cordis Europa N.V. and Cordis Corporation are Affiliates of Johnson & Johnson. The beneficial interest in such trade marks have been transferred to the Companies. -16-
12. CRYOTECH United Kingdom 1560476 United States 74/555391 13. CRYOTECH logo (x2) United Kingdom 1560323 1565601 United States 74/555392 (suspended) 14. HCS2000 (series of 3) United Kingdom 1577747 (abandoned) 15. LCS2000 (series of 3) United Kingdom 1563254 (abandoned) United States 74/564754 (abandoned)
Trade marks and trade mark applications numbered 12 to 15 are registered in the name of Cryogenic Technology Limited while the beneficial interest has been transferred to SCL pursuant to an asset purchase agreement between (1) Cryogenic Technology Limited, (2) SCL and (3) Spembly dated August 30, 1995. 16. SONOCUT Sweden 209645 17. SWEDEMED Sweden 18. SELECTOR Japan 4040537 United Kingdom 1367059 United States 1629037 19. AMOILS United Kingdom 1138472 20. CRYONEEDLE United Kingdom 1559062 21. ENDOCRYO United Kingdom 1559059 United States 74/515948 (published for opposition - fifth extension granted (October 14, 1997)). 22. NEUROSTAT United Kingdom B1074084 23. PULSAR United Kingdom B1259448
Trade marks and trade mark applications numbered 16 to 23 are registered in the name of Spembly. -17- LICENSED TRADEMARKS HAKIM -18- AMENDMENT NO. 1 TO PURCHASE AGREEMENT This Amendment No. 1 to the Purchase Agreement dated May 8, 1998 by and between Elekta AB (Publ), a corporation organized and existing under the laws of Sweden (the "Seller") and Nitinol Medical Technologies, Inc., a corporation organized under the laws of the State of Delaware (the "Buyer") is entered into as of July 8, 1998 by and between the Seller and the Buyer. WHEREAS, the Buyer and the Seller have agreed to amend the Purchase Agreement of hereinafter set forth; NOW, THEREFORE, in consideration of the mutual promises and undertakings herein contained, and for other good and valuable consideration, the parties agree as follows: 1. All capitalized terms used herein shall have the meanings assigned to them in the Purchase Agreement. 2. Section 5.6 of the Purchase Agreement is hereby amended by adding the following to the end thereof: ", except for (i) the promissory notes referred to on Exhibit 5.6 attached hereto and (ii) trade accounts receivable held by the Acquired Companies due from the Seller and/or its Affiliates (other than the Acquired Companies) as of April 30, 1998 (the "Acquired Companies' Receivables from Group") and (iii) trade accounts receivable held by Seller and/or its Affiliates (other than the Acquired Companies) due from the Acquired Companies as of April 30, 1998 (the "Group's Receivables from the Acquired Companies"). Effective as of the Closing, Buyer shall cause the Acquired Companies to transfer the Acquired Companies' Receivables from Group to Elekta Instrument AB, an Affiliate of Seller. Effective as of the Closing, Seller shall, and shall cause its Affiliates to, transfer the Group's Receivables from the Acquired Companies (except for the account payable owed by EIL to Seller totalling SEK 3,866,070 relating to the Birmingham Surgiscope and the account payable from ESRL to Seller totalling SEK 1,723,962.50 relating to the Marseilles Leksell Gamma Plan) to such Affiliates of Buyer as may be designated by Buyer. On or before July 22, 1998, the Seller shall provide the Buyer with a written itemization of the Group's Receivables from the Acquired Companies, indicating the amount of the trade account receivable due to the Seller and each Affiliate of the Seller, as the case may be, from each Acquired Company as of April 30, 1998, certified as accurate and complete by the Chief Financial Officer of the Seller. The Seller shall cause its Affiliates to promptly execute and deliver to the Buyer any additional transfer of the Group's Receivables from the Acquired Companies as the Buyer may request after receipt of such itemization from the Seller (except for the account payable owed by EIL to Seller totalling SEK 3,866,070 relating to the Birmingham Surgiscope and the account payable from ESRL to Seller totalling SEK 1,723,962.50 relating to the Marseilles Leksell Gamma Plan)." 3. The Schedule of Assets to the Purchase Agreement is hereby amended by adding the following to the end thereof: 1 "(11) The following promissory notes, each dated April 30, 1998, payable to the Seller, copies of which are attached:
Borrower Amount Rate Approximate USD - -------- ------ ---- --------------- Elekta Holding SA, France FF 66,838,000 0.1655 $11,061,689 Elekta Holding SA, France ESP 2,500,000 0.0066 $ 16,500 Elekta Instruments SA., Spain ESP 16,450,000 0.0066 $ 108,570 Elekta Instruments Ltd., UK GBP 350,912.64 1.672 $ 586,726 Spembly Medical Ltd., UK GBP 1,129,746.69 1.672 $ 1,888,936 Spembly Cryosurgery Ltd., UK GBP 350,000 1.672 $ 585,200 ----------- Total $14,247,621 ===========
(12) Trade accounts receivable held by the Seller and/or its Affiliates (other than the Acquired Companies) from any of the Acquired Companies as of April 30, 1998, excluding (i) accounts payable from ESRL to the Seller totalling 1,723,962.50 SEK relating to the Marseilles Leksell Gamma Plan and (ii) accounts payable owed by EIL to the Seller totalling 3,866,070 SEK relating to the Birmingham Surgiscope." 4. There shall be added a new paragraph (f) at the end of Section 15.4, as follows: "(f) MODUS Consignment Inventory. At any time prior to December 31, 1998, --------------------------- the Buyer may, by giving written notice to the Seller, require the Seller to repurchase, at book value, any MODUS consignment inventory which is suitable exclusively for facial use and, following such repurchase, the Buyer shall deliver such inventory to EII." 5. Notwithstanding any other provision of the Purchase Agreement to the contrary, the Purchase Price shall be $32,760,261 and no further adjustments shall be made in such Purchase Price, except for indemnification payments pursuant to Section 14.6 of the Purchase Agreement that are treated as a reduction in the Purchase Price. 6. Except as set forth above, the Purchase Agreement is hereby ratified and confirmed in all respects. IN WITNESS WHEREOF, the Buyer and the Seller have each caused this amendment to be duly executed in its corporate name by a duly authorized representative as of the date first above written. SELLER: ELEKTA AB (PUBL) /s/ Jonas Serlachius ------------------------------- By: JONAS SERLACHIUS ---------------------------- Title: Attorney-in-Fact ------------------------- BUYER: NITINOL MEDICAL TECHNOLOGIES, INC. /s/ TM Tully ------------------------------- By: TM TULLY ---------------------------- Title: CEO ------------------------- 2 Exhibit 5.6 Promissory Notes Payable to the Seller, each dated April 30, 1998 Borrower Amount Rate Approximate USD - -------- ------ ---- --------------- Elekta Holding SA, France FF 66,838,000 0.1655 $ 11,061,689 Elekta Holding SA, France ESP 2,500,000 0.0066 $ 16,500 Elekta Instruments SA, Spain ESP 16,450,000 0.0066 $ 108,570 Elekta Instruments Ltd., UK GBP 350,912.64 1.672 $ 586,726 Spembly Medical Ltd., UK GBP 1,129,746.69 1.672 $ 1,888,936 Spembly Cryosurgery Ltd., UK GBP 350,000 1.672 $ 585,200 ------------ Total $ 14,247,621 ============ 3 EX-10.1 3 ASSIGNMENT AND ASSUMPTION AGREEMENT EXHIBIT 10.1 ASSIGNMENT AND ASSUMPTION AGREEMENT This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is made and entered into on July 8, 1998 (the "Closing Date"), by and among ELEKTA AB (publ), a Swedish corporation ("Seller") and NITINOL MEDICAL TECHNOLOGIES, INC., a Delaware corporation ("Buyer"). RECITALS: WHEREAS, Seller and Buyer have entered into that certain Purchase Agreement dated as of May 8, 1998 (the "Purchase Agreement"), providing for, among other things, the sale by the Seller and its Affiliates, and the purchase by Buyer, of certain assets of the Seller and its Affiliates constituting the Business; WHEREAS, the execution and delivery of this Agreement by the parties hereto is a condition to the obligation of the other parties hereto to consummate the transactions contemplated by the Purchase Agreement; NOW, THEREFORE, in consideration of the premises and the mutual promises, representations, warranties and covenants set forth herein, the parties hereto hereby agree as follows: 1. Defined Terms. Capitalized terms used in this Agreement and not ------------- otherwise defined herein are used herein as defined in the Purchase Agreement. 2. Assignment of Contracts. Seller and the Companies hereby convey and ----------------------- assign to the Buyer, its successors and assigns, all of their title, rights and interests in and to the contracts listed on Exhibit 3.9 of the Purchase Agreement (the "Assigned Contracts"). 3. Assumption of Assigned Contracts. Buyer hereby undertakes, assumes and -------------------------------- agrees, subject to the limitations contained herein, to perform, pay or discharge when due those liabilities of the Seller and its Affiliates under the Assigned Contracts. 4. Contested Liabilities. Nothing contained herein shall require Buyer to --------------------- perform, pay or discharge any debts, liabilities or obligations assumed hereby so long as Buyer shall in good faith contest or cause to be contested and amount or validity thereof. 5. Indemnification. Nothing contained herein shall reduce or otherwise --------------- affect Buyer's rights to be indemnified by the Seller in accordance with the terms of the Purchase Agreement. 6. Consequences of Absence of Consent. Nothing in this Agreement shall be ---------------------------------- deemed to constitute or require an assignment or an attempt to assign any contract or other agreement with any third party if the attempted assignment thereof without the consent of any such third party would constitute a breach thereof or adversely affect in any way the rights of 1 Seller and Buyer thereunder. If any such consent has not been obtained at or prior to the Closing Date, or the attempted assignment of such contract or agreement without such consent would have an adverse effect on such rights or Buyer would not in fact receive such rights, Seller shall cooperate with Buyer, at Buyer's expense, in any reasonable arrangement designed to provide for Buyer the benefits thereunder, including enforcing for the benefit of Buyer any or all rights of Seller (or any of its Affiliates) against any such third party arising out of the breach or cancellation thereof by any such third party or otherwise. 7. AFFILIATE INVOLVEMENT. It is understood that both Seller and Buyer --------------------- conduct parts of their respective businesses through and in conjunction with Affiliates and are likely to do so in the future. In this Agreement, references to Affiliates are made in certain provisions for the sake of clarity, but some repeated references have been avoided because the terms "Seller" and "Buyer" are intended to encompass the Affiliates of each insofar as that is necessary to give full effect to the rights and obligations of the parties hereunder and to prevent results which are anomalous in the context of the transactions contemplated hereby. The covenant or agreement of a party to do or not to do a thing is also such party's covenant or agreement to cause its relevant Affiliates to do or not to do that thing. A covenant, agreement, representation or warranty for the benefit of a party is also for the benefit of such party's relevant Affiliates. The act, omission or knowledge of a party's relevant Affiliate is attributed to the party. Damages suffered by a relevant Affiliate of a party are also suffered by the party. 8. DISPUTE RESOLUTION ------------------ 8.1 OBJECTIVE. This Agreement will be implemented by the parties and --------- their Affiliates in more than one jurisdiction. The negotiations of the parties have focused primarily on the ordinary meaning of the provisions of this Agreement and not on the legal effects those provisions might have under the laws of a particular jurisdiction. One of the purposes of this Section is to minimize the possibility of an unexpected reordering of agreed rights and obligations. 8.2 NO AFFILIATE ACTIONS. Neither party shall permit any of its -------------------- Affiliates to initiate or participate in any legal proceeding in connection with any controversy or claim arising out of or relating to this Agreement or the transactions contemplated hereby; rather, Buyer and Seller shall settle all such controversies or claims on behalf of their Affiliates by arbitration conducted by the parties in accordance with this Section. Buyer and Seller shall cause their Affiliates to comply with any award rendered in an arbitration proceeding pursuant hereto. 8.3 ARBITRATION. Any controversy or claim arising out of or relating ----------- to this Agreement or the transactions contemplated hereby shall be determined by arbitration in accordance with the Rules of Arbitration of the London Court of Arbitration, and judgment upon the award rendered by the arbitral tribunal may be entered in any court having jurisdiction thereof. The place of arbitration shall be London, England, and the language of the arbitration shall be English. The arbitral tribunal shall apply the substantive laws of the State of Georgia without regard to the conflicts of laws principles of the State of Georgia. 8.4 GOVERNING LAW. This Agreement shall be governed by and ------------- interpreted in accordance with the laws of the State of Georgia. 2 9. Conflict. If there is any conflict between the terms of this Agreement -------- and the Purchase Agreement, the terms of the Purchase Agreement shall prevail. Nothing contained in this Agreement shall be deemed to amend any provision of the Purchase Agreement. IN WITNESS WHEREOF, Buyer and Seller have each caused this Agreement to be duly executed in its corporate name by a duly authorized representative as of the date first above written. SELLER: ELEKTA AB (PUBL) By: /s/ Jonas Serlachius --------------------------------- Title: Attorney-in-Fact ------------------------------ BUYER: NITINOL MEDICAL TECHNOLOGIES, INC. By: /s/ Thomas M. Tully --------------------------------- Title: CEO ------------------------------ 3 EX-10.2 4 TAX COVENANT, DATED JULY 8, 1998 EXHIBIT 10.2 TAX COVENANT as of July 8, 1998 Between ELEKTA AB (PUBL) and NITINOL MEDICAL TECHNOLOGIES, INC. relating to the acquisition of the entire issued share capital of ELEKTA INSTRUMENTS LIMITED 1 DEED OF COVENANT This DEED of COVENANT, dated as of July 1998 between ELEKTA AB (PUBL) a Swedish corporation ("Seller") and NITINOL MEDICAL TECHNOLOGIES, INC., a Delaware corporation ("Buyer") WITNESSETH This DEED is entered into pursuant to the Agreement (as defined below). 1 INTERPRETATION. -------------- 1.1 In this Deed and unless the context otherwise requires words and expressions referred to in the Agreement shall have the meanings set out therein save that the following expressions shall have the following meanings: Expression Meaning ---------- ------- "the Accounting Date" 30th April 1998 "Accounts" The [audited] accounts of each of the Companies for the financial year ended on the Accounting Date comprising a balance sheet, a profit and loss account, notes and directors' and auditors reports, which are consolidated in the "Closing Balance Sheet" referred to in the Agreement. "ACT" Advance corporation tax "Agreement" The agreement dated 8th May 1998 herewith between (1) Seller and (2) Buyer concerning the sale of the Seller's neurosurgical instruments business "the Auditors" The auditors for the time being of each of the Companies "Assessment" A claim, assessment, notice, demand or other document issued or action taken by or on behalf of a Taxation Authority by which a Company is liable or is sought to be made liable to make payment to a Taxation Authority or is denied or sought to be denied a Relief "Buyer's Relief" (a) Any Relief which was treated as an asset of any of the Companies in their respective Accounts; 2 (b) any Relief which was taken into account in computing (and so reducing or eliminating) any provision for deferred tax which appears in the Accounts or which would have appeared in the Accounts but for the presumed availability of such Relief; and (c) any Relief which arises wholly or mainly as a result of any Event which has occurred or occurs after the Accounting Date "Claim" Any notice, demand, assessment, letter or other document issued, or action taken, by or on behalf of any Taxation Authority and the submission of any Taxation form, return or computation from which, in either case, it appears that any of the Companies are or may be subject to a Liability to Taxation or other liability in respect of which the Seller is or may be liable under c1ause ------ 2 - "Companies" EIL, SCL and Spembly "Company" Any of the Companies "Dispute" Any dispute, appeal, negotiations or other proceedings in connection with a Claim "Event" Any event, fact or circumstance including but not limited to: (a) any transaction, action or omission (whether or not any of the Companies are party to it); (b) the earning, receipt or accrual for any Taxation purpose of any income, profits or gains; (c) the incurring for any Taxation purpose of any loss or expenditure; (d) the declaration, payment or making of any dividend or other distribution; (e) the sale and purchase of the shares in the Companies pursuant to the Agreement; and 3 (f) Closing "ICTA" Income and Corporation Taxes Act 1988 "Liability to Taxation" (a) Any liability of any of the Companies to make an actual payment of Taxation; and (b) the use by any of the Companies of any Buyer's Relief to reduce or eliminate any liability of any of the Companies to make an actual payment of Taxation in respect of which Seller would otherwise have been liable under clause 2 -------- "Relief" Any relief, allowance, exemption, set- off, deduction or credit available from, against or in relation to Taxation or in the computation for any Taxation purpose of income, profits or gains "Saving" The reduction or elimination of any liability of any of the Companies to make an actual payment of any Taxation in respect of which the Seller would not have been liable under clause 2, by the -------- use of any Relief arising wholly as a result of a Liability to Taxation in respect of which the Seller has made a payment under clause 2 -------- "Tax" and "Taxation" (a) Any tax, duty, impost or levy, past or present, of the United Kingdom or elsewhere, whether governmental, state, provincial, local governmental or municipal, including but not limited to income tax (including income tax required to be deducted or withheld from or accounted for in respect of any payment under section 203 ICTA or otherwise), corporation tax, ACT, capital gains tax, inheritance tax, VAT, customs and other import or export duties, rates, stamp duty, stamp duty reserve tax, national insurance and social security contributions; and (b) any fine, penalty, surcharge, interest or other imposition relating to any tax, duty, impost or levy mentioned in paragraph (a) ------------- of this definition or to any account, record, form, return or 4 computation required to be kept, preserved, maintained or submitted to any person for the purposes of any such tax, duty, impost or levy "Taxation Authority" Any authority, whether of the United Kingdom or elsewhere, competent to impose, assess or collect Taxation, including but not limited to the Board of Inland Revenue, the Commissioners of Customs and Excise and the Department of Social Security "VAT" Value added tax. 1.2 references to Events include Events which are deemed to have occurred for any Taxation purpose and references to income, profits or gains earned, received or accrued for any Taxation purpose include income, profits or gains which are deemed to have been earned, received or accrued for any Taxation purpose and any reference to any Event which occurred on or before Closing shall be deemed to include a series or combination of Events, the first of which occurred outside the ordinary course of business on or before Closing and those occurring after Closing occurred within the ordinary course of trading; 1.3 references to the loss of a Relief include the disallowance (whether in whole or in part) of a Relief and the failure to obtain (whether in whole or in part) a Relief (whether as a result of the surrender of the Relief to another company or otherwise); 1.4 references to any statute or statutory provisions will, unless the context otherwise requires, be construed as including references to any earlier statute or the corresponding provisions of any earlier statute, whether repealed or not, directly or indirectly amended, consolidated, extended or replaced by such statute or provisions, and to any subsequent statute or the corresponding provisions of any subsequent statute directly or indirectly amending, consolidating, extending, replacing or re-enacting the same, and will include any orders, regulations, instruments or other subordinate legislation made under the relevant statute or statutory provisions. 2 COVENANT. Subject to the provisions of this Deed, the Seller covenants with -------- the Buyer (for itself and as trustee for its successors in title) to pay to the Buyer an amount equal to the amount of any Liability to Taxation which has arisen or arises as a result of or in connection with any Event which occurred on or before Closing, whether or not such Liability to Taxation has been discharged on or before Closing and all reasonable costs and expenses incurred by the Buyer in connection with any successful claim under this Deed. 3 QUANTIFICATION. For the purposes of clause 2 the amount of a Liability to -------------- -------- Taxation will be determined as follows: 3.1 the amount of a Liability to Taxation falling within paragraph (a) ------------- of the definition of that expression in clause 1.1 will be the amount of the ---------- actual payment of Taxation which any of the Companies are liable to make; and 5 3.2 the amount of a Liability to Taxation falling within paragraph (b) of ------------- the definition of that expression in clause 1.1 will be the amount of Taxation ---------- saved by the Companies as a result of the use of the Buyer's Relief. 4 Exclusions. ---------- 4.1 The Seller will not be liable under this Deed unless within seven years after Closing the Buyer has given written notice to the Seller of any Claim whatsoever relating to such Liability to Taxation. 4.2 Clause 2 does not apply to a liability hereunder to the extent that: -------- 4.2.1 any provision or reserve in respect of the liability is made in the Accounts or discharge thereof is reflected in the Accounts; and/or 4.2.2 the liability arises in consequence of an Event which has occurred since the Accounting Date in the relevant Company's ordinary course of trading; and/or 4.2.3 it arises or is increased or any allowance, provision or reserve for the liability made in the Accounts is insufficient by reason of the imposition of or increase in the rates of Tax (whether or not retrospective) as a consequence of any change in law, regulation or published revenue authority practice or policy or the withdrawal of any concession occurring after Closing with or without retrospective effect; and/or 4.2.4 the liability arises in consequence of a voluntary act or omission of the Buyer or a Company or any member of the Buyer's group after Closing otherwise than in the ordinary course of business of a Company; and/or 4.2.5 any amount otherwise subject to the covenant contained in clause 2 has been recovered under the Agreement; and/or - -------- 4.2.6 a Company or the Buyer has already recovered from any other person any sum in respect of the Liability for Tax in question; and/or 4.2.7 the liability would not have arisen but for a disclaimer, of, or election to reduce, capital allowances or any other claim, election, surrender or disclaimer where such claim, election, surrender or disclaimer is made after Closing and was not assumed to have been made, given or done in the Accounts; and/or 4.2.8 the liability arises as a result of any matter or thing done or omitted to be done prior to Closing by the Seller or the Companies at the request of the Buyer; and/or 4.2.9 the liability arises in respect of stamp duty or stamp duty reserve tax arising by virtue of the agreement to sell and purchase the shares or the assets pursuant to the Agreement or the completion of the transfer of such shares or assets; and/or 4.2.10 the liability would not have arisen but for or has been increased by a failure or omission by a Company to make any proper claim, election, surrender or disclaimer or to give any notice or consent or do any other thing after Closing, the making 6 giving or doing of which was taken into account or assumed in computing the provision for Tax (including the provision for deferred tax) in the Accounts; and/or 4.2.11 the liability would not have arisen or is increased because notice in writing of any Assessment which does or may give rise to a liability under this Deed (specifying in reasonable detail, so far as reasonably practicable, the event matter or default which gives rise to the Assessment and, if known to the Buyer, the amount of the liability) is not given to the Seller in accordance with clause 6.1 of this Deed; and/or ---------- 4.2.12 the liability is to fines, penalties or interest in respect of any Tax which arises or which is increased as a result of the failure of the Buyer to comply with its obligations under this Deed or under the Agreement; and/or 4.2.13 there is available to a Company any Relief, other than a Relief arising after Closing or a Relief which is taken into account as an asset in the Accounts, which is or can be offset against the liability in question (and so that the Group Member shall take all necessary steps to claim the benefit of any such Relief); and/or 4.2.14 the liability is in respect of any Tax which has been paid or discharged prior to Closing at no cost to the Buyer; 4.2.15 the liability arises or is increased by a change in the accounting principles, bases, policies and methods of a Company after Closing; and/or 4.2.16 the liability to fines, penalties or interest in respect of any Tax which arises or which is increased as a result of the failure of the Buyer to comply with its obligations under the Agreement or this Deed, and/or 4.2.17 the liability is increased, or would not have arisen, but for the Buyer's residence for Tax purposes outside the United Kingdom; and/or 4.2.18 the liability arises from the cessation of trade or the winding up of a Company or a major change in the nature of conduct of the trade of a Company which, in any case, occurs after Closing; and/or 4.2.19 the liability arises in respect of actual as opposed to deemed profits which are earned or received by a Company; and/or 4.2.20 the Seller has made payment in respect of the liability pursuant to section 767A et seq ICTA or any other provision in the UK or elsewhere imposing liability on the Seller or any connected person (howsoever defined) for Tax primarily chargeable against a Company (and so that the Seller shall be entitled to pay relevant amounts assessed under any such provision directly to the Tax Authority in question towards discharge of its obligations hereunder or under the Agreement). 4.3 The provisions of section 14.3 of the Agreement (other than the provision concerning the period during which written notice of a claim must be made) shall operate to limit the liability of the Seller under this Deed. 7 4.4 The Seller shall not be liable under this Deed to the extent more than one claim is made, or action brought, by the Buyer in respect of loss in respect of the same facts or subject matter. 5 Due Date for Payment. -------------------- 5.1 The due date for the making of a payment by the Seller under this Deed will be:- 5.1.1 the date falling ten clear business days after the Buyer has served written notice on the Seller demanding such payment; or 5.1.2 in any case involving a liability of any of the Companies or the Buyer to make an actual payment (whether or not a payment of Taxation), the later of the date mentioned in clause 5.1.1 and the date falling seven clear ------------ business days before the last date upon which the payment is required to be made to the person entitled to the payment (after taking into account any postponement of the due date for payment of any Taxation which is obtained). 5.2 If any payment required to be made by the Seller under this Deed is not made by the due date, ascertained in accordance with clause 5.1. then, ---------- except to the extent that the Seller's liability under clause 2 compensates the -------- Buyer for the late payment by virtue of the definition of the expression "Taxation" in clause 1.1 extending to interest, such payment will bear interest ---------- from the due date for payment at the annual rate of 2 per cent above the base lending rate from time to time of Barclays Bank plc, accruing on a daily basis until payment is made, whether before or after any judgment. 6 Claims Procedure. ---------------- 6.1 The Buyer will as soon as reasonably practicable give notice of any Claim to the Seller, provided that the giving of such notice will not be a condition precedent to the liability of the Seller under clause 2. -------- 6.2 Provided that the Seller indemnifies and secures the Company to the reasonable satisfaction of the Buyer against all reasonable costs and expenses (including interest on overdue Taxation) which may be incurred thereby, the Buyer will procure that the Company, at the Seller's cost and expense, takes such action and gives such information and assistance in connection with its Taxation affairs as the Seller may reasonably request to dispute, appeal against, settle or compromise any Claim, including, but not limited to,:- 6.2.1 applying to postpone (so far as legally possible) the payment of any Taxation; and 6.2.2 allowing the Seller to undertake, at its own cost and expense, the conduct of the Dispute. 8 6.3 The Seller will as soon as reasonably practicable inform the Buyer of all matters relating to any Dispute conducted by or at the request of the Seller and will provide the Buyer with copies of all correspondence and other documents relating thereto. 6.4 Without prejudice to the liability of the Seller under this Deed: 6.4.1 the Buyer will not be obliged to prevent the Company from making a payment of Taxation at the time necessary to avoid incurring any fine, penalty, surcharge, interest or other imposition in respect of any unpaid Taxation; and 6.4.2 if the Seller fails within fifteen business days of the Buyer giving written notice requiring it to do so to inform the Buyer of any action which it wishes the Buyer to procure any of the Companies to take under clause ------ 6.2, the Buyer will be entitled to procure that the Companies settle or - --- compromise any Claim on such terms as it determines in its absolute discretion. 7 SAVINGS. ------- 7.1 If (at the Seller's request) the Auditors determine that any of the Companies have obtained a Saving, the Buyer will as soon as reasonably practicable thereafter, repay to the Seller the lesser of: 7.1.1 the amount of the Saving (as determined by the Auditors); and 7.1.2 the amount paid by the Seller under clause 2 in respect of the -------- Liability to Taxation which gave rise to the Saving less any part of that amount previously repaid to the Seller under any provision of this Deed. 7.2 In determining whether any of the Companies have obtained a Saving, the Auditors will act as experts and not as arbitrators and their determination will (in the absence of manifest error) be conclusive and binding on the parties. 8 OVER PROVISIONS AND UNDERSTATEMENT. ---------------------------------- 8.1 The amount of the Sellers' liability under this Deed shall be reduced by: (i) the amount (if any) by which any provision for any Liability to Taxation in the Accounts is confirmed by the relevant Group Member's auditors at the request of any party to be an over provision; and/or (ii) the amount (if any) by which the value attributed in the Accounts to any Relief which is treated as an asset therein is confirmed by the relevant Company's auditors at the request of any party shall be understated, and to the extent that any such over provision or under-statement shall be so taken into account in computing the Seller's liability under this Deed, it shall not thereafter be regarded as an over provision or understatement in the Accounts. 8.2 If the Seller shall have paid any amount under this Deed and subsequently: (i) the amount (if any) by which any provision for any Liability to Taxation in the Accounts is confirmed by the relevant Company's auditors at the request of any party to be an over provision; and/or (ii) the amount (if any) by which the value attributed in the Accounts to any Relief which is treated as an asset therein is confirmed by the relevant Company's auditors at 9 the request of any party shall be understated, the Buyer shall or shall procure that the relevant Company shall repay to the Seller an amount equal to the lesser of such payment and the amount of the over provision or the under- statement (as the case may be) and the amount of any relevant over provision or under-statement shall thereafter for the purposes of this clause 9 be treated as -------- reduced (or, in the case of an understatement, increased) by the amount of such repayment hereunder. 8.3 If the Buyer shall discover that there has been such an over provision or under-statement it shall as soon as reasonably practicable give to the Seller such details of it of which the Buyer shall be aware, together with such relevant information as the Seller shall (at the Seller's expense) reasonably request for the purposes of determining the extent of such over provision or under-statement. 9 BUYER'S COVENANT. ---------------- The Buyer covenants to pay to the Seller: 9.1 any Liability to Taxation of a Company in respect of which the Seller is liable to make a payment to the Buyer pursuant to this Deed and where the assessment under section 767A ICTA would not have been made but for the failure by a Group Member to discharge that liability to Taxation; and 9.2 where the Seller has made a payment in respect of Taxation to the Buyer under this Deed and a Company fails to discharge such Taxation, an amount equal to any Liability to Taxation which subsequently becomes payable by the Seller under section 767A ICTA in respect of the same subject matter. 10 RECOVERY FROM OTHER PERSONS. --------------------------- 10.1 If the Company recovers from any other person (including any Taxation Authority) any amount which is referable to a Liability to Taxation or other liability of any of the Companies in respect of which the Seller has made a payment under clause 2, the Buyer will repay to the Seller the lesser of: -------- 10.1.1 the amount so recovered (less any reasonable costs and expenses incurred by the Company); and 10.1.2 the amount paid by the Buyer under clause 2 in respect of the -------- Liability to Taxation or other liability in question less any part of such amount previously repaid to the Buyer under any provision of this Deed. 10.2 Upon the Buyer becoming aware that the Companies are entitled to recover any amount mentioned in clause 9.1, the Buyer will promptly give notice ---------- of that fact to the Seller and provided that the Seller indemnifies and secures the Company to the reasonable satisfaction of the Buyer against all reasonable costs and expenses which may be incurred thereby, the Buyer will procure that the Company, at the Seller's cost and expense, takes such action as the Seller may reasonably and promptly request to effect such recovery. 10 11 WITHHOLDINGS. All sums payable by the Seller under this Deed shall be paid ------------ free and clear of all deductions or withholdings unless the deduction or withholding is required by law, in which event the Seller shall pay such additional amount as shall be required to ensure that the net amount received by the Buyer under this Deed will equal the full amount which would have been received by it had no such deduction or withholding been required to be made provided that if the Buyer subsequently obtains a credit, repayment or other form of relief for Taxation in respect of the amount withheld or deducted it shall, as soon as reasonably practicable after it obtains the benefit of the credit, repayment or other form of relief account to the Seller for the lesser of: (a) the amount of the benefit of the credit, repayment or other form of relief less the reasonable costs and expenses incurred in obtaining such credit, repayment or other benefit; and (b) the amount of the withholding or deduction. 12 TAX ON INDEMNITY PAYMENTS. If any Taxation Authority brings into charge to ------------------------- tax any sum paid to the Buyer (other than a payment to the Buyer in its capacity as trustee for its successors in title or interest payable under Clause 5.2) under this Deed (including in circumstances when any Relief is available in respect of such charge to tax) then the Seller shall pay such additional amount as shall be required to ensure that the total amount paid, less the tax chargeable on such amount (or that would be so chargeable but for such Relief), is equal to the amount which would otherwise be payable under this Deed. 13 GENERAL. All payments by the Seller under this Deed will be treated as ------- repayments by the Seller of the consideration paid pursuant to the Agreement. 14 GOVERNING LAW. This Deed shall be governed by and interpreted in accordance ------------- with the law of Georgia. 15 DISPUTE RESOLUTION. Any controversy or claim arising out of or relating to ------------------ this Agreement shall be finally settled by arbitration as provided in section 17.3 of the Agreement. 11 IN WITNESS of which this Deed has been duly executed by the parties and Delivered on the date set out above. SIGNED by the undersigned ) /s/ Jonas Serlachius ---------------------- for and on behalf ) By: Jonas Serlachius of ELEKTA AB (PUBL) and ) Title: Attorney-in-Fact DELIVERED as a Deed ) SIGNED by the undersigned ) /s/ Thomas M. Tully ---------------------- for and on behalf ) By: TM Tully of NITINOL MEDICAL ) Title: CEO TECHNOLOGIES, INC. and ) DELIVERED as a Deed ) 12 EX-10.3 5 SUBORDINATED NOTE & COMMON STOCK PURCHASE AGREEMENT EXHIBIT 10.3 ________________________________________________________________________ SUBORDINATED NOTE AND COMMON STOCK PURCHASE AGREEMENT BY AND AMONG NITINOL MEDICAL TECHNOLOGIES, INC., WHITNEY SUBORDINATED DEBT FUND, L.P. AND, FOR CERTAIN PURPOSES, J.H. WHITNEY & CO. _________________________________ DATED AS OF JULY 8, 1998 _________________________________ _______________________________________________________________________ TABLE OF CONTENTS -----------------
Page ---- ARTICLE 1 DEFINITIONS 1 1.1 Definitions 1 1.2 Accounting Term: Financial Statements 13 1.3 Knowledge of the Company 13 ARTICLE 2 PURCHASE AND SALE OF THE WSDF NOTE AND THE PURCHASED SHARES 13 2.1 Purchase and Sale of the WSDF Note and the Purchased Shares 13 2.2 Fees at Closing 14 2.3 Closing 14 2.4 Financial Accounting Positions; Tax Reporting 14 ARTICLE 3 CONDITIONS TO THE OBLIGATION OF THE PURCHASER TO PURCHASE THE WSDF NOTE AND THE PURCHASED SHARES 15 3.1 Representations and Warranties 15 3.2 Compliance with this Agreement 15 3.3 Secretary's Certificates 15 3.4 Documents 15 3.5 Opinion of Counsel 16 3.6 Approval of Counsel to the Purchaser 16 3.7 Consents and Approvals 16 3.8 No Material Judgment or Order 16 3.9 Pro Forma Balance Sheet 16 3.10 Goodstanding Certificates 16 3.11 No Material Adverse Change 17 3.12 Due Diligence 17 3.13 Certificate of Incorporation and By-Laws of the Company and the Subsidiaries 17 3.14 Market Conditions 17 3.15 No Default or Breach 17 3.16 Elekta Purchase Agreement 17 3.17 Fairness Opinion 18 3.18 Facilities Fee and Transaction Fee 18 3.19 Registration Rights Agreement. 18 3.20 Security Documents. 18 ARTICLE 4 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL THE WSDF NOTE AND THE PURCHASED SHARES 18 4.1 Representations and Warranties 19 4.2 Compliance with this Agreement 19
Page ---- 4.3 Consents and Approvals 19 4.4 Elekta Purchase Agreement 19 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 19 5.1 Corporate Existence and Power 19 5.2 Corporate Authorization; No Contravention 20 5.3 Governmental Authorization; Third Party Consents 20 5.4 Binding Effect 20 5.5 No Legal Bar 20 5.6 Litigation 20 5.7 Compliance with Laws 21 5.8 No Default or Breach 21 5.9 Title to Properties 21 5.10 Use of Real Property 22 5.11 Taxes 23 5.12 Financial Condition 25 5.13 ERISA -- Prohibited Transactions 26 5.14 Disclosure 26 5.15 Absence of Certain Changes or Events 27 5.16 Environmental Matters 27 5.17 Investment Company/Government Regulations 28 5.18 Subsidiaries 28 5.19 Capitalization 29 5.20 Private Offering 30 5.21 Broker's, Finder's or Similar Fees 30 5.22 Labor Relations 30 5.23 Employee Benefit Plans 31 5.24 Patents, Trademarks, Etc. 32 5.25 Potential Conflicts of Interest 34 5.26 Trade Relations 35 5.27 Outstanding Borrowings 35 5.28 Material Contracts 35 5.29 Insurance 35 5.30 Products Liability 36 5.31 Solvency 36 5.32 Year 2000 Systems 36 5.33 Elekta Purchase Agreement 36 5.34 Commission Documents 36 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND WHITNEY 37 6.1 Authorization; No Contravention 37 6.2 Binding Effect 37 6.3 No Legal Bar 37 6.4 Purchase for Own Account 38 6.5 Broker's, Finder's or Similar Fees 38 6.6 Governmental Authorization; Third Party Consent 38
Page ---- ARTICLE 7 INDEMNIFICATION 38 7.1 Indemnification 38 7.2 Procedure; Notification 39 ARTICLE 8 AFFIRMATIVE COVENANTS 40 8.1 Financial Statements and Other Information 41 8.2 Preservation of Corporate Existence 44 8.3 Payment of Obligations 45 8.4 Compliance with Laws 45 8.5 Inspection 45 8.6 Payment of Note 46 8.7 Insurance 46 8.8 Books and Records 46 8.9 Use of Proceeds 46 8.10 Initial Interest Payments 46 ARTICLE 9 NEGATIVE COVENANTS 47 9.1 Fundamental Changes; Consolidations, Mergers and Acquisitions 47 9.2 Transactions with Affiliates 47 9.3 No Inconsistent Agreements 47 9.4 Limitation on Indebtedness 47 9.5 Limitation on Liens 49 9.6 Dispositions of Assets 50 9.7 Limitations on Restricted Payments 51 9.8 Financial Covenants 51 9.9 Employee Benefit Plans 53 9.10 Limitation on Business of the Company 54 9.11 Investments 54 9.12 Contingent Obligations 54 9.13 Management Fees and Compensation 55 9.14 Fiscal Year 55 9.15 Subsidiaries 55 9.16 No Negative Pledges 55 9.17 No Restrictions on Subsidiary Distributions to the Company 55 9.18 Bank Accounts 55 ARTICLE 10 PREPAYMENT 56 10.1 Optional Prepayment 56 10.2 Mandatory Prepayment 56 ARTICLE 11 MISCELLANEOUS 56 11.1 Survival of Representations and Warranties 56 11.2 Dispositions by the Purchaser 56 11.3 Notices 56 11.4 Successors and Assigns 57 11.5 Termination 58
Page ---- 11.6 Amendment and Waiver 58 11.7 Signatures; Counterparts 59 11.8 Headings 59 11.9 GOVERNING LAW 59 11.10 Determinations, Request or Consents 59 11.11 JURISDICTION, JURY TRIAL WAIVER, ETC. 59 11.12 Severability 60 11.13 Rules of Construction 60 11.14 Entire Agreement 60 11.15 Certain Expenses 61 11.16 Publicity 61 11.17 Further Assurances 61
Exhibit A Form of WSDF Note Exhibit B-1 Form of Legal Opinion of Hale and Dorr LLP Exhibit B-2 Form of Legal Opinion of Collyer-Bristow Exhibit B-3 Form of Legal Opinion of Nauta Dutilh Exhibit C Form of Guarantee and Collateral Agreement Exhibit D Form of UK Pledge Agreement Exhibit E Form of Dutch Pledge Agreement Exhibit F Form of Registration Rights Agreement Exhibit G Form of Compliance Certificate Exhibit H Financial Covenant Calculations Schedule 5.6 Litigation Schedule 5.7 Compliance with Laws Schedule 5.9(a) Title to Properties Schedule 5.9(b) Title to Properties -- Leases Schedule 5.10 Use of Real Property Schedule 5.11 Taxes Schedule 5.14(b) Material Adverse Effects Schedule 5.15 Absence of Certain Changes or Events Schedule 5.16 Environmental Matters Schedule 5.18 Subsidiaries Schedule 5.19(a) Capitalization Schedule 5.19(b) Exchangeable Securities Schedule 5.22 Labor Relations Schedule 5.23(a) Employee Benefit Plans Schedule 5.23(c) Prohibited Transaction Schedule 5.23(d) COBRA Schedule 5.24(a) Intellectual Property Exceptions Schedule 5.24(b)(i) Patents, Copyrights and Trademarks Schedule 5.24(b)(ii) IP Licenses - Licensee Schedule 5.24(b)(iii) IP Licenses - Licensor Schedule 5.24(e) Intellectual Property - Litigation Schedule 5.24(h) Intellectual Property - Indemnification Schedule 5.25 Potential Conflicts of Interest Schedule 5.26 Trade Relations Schedule 5.27 Outstanding Borrowings Schedule 5.28 Material Contracts Schedule 5.29 Insurance Schedule 5.30 Products Liability Schedule 5.32 Year 2000 Systems Schedule 9.2 Transactions with Affiliates Schedule 9.5 Existing Liens Schedule 9.12 Permissible Contingent Obligations Schedule 9.13 Permissible Management Fees and Compensation SUBORDINATED NOTE AND COMMON STOCK PURCHASE AGREEMENT SUBORDINATED NOTE AND COMMON STOCK PURCHASE AGREEMENT, dated as of July 8, 1998, by and among NITINOL MEDICAL TECHNOLOGIES, INC. (the "COMPANY"), a Delaware corporation, WHITNEY SUBORDINATED DEBT FUND, L.P. (the "PURCHASER") and, solely for the purposes of Section 2.2, Article 6 and Section 11.2 hereof, J.H. WHITNEY & CO. ("WHITNEY"). W I T N E S S E T H: WHEREAS, the Company proposes to acquire (the "ACQUISITION") certain assets of Elekta AB (PUBL), a Swedish corporation ("ELEKTA"), relating to its neurosurgical instrument business pursuant to a Purchase Agreement, dated May 8, 1998, among Elekta and the Company (the "ELEKTA PURCHASE AGREEMENT"); and WHEREAS, concurrently with the Acquisition, the Company wishes to sell to the Purchaser and the Purchaser wishes to purchase from the Company, a subordinated promissory note (the "WSDF NOTE"), due September 30, 2003, in the principal amount of $20,000,000, substantially in the form attached hereto as Exhibit A, and 561,207 shares (the "PURCHASED SHARES") of common stock, $.001 - --------- par value (the "COMMON STOCK"), of the Company upon the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS ----------- 1.1 DEFINITIONS. As used in this Agreement, and unless the context ----------- requires a different meaning, the following terms have the meanings indicated: "ACQUISITION" shall have the meaning ascribed to such term in the first Whereas clause. "ACQUISITION DOCUMENTS" shall mean the Elekta Purchase Agreement and the agreements entered into in connection therewith. "AFFILIATE" shall mean any Person (a) directly or indirectly controlling, controlled by, or under common control with, the Company, (b) directly or indirectly owning or holding five percent (5%) or more of any equity interest in the Company, or (c) five percent (5%) or more of whose voting stock or other equity interest is directly or indirectly owned or held by the Company. For purposes of this definition, "control" (including with correlative meanings, the terms "controlling," "controlled by" and under "common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "AFFILIATED GROUP" shall have the meaning set forth in Section 1504(a) of the Code. "AGREEMENT" shall mean this Agreement, including the exhibits and schedules attached hereto, as the same may be amended, supplemented or modified in accordance with the terms hereof. "ASSET DISPOSITION" shall mean the disposition, whether by sale, lease, transfer, loss, damage, destruction, condemnation or otherwise of any of the following: (a) any of the stock of any of the Company's Subsidiaries or (b) any substantial portion or all of the assets of the Company or its Subsidiaries other than sales of inventory in the ordinary course of business. "NET PROCEEDS" of any Asset Disposition means cash proceeds received by the Company or any of its Subsidiaries from any Asset Disposition (including insurance proceeds, awards of condemnation, and payments under notes or other debt securities received in connection with any Asset Disposition), net of (x) the costs of such sale, lease, transfer or other disposition (including taxes attributable to such sale, lease or transfer), and (y) amounts applied to repayment of Indebtedness secured by a Lien on the asset or property disposed. "AUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to that term in Section 5.12(a) of this Agreement. "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required by law or executive order to close. "BY-LAWS" shall mean, unless the context in which it is used otherwise requires, the By-laws of the Company or any of its Subsidiaries as in effect on the Closing Date. "CAPITAL EXPENDITURES" shall mean the aggregate expenditures (whether or not financed) made by the Company and its Subsidiaries for fixed or capital assets 2 (other than interests in real property held for resale in which only purchase money Indebtedness is issued in payment therefor) or improvements, or for replacements, substitutions or additions thereto, that have a useful service life of one year or more at the time the asset is acquired by the Company or any of its Subsidiaries, and are used in the production, distribution and/or the sale of the goods or services or offered for sale by the Company or any of its Subsidiaries, all as determined in accordance with GAAP. "CAPITAL LEASE OBLIGATIONS" of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP consistently applied. "CASH" shall mean the currency of the United States of America. "CASH EQUIVALENTS" shall mean: (i) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within two (2) years from the date of acquisition thereof; (ii) commercial paper maturing no more than one (1) year from the date issued and, at the time of acquisition, having a rating of at least A-1 from Standard & Poor's rating service or a least P-1 from Moody's Investors Service, Inc., (iii) certificates of deposit or bankers' acceptances maturing within one (1) year from the date of issuance thereof issued by, or overnight reverse repurchase agreements from, any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia having combined capital and surplus of not less than $500,000,000; (iv) time deposits maturing no more than thirty (30) days from the date of creation thereof with commercial banks having membership in the Federal Deposit Insurance Corporation in amounts not exceeding the lesser of $100,000 or the maximum amount of insurance applicable to the aggregate amount of the Company's and its Subsidiaries' deposits at such institution; and (v) deposits or investments in mutual or similar funds offered or sponsored by brokerage or other companies having membership in the Securities Investor Protection Corporation in amounts not exceeding the lesser of $100,000 or the maximum amount of insurance applicable to the aggregate amount of the Company's and its Subsidiaries, deposits at such institution. "CERTIFICATE OF INCORPORATION" shall mean, unless the context in which it is used shall otherwise require, the Certificate of Incorporation of the Company or any of its Subsidiaries as in effect on the Closing Date. "CHANGE OF CONTROL" means (i) any transaction or series of transactions in which any Person or group, other than the Purchaser, Whitney Equity Partners, L.P., the Company or any affiliates of the foregoing becomes the beneficial owner of 50% or 3 more of the then outstanding capital stock of the Company or of any Subsidiary of the Company, the operations of which in the reasonable judgment of the Purchaser would constitute a material part of the business or operations of the Company and all of its Subsidiaries, taken as a whole, (ii) the sale of all or substantially all of the assets of the Company or any Subsidiary of the Company, the operations of which in the reasonable judgment of the Purchaser would constitute a material part of the business or operations of the Company and all of its Subsidiaries, taken as a whole, (iii) the liquidation of the Company, and (iv) the combination of the Company or of any Subsidiary of the Company, the operations of which in the reasonable judgement of the Purchaser would constitute a material part of the business or operations of the Company and all of its Subsidiaries, taken as a whole, with another entity, as a result of which (A) the shareholders of the Company or any of its Subsidiaries hold less than 50% of the total of all voting shares outstanding or (B) directors of the Company or any of its Subsidiaries constitute less than a majority of the Board of Directors of the combined entity. "CLOSING" shall have the meaning assigned to that term in Section 2.3. "CLOSING DATE" shall have the meaning assigned to that term in Section 2.3. "CODE" shall mean the Internal Revenue Code of 1986, as amended, or any successor statute thereto. "COMMISSION" shall mean the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act. "COMMISSION DOCUMENTS" shall have the meaning assigned to such term in Section 5.34. "COMMON STOCK" shall have the meaning assigned to that term in the second Whereas clause hereof, or any other capital stock of the Company into which such stock is reclassified or reconstituted. "COMPLIANCE CERTIFICATE" shall have the meaning assigned to such term in Section 8.1(c). "CONDITION OF THE COMPANY" shall mean the assets, business, properties, prospects, operations or financial or other condition of the Company and its Subsidiaries, taken as a whole. "CONTINGENT OBLIGATION" as applied to any Person, shall mean any direct or indirect liability, contingent or otherwise, of that Person: (i) with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or 4 discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; or (iii) under any foreign exchange contract, currency swap agreement, interest rate swap agreement or other similar agreement or arrangement designed to alter the risks of that Person arising from fluctuations in currency values or interest rates. Contingent Obligations shall include (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement, and (c) any liability of such Person for the obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition or any balance sheet item or level of income of another. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed. "CONTRACTUAL OBLIGATIONS"shall mean as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument to which such Person is a party or by which it or any of its property is bound. "CURRENT ASSETS" shall mean, at any date, the aggregate of the current assets of the Company and its Subsidiaries determined on a consolidated basis as of such date, as determined in accordance with GAAP. "CURRENT LIABILITIES" shall mean, at any date, the aggregate of the current liabilities of the Company and its Subsidiaries, determined on a consolidated basis as of such date, as determined in accordance with GAAP. "DEFINED BENEFIT PLAN" shall mean a defined benefit plan within the meaning of Section 3(35) of ERISA or Section 414(j) of the Code, whether funded or unfunded, qualified or non-qualified (whether or not subject to ERISA or the Code). "EBITDA" shall be calculated as set forth in Exhibit H. --------- "ELEKTA" shall have the meaning ascribed to such term in the first Whereas clause. "ELEKTA PURCHASE AGREEMENT" shall have the meaning ascribed to such term in the first Whereas clause. 5 "ENVIRONMENTAL LAWS" shall mean any applicable federal, state, territorial, provincial or local law, common law doctrine, rule, order, decree, judgment, injunction, license, permit or regulation relating to environmental matters, including those pertaining to land use, air, soil, surface water, ground water (including the protection, cleanup, removal, remediation or damage thereto, public or employee health or safety or any other environmental matter, together with any other laws (federal, state, territorial, provincial or local) relating to emissions, discharges, releases or threatened releases of any pollutant or contaminant including, without limitation, medical, chemical, biological, biohazardous or radioactive waste and materials, into ambient air, land, surface water, groundwater, personal property or structures, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, discharge or handling of any contaminant, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. 9601 et seq.), the Hazardous Material Transportation Act (49 -- --- U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. -- --- 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 -- --- et seq.), the Clean Air Act (42 U.S.C. 1251 et seq.), the Toxic Substances - -- --- -- --- Control Act (15 U.S.C. 2601 et seq.), and the Occupational Safety and Health -- --- Act (29 U.S.C. 651 et seq.), as such laws have been, or are, amended, modified -- --- or supplemented heretofore. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA AFFILIATE" shall mean a corporation that is or was a member of a controlled group of corporations with the Company within the meaning of section 4001(a) or (b) of ERISA or section 414(b) of the Code, a trade or business (including a sole proprietorship, partnership, trust, estate or corporation) that is under common control with the Company within the meaning of section 414(m) of the Code, or a trade or business which together with the Company, is treated as a single employer under section 414(o) of the Code. "EVENT OF DEFAULT" shall have the meaning assigned to such term in the Note. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder. "FDA" shall have the meaning ascribed to such term in Section 5.7. "FUNDED DEBT" means with respect to any Person and as at any date of determination thereof, without duplication, (a) all Indebtedness of such Person as at such date for money borrowed, (b) the principal component of all Capital Lease Obligations, (c) all Indebtedness for the deferred purchase price of property or services represented by a note or other security (other than in respect of any trade payable) or other Indebtedness arising under any conditional sale or other title retention agreement with 6 respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), and (d) all Indebtedness of such Person secured by a purchase money mortgage or other lien to secure all or part of the purchase price of property subject to such mortgage or lien. "GAAP" shall mean generally accepted accounting principles in effect from time to time within the United States. "GOVERNMENTAL AUTHORITY" shall mean the government of any nation, state, city, locality or other political subdivision of any thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "GUARANTEE AND COLLATERAL AGREEMENT" means the Guarantee and Collateral Agreement substantially in the form of Exhibit C to be delivered by the Company and the Guarantors under the terms of this Agreement, including any future such agreement delivered by a Subsidiary pursuant to Section 8.1(j) hereof. "GUARANTORS" means any Subsidiary of the Company that is party to the Guarantee and Collateral Agreement, including without limitation, NMT NeuroSciences (International), Inc., NMT Investments Corp., NMT NeuroSciences (US), Inc., NMT NeuroSciences (IP), Inc., NMT Heart, Inc. and Cordis Innovasive Systems, Inc. "HAZARDOUS MATERIALS" shall mean (i) any chemical pollutant, contaminant, pesticide, petroleum or petroleum product or byproduct radioactive substance, solid waste (hazardous or extremely hazardous), special, dangerous or toxic waste, hazardous or toxic substance, chemical or material regulated, listed, referred to, limited or prohibited under any Environmental Law, including without limitation: (i) friable or damaged asbestos, asbestos-containing material, polychlorinated biphenyls (PCBs), solvents and waste oil; (ii) any "hazardous substance" as defined under CERCLA or any environmental law, statute, regulation or rule; (iii) any hazardous waste defined under RCRA or any Environmental Law; and (iv) even if not prohibited, listed, limited or regulated by an Environmental Law, all pollutants, contaminants, hazardous, dangerous or toxic chemical materials, wastes or any other substances, including without limitation, any industrial process or pollution control waste (whether or not hazardous within the meaning of RCRA) which could pose a hazard to the environment, or the health and safety of any person or impair the use or value of any portion of the property of the Company or any of its Subsidiaries. "INDEBTEDNESS" shall mean as to any Person (a) all obligations of such Person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, unfunded credit commitments, letters of credit and bankers' acceptances, whether or not matured), (b) all obligations of such Person 7 evidenced by notes, bonds, debentures or similar instruments, (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade liabilities arising in the ordinary course of business, (d) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, (e) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (f) all Capital Lease Obligations of such Person, (g) all indebtedness secured by any Lien (other than Liens in favor of lessors under leases other than leases included in clause (f)) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non- recourse to the credit of that Person, and (h) any Contingent Obligation of such Person. "INDEMNIFIED PARTY" shall have the meaning assigned to such term in Section 7.1. "INTELLECTUAL PROPERTY" shall mean all of the following as they exist in all jurisdictions throughout the world: (i) patents and patent applications (including any divisions, continuations, continuations-in-part, substitutions or reissues thereof, whether or not patents are issued on such applications and whether or not such applications are modified, withdrawn or resubmitted) ("PATENTS")' (ii) trademarks, service marks, trade dress, trade names, brand names, designs and logos, corporate names, product or service identifiers, whether registered or unregistered, and all registrations and applications for registration thereof (collectively, "TRADEMARKS"); (iii) copyright registrations and applications for registration thereof, and any non-registered copyrights ("COPYRIGHTS"); (iv) trade secrets, inventions (whether or not patentable and whether or not reduced to practice), invention disclosures and improvements thereto (collectively, "TRADE SECRETS"); (v) proprietary computer software programs and source code; and (vi) any other information concerning the Company or any Subsidiary that is not generally available to the public and which is treated as confidential 8 or proprietary by the Company or such Subsidiary (collectively, "CONFIDENTIAL INFORMATION"). "INTEREST COVERAGE" shall be determined as set forth in Exhibit H. --------- "INTEREST EXPENSE" shall mean, with respect to the Company and its Subsidiaries on a consolidated basis for any period, the sum of (a) gross interest expense of the Company and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP consistently applied, including (i) the amortization of debt discounts, (ii) the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense, (iii) the portion of any payments or accruals with respect to Capital Lease Obligations allocable to interest expense and (iv) all commissions paid to factors during such period, and (b) any other capitalized interest of the Company and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP consistently applied. "INTERIM FINANCIAL STATEMENTS" shall have the meaning assigned to that term in Section 5.12(a) of this Agreement. "INVESTMENT" shall mean (i) any direct or indirect purchase or other acquisition by the Company or any of its Subsidiaries of any beneficial interest in, including stock, partnership interest or other equity securities of, any other Person (other than a Person that prior to the relevant purchase or acquisition was a Subsidiary of the Company) or (ii) any direct or indirect loan, advance or capital contribution by the Company or any of its Subsidiaries to any other Person (other than a Subsidiary of the Company), including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for ---- increases or decreases in value, or writeups, write-downs or write-offs with respect to such Investment. "IP LICENSES" shall have the meaning assigned to that term in Section 5.24(b)(ii). "ITC" shall have the meaning assigned to that term in Section 5.12(b) of this Agreement. "ITC AUDITED FINANCIAL STATEMENTS" shall have the meaning assigned to that term in Section 5.12(b) of this Agreement. "ITC INTERIM FINANCIAL STATEMENTS" shall have the meaning assigned to that term in Section 5.12(b) of this Agreement. "LIABILITIES" shall have the meaning assigned to that term in Section 7.1. 9 "LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), charge, claim, restriction or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity related preferences) including, without limitation, those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease Obligation, or any financing lease having substantially the same economic effect as any of the foregoing. "MULTIEMPLOYER PLAN" shall mean a multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code. "NET FUNDED INDEBTEDNESS" shall be calculated as set forth in Exhibit H. --------- "NOTES" shall mean the WSDF Note, together with all notes issued in connection with the substitution, replacement or transfer thereof. "OPERATING CASH FLOW" shall be calculated as set forth in Exhibit H. --------- "OPTIONS" shall have the meaning assigned to that term in Section 5.19(a) of this Agreement. "OUTSTANDING BORROWINGS" shall mean all Indebtedness of the Company and its Subsidiaries for money borrowed that is outstanding at the relevant time of determination. "PERSON" shall mean any individual, firm, corporation, limited liability company, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "PLANS" shall have the meaning assigned to that term in Section 5.23 of this Agreement. "PLEDGE AGREEMENTS" means the pledge agreements substantially in the forms of Exhibits D and E hereto to be delivered by (x) NMT NeuroSciences (International) Inc., in respect of the stock of NMT NeuroSciences (U.K.) Ltd. and (y) NMT Neurosciences (International) Inc. and Nitinol Medical Technologies, Inc. in respect of the stock of Yellow Tape B.V. and Nitinol Medical Technologies International, B.V., under the terms of this Agreement, and any future pledge agreements delivered by the Company or a Subsidiary pursuant to Section 8.1(j) hereof. "PREFERRED STOCK" shall have the meaning assigned to that term in Section 5.19(a) of this Agreement. 10 "PRO FORMA BALANCE SHEET" shall mean the pro forma consolidated balance sheet of the Company and its Subsidiaries referred to in Section 5.12(a). "PURCHASED SHARES" shall have the meaning assigned to such term in the second Whereas clause. REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement substantially in the form attached hereto as Exhibit F granting registration --------- rights to the Purchaser and Whitney. "REQUIREMENTS OF LAW" shall mean as to any Person, provisions of the Certificate of Incorporation and By-laws or other organizational or governing documents of such Person, or any law, treaty, rule, regulation, right, privilege, qualification, license or franchise or determination of an arbitrator or a court or other Governmental Authority, in each case applicable or binding upon such Person or any of its property or to which such Person or any of its Property is subject or pertaining to any or all of the transactions contemplated or referred to herein. "RESTRICTED PAYMENT"shall mean: (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock, limited liability company interest, or partnership interest of the Company or any of its Subsidiaries now or hereafter outstanding, except a dividend payable solely in shares of that class of stock, limited liability company interest, or partnership interest to the holders of that class; (ii) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock, limited liability company interest or partnership interest of the Company or any of its Subsidiaries now or hereafter outstanding; (iii) any payment or prepayment of interest on, principal of, premium, if any, redemption, conversion, exchange, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any Indebtedness subordinated to the Indebtedness existing pursuant to the Note and this Agreement; (iv) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock, limited liability company interest, or partnership interest of the Company or any of its Subsidiaries now or hereafter outstanding; and (v) any payment under any noncompete agreement. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations thereunder as the same shall be in effect at the time. "SECURITY DOCUMENTS" shall mean, collectively, the Guarantee and Collateral Agreement and the Pledge Agreements. "SENIOR INDEBTEDNESS" shall mean all Indebtedness of the Company and its Subsidiaries currently outstanding or incurred in the future pursuant to any borrowing by the Company or any of its Subsidiaries from any bank or institutional lender having 11 total assets (together with its affiliates) in excess of $500,000,000, and any renewals, extensions, refinancings or refundings thereof. "SHARES" shall mean the Purchased Shares and the Transaction Fee Shares. "SOLVENT" shall mean, with respect to the Company and its Subsidiaries considered as a whole, based on the Pro Forma Balance Sheet, that (i) the assets and the property of the Company and its Subsidiaries, considered as a whole, exceed the aggregate liabilities (including contingent and unliquidated liabilities) of the Company and its Subsidiaries, considered as a whole, and (ii) after giving effect to the transactions contemplated by the Transaction Documents and the Acquisition Documents, the Company and its Subsidiaries, considered as a whole, are able to both service and pay their liabilities as they mature. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities will be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that is likely to become an actual or matured liability. "STOCK PLAN" shall have the meaning assigned to that term in Section 5.19(a) of this Agreement. "STOCK PLAN SHARES" shall have the meaning assigned to that term in Section 5.19(a) of this Agreement. "SUBSIDIARY" shall mean, with respect to any Person, a corporation or other entity of which 50% or more of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "TAX" shall mean any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. "TAX RETURN" shall mean, any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "TRANSACTION DOCUMENTS" shall mean, collectively, this Agreement, the Note, the Security Documents, and any other document, certificate, notice or consent related to any of the foregoing. 12 "TRANSACTION FEE SHARES" has the meaning assigned such term in Section 2.2. "WARRANTS" shall have the meaning assigned to that term in Section 5.19(a) of this Agreement. "WHITNEY" shall have the meaning assigned to such term in the preamble hereto. "WSDF NOTE" shall have the meaning ascribed such term in the second Whereas clause. 1.2 ACCOUNTING TERM: FINANCIAL STATEMENTS. All accounting terms used -------------------------------------- herein and not expressly defined in this Agreement shall have the respective meanings given to them in conformance with GAAP. Financial statements and other information furnished pursuant to this Agreement or the other Transaction Documents shall be prepared in accordance with GAAP as in effect at the time of such preparation. No "Accounting Changes" (as defined below) shall affect financial covenants, standards or terms in this Agreement; provided that the -------- Company shall prepare footnotes to each Compliance Certificate and the financial statements required to be delivered hereunder that show the differences between the financial statements delivered (which reflect such Accounting Changes) and the basis for calculating financial covenant compliance (without reflecting such Accounting Changes). "ACCOUNTING CHANGES" means: (a) changes in accounting principles required by GAAP and implemented by the Company and (b) changes in accounting principles recommended by the Company's certified public accountants and implemented thereby. 1.3 KNOWLEDGE OF THE COMPANY. All references to the knowledge of the ------------------------ Company or to facts known by the Company shall mean actual knowledge or notice of its Chief Executive Officer, President, Chief Financial Officer or other executive officer or any Chief Executive Officer, Chief Financial Officer or other executive officer of any Subsidiary (prior to giving effect to the Acquisition) or division thereof or knowledge which such Person could reasonably have acquired through the exercise of due inquiry. ARTICLE 2 PURCHASE AND SALE OF THE WSDF NOTE AND THE PURCHASED SHARES ------------------------ 2.1 PURCHASE AND SALE OF THE WSDF NOTE AND THE PURCHASED SHARES. ------------------------------------------------------------ Subject to the terms and conditions herein set forth, the Company agrees that it will issue and sell to the Purchaser, and the Purchaser agrees that it will acquire from the Company on the Closing Date, the WSDF Note and the Purchased Shares. The purchase price for 13 the WSDF Note and the Purchased Shares shall be $20,000,000. The parties hereto covenant and agree that they shall allocate $3,255,001 of the purchase price to the purchase by the Purchaser of the Purchased Shares. 2.2 FEES AT CLOSING. Concurrently with the execution hereof, the --------------- Company shall (a) pay to Whitney a debt placement fee of $600,000, (b) pay to Whitney a transaction fee of 113,793 shares (the "TRANSACTION FEE SHARES") of Common Stock in connection with the Elekta Purchase Agreement and (c) reimburse all of the Purchaser's and Whitney's reasonable out-of-pocket expenses (including, without limitation, reasonable fees, charges, disbursements of counsel (including Paul, Weiss, Rifkind, Wharton & Garrison, Rowe & Maw and Stibbe Simont Monahan Dubot) and travel expenses) incurred in connection with (i) the negotiation and execution and delivery of this Agreement and the Transaction Documents and the Purchaser's due diligence investigation and (ii) the transactions contemplated by this Agreement and the other Transaction Documents, which payments shall be made, if in cash, by wire transfer of immediately available funds to an account or accounts designated by the Purchaser and, if in Common Stock, as set forth herein. 2.3 CLOSING. The purchase and issuance of the WSDF Note and the ------- Purchased Shares shall take place at the closing (the "CLOSING") to be held at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York 10019-6064 concurrently with the closing of the Acquisition pursuant to the Elekta Purchase Agreement (the "CLOSING DATE"). At the Closing, the Company shall deliver the WSDF Note and the Purchased Shares to the Purchaser against delivery by the Purchaser to the Company of the purchase price therefor specified in Section 2.1. Payment of such purchase price shall be by wire transfer. 2.4 FINANCIAL ACCOUNTING POSITIONS; TAX REPORTING. Each of the --------------------------------------------- parties hereto agrees to take reporting and other positions with respect to the WSDF Note and the Purchased Shares which is consistent with the purchase price of the WSDF Note and the Purchased Shares set forth herein for all financial accounting purposes, unless otherwise required by applicable GAAP or Commission rules (in which case the parties agree only to take positions inconsistent with the purchase price of the WSDF Note and the Purchased Shares set forth herein provided that the Purchaser has consented thereto, which consent shall not be unreasonably withheld). Each of the parties to this Agreement agrees to take reporting and other positions with respect to the WSDF Note and the Purchased Shares which is consistent with the purchase price of the WSDF Note and the Purchased Shares set forth herein for all other purposes, including without limitation, for all federal, state and local tax purposes. 14 ARTICLE 3 CONDITIONS TO THE OBLIGATION OF THE PURCHASER TO PURCHASE THE WSDF NOTE AND THE PURCHASED SHARES ------------------------ The obligation of the Purchaser to purchase the WSDF Note and the Purchased Shares, to pay the purchase price therefor at the Closing and to perform any obligations hereunder shall be subject to the satisfaction as determined by, or waived by, the Purchaser of the following conditions on or before the Closing Date or as specified herein. 3.1 REPRESENTATIONS AND WARRANTIES. The representations and ------------------------------ warranties of the Company contained in Article 5 hereof shall be true and correct (a) at and as of the Closing Date and (b) after giving effect to the transactions contemplated by the Transaction Documents and the Acquisition Documents, as if made at and as of such date, and the Purchaser shall have received at the Closing a certificate to the foregoing effect, dated the Closing Date, and executed by the Chief Executive Officer, President or a Vice President of the Company. 3.2 COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed ------------------------------ and complied with all of its agreements and conditions set forth or contemplated herein that are required to be performed or complied with by the Company on or before the Closing Date, and the Purchaser shall have received at the Closing a certificate to the foregoing effect, dated the Closing Date, and executed by the Chief Executive Officer, President or a Vice President of the Company. 3.3 SECRETARY'S CERTIFICATES. The Purchaser shall have received ------------------------ certificates from the Company and each of its Subsidiaries that is party to the Guarantee and Collateral Agreement, dated the Closing Date and signed by the Secretary or an Assistant Secretary of the Company or its appropriate Subsidiary, certifying (a) that the attached copies of the Certificate of Incorporation and By-laws of the Company or its Subsidiary, and resolutions of the Board of Directors of the Company or its Subsidiary, approving the Transaction Documents to which it is a party and the transactions contemplated hereby and thereby, are all true, complete and correct and remain unamended and in full force and effect, and (b) as to the incumbency and specimen signature of each officer of the Company or its Subsidiaries, as appropriate, executing any Transaction Document to which it is a party or any other document delivered in connection herewith on behalf of the Company or one of its Subsidiaries, as appropriate. 3.4 DOCUMENTS. The Purchaser shall have received true, complete and --------- correct copies of such agreements, schedules, exhibits, certificates, documents, financial information and filings as it may request in connection with or relating to the transactions contemplated hereby, all in form and substance satisfactory to the Purchaser. 15 3.5 OPINION OF COUNSEL. The Purchaser shall have received opinions ------------------ of Hale and Dorr LLP, Collyer-Bristow, and Nauta Dutilh, outside counsel to the Company and its Subsidiaries, dated as of the Closing Date, relating to the transactions contemplated by or referred to herein, in form and substance attached hereto as Exhibits B-1, B-2 and B-3. ------------------------- 3.6 APPROVAL OF COUNSEL TO THE PURCHASER. All actions and ------------------------------------ proceedings hereunder and all agreements, schedules, exhibits, certificates, opinions, financial information, filings and other documents required to be delivered by the Company and each of its Subsidiaries hereunder or in connection with the consummation of the transactions contemplated hereby, and all other related matters, shall have been in form and substance acceptable to Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the Purchaser, in its reasonable judgment. 3.7 CONSENTS AND APPROVALS. All consents, exemptions, authorizations, or ---------------------- other actions by, or notices to, or filings with, Governmental Authorities and other Persons in respect of all Requirements of Law and with respect to those Contractual Obligations of the Company and each of its Subsidiaries necessary, desirable, or required in connection with the execution, delivery or performance (including, without limitation, the payment of interest on the Note) by the Company or its Subsidiaries, or enforcement against the Company or its Subsidiaries, of those Transaction Documents to which it is a party shall have been obtained and be in full force and effect, and the Purchaser shall have been furnished with appropriate evidence thereof, and all waiting periods shall have lapsed without extension or the imposition of any conditions or restrictions. 3.8 NO MATERIAL JUDGMENT OR ORDER. There shall not be on the Closing ----------------------------- Date any judgment or order of a court of competent jurisdiction or any ruling of any Governmental Authority or any condition imposed under any Requirement of Law which, in the judgment of the Purchaser, would prohibit the purchase and issuance of the WSDF Note or the Purchased Shares or the issuance of the Transaction Fee Shares or the payment of the debt placement fee hereunder or subject the Purchaser to any penalty or other onerous condition under or pursuant to any Requirement of Law if the WSDF Note or the Purchased Shares were to be purchased hereunder; and the Purchaser shall have received such certificates or other evidence as it may reasonably request to establish compliance with this condition. 3.9 PRO FORMA BALANCE SHEET. The Company shall have delivered to the ----------------------- Purchaser as of the Closing Date the Pro Forma Balance Sheet, certified by the Chief Financial Officer of the Company that fairly presents the pro forma adjustments reflecting the consummation of the transactions contemplated by the Transaction Documents and the Acquisition Documents, including all material fees and expenses in connection therewith. 3.10 GOODSTANDING CERTIFICATES. The Company shall have delivered to ------------------------- the Purchaser as of the Closing Date, goodstanding certificates for the Company and each 16 of its Subsidiaries that is a party to the Guarantee and Collateral Agreement for each of their respective jurisdictions of incorporation and all other jurisdictions where they are qualified to do business as a foreign corporation. 3.11 NO MATERIAL ADVERSE CHANGE. Since December 31, 1997, except as -------------------------- publicly announced and identified on Schedule 5.14(b), there shall have been no ---------------- material adverse change, nor shall any such change be threatened, in the Condition of the Company. 3.12 DUE DILIGENCE. The Purchaser shall have completed its due ------------- diligence review of the assets, business, properties, prospects, operations and financial and other condition of the assets of Elekta being acquired pursuant to the Elekta Purchase Agreement, and shall be reasonably satisfied with the results of such review. Such due diligence review shall include, without limitation, receipt of audited Elekta financial statements for the 12 months ended April 30, 1998 and review of Elekta's financial systems integration plan and audit work papers by the Purchaser's Chief Financial Officer, Daniel O'Brien. 3.13 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY AND THE --------------------------------------------------------------- SUBSIDIARIES. No amendments to the articles or certificate of incorporation or - ------------ by-laws of the Company or any of its Subsidiaries as in effect on the date hereof shall have been effected. 3.14 MARKET CONDITIONS. Prior to the Closing Date, (a) trading in ----------------- securities generally on the National Market System of the Nasdaq Stock Market shall not have been suspended or limited or minimum or maximum prices shall not have been generally established on such exchange, or additional material governmental restrictions, not in force on the date of this Agreement, shall not have been imposed upon trading in securities generally by such exchange or by order of the Commission or any court or other Governmental Authority, (b) a general banking moratorium shall not have been declared by either federal, New York State or Commonwealth of Massachusetts authorities or (c) any material adverse change in the financial or securities markets in the United States or in political, financial or economic conditions in the United States or any outbreak or material escalation of hostilities or declaration by the United States of a national emergency or war or other calamity or crisis shall not have occurred. 3.15 NO DEFAULT OR BREACH. Neither the Company nor any of its -------------------- Subsidiaries shall have been in default under or with respect to any of the Transaction Documents or the Acquisition Documents and, after giving effect to the transactions contemplated hereby and thereby, neither the Company nor any of its Subsidiaries will be in default under any of the Transaction Documents or the Acquisition Documents. 3.16 ELEKTA PURCHASE AGREEMENT. The closing of the transactions ------------------------- contemplated by the Elekta Purchase Agreement shall simultaneously occur with the Closing hereof and all of the conditions set forth in Article 6 thereof shall have been 17 satisfied or waived; provided, that any such waiver shall have been given only -------- ---- with the prior written consent of the Purchaser. 3.17 FAIRNESS OPINION. At least three (3) Business Days prior to the ---------------- Closing, the Company shall have obtained and delivered to the Purchaser a copy of an opinion from Junewicz & Co., Inc., in form and substance satisfactory to the Purchaser, that the terms of this Agreement are fair, from a financial point of view, to the Company. 3.18 FACILITIES FEE AND TRANSACTION FEE. The Company shall have paid ---------------------------------- to Whitney the fees and payments provided for in Section 2.2 hereof. 3.19 REGISTRATION RIGHTS AGREEMENT. The Company shall have duly ----------------------------- executed and delivered the Registration Rights Agreement. 3.20 SECURITY DOCUMENTS. The Company and its Subsidiaries, as ------------------ appropriate, shall have duly executed and delivered to the Purchaser, the Security Documents. The Security Documents shall be accompanied by (i) financing statements (UCC-1) duly executed and in proper form for filing under the Uniform Commercial Code of all jurisdictions necessary or, in the opinion of the Purchaser, desirable, to perfect the security interests created by the Security Documents, and (ii) certified copies of requests for information identifying all of the financing statements on file with respect to the debtors in all jurisdictions referred to under (i), indicating that no party claims an interest in any of the Collateral (as defined in the Security Documents), except for Liens identified on Schedule 5.27. The Guarantee and Collateral Agreement shall be accompanied by duly executed instruments for filing with the United States Patent and Trademark Office and the United States Copyright Office and searches of the files of such offices indicating that no party claims an interest in any of the Collateral (as defined in the Guarantee and Collateral Agreement). Pledges of stock pursuant to the Pledge Agreements and Section 5.7 of the Guarantee and Collateral Agreement shall be accompanied by certificates representing the pledged shares referred to therein accompanied by undated stock powers executed in blank. ARTICLE 4 CONDITIONS TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL THE WSDF NOTE AND THE PURCHASED SHARES -------------------------------------------------------- The obligation of the Company to issue and sell the WSDF Note and the Purchased Shares and to perform its other obligations hereunder relating thereto shall be subject to the satisfaction as determined by, or waived by, the Company of the following conditions on or before the Closing Date: 18 4.1 REPRESENTATIONS AND WARRANTIES. The representations and ------------------------------ warranties of the Purchaser contained in Article 6 hereof shall be true and correct at and as of the Closing Date as if made at and as of such date. 4.2 COMPLIANCE WITH THIS AGREEMENT. The Purchaser shall have ------------------------------ performed and complied with all of its agreements and conditions set forth or contemplated herein that are required to be performed or complied with by the Purchaser on or before the Closing Date. 4.3 CONSENTS AND APPROVALS. All consents, exemptions, authorizations ---------------------- or other actions by, or notices to, or filings with, Governmental Authorities and other Persons in respect of all Requirements of Law and with respect to those Contractual Obligations of the Company and each of its Subsidiaries necessary, desirable, or required in connection with the execution, delivery or performance (including, without limitation, the payment of interest on the Note) by the Company or enforcement against the Company, of the Transaction Documents to which it is a party shall have been obtained and be in full force and effect, and the Company shall have been furnished with appropriate evidence thereof. 4.4 ELEKTA PURCHASE AGREEMENT. The closing of the transactions ------------------------- contemplated by the Elekta Purchase Agreement shall simultaneously occur with the Closing hereof. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY --------------------------------------------- The Company hereby represents and warrants to the Purchaser as follows: 5.1 CORPORATE EXISTENCE AND POWER. The Company and each of its ----------------------------- Subsidiaries: (a) is, and after giving effect to the transactions contemplated by the Transaction Documents and the Acquisition Documents, will be a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) will have all requisite corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently, or is currently proposed to be, engaged; (c) is, and after giving effect to the transactions contemplated by the Transaction Documents and the Acquisition Documents, will be duly qualified as a foreign corporation, licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to do so would not have a material adverse effect on the Condition of the Company; and (d) has the corporate power and authority to execute, deliver and perform its obligations under each Transaction Document to which it is or will be a party. 19 5.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution, ----------------------------------------- delivery and performance by the Company and its Subsidiaries of each Transaction Document to which it is a party and the consummation of the transactions contemplated hereby and thereby, including without limitation the issuance of the WSDF Note and the Shares: (a) has been duly authorized by all necessary corporate, and if required, stockholder action; (b) does not contravene the terms of the Company's or any of its Subsidiaries' Certificate of Incorporation or By-laws, or any amendment thereof, and (c) will not violate, conflict with or result in any breach or contravention of or the creation of any Lien under, any Contractual Obligation of the Company or any of its Subsidiaries or any Requirement of Law applicable to the Company or any of its Subsidiaries. 5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. No approval, ------------------------------------------------ consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance by (including, without limitation, the payment of interest on the Note), or enforcement against, the Company or any of its Subsidiaries of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby. 5.4 BINDING EFFECT. This Agreement has been, and each of the other -------------- Transaction Documents to which the Company or any of its Subsidiaries will be a party to, will be duly executed and delivered by the Company or one of its Subsidiaries, as applicable, and this Agreement constitutes, and such Transaction Documents will constitute, the legal, valid and binding obligation of the Company or its Subsidiaries, as applicable, enforceable against the Company or its Subsidiaries in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity relating to enforceability. 5.5 NO LEGAL BAR. Neither the execution, delivery and performance of ------------ the Transaction Documents or the Acquisition Documents, the issuance of the Shares nor the issuance or performance of the terms of the WDSF Note will violate any Requirement of Law or any Contractual Obligation of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has previously entered into any agreement which is currently in effect or to which the Company or any of its Subsidiaries is currently bound, granting any rights to any Person which are inconsistent with the rights to be granted by the Company in the Transaction Documents. 5.6 LITIGATION. Except as set forth on Schedule 5.6, there are no ---------- ------------ legal actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Company, threatened, at law, in equity, in arbitration or before any Governmental Authority against or affecting the Company or any of its Subsidiaries (or, as applicable, to the Company's knowledge, any of their respective shareholders, directors, officers, 20 employees or agents). No injunction, writ, temporary restraining order, decree or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of the Transaction Documents. 5.7 COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.7, the -------------------- ------------ Company and each of its Subsidiaries are in compliance with all Requirements of Law. Except as set forth on Schedule 5.7, there are no product recalls by the ------------ United States Food and Drug Administration ("FDA") or any comparable foreign regulatory authority pending or, to the knowledge of the Company, contemplated or threatened, with respect to any products manufactured, sold, marketed, distributed or delivered by the Company or any of its Subsidiaries or, to the knowledge of the Company, with respect to any licensed products manufactured, sold, marketed, distributed or delivered by the Company's licensees pursuant to license agreements with the Company and, to the knowledge of the Company, there are no pending or threatened investigations by any Governmental Authority with respect to such products which, either individually or in the aggregate, could have a material adverse effect on the Condition of the Company. Except as set forth on Schedule 5.7, the Company and each of its Subsidiaries is in compliance ------------ in all material respects with all applicable FDA or comparable foreign regulatory authority requirements, including, without limitation, facility registration, device listing and product notifications, and the Company has no knowledge that it or any of its Subsidiaries or licensees is not operating in compliance in all material respects with FDA or comparable foreign regulatory authority operating requirements, including, without limitation, good manufacturing practices. In April 1990 the FDA accepted the Company's 510(k) notification with respect to the Simon Nitinol Filter and all 510(k) notifications with respect to subsequent modifications thereto have been accepted by the FDA. 5.8 NO DEFAULT OR BREACH. No event has occurred and is continuing or -------------------- would result from the incurring of obligations by the Company and its Subsidiaries under the Transaction Documents or the Acquisition Documents which constitutes or, with the giving of notice or lapse of time or both, would constitute an Event of Default. Neither the Company nor any of its Subsidiaries is in default under or with respect to any Contractual Obligation in any material respect. 5.9 TITLE TO PROPERTIES. ------------------- (a) The Company and/or its Subsidiaries have good and marketable title in and to all real property reflected on the Pro Forma Balance Sheet or used in connection with their business, free and clear of all Liens, liabilities and rights except as provided on Schedule 5.9(a). --------------- (b) The Company and/or its Subsidiaries hold all of the right, title and interest of the tenant under the leases reflected on the Pro Forma Balance Sheet free and clear of all Liens, liabilities and rights except as provided on Schedule 5.9(b). - --------------- 21 5.10 USE OF REAL PROPERTY. Except as set forth on Schedule 5.10, the -------------------- ------------- owned and leased real properties reflected on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries, are used and operated in compliance and conformity with all applicable leases, contracts, commitments, licenses and permits, except to the extent that the failure so to comply would not, in the aggregate, materially adversely affect the Condition of the Company; neither the Company nor any of its Subsidiaries has received notice of violation of any applicable zoning or building regulation, ordinance or other law, order, regulation or requirement relating to the operations of either the Company or any of its Subsidiaries; and there is no such violation. Except as set forth on Schedule 5.10, all structures, ------------- improvements and other buildings that are owned or covered by leases reflected on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries, comply with all applicable ordinances, codes, regulations and requirements, have a valid and subsisting certificate of occupancy for their present use, and neither the Company nor any Subsidiary thereof has received any written notice from any Governmental Authority which is still outstanding of any failure to obtain any certificate, permit, license or approval with respect to the real property, or any intended revocation, modification or cancellation of same, and no law or regulation presently in effect or condition precludes or materially restricts continuation of the present use of such properties. Each lease relating to leased real property reflected on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries is in full force and effect and the Company enjoys peaceful and undisturbed possession thereunder. There is no default on the part of the Company or any of its Subsidiaries or event or condition which with notice or lapse of time, or both, would constitute a default on the part of the Company or any of its Subsidiaries under any such lease. There are no service contracts, maintenance contracts, union contracts, concession agreements, licenses, agency agreements or any other written contracts or agreements affecting the real property or the leased property, reflected on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries, or the operation thereof, other than those listed on Schedule 5.10, except for contracts or agreements (oral or written) which are - ------------- cancelable on no more than thirty (30) days' notice. There are no pending or, to the knowledge of the Company, threatened condemnation or eminent domain proceedings that would affect any part of the real property or the leased property reflected on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries. There are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against the real property or the leased property on the Pro Forma Balance Sheet or used in connection with the business of the Company and its Subsidiaries, at law or in equity, before any federal, state, municipal or governmental department, commission, board, bureau, agency or instrumentality which would in any way affect title to such real property or the leased property. 22 5.11 TAXES. ----- (a) Each of the Company and its Subsidiaries has filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all respects. All Taxes owed by the Company or any of its Subsidiaries (whether or not shown on any Tax Return) have been paid. Except as set forth on Schedule -------- 5.11, neither the Company nor any of its Subsidiaries currently is the - ---- beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by a Governmental Authority in a jurisdiction where the Company or any of Subsidiaries does not file Tax Returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction. There are no Liens on any of the assets of the Company or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax. (b) Each of the Company and its Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. (c) Neither the Company nor any of its Subsidiaries expects any Governmental Authority to assess any additional Taxes for any period for which Tax Returns have been filed. There is no dispute or claim concerning any Tax liability of the Company or any of its Subsidiaries either (i) claimed or raised by any Governmental Authority in writing or (ii) as to which the Company has knowledge based upon personal contact with any agent of such authority. Schedule 5.11 lists all federal, state, local, and foreign income Tax Returns - ------------- filed with respect to any of the Company and its Subsidiaries for taxable periods ended on or after December 31, 1995, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of an audit. The Company has delivered to the Purchaser correct and complete copies of all federal income Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by any of the Company and its Subsidiaries since December 31, 1995. (d) Neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. (e) Neither the Company nor any of its Subsidiaries has filed a consent under Code (S) 341(f) concerning collapsible corporations. Neither the Company nor any of its Subsidiaries has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code (S) 280G. Neither the Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Code (S) 897(c)(2) during the applicable period specified in Code (S) 897(c)(1)(A)(ii). Each of the Company and its Subsidiaries has disclosed on 23 its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code (S) 6621. Neither the Company nor any of its Subsidiaries is a party to any Tax allocation or sharing agreement. Neither the Company nor any of its Subsidiaries has been a member of an Affiliated Group filing a consolidated federal income Tax Return other than a group consisting of the Company and its Subsidiaries. (f) Schedule 5.11 sets forth the following information with respect to ------------- each of the Company and its Subsidiaries (or, in the case of clause (ii) below, with respect to each of the Subsidiaries) as of the most recent practicable date (as well as on an estimated pro forma basis as of the Closing giving effect to the consummation of the transactions contemplated hereby and by the other Transaction Documents and the Acquisition Documents); (i) the basis of the Company or Subsidiary in its assets, (ii) the basis of the stockholder(s) of the Subsidiary in its stock (or the amount of any excess loss account); (iii) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to the Company or Subsidiary; and (iv) the amount of any deferred gain or loss allocable to the Company or Subsidiary arising out of any deferred intercompany transaction. (g) The unpaid Taxes of the Company and its Subsidiaries (i) did not, as of April 30, 1998 month end, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheet for such month end (rather than in any notes thereto) and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries in filing their Tax Returns. (h) Neither the Company nor any of its Subsidiaries has any liability for the Taxes of any person or entity other than the Company and its Subsidiaries (i) under Reg. (S) 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise. (i) Each Affiliated Group has filed all income Tax Returns that it was required to file for each taxable period during which any of the Company and its Subsidiaries was a member of the group. All such Tax Returns were correct and complete (i) in all respects insofar as they relate to any of the Company and its Subsidiaries and (ii) in all material respects insofar as they do not relate to the Company and its Subsidiaries. All material income Taxes owed by any Affiliated Group (whether or not shown on any Tax Return) have been paid for each taxable period during which any of the Company and its Subsidiaries was a member of the group. (j) Neither the Company nor any of its Subsidiaries expects any Governmental Authority to assess any additional income Tax against any Affiliated Group for any taxable period during which any of the Company and its Subsidiaries was a member of the group. There is no dispute or claim concerning any income Tax liability 24 of any Affiliated Group for any taxable period during which any of the Company and its Subsidiaries was a member of the group either (i) claimed or raised by any Governmental Authority in writing or (ii) as to which the Company has knowledge based upon personal contact with any agent of such authority. Except as disclosed on Schedule 5.11, no Affiliated Group has waived any statute of ------------- limitations in respect of any income Taxes or agreed to any extension of time with respect to an income Tax assessment or deficiency for any taxable period during which any of the Company and its Subsidiaries was a member of the group. 5.12 FINANCIAL CONDITION. ------------------- (a) The Company has furnished the Purchaser with true and complete copies of (i) the audited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 1997, December 1, 1996 and December 31, 1995 and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows, together with the notes thereto, of the Company and its Subsidiaries for the years then ended, together with the report of Arthur Andersen LLP thereon (the "AUDITED FINANCIAL STATEMENTS") and (ii) the unaudited consolidated balance sheet of the Company and its Subsidiaries as of April 30, 1998 and the related consolidated statements of operations, stockholders' equity (deficit) and cash flow of the Company and its Subsidiaries for the four month period ended April 30, 1998 (the "INTERIM FINANCIAL STATEMENTS"). The Audited Financial Statements and the Interim Financial Statements fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof, and the consolidated results of operations and cash flows of the Company and its Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied during the periods involved, except as otherwise set forth in the notes thereto and subject, in the case of the Interim Financial Statements, to normal year-end audit adjustments. (b) The Company has furnished the Purchaser with true and complete copies of (i) the audited balance sheet of Image Technologies Corporation ("ITC") as of December 31, 1997, and the related statements of operations, stockholders' equity (deficit) and cash flows, together with the notes thereto, of ITC for the year then ended, and for the period from inception (November 17, 1995) to December 31, 1997, together with the report of Arthur Andersen LLP thereon (the "ITC AUDITED FINANCIAL STATEMENTS") and (ii) the unaudited balance sheet of ITC as of April 30, 1998 and the related statements of operations, stockholders' equity (deficit) and cash flow of ITC for the four months ended April 30, 1998 (the "ITC INTERIM FINANCIAL STATEMENTS"). The ITC Audited Financial Statements and the ITC Interim Financial Statements fairly present, in all material respects, the financial position of ITC as of the respective dates thereof, and the results of operations and cash flows of ITC as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied during the period involved, except as otherwise set forth in the notes thereto and 25 subject, in the case of the ITC Interim Financial Statements, to normal year-end audit adjustments. (c) The Pro Forma Balance Sheet delivered to the Purchaser sets forth the assets and liabilities of the Company and each of its Subsidiaries on a pro forma consolidated basis after taking into account the consummation of the transactions contemplated in this Agreement and by the other Transaction Documents and the Acquisition Documents as of the Closing Date. The Pro Forma Balance Sheet has been prepared in a manner that fairly presents in all material respects the assets and liabilities of the Company and each Subsidiary and: (i) in respect of information relating to periods ending on or prior to April 30, 1998, (x) in relation to the Company and Subsidiaries of the Company prior to the consummation of the Acquisition, in accordance with GAAP and (y) in relation to entities and assets acquired by the Company upon consummation of the Acquisition, based upon an audited financial statement prepared by Coopers & Lybrand in accordance with International GAAP; and (ii) in respect of information relating to the period commencing May 1, 1998, (x) in relation to the Company and Subsidiaries of the Company prior to the consummation of the Acquisition, in accordance with the Company's normal accounting practices which are, to the best of the Company's knowledge, consistent with GAAP, consistently applied, and (y) in relation to entities and assets acquired by the Company upon consummation of the Acquisition, in accordance with such entities' normal accounting practices which are, to the best of the Company's knowledge, consistent with International GAAP, consistently applied; provided, however, -------- ------- that information in the Pro Forma Balance Sheet for the period commencing May 1, 1998 with respect to the business being acquired in the Acquisition represents the best estimate by the Company of such information. (d) The projections of the Company and its Subsidiaries on a consolidated basis heretofore delivered to the Purchaser (i) were prepared by the Company in the ordinary course of its operations consistent with past practice, (ii) are the most current projections prepared by the Company relating to the periods covered thereby, and (iii) are based on assumptions which were reasonable when made and such assumptions and projections are reasonable on the date hereof. Neither the Company nor any of its Subsidiaries have delivered to any Person any later dated projections. 5.13 ERISA -- PROHIBITED TRANSACTIONS. The execution and delivery of -------------------------------- the Transaction Documents and the Acquisition Documents, the purchase and sale of the WSDF Note hereunder and the consummation of the transactions contemplated hereby and thereby will not result in any prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 5.14 DISCLOSURE. ---------- (a) Agreement and Other Documents. Neither (i) the Acquisition ----------------------------- Agreements or (ii) the Transaction Documents contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the 26 statements contained herein or therein, in the light of the circumstances under which they were made, not misleading; provided however, that to the extent the ---------------- representation made by the Company in this Section 5.14(a) relates to statements or omissions regarding the assets acquired pursuant to the Acquisition Documents, it is made by the Company solely to the extent of its knowledge. (b) Material Adverse Effects. Except as described in Schedule ------------------------ -------- 5.14(b), there is no fact known to the Company, which the Company has not disclosed to the Purchaser in writing which materially adversely affects or, insofar as the Company can reasonably foresee, could materially adversely affect, the Condition of the Company or the ability of the Company or any of its Subsidiaries to perform its obligations under the Transaction Documents or the Acquisition Documents, or any agreement or other document contemplated hereby or thereby to which it is a party. 5.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997, ------------------------------------ except as set forth on Schedule 5.15 or as contemplated by this Agreement, ------------- neither the Company nor any of its Subsidiaries has (i) issued any stock, bonds or other corporate securities, (ii) borrowed any amount or incurred any liabilities (absolute or contingent), other than in the ordinary course of business, in excess of $10,000, (iii) discharged or satisfied any Lien or incurred or paid any obligation or liability (absolute or contingent), other than in the ordinary course of business, in excess of $10,000, (iv) declared or made any payment or distribution to stockholders or purchased or redeemed any shares of its capital stock or other securities, (v) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible, other than in the ordinary course of business consistent with past practice, (vi) sold, assigned or transferred any of its tangible assets, or canceled any debts or claims, other than in the ordinary course of business consistent with past practice (vii) sold, assigned or transferred any patents, trademarks, trade names, copyrights, trade secrets or other intangible assets, other than in the ordinary course of business consistent with past practice, (viii) suffered any losses of property or waived any rights of substantial value, (ix) suffered any material adverse change in the Condition of the Company, (x) expended any material amount, granted any bonuses or extraordinary salary increases, (xi) entered into any transaction involving consideration in excess of $50,000 other than in the ordinary course of its business and consistent with past practice or except as otherwise contemplated hereby or (xii) entered into any agreement or transaction, or amended or terminated any agreement, with an Affiliate. 5.16 ENVIRONMENTAL MATTERS. Except as described on Schedule 5.16: --------------------- ------------- (a) The property, assets and operations of the Company and its Subsidiaries are and have been in compliance with all applicable Environmental Laws; there are no Hazardous Materials stored or otherwise located in, on or under any of the property or assets of the Company or its Subsidiaries, including, without limitation, the groundwater, except in compliance with applicable Environmental Laws; and there have been no releases or threatened releases of Hazardous Materials in, on or under any property adjoining any of the property or assets of the Company or its Subsidiaries which 27 have not been remediated to the satisfaction of the appropriate Governmental Authorities and in compliance with Environmental Laws. (b) None of the property, assets or operations of the Company or its Subsidiaries is the subject of any Federal, state, local or foreign investigation evaluating whether (i) any remedial action is needed to respond to a release or threatened release of any Hazardous Materials into the environment or (ii) any release or threatened release of any Hazardous Materials into the environment is in contravention of any Environmental Law. (c) Neither the Company nor any of its Subsidiaries has received any notice or claim, nor are there pending, threatened or reasonably anticipated, lawsuits or proceedings against any of them, with respect to violations of an Environmental Law or in connection with the presence of or exposure to any Hazardous Materials in the environment or any release or threatened release of any Hazardous Materials into the environment, and neither the Company nor its Subsidiaries is or was the owner or operator of any property which (i) pursuant to any Environmental Law has been placed on any list of Hazardous Materials disposal sites, including, without limitation, the "National Priorities List" or "CERCLIS List," (ii) has, or had, any subsurface storage tanks located thereon, or (iii) has ever been used as or for a waste disposal facility, a mine, a gasoline service station or, other than for petroleum substances stored in the ordinary course of business, a petroleum products storage facility. (d) Neither the Company nor any of its Subsidiaries has any present or contingent liability in connection with the presence either on or off the property or assets of the Company or its Subsidiaries of any Hazardous Materials in the environment or any release or threatened release of any Hazardous Materials into the environment. 5.17 INVESTMENT COMPANY/GOVERNMENT REGULATIONS. The Company is not an ----------------------------------------- "investment company" within the meaning of the Investment Company Act of 1940, as amended. Neither the Company nor its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act, or any federal or state statute or regulation limiting its ability to incur Indebtedness. 5.18 SUBSIDIARIES. ------------ (a) Schedule 5.18 sets forth a complete and accurate list, after ------------- giving effect to the transactions contemplated by the Acquisition Documents, of all of the Subsidiaries of the Company together with their respective jurisdictions of incorporation or organization. All of the outstanding shares of capital stock of such Subsidiaries that are corporations are validly issued, fully paid and nonassessable. Except as set forth on Schedule 5.18 or as ------------- contemplated by the Transaction Documents, as of the Closing Date, 28 all of the outstanding shares of capital stock of, or other ownership interests in, each of such Subsidiaries are owned by the Company or by a wholly owned Subsidiary free and clear of any Liens. No Subsidiary has outstanding options, warrants, subscriptions, calls, rights, convertible securities or other agreements or commitments obligating the Subsidiary to issue, transfer or sell any securities of the Subsidiary. (b) Except for the Subsidiaries of the Company and as set forth on Schedule 5.18, the Company does not own of record or beneficially, directly or - ------------- indirectly, (i) any shares of outstanding capital stock or securities convertible into capital stock of any other corporation, and (ii) any equity, voting or participating interest in any limited liability company, partnership, joint venture or other noncorporate business enterprises. 5.19 Capitalization. -------------- (a) As of the Closing Date, the authorized capital stock of the Company consists of 30,000,000 shares of Common Stock, of which 9,828,210 shares are issued and outstanding, and 3,000,000 shares of preferred stock, $.001 par value per share (the "PREFERRED STOCK"), of which no shares were issued and outstanding. The Company has no shares of capital stock held in treasury. As of the Closing Date, after giving effect to the transactions contemplated hereby and by the other Transaction Documents and the Acquisition Documents, there will be: (i) no shares of issued and outstanding Preferred Stock; (ii) 10,503,210 shares of Common Stock issued and outstanding; (iii) an aggregate of 1,865,789 shares of Common Stock reserved for issuance pursuant to the exercise of stock options issuable in accordance with the terms of the Company's 1994 Stock Option Plan, 1996 Stock Option Plan, 1996 Stock Option Plan for Non-Employee Directors and the 1998 Stock Incentive Plan and an aggregate of 1,320,002 shares of Common Stock reserved for issuance pursuant to the exercise of stock options not issued pursuant to a plan (collectively, the "OPTIONS"); (iv) 83,329 shares of Common Stock reserved for issuance upon exercise of the stock purchase warrant issued in February 1996 to Fletcher Spaght, Inc. relating to the acquisition by the Company of certain technology relating to the CardioSEAL Septal Occluder; (v) 28, 489 shares of Common Stock reserved for issuance upon exercise of the stock purchase warrant transferred by Fletcher Spaght, Inc. in June 1998 to David Chazanovitz; (vi) 99,660 shares of Common Stock reserved for issuance upon exercise of the stock purchase warrant issued in February 1996 to Junewicz & Co., Inc.; (vii) 5,263 shares of Common Stock reserved for issuance upon exercise of the stock purchase warrant issued in April 1996 to Dr. Lloyd Marks (together with the warrants described above in (iii), (iv) and (v), the "WARRANTS"); and (viii) 84,973 shares (the "STOCK PLAN SHARES") of Common Stock reserved for issuance in connection with the Company's Employee Stock Purchase Plan (the "STOCK PLAN"). The Options, the Warrants, the Stock Plan Shares and all outstanding shares of capital stock of the Company have been duly authorized by all necessary corporate action. All outstanding shares of capital stock of the Company are, and the shares of Common Stock issuable upon (i) exercise of the Options and the Warrants and (ii) purchase under the Stock Plan, when issued, will be, 29 validly issued, fully paid and nonassessable. Schedule 5.19(a) provides an ---------------- accurate list of all of the holders of warrants, options, rights and securities convertible into Common Stock, together with the number of shares of Common Stock to be issued upon the exercise or conversion of such warrants, options, rights and convertible securities. (b) On the Closing Date, except for the Warrants and the Options and as set forth on Schedule 5.19(b), there will be no outstanding securities ---------------- convertible into or exchangeable for capital stock of the Company or options, warrants or other rights to purchase or subscribe to capital stock of the Company or contracts, commitments, agreements, understandings or arrangements of any kind to which the Company is a party relating to the issuance of any capital stock of the Company, any such convertible or exchangeable securities or any such options, warrants or rights. 5.20 PRIVATE OFFERING. No form of general solicitation or general ---------------- advertising was used by the Company or any of its Subsidiaries, or their respective representatives in connection with the offer or sale of the WSDF Note and the Purchased Shares. No registration of the WSDF Note or the Shares pursuant to the provisions of the Securities Act or the state securities or "blue sky" laws will be required by the offer, sale or issuance of the WSDF Note pursuant to this Agreement. The Company agrees that neither it, nor anyone acting on its behalf, will offer or sell the WSDF Note or any other security so as to require the registration of the WSDF Note pursuant to the provisions of the Securities Act or any state securities or "blue sky" laws. 5.21 BROKER'S, FINDER'S OR SIMILAR FEES. Except as provided in ---------------------------------- Section 2.2 hereof, there are no brokerage commissions, finder's fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Company or any of its Subsidiaries, or any action taken by any such entity. 5.22 LABOR RELATIONS. Neither the Company nor any of its Subsidiaries --------------- has committed or is engaged in any unfair labor practice. Except as set forth in Schedule 5.22, there is (a) no unfair labor practice complaint pending or, to ------------- the knowledge of the Company, threatened against the Company or any of its Subsidiaries before the National Labor Relations Board and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is so pending or, to the knowledge of the Company, threatened, (b) no strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, (c) no union representation question existing with respect to the employees of the Company or any of its Subsidiaries and, to the knowledge of the Company, no union organizing activities are taking place, and (d) no employment contract with any employee or independent contractor of the Company or any Subsidiary. The Company and each Subsidiary is in compliance in all material respects with all federal, state or other applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours. Neither the Company, nor any of its Subsidiaries, is a party to any collective bargaining agreement. 30 5.23 EMPLOYEE BENEFIT PLANS. ---------------------- (a) Employee Benefit Plans and Liabilities. Neither the Company nor -------------------------------------- any ERISA Affiliate has contributed to nor has any actual or contingent, direct or indirect, liability in respect of any employee benefit plan (as defined in Section 3(3) of ERISA) or other employee benefit arrangement (collectively, the "PLANS"), within the five-consecutive-year period immediately preceding the first day of the year in which the Closing Date occurs other than those liabilities with respect to such Plans specifically described on Schedule -------- 5.23(a). Schedule 5.23(a) sets forth all Plans. At no time during such five - ------- ---------------- year period has the Company or any ERISA Affiliate participated in or contributed to any Multiemployer Plan, nor during such period has the Company or any ERISA Affiliate had an obligation to participate in or contribute to any such Multiemployer Plan. No agreement subject to Section 4204 of ERISA has been entered into in connection with the transactions contemplated in this Agreement. There are no outstanding liabilities of the Company or any ERISA Affiliate to any employee benefit plans previously maintained by the Company or any ERISA Affiliate, and the Company is not aware of any potential liabilities in connection therewith. There are no actions, suits or claims, other than for benefits in the ordinary course, pending or, to the knowledge of the Company, threatened against the Company or the Plans which might subject the Company to any material liability. The Company has delivered to the Purchaser accurate and complete copies of all of the Plans. (b) Plan Compliance. The Company and each of its Subsidiaries is in --------------- compliance in all material respects with all reporting, disclosure and registration requirements applicable to it under the Code, ERISA and all federal and state securities laws, and Department of Labor, Internal Revenue Service and Commission rules and regulations promulgated thereunder, with respect to all of the Plans, and is not subject to any liability, whether asserted or not, for any penalties to any Governmental Authority for late filing, of any return, report or other governmental filing. No civil or criminal action brought pursuant to the provisions of Title 1, Subtitle B, Part 5 of ERISA or any other federal or state law is pending or threatened against any fiduciary of the Plans. No Plan, or any fiduciary thereof, has been, or is currently the direct or indirect subject of an audit, investigation or examination by any Governmental Authority. All of the Plans comply currently, and have complied in the past, both as to form and operation, in all material respects, with their terms and with all Requirements of Law. Each of the Plans maintained by the Company or any Subsidiary that is an "employee benefit pension plan" (within the meaning of Section 3(2)(A) of ERISA) has obtained a favorable determination (covering all changes or amendments applicable under Requirements of Law) from the Internal Revenue Service as to its qualification under Sections 401(a) and 501(a) of the Code or is within the remedial amendment period (as provided in Section 401(b) of the Code) for making any required changes or amendments, and nothing has occurred before or after the date of each such determination letter that would adversely affect such qualification. All amounts that are currently owing to plan participants or contributions required to be made to the Plans (without giving effect to the transactions contemplated by the Acquisition Documents) 31 have been timely paid or contributed with respect to all periods prior to the Closing Date or provided for by adequate reserves on the Pro Forma Balance Sheet. (c) Prohibited Transaction. Except as set forth on Schedule 5.23(c), ---------------------- ---------------- no Plan, nor any related trust, nor the Company, nor any Subsidiary thereof, nor any trustee, administrator or other "party in interest" or "disqualified person" (within the meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Code, respectively) with respect to the Plans, has engaged in any nonexempt "prohibited transaction" (within the meaning of Section 406 of ERISA or Section 4975(c) of the Code, respectively) with respect to the participation of Company or any of its Subsidiaries therein, which could subject any of the Plans or related trusts, or any trustee, administrator or other fiduciary of any such Plan, or the Company, any Subsidiary of the Company or the Purchaser, or any other party dealing with the Plans, to the penalties or excise tax imposed on prohibited transactions by Section 502 of ERISA or Section 4975 of the Code which could have a material adverse effect on the Condition of the Company. (d) COBRA. Except as set forth in Schedule 5.23(d), the Company and ----- ---------------- each of its Subsidiaries has complied with the continuation coverage requirements of group health plans provided in Section 4980B of the Code, Sections 601 et seq. of ERISA, the Family and Medical Leave Act of 1994, and the regulations promulgated thereunder. (e) Miscellaneous. Neither the Company, its Subsidiaries, nor any ------------- Plan provides for or promises retiree medical, disability or life insurance benefits to any current or former employees, officers or directors of the Company or any of its Subsidiaries, other than continuation coverage required by section 4980B of the Code. Neither the Company nor any of its Subsidiaries is a party to or obligated under any agreement, plan, contract or other arrangements that will result, separately or in the aggregate, in the payment of any "excess parachute payment" within the meaning of section 280G of the Code. 5.24 PATENTS, TRADEMARKS, ETC. ------------------------- (a) Except as set forth on Schedule 5.24(a), the Company or one of ---------------- its Subsidiaries owns or is licensed or otherwise has the right to use all Intellectual Property necessary for the operation of its business as presently conducted (including its business after giving effect to the transactions contemplated by the Elekta Purchase Agreement). (b) (i) Schedule 5.24(b)(i) sets forth all Patents, Copyrights and ------------------- Trademarks owned by or issued to the Company or any Subsidiary, and all applications relating to Patents, Copyrights and Trademarks filed by the Company or any Subsidiary, specifying as to each item, as applicable: (A) the nature of the item, including the title or description; (B) the owner of the item; (C) the jurisdictions by or in which the item 32 is recognized without regard to registration, or in which the item has been issued or registered, or in which an application for issuance or registration has been filed, including the respective registration or application numbers; (D) the registration or application number; (E) the issue date and expiration date of the item; and (F) with respect to each Trademark, the class or classes of goods or services on which such trademark is or is intended to be used. (ii) Schedule 5.24(b)(ii) sets forth all material licenses, -------------------- sublicenses, registered user agreements and other agreements or permissions ("IP LICENSES") under which the Company or any Subsidiary is a licensee or otherwise is authorized to use or practice any Intellectual Property. (iii) Schedule 5.24(b)(iii) sets forth all IP Licenses under --------------------- which the Company or any Subsidiary is a licensor or otherwise authorizes any person to use or practice Intellectual Property. (c) To the knowledge of the Company, all issued Patents and registered Trademarks and Copyrights held by the Company or any Subsidiary are valid and subsisting. The Company and its Subsidiaries have taken all necessary and desirable action to maintain and protect each item of Intellectual Property owned or used by the Company and its Subsidiaries. (d) To the knowledge of the Company, no party is in breach or default under any IP License in any material respect, nor does any condition exist which with notice or lapse of time or both would constitute a material breach or default or permit termination, modification or acceleration thereunder, and no party has repudiated any provision thereof. Except as disclosed with respect to the IP Licenses listed on Schedule 5.24(b)(ii), there are no material royalties, -------------------- fees or other payments payable by the Company or any Subsidiary to any other Person by reason of the ownership, use, license, sale or disposition of any Intellectual Property. (e) Except as set forth on Schedule 5.24(e), no litigation is pending ---------------- or, to the knowledge of the Company, threatened that challenges the validity, enforceability, ownership or right to use, sell, license or dispose of any item of Intellectual Property used (including after giving effect to the transactions contemplated by the Elekta Purchase Agreement) by the Company or any Subsidiary, and no such item of Intellectual Property is subject to any outstanding order, ruling, judgment, decree, stipulation, charge or settlement agreement, restricting in any manner the use or the licensing thereof by the Company or any Subsidiary. (f) To the knowledge of the Company, neither the Company nor any Subsidiary has ever infringed upon the material intellectual property rights of any third party, or received any claim, charge, complaint, demand or notice in writing alleging any such infringement or other violation of the intellectual property rights of any third party, or knows of any basis for any such claim. To the knowledge of the 33 Company, the use of any Intellectual Property as a result of the operation of the businesses as currently conducted or proposed to be conducted (including after giving effect to the transactions contemplated by the Elekta Purchase Agreement) will not infringe upon or otherwise violate the intellectual property rights of any third party. (g) To the knowledge of the Company, no third party is materially infringing upon or otherwise materially violating rights of the Company or any Subsidiary in the Intellectual Property. (h) Except as set forth on Schedule 5.24(h), neither the Company nor ---------------- any Subsidiary has agreed to indemnify any person against any charge of infringement or other violation, or granted any third party the right to bring infringement or other enforcement actions, with respect to any Intellectual Property owned or used by the Company or any Subsidiary. Except as set forth on Schedule 5.24(h), the Company or one of its Subsidiaries has the exclusive right - ---------------- to file, prosecute and maintain all applications and registrations with respect to the Intellectual Property owned or used by the Company or any Subsidiary. (i) To the knowledge of the Company, no current or former employee of the Company or any Subsidiary is in violation of any Requirement of Law applicable to such employee, or any term of any employment agreement, patent or invention disclosure agreement, or other agreement with the Company or such Subsidiary concerning Intellectual Property. No former employer of any Company or Subsidiary employee, or current or former employer of any Company or Subsidiary consultant, has made a claim against the Company or any Subsidiary, or, to the knowledge of the Company, against any other person, that such employee or such consultant is utilizing proprietary information of such employer. 5.25 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on Schedule ------------------------------- -------- 5.25, no officer or director of the Company or any of its Subsidiaries (other - ---- than a director of the Company who is a representative of Whitney or any investment fund affiliate of Whitney): (a) owns, directly or indirectly, any interest in (excepting less than 5% stock holdings for investment purposes in securities of publicly held and traded companies), or is an officer, director, employee or consultant of, any Person that is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, sales agent or customer of, or lender to or borrower from, the Company or any of its Subsidiaries; (b) owns, directly or indirectly, in whole or in part, any tangible or intangible property that the Company or any of its Subsidiaries uses in the conduct of business; or (c) has any cause of action or other claim whatsoever against, or owes or has advanced any amount to, the Company or any of its Subsidiaries, except for claims in the ordinary course of business such as for accrued vacation pay, accrued benefits under employee benefit plans, and similar matters and agreements existing on the date hereof; provided however, that to the extent the ---------------- representation made by the Company in this Section 5.25 relates to Subsidiaries to be acquired pursuant to the Acquisition Documents, it is made by the Company solely to the extent of its knowledge. 34 5.26 TRADE RELATIONS. Set forth on Schedule 5.26 is a true and --------------- ------------- correct list of the twenty largest customers of the Company and its Subsidiaries taken as a whole in terms of sales during the twelve-month period ended December 31, 1997 and the five-month period ended May 31, 1998, and any other customers who accounted for more than 3% of such sales, and a list of the five largest suppliers to the Company and its Subsidiaries taken as a whole in terms of purchases during the twelve-month period ended December 31, 1997 and the five- month period ended May 31, 1998, as well as any sole source suppliers of goods or services for which there is no ready alternative to the Company and its Subsidiaries on comparable terms. There exists no actual or, to the knowledge of the Company, threatened termination, cancellation or limitation of, or any adverse modification or change in, the business relationship of the Company, its Subsidiaries or their business with any customer or any group of customers whose purchases are individually or in the aggregate material to the business of the Company or any such Subsidiary, or with any material supplier, and there exists no present condition or state of facts or circumstances that would materially adversely affect the Condition of the Company or prevent the Company or its Subsidiaries from conducting their business after the consummation of the transactions contemplated by the Transaction Documents and the Acquisition Documents, in substantially the same manner in which such business has heretofore been conducted. 5.27 OUTSTANDING BORROWINGS. Schedule 5.27 lists (i) the amount of ---------------------- ------------- all Outstanding Borrowings of the Company and its Subsidiaries (other than Indebtedness under this Agreement) as of the closing of the transactions contemplated hereby and by the Acquisition Documents, (ii) the Liens that relate to such Outstanding Borrowings and that encumber the assets of the Company and its Subsidiaries, (iii) the name of each lender thereof, and (iv) the amount of any unfunded commitments available to the Company in connection with any Outstanding Borrowings; provided however, that to the extent the representation ---------------- made by the Company in Section 5.27(ii) relates to Liens relating to Outstanding Borrowings of Subsidiaries to be acquired pursuant to the Acquisition Documents, it is made by the Company solely to the extent of its knowledge. 5.28 MATERIAL CONTRACTS. Neither the Company nor any Subsidiary is a ------------------ party to any Contractual Obligation, or is subject to any charge, corporate restriction, judgment, injunction, decree, or Requirement of Law, materially adversely affecting the Condition of the Company. Schedule 5.28 lists all ------------- contracts, agreements and commitments of the Company and its Subsidiaries as of the Closing Date, whether written or oral, other than (a) the Transaction Documents and the Acquisition Documents, (b) purchase orders in the ordinary course of business, and (c) any other contracts, agreements and commitments of the Company that do not extend beyond one year and involve the receipt or payment of not more than $25,000. Each of the contracts, agreements and commitments of the Company set forth on Schedule 5.28 is in full force and ------------- effect. 5.29 INSURANCE. Schedule 5.29 accurately summarizes all of the --------- ------------- insurance policies or programs of the Company and each Subsidiary in effect as of the 35 date hereof, and indicates the insurer's name, policy number, expiration date, amount of coverage, type of coverage, annual premiums, exclusions and deductibles, and also indicates any self-insurance program that is in effect. All such policies are in full force and effect, are underwritten by financially sound and reputable insurers, are sufficient for all applicable Requirements of Law and otherwise are in compliance with the criteria set forth in Section 8.7 hereof. All such policies will remain in full force and effect and will not in any way be affected by, or terminate or lapse by reason of any of the transactions contemplated by the Transaction Documents or the Acquisition Documents. 5.30 PRODUCTS LIABILITY. Except as set forth on Schedule 5.30, there ------------------ ------------- is no action, suit, proceeding or, to the knowledge of the Company, inquiry or investigation pending, by or before any Governmental Authority against the Company or any of its Subsidiaries relating to any product alleged to have been sold by the Company or any of its Subsidiaries and alleged to have been defective, or improperly designed or manufactured, nor to the knowledge of the Company is there any valid basis for any such action, proceeding or investigation; provided however, that to the extent the representation made by ---------------- the Company in this Section 5.30 relates to Subsidiaries to be acquired pursuant to the Acquisition Documents, it is made by the Company solely to the extent of its knowledge. 5.31 SOLVENCY. On and as of the Closing Date, after giving effect to -------- the transactions contemplated by the Transaction Documents and the Acquisition Documents, the Company and its Subsidiaries, taken as a whole, will be Solvent. 5.32 YEAR 2000 SYSTEMS. Except as set forth in Schedule 5.32 and ----------------- ------------- except with respect to any assets acquired under the Elekta Purchase Agreement, to the Company's knowledge, the Company's computer systems and software are able to process accurately date data, including, without limitation, calculating, comparing and sequencing from, into and between the twentieth century (through year 1999), in the year 2000 and the twenty-first century, including, without limitation leap year calculations. 5.33 ELEKTA PURCHASE AGREEMENT. The copy of the Elekta Purchase ------------------------- Agreement provided by the Company to the Purchaser (a) is a true and correct copy thereof, (b) has not been amended or modified since May 8, 1998 and (c) is in full force and effect and will be in full force and effect as of the Closing Date. On the Closing Date, each of the representations and warranties made by the Company and, to the knowledge of the Company, Elekta in the Elekta Purchase Agreement is true and correct in all material respects. All consents, approvals and authorizations of, and filings, registrations and qualifications with, any Governmental Authority on the part of the Company and, to the knowledge of the Company, Elekta required in connection with the consummation of the Acquisition have been obtained or made and remain in full force and effect. 5.34 COMMISSION DOCUMENTS. The Company has filed all registration -------------------- statements, proxy statements, reports and other documents required to be filed by it 36 under the Securities Act and the Exchange Act, and all amendments thereto (collectively, the "COMMISSION DOCUMENTS"), and the Company has furnished or made available to the Purchaser correct and complete copies of all Commission Documents, each as filed with the Commission. Each Commission Document was true and accurate in all material respects and did not omit to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading when filed with the Commission and in compliance in all material respects with the requirements of its respective report form. The representations and warranties made by the Company in Sections 5.9, 5.10, 5.18 and 5.24 with respect to the assets being acquired by the Company simultaneously herewith pursuant to the Elekta Purchase Agreement are made solely to the extent and in reliance upon the representations and warranties made by Elekta to the Company in the Elekta Purchase Agreement. The representations and warranties made by the Company in the first sentence of Section 5.6 and in Sections 5.7, 5.8, 5.11, 5.13, 5.15, 5.16, 5.22, 5.23, 5.26, 5.28 and 5.29 shall be made by the Company prior to giving effect to the consummation of the transactions contemplated by the Acquisition Documents. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND WHITNEY --------------------------------------- Each of the Purchaser and Whitney, severally and not jointly, hereby represents and warrants as follows: 6.1 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and ------------------------------- performance by it of this Agreement: (a) is within its power and authority and has been duly authorized by all necessary action; (b) does not contravene the terms of its organizational documents or any amendment thereof, and (c) will not violate, conflict with or result in any breach or contravention of any of its Contractual Obligations, or any order or decree directly relating to it. 6.2 BINDING EFFECT. This Agreement has been duly executed and -------------- delivered by it and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 6.3 NO LEGAL BAR. The execution, delivery and performance of this ------------ Agreement by it will not violate any Requirement of Law applicable to it. 37 6.4 PURCHASE FOR OWN ACCOUNT. The WSDF Note and/or the Shares to be ------------------------ acquired by it pursuant to this Agreement are being or will be acquired for its own account and with no intention of distributing or reselling such security or any part thereof in any transaction that would be in violation of the securities laws of the United States of America, or any state, without prejudice, however, to its right at all times to sell or otherwise dispose of all or any part of the WSDF Note or the Shares under an effective registration statement under the Securities Act, or under an exemption from such registration available under the Securities Act, and subject, nevertheless, to the disposition of its property being at all times within its control. If it should in the future decide to dispose of all or any portion of the WSDF Note or the Shares, it understands and agrees that it may do so only in compliance with the Securities Act and applicable state securities laws, as then in effect. It agrees to the imprinting of a legend on certificates representing the WSDF Note and the Shares to the following effect: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS." 6.5 BROKER'S, FINDER'S OR SIMILAR FEES. Except as set forth in ---------------------------------- Section 2.2 hereof, there are no brokerage commissions, finder's fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with it or any action taken by it. 6.6 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT. No approval, ----------------------------------------------- consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance by it or enforcement against it of this Agreement or the transactions contemplated hereby. ARTICLE 7 INDEMNIFICATION --------------- 7.1 INDEMNIFICATION. In addition to all other sums due hereunder or --------------- provided for in this Agreement, the Company agrees to indemnify and hold harmless the Purchaser and its Affiliates and each of their respective officers, directors, agents, employees, subsidiaries, partners, attorneys, accountants and controlling persons (each, an "INDEMNIFIED PARTY") to the fullest extent permitted by law from and against any and all losses, claims, damages, expenses (including, without limitation, reasonable fees, disbursements and other charges of counsel incurred by an Indemnified Party in any 38 action or proceeding between the Company and such Indemnified Party (or Indemnified Parties) or between an Indemnified Party (or Indemnified Parties) and any third party or otherwise) or other liabilities, losses, or diminution in value (collectively, "LIABILITIES") resulting from or arising out of any breach of any representation or warranty, covenant or agreement of the Company in this Agreement, the Note or the other Transaction Documents, including without limitation, the failure to make payment when due of amounts owing pursuant to this Agreement, the Note or the other Transaction Documents, on the due date thereof (whether at the scheduled maturity, by acceleration or otherwise) or any legal, administrative or other actions (including, without limitation, actions brought by the Purchaser, the Company, any of its Subsidiaries or any equity holders of the Company or any of its Subsidiaries or derivative actions brought by any Person claiming through or in the Company's or any Subsidiary's name), proceedings or investigations (whether formal or informal), or written threats thereof, based upon, relating to or arising out of the Transaction Documents, the transactions contemplated thereby, or any Indemnified Party's role therein or in the transactions contemplated thereby; provided, however, that the Company -------- ------- shall not be liable under this Section 7.1 to an Indemnified Party: (a) for any amount paid by the Indemnified Party in settlement of claims by the Indemnified Party without the Company's consent (which consent shall not be unreasonably withheld), (b) to the extent that it is finally judicially determined that such Liabilities resulted primarily from the willful misconduct or gross negligence of such Indemnified Party or (c) to the extent that it is finally judicially determined that such Liabilities resulted primarily from the breach by such Indemnified Party of any representation, warranty, covenant or other agreement of such Indemnified Party contained in this Agreement; provided, further, that -------- ------- if and to the extent that such indemnification is unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of such Liabilities which shall be permissible under applicable laws. In connection with the obligation of the Company to indemnify for reasonable expenses as set forth above, the Company further agrees, upon presentation of appropriate invoices containing reasonable detail, to reimburse each Indemnified Party for all such expenses (including, without limitation, reasonable fees, disbursements and other charges of counsel incurred by an Indemnified Party in any action or proceeding between the Company and such Indemnified Party (or Indemnified Parties) or between an Indemnified Party (or Indemnified Parties) and any third party or otherwise) as they are incurred by such Indemnified Party; provided, however, that if an Indemnified Party is reimbursed hereunder -------- ------- for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Liabilities in question resulted primarily from (i) the willful misconduct or gross negligence of such Indemnified Party or (ii) the breach by such Indemnified Party of any representation, warranty, covenant or other agreement of such Indemnified Party contained in this Agreement or any other Transaction Document. 7.2 PROCEDURE; NOTIFICATION. Each Indemnified Party under this ----------------------- Article 7 will, promptly after the receipt of notice of the commencement of any action, investigation, claim or other proceeding against such Indemnified Party in respect of which indemnity may be sought from the Company under this Article 7, notify the 39 Company in writing of the commencement thereof. The omission of any Indemnified Party so to notify the Company of any such action shall not relieve the Company from any liability which it may have to such Indemnified Party unless, and only to the extent that, such omission results in the Company's forfeiture of substantive rights or defenses. In case any such action, claim or other proceeding shall be brought against any Indemnified Party, and it shall notify the Company of the commencement thereof, the Company shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party, in its reasonable judgment; provided, however, that any -------- ------- Indemnified Party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action, claim or proceeding in which the Company, on the one hand, and an Indemnified Party, on the other hand, is, or is reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel at the Company's expense and to control its own defense of such action, claim or proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or potential conflict exists between the Company, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however, that in no event shall the Company -------- ------- be required to pay fees and expenses under this Article 7 for more than one firm of attorneys in any jurisdiction in any one legal action or group of related legal actions. The Company agrees that it will not, without the prior written consent of the Purchaser, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of the Purchaser and each other Indemnified Party from all liability arising or that may arise out of such claim, action or proceeding. The Company shall not be liable for any settlement of any claim, action or proceeding effected against an Indemnified Party without its written consent, which consent shall not be unreasonably withheld. The rights accorded to Indemnified Parties hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise. ARTICLE 8 AFFIRMATIVE COVENANTS --------------------- Until the payment by the Company of all principal of and interest on the Note and all other amounts due to the Purchaser under this Agreement and the other Transaction Documents, including, without limitation, all fees, expenses and amounts due in respect of indemnity obligations under Article 7, the Company hereby covenants and agrees with the Purchaser as follows: 40 8.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall ------------------------------------------ maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP (it being understood that monthly financial statements are not required to have footnote disclosures). The Company shall deliver to the Purchaser each of the financial statements and other reports described below: (a) Monthly and Quarterly Financial. As soon as available and in any ------------------------------- event within thirty (30) days after the end of each month, the Company shall deliver (i) the consolidated balance sheet of the Company and its Subsidiaries, as at the end of such month and the related consolidated statements of operations, stockholders' equity (deficit) and cash flow for such month and for the period from the beginning of the then current fiscal year of the Company to the end of such month (and, with respect to financial statements delivered for months that are also the last month of any fiscal quarter, accompanied by the related consolidated statements of operations, stockholders' equity (deficit) and cash flow for such fiscal quarter) and a schedule of the outstanding Indebtedness for borrowed money of the Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan. As soon as available and in any event within forty-five (45) days after the end of each month that is also the last month of any fiscal quarter, the Company shall deliver the consolidated balance sheet of the Company and its Subsidiaries, as at the end of such fiscal quarter and the related consolidated statements of operations, stockholders' equity (deficit) and cash flow for such fiscal quarter and for the period from the beginning of the then current fiscal year of the Company to the end of such fiscal quarter, in each case presenting data for each business unit of the Company and its Subsidiaries. (b) Year-End Financial. As soon as available and in any event within ------------------ ninety (90) days after the end of the fiscal year of the Company, the Company shall deliver (i) the consolidated balance sheet of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of operations, stockholders' equity (deficit) and cash flow for such fiscal year, (ii) a schedule of the outstanding Indebtedness for borrowed money of the Company and its Subsidiaries describing in reasonable detail each such debt issue or loan outstanding and the principal amount and amount of accrued and unpaid interest with respect to each such debt issue or loan, and (iii) a report with respect to the financial statements from Arthur Andersen LLP or another "Big Six" firm of certified public accountants selected by the Company and reasonably acceptable to the Purchaser, which report shall be prepared in accordance with Statement of Auditing Standards No. 58 entitled "Reports on Audited Financial Statements" and such report shall be "Unqualified" (as such term is defined in such Statement). Together with each delivery of financial statements of the Company and its Subsidiaries pursuant to this subsection 8.1(b), the Company shall deliver to the Purchaser a copy of a letter from the Company to such accounting firm, which letter shall have been delivered to such accounting firm prior to its delivery of such financial 41 statements, stating that an intent of the Company in engaging the accounting firm's professional services to prepare the audit report relating to such financial statements was to benefit and influence the Purchaser and their successors or assigns. Such letter shall state that the Purchaser intends to rely on the audit report and the accounting firm's professional services provided to the Company and its Subsidiaries. (c) Company's Compliance Certificate. Together with each delivery of -------------------------------- financial statements of the Company and its Subsidiaries pursuant to Sections 8.1(a) and 8.1(b) above, the Company shall deliver or cause to be delivered a fully and properly completed compliance certificate (in substantially the form attached hereto as Exhibit G (or in such other form or substance as shall be --------- satisfactory to Purchaser) and referred to as a "COMPLIANCE CERTIFICATE") signed by the chief executive officer or chief financial officer of the Company. The Company and the Purchaser acknowledge and agree that calculations of covenant compliance, with respect to the financial covenants contained in Section 9.8 hereof and contained in any such compliance certificate delivered for a month that is not the last month of a calendar quarter, will be for informational purposes only and shall not measure compliance (or lack of compliance) with such financial covenants. (d) Accountants' Reports. Promptly upon receipt thereof, the Company -------------------- shall deliver copies of all significant reports submitted by the Company's firm of certified public accountants in connection with each annual, interim or special audit or review of any type of the financial statements or related internal control systems of the Company and its Subsidiaries made by such accountants, including any comment letter submitted by such accountants to management in connection with their services. (e) Management Reports. Together with each delivery of financial ------------------ statements of the Company and its Subsidiaries pursuant to subsections 8.1(a) and 8.1(b), the Company will deliver a management report (i) describing the operations and financial condition of the Company and its Subsidiaries for the month then ended and the portion of the current fiscal year then elapsed (or for the fiscal year then ended in the case of year-end financial), (ii) setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year and the corresponding figures from the most recent projections for the current fiscal year delivered pursuant to subsection 8.1(f) and (iii) discussing the reasons for any significant variations. The information above shall be presented in reasonable detail and shall be certified by the chief financial officer of the Company to the effect that such information fairly presents the results of operations and financial condition of the Company and its Subsidiaries as at the dates and for the periods indicated. In addition to the foregoing management report, the chief financial officer of the Company shall discuss with the Purchaser on a monthly basis, either in person or by telephone conference call, the Company's operations and financial condition for each of the first six months following the Closing Date. 42 (f) Projections/Plan of Operation. As soon as available and in any ----------------------------- event no later than the last day of the Company's fiscal year, the Company shall deliver projections of the Company and its Subsidiaries for the forthcoming fiscal year, prepared on a month by month basis. As soon as available and in any event within thirty (30) days after the end of the fiscal year of the Company, the Company shall deliver a plan of operation covering the current and succeeding fiscal year of the Company, in form and substance reasonably satisfactory to the Purchaser. (g) Commission Filings and Press Releases. Promptly upon their ------------------------------------- becoming available, the Company shall deliver copies of (i) all financial statements, reports, notices and proxy statements sent or made available by the Company or any of its Subsidiaries to their security holders, (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by the Company or any of its Subsidiaries with any securities exchange or with the Commission or any governmental or private regulatory authority, and (iii) all press releases and other statements made available by the Company or any of its Subsidiaries to the public concerning material developments in the business of the Company or any of its Subsidiaries. (h) Events of Default, Etc. Promptly upon the Company obtaining ---------------------- knowledge of any of the following events or conditions, the Company shall deliver copies of all notices given or received by the Company or any of its Subsidiaries with respect to any such event or condition and a certificate of the Company's chief executive officer specifying the nature and period of existence of such event or condition and what action the Company has taken, is taking and proposes to take with respect thereto: (i) any condition or event that constitutes an Event of Default; (ii) any notice that any Person has given to the Company or any of its Subsidiaries or any other action taken with respect to a claimed default or event or condition in any other agreement to which the Company or any of its Subsidiaries is a party; or (iii) any event or condition that could reasonably be expected to result in any material adverse effect on the Condition of the Company. (i) Litigation. Promptly upon any officer of the Company obtaining ---------- knowledge of (i) the institution of any material action, suit, proceeding, governmental investigation or arbitration against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries not previously disclosed by the Company to the Purchaser or (ii) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries which, in each case, is reasonably possible to have a material adverse effect on the Condition of the Company, the Company will promptly give notice thereof to the Purchaser and provide such other information as may be reasonably available to them to enable the Purchaser and its counsel to evaluate such matter. 43 (j) Subsidiaries. Not less than fifteen (15) days prior to creating ------------ a Subsidiary or acquiring the stock of a Person, such that such Person will become a Subsidiary, the Company shall notify the Purchaser of the Company's or any of its Subsidiary's intention to create such Subsidiary or acquire such stock, and following such notice, such Subsidiary will not be created or acquired until the Company has caused each Subsidiary, to execute a joinder to the appropriate Security Documents in form and substance satisfactory to the Purchaser. For purposes of clarification, (I) each newly created or acquired domestic Subsidiary shall execute and deliver to the Purchaser (a) the Guarantee and Collateral Agreement, together with all other items customarily delivered in connection with such a security agreement, (b) an opinion of counsel to the Company and such Subsidiary addressed to the Purchaser, in form and substance reasonably satisfactory to the Purchaser, as to such matters as the Purchaser may reasonably require, including, without limitation, the creation and perfection of the Purchaser's security interests, and (c) such other approvals, opinions or documents as the Purchaser may reasonably request; and (II) each newly created or acquired first tier foreign Subsidiary of the Company or any of its domestic Subsidiaries, shall execute and deliver (x) the Guarantee and Collateral Agreement pledging 100% of the stock of each such domestic Subsidiary and 65% of the stock of the first tier foreign Subsidiary, (y) an opinion of counsel to the Company, addressed to the Purchaser, in form and substance reasonably satisfactory to the Purchaser, as to such matters as the Purchaser may reasonably require, including, without limitation, the creation and perfection of the Purchaser's security interests, and (z) such other approvals, opinions or documents as the Purchaser may reasonably request. (k) Supplemental Schedules; Notices of Corporate Changes. Annually, ---------------------------------------------------- concurrently with the delivery of the projections required by subsection 8.1(f), the Company shall supplement in writing and deliver to the Purchaser revisions of the Schedules annexed to this Agreement to the extent necessary to disclose new or changed facts or circumstances after the Closing Date; provided that -------- subsequent disclosures shall not constitute a cure or waiver of any Event of Default resulting from the matters disclosed. The Company shall provide prompt written notice to the Purchaser of (i) all jurisdictions in which the Company or any of its Subsidiaries becomes qualified after the Closing Date to transact business, and (ii) any material change after the Closing Date in the authorized and issued capital stock or other equity interests of the Company or any of its Subsidiaries or any other material amendment to their charter, by-laws or other organization documents, such notice, in each case, to identify the applicable jurisdictions or capital structures, as applicable. (l) Other Information. With reasonable promptness, the Company shall ----------------- deliver such other information and data with respect to the Company or any of its Subsidiaries as from time to time may be reasonably required by the Purchaser. 8.2 PRESERVATION OF CORPORATE EXISTENCE. The Company shall, and ----------------------------------- shall cause each of its Subsidiaries to: 44 (a) preserve and maintain in full force and effect its corporate existence; (b) conduct its business in accordance with sound business practices, keep its properties in good working order and condition (normal wear and tear excepted), and from time to time make all needed repairs to, renewals of or replacements of its properties (except to the extent that any of such properties are obsolete or are being replaced) so that the efficiency of its business operations shall be fully maintained and preserved; and (c) file or cause to be filed in a timely manner all reports, applications, estimates and licenses that shall be required by a Governmental Authority. 8.3 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause each ---------------------- of its Subsidiaries to, pay and discharge as the same shall become due and payable, all their respective obligations and liabilities, including without limitation: (a) all Tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; (b) all lawful claims which the Company and each of its Subsidiaries is obligated to pay, which are due and which, if unpaid, might by law become a Lien upon its property, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; and (c) all payments of principal, interest and other amounts when due on Indebtedness. 8.4 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause -------------------- each of its Subsidiaries to comply, in all material respects with all Requirements of Law and with the directions of any Governmental Authority having jurisdiction over them or their business or property (including all applicable Environmental Laws). 8.5 INSPECTION. The Company will permit, and will cause each of its ---------- Subsidiaries to permit, representatives of the Purchaser to visit and inspect any of their properties, to examine their corporate, financial and operating records and make copies thereof or abstracts therefrom, and to discuss their affairs, finances and accounts with their respective directors, officers and independent public accountants, all at such reasonable times during normal business hours and as often as may be reasonably requested, upon reasonable advance notice. 45 8.6 PAYMENT OF NOTE. The Company shall pay the principal of, --------------- interest on and other amounts due in respect of, the Note on the dates and in the manner provided in the Note. 8.7 INSURANCE. The Company and its Subsidiaries will maintain or --------- cause to be maintained with financially sound and reputable insurers that have a rating of "A" or better as established by Best's Rating Guide (or an equivalent rating with such other publication of a similar nature as shall be in current use), public liability and property damage insurance with respect to their respective businesses and properties against loss or damage of the kinds customarily carried or maintained by companies of established reputation engaged in similar businesses and in amounts acceptable to Purchaser and will deliver evidence thereof to Purchaser. 8.8 BOOKS AND RECORDS. The Company shall, and shall cause each of ----------------- its Subsidiaries to, keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and each of its Subsidiaries in accordance with GAAP consistently applied to the Company and its Subsidiaries taken as a whole. 8.9 USE OF PROCEEDS. The Company shall use the proceeds of the sale --------------- of the Note and the Shares hereunder only as follows: (i) for the payment of fees and expenses in connection with the transactions contemplated hereunder and in the other Transaction Documents and (ii) to fund the payment of the purchase price of the Acquisition under the Elekta Purchase Agreement. 8.10 INITIAL INTEREST PAYMENTS. Notwithstanding anything to the ------------------------- contrary contained herein or in the Note, the Company agrees that the Purchaser shall deduct $1,475,868.33 from the amount to be paid pursuant to Section 2.1 for the WDSF Note. Such amount shall be retained by the Purchaser and applied as follows in full satisfaction of the first four interest payments (but specifically excluding any additional interest accruing under the Note upon and during the occurrence of an Event of Default) otherwise due and owing under the Note:
Interest Payment Date Amount - ----------------------- ----------- September 30, 1998 $ 465,768.33 December 31, 1998 $ 505,050 March 31, 1999 $ 505,050
The Purchaser agrees to deposit the amount deducted and retained under this Section 8.10 into an interest bearing account (at the discretion of the Purchaser) and to pay to the Company all interest received on such deposit on a quarterly basis. 46 ARTICLE 9 NEGATIVE COVENANTS ------------------ Until the payment by the Company of all principal of and interest on the Note and all other amounts due at the time of payment of such principal and interest to the Purchaser under this Agreement and the other Transaction Documents, including, without limitation, all fees, expenses and amounts due at such time in respect of indemnity obligations under Article 7, the Company hereby covenants and agrees with the Purchasers as follows: 9.1 FUNDAMENTAL CHANGES; CONSOLIDATIONS, MERGERS AND ACQUISITIONS. ------------------------------------------------------------- The Company shall not, and shall not permit any of its Subsidiaries directly or indirectly to: (a) amend, modify or waive any term or provision of its certificate of incorporation, by-laws or other organization or governing agreements and documents, unless required by law; (b) enter into any transaction of merger or consolidation; (c) liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution); or (d) except pursuant to the exercise by the Company of its option to purchase the portion of ITC it does not already own, acquire by purchase or otherwise all or any substantial part of the business assets of any other Person. 9.2 TRANSACTIONS WITH AFFILIATES. Except in the ordinary course of ---------------------------- business and consistent with past practices or as set forth on Schedule 9.2, the ------------ Company shall not, and shall not permit any of its Subsidiaries to, (a) enter into any transaction or agreement with, or make any payment (other than pursuant to agreements existing on the date hereof or subsequently approved by the Purchaser) to, any Affiliate, (b) amend or terminate any existing agreement with any Affiliate, (c) purchase from or provide to an Affiliate any selling, general, management or administrative services, (d) directly or indirectly make any sales to or purchases from an Affiliate, or (e) increase the compensation being paid to an Affiliate. 9.3 NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its -------------------------- Subsidiaries shall enter into any Contractual Obligation or enter into any amendment or other modification to any currently existing Contractual Obligation of the Company or any of their Subsidiaries, which by its terms restricts or prohibits the ability of the Company to pay the principal of or interest on the Note or to fully satisfy all of the obligations under the Transaction Documents of the Company or its Subsidiaries. 9.4 LIMITATION ON INDEBTEDNESS. The Company shall not, and shall not -------------------------- cause, suffer or permit any of its Subsidiaries to, directly or indirectly, collectively and in the aggregate, issue, assume or otherwise incur any Indebtedness, other than: (a) Indebtedness created under the Transaction Documents; 47 (b) (i) at such time as the financial covenants contained in Sections 9.8(e) and (f) are no longer applicable (and so long as, on a pro forma basis after giving effect to the incurrence of any Indebtedness proposed to be incurred under this Section 9.4(b)(i), the Company would be in compliance with the covenants contained in Sections 9.8(e) and (f)), Indebtedness, including without limitation Capital Lease Obligations, up to an aggregate outstanding amount of $10,000,000 (including any Indebtedness previously incurred under (ii) below), and (ii) prior to such time as the Company may incur Indebtedness under Section 9.4(b)(i), Indebtedness, including without limitation Capital Lease Obligations, up to an aggregate outstanding principal amount of $3,500,000, in either case inclusive of Indebtedness listed on Schedule 5.27; ------------- (c) Non-current liabilities for post-employment healthcare and other insurance benefits; (d) Trade payables and accrued expenses, in each case arising in the ordinary course of business; (e) Indebtedness secured by a Lien permitted under Section 9.5(e); (f) Indebtedness between and/or among the Company and its Subsidiaries; provided that the obligations of such Indebtedness shall: -------- (i) be subordinated in right of payment to all Indebtedness under the Note and this Agreement from and after such time as any portion of the Indebtedness under the Note and this Agreement shall become due and payable (whether at stated maturity, by acceleration or otherwise); and (ii) have such other terms and provisions as the Purchaser may reasonably require; (g) Refinancings, refundings or extensions of the foregoing; provided, that any such refinancings, refundings or extensions shall not: - -------- (i) exceed the principal amount refinanced, refunded or extended; (ii) shorten the maturity (or weighted average life to maturity) of such Indebtedness or convert a revolving credit facility into a facility which provides for the amortization of principal; (iii) increase the interest rate applicable to such Indebtedness; 48 (iv) upon the occurrence and during the continuance of an Event of Default, cause any covenants or undertakings (whether affirmative or negative) of the Company or its Subsidiaries in respect of such Indebtedness to be more restrictive than such covenants or undertakings had been prior to such refinancing, refunding or extension; (v) facilitate the exercise or enforcement of any remedies of any obligee of such Indebtedness in respect of any default or event of default thereunder; (vi) materially and adversely affect any obligations under the Transaction Documents to the Purchaser; or (vii) result in any amendments or modifications of any of the subordination provisions applicable to such Indebtedness. 9.5 LIMITATION ON LIENS. The Company will not, nor will it permit ------------------- any of its Subsidiaries, directly or indirectly, to create, incur, assume or permit to exist any Lien on or with respect to any property or asset (including any document or instrument with respect to goods or accounts receivable) of the Company or its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except Permitted Encumbrances. "PERMITTED ENCUMBRANCES" means the following: (a) Liens for taxes, assessments or other governmental charges which are not yet due and payable or which are being contested in good faith with a reserve or other appropriate provision having been made thereof; (b) Liens of landlords, carriers, warehousemen, mechanics, materialmen and other similar Liens imposed by law, which are incurred in the ordinary course of business for sums not more than thirty (30) days delinquent or which are being contested in good faith; provided that a reserve or other -------- appropriate provision shall have been made therefor and the aggregate amount of such Liens is less than $100,000; (c) Liens (other than any Lien imposed by ERISA or any rule or regulation promulgated thereunder) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety, stay, customs and appeal bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (d) Deposits in an aggregate amount not to exceed $100,000, made in the ordinary course of business to secure liability to insurance carriers; 49 (e) Liens for purchase money obligations to acquire assets; provided that: - -------- (i) such Lien attaches to such asset concurrently with or within 10 days after acquisition thereof; (ii) such Lien does not exceed the purchase price of such asset; and (iii) the Indebtedness secured by all such Liens, shall not exceed $1,000,000; and (iv) any such Lien encumbers only the asset so purchased; (f) Any attachment or judgment Lien not constituting an Event of Default; (g) Leases or subleases granted to others not interfering in any material respect with the business of the Company or its Subsidiaries; (h) Easements, rights of way, restrictions and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Subsidiaries; (i) Liens to secure Senior Indebtedness and Indebtedness permitted under Section 9.4(a); (j) Liens to secure Indebtedness permitted under Section 9.4(b); and (k) Liens existing on the date hereof and renewals and extensions thereof, which Liens are set forth on Schedule 9.5 hereto. ------------ 9.6 DISPOSITIONS OF ASSETS. The Company will not, nor will it permit ---------------------- any of its Subsidiaries, directly or indirectly, to: convey, sell (pursuant to a sale/leaseback or otherwise), lease, sublease, transfer or otherwise dispose of, or grant any Person an option to acquire, in one transaction or a series of transactions, any of its property, business or assets, or the capital stock of or other equity interests in any of its Subsidiaries, whether now owned or hereafter acquired, except for: (a) Bona fide sales of inventory, including real estate acquired in the ordinary course of business, to customers for fair value in the ordinary course of business and dispositions of obsolete equipment not used or useful in the business; 50 (b) Asset Dispositions if all of the following conditions are met: (i) the market value of assets sold or otherwise disposed of (by the Company and its Subsidiaries taken as a whole) in any fiscal year do not exceed $500,000; (ii) the Net Proceeds received is at least equal to the fair market value of such assets; (iii) at least 75% of the consideration received is Cash; (iv) after giving effect to the sale or other disposition of the assets included within the Asset Disposition and the repayment of Indebtedness with the proceeds thereof, the Company would be in compliance on a pro forma basis with the covenants set forth in Section 9.8 hereof recomputed for the most recently ended month for which information is available and is in compliance with all other terms and conditions of this Agreement; (v) no Event of Default then exists or shall result from such sale or other disposition; or (c) Sale and leaseback transactions relating to real estate or capital equipment; provided however, that 50% of the Net Proceeds of any such ---------------- transaction shall be utilized by the Company to prepay the outstanding principal and any outstanding interest or penalties on the Note pursuant to Section 4 of the Note. 9.7 LIMITATIONS ON RESTRICTED PAYMENTS. The Company shall not, and ---------------------------------- shall not permit any of its Subsidiaries to declare, or make any Restricted Payment. 9.8 FINANCIAL COVENANTS. The Company covenants and agrees that until ------------------- payment in full of all Indebtedness hereunder and under the Note, the Company shall comply with and shall cause each of its Subsidiaries to comply with all covenants in this Section 9.8 applicable to such Person. (a) Interest Coverage. The Company shall not permit Interest Coverage for any twelve (12) month period ending on the last day of a calendar quarter during any of the periods set forth below, to be less than the ratio set forth below for such period:
Period Ratio - ------------------------------------------------------- ----------- September 30, 1998 to and including March 31, 1999 2.75 : 1.00 June 30, 1999 to and including September 30, 1999 3.0 : 1.00 December 31, 1999 to and including December 31, 2000 3.5 : 1.00 March 31, 2001 and thereafter 4.0 : 1.00
51 "INTEREST COVERAGE" will be calculated as illustrated on Exhibit H. --------- Notwithstanding anything to the contrary contained herein or in Exhibit H --------- hereto, the determination of Interest Coverage for the periods ended September 30, 1998, December 31, 1998 and March 30, 1999 shall not be calculated for a twelve month period, but rather shall be calculated for the 3 month, 6 month and 9 month periods, respectively, ending on the last day of each such calendar quarter. (b) Total Leverage Test. The Company shall not permit the ratio of Net Funded Indebtedness as of the last day of any calendar quarter during any of the periods set forth below to Adjusted Operating Cash Flow for the twelve (12) month period ending on the last day of such calendar quarter to be greater than the ratio set forth below for such period:
Period Ratio - ---------------------------------------------------- ------------ September 30, 1998 5.0 : 1.00 December 31, 1998 to and including March 31, 1999 4.5 : 1.00 June 30, 1999 4.25 : 1.00 September 30, 1999 to and including March 31, 2000 4.0 : 1.00 June 30, 2000 to and including March 31, 2001 3.5 : 1.00 June 30, 2001 and thereafter 3.0 : 1.00
"NET FUNDED INDEBTEDNESS" and "ADJUSTED OPERATING CASH FLOW" will be calculated as illustrated on Exhibit H. Notwithstanding anything to the contrary contained --------- herein or in Exhibit H hereto, (x)(i) the determination of EBITDA for the period --------- ended September 30, 1998 shall be calculated by multiplying the EBITDA of the Company and its Subsidiaries for the three months then ended by 4; (ii) the determination of EBITDA for the period ended December 31, 1998 shall be calculated by multiplying the EBITDA of the Company and its Subsidiaries for the six months then ended by 2; and (iii) the determination of EBITDA for the period ended March 31, 1999 shall be calculated by multiplying the EBITDA of the Company and its Subsidiaries for the nine months then ended by 1.33 and (y) any calculation of this covenant requiring reference to the Adjusted Operating Cash Flow of the Company for any of the periods ended on or before June 30, 1999, shall be calculated assuming that the Capital Expenditures of the Company for the relevant period are equal to the lesser of the actual Unfinanced Capital Expenditures for such period or $575,000. (c) Fixed Charge Coverage. The Company shall not permit Fixed Charge Coverage for any twelve (12) month period ending on the last day of a calendar quarter during any of the periods set forth below to be less than the ratio set forth below for such period:
Period Ratio - ---------------------------------------------------- ----------- September 30, 1998 to and including March 31, 1999 1.15 : 1.00 June 30, 1999 to and including September 30, 1999 1.25 : 1.00 December 31, 1999 to December 31, 2000 1.5 : 1.00 March 31, 2001 and thereafter 1.75 : 1.00
52 "FIXED CHARGE COVERAGE" will be calculated as illustrated on Exhibit H. ---------- Notwithstanding anything to the contrary contained herein or in Exhibit H --------- hereto, the determination of Fixed Charge Coverage for the periods ended September 30, 1998, December 31, 1998 and March 30, 1999 shall not be calculated for a twelve month period, but rather shall be calculated for the 3 month, 6 month and 9 month periods, respectively, ending on the last day of each such calendar quarter. (d) Capital Expenditures. The Company shall not permit Capital Expenditures in any fiscal period to exceed the amounts set forth below for each corresponding period.
Period Amount - ----------------------------------------------- ---------- July 1, 1998 through June 30, 1999 $2,300,000 July 1, 1999 through June 30, 2000 $1,900,000 July 1 through June 30 for each annual period commencing July 1, 2000 and thereafter $1,000,000
(e) Funded Debt to Cash and Cash Equivalents. The Company shall not permit the ratio of Funded Debt of the Company and its Subsidiaries on a consolidated basis to the sum of the cash and Cash Equivalents of the Company and its Subsidiaries on a consolidated basis to be greater than 2.0:1.0; provided, however, that this Section 9.8(e) shall be of no further force or - -------- ------- effect at such time as the ratio of Net Funded Indebtedness to Adjusted Operating Cash Flow, as determined in accordance with Section 9.8(b) of this Agreement without regard to the last sentence thereof, is less than 4.0:1 for four consecutive fiscal quarters. (f) Current Ratio. The Company shall not permit the ratio of Current Assets less cash and Cash Equivalents to Current Liabilities as of the last day of any calendar quarter during any of the periods set forth below to be less than the ratio set forth below for such period; provided, however, that this -------- ------- Section 9.8(f) shall be of no further force or effect at such time as the ratio of Net Funded Indebtedness to Adjusted Operating Cash Flow, as determined in accordance with Section 9.8(b) of this Agreement without regard to the last sentence thereof, is less than 4.0:1.0 for four consecutive fiscal quarters.
Period Ratio - ------------------------------------------------------- ------------ September 30, 1998 to and including December 31, 1999 1.5 : 1:00 March 31, 2000 and thereafter 1.75 : 1:00
9.9 EMPLOYEE BENEFIT PLANS. The Company shall not, and shall not permit ---------------------- any of its Subsidiaries or any ERISA Affiliate, without the prior approval of the 53 Purchaser, (a) to establish or contribute to any employee benefit plan (within the meaning of Section 3(3)) of ERISA) or other employee benefit arrangement which (i) is subject to Title IV of ERISA or is otherwise a Defined Benefit Plan, Multiemployer Plan or multiple employer plan (within the meaning of Section 413(c) of the Code); or (ii) provides post-retirement welfare benefits or "parachute payments" (within the meaning of Section 280G(b) of the Code); or (b) to amend any Plan if the effect of such amendment would cause such Plan to be a plan or arrangement described in clause (a)(i) hereof or to provide any of the benefits described in clause (a)(ii) hereof. 9.10 LIMITATION ON BUSINESS OF THE COMPANY. Neither the Company nor ------------------------------------- any of its Subsidiaries shall engage in any business or transaction other than the business in which it is currently engaged and the transactions contemplated by, or permitted under, the Transaction Documents and the Acquisition Documents. 9.11 INVESTMENTS. Except in the ordinary course of business and ----------- consistent with past practices, the Company shall not, and shall not permit any of its Subsidiaries, directly or indirectly, to make or own any Investment in any Person except: (a) Investments in Cash Equivalents; provided that such Cash Equivalents are not subject to setoff rights in favor of the issuing bank arising from any existing banking relationship; (b) intercompany loans and investments to the extent permitted under Sections 9.2 or 9.4; (c) loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $50,000 in the aggregate at any time outstanding; (d) loans of up to $2 million to ITC in accordance with the terms and provisions of that certain Loan and Security Agreement, dated May 29, 1997, between the Company and ITC (including the conversion of such loans into shares of ITC's redeemable convertible preferred stock, par value $.01 per share, representing a 20% ownership interest therein); (e) the acquisition by the Company of the portion of ITC it does not already own for $24,500,000 pursuant to the exercise of its option to acquire such ownership interest in accordance with the terms of that certain Stockholders Option Agreement dated May 29, 1997 among the Company, ITC and the holders of common stock and warrants of ITC listed on Schedule A thereto and (f) a loan to or investment in ITC in an amount not to exceed $800,000, and in a manner consistent with the terms and conditions previously approved by the Company's Board of Directors. 9.12 CONTINGENT OBLIGATIONS. The Company shall not, nor shall it ---------------------- permit any of its Subsidiaries directly or indirectly to create or become or be liable with respect to any Contingent Obligation except those: (a) resulting from endorsements of negotiable instruments for collection in the ordinary course of business; (b) arising under the Transaction Documents; (c) existing on the Closing Date and as described in Schedule 9.12 annexed hereto; (d) arising ------------- with respect to customary indemnification and purchase price adjustment obligations incurred in connection with any Asset Dispositions; (e) incurred in the ordinary course of business with respect to surety and appeal bonds, performance and return-of-money bonds, letter of credit and similar obligations not exceeding any time outstanding $150,000 in aggregate liability; (f) incurred with respect 54 to any Indebtedness permitted pursuant to Section 9.4 hereof; (g) not otherwise permitted by clauses (a) through (f) above so long as any such Contingent Obligations, in the aggregate at any time outstanding do not exceed $100,000. 9.13 MANAGEMENT FEES AND COMPENSATION. The Company shall not, nor -------------------------------- shall it permit any of its Subsidiaries, directly or indirectly, to pay any management, consulting or similar fees to any Affiliate or to any director, officer or employee of the Company or any of its Subsidiaries except reasonable director's fees and expenses and except as set forth on Schedule 9.13. ------------- Notwithstanding the foregoing, no payments may be made with respect to any items set forth on Schedule 9.13 upon the incurrence and during the continuation of an ------------- Event of Default. 9.14 FISCAL YEAR. The Company and its Subsidiaries shall not change ----------- their fiscal year without the prior consent of the Purchaser. 9.15 SUBSIDIARIES. Except as permitted in Section 8.1(j), the Company ------------ shall not, nor shall any of the Subsidiaries be permitted to, directly or indirectly, establish, create or acquire any new Subsidiary. 9.16 NO NEGATIVE PLEDGES. Except pursuant to agreements with the ------------------- creditors of the Senior Indebtedness, the Company will not and will not permit any of its Subsidiaries directly or indirectly to enter into or assume any agreement prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired. 9.17 NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO THE COMPANY. ---------------------------------------------------------- Except as otherwise provided herein, the Company will not and will not permit any of its Subsidiaries directly or indirectly to create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of the Company or any such Subsidiary to: (a) pay dividends or make any other distribution on any of such Subsidiary's capital stock owned by the Company or any Subsidiary; (b) subject to subordination provisions for the benefit of Purchaser, pay any Indebtedness owed to the Company or any other Subsidiary; (c) make loans or advances to the Company or any other Subsidiary; or (d) transfer any of its property or assets to the Company or any other Subsidiary. 9.18 BANK ACCOUNTS. The Company will not and will not permit any of ------------- its U.S. Subsidiaries to establish any new bank accounts without prior written notice to the Purchaser. 55 ARTICLE 10 PREPAYMENT ---------- 10.1 OPTIONAL PREPAYMENT. The Company may prepay outstanding ------------------- principal (together with accrued interest) on the Note at any time without penalty. 10.2 MANDATORY PREPAYMENT. Subject to Section 7 of the Note, the -------------------- Company shall prepay outstanding principal (together with accrued interest) on the Note in accordance with the "Mandatory Prepayment" provisions set forth in Section 3 of the Note. ARTICLE 11 MISCELLANEOUS ------------- 11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the ------------------------------------------ representations and warranties made herein shall survive the execution and delivery of this Agreement, any investigation by or on behalf of the Purchaser, acceptance of the WSDF Note and payment therefor. 11.2 DISPOSITIONS BY THE PURCHASER. At any time prior to the earlier ----------------------------- to occur of (x) one year from the Closing Date or (y) a Change of Control of the Company, each of the Purchaser and Whitney covenants and agrees that it will not sell or otherwise dispose of the Shares. 11.3 NOTICES. All notices, demands and other communications provided ------- for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier (with receipt confirmed), courier service or personal delivery: (a) if to the Purchaser: Whitney Subordinated Debt Fund, L.P. 177 Broad Street Stanford, Connecticut 06901 Telecopier No.: (203) 973-1422 Attention: Mr. Daniel J. O'Brien 56 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Telecopier No.: (212) 757-3900 Attention: Bruce A. Gutenplan, Esq. (b) if to the Company: Nitinol Medical Technologies, Inc. 27 Wormwood Street Boston, Massachusetts 02210 Telecopier: 617-737-0924 Attention: Mr. Theodore I. Pincus with a copy to: Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 Telecopier: 617-526-5000 Attention: Steven D. Singer, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; if mailed, five Business Days after being deposited in the mail, postage prepaid; or if telecopied, when receipt is acknowledged. 11.4 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the ---------------------- benefit of and be binding upon the successors and permitted assigns of the parties hereto. Subject to applicable securities laws, the Purchaser may assign any of its rights under any of the Transaction Documents to any Person and any holder of the Note may assign the Note to any Person. The Company may not assign any of its rights under this Agreement without the prior written consent of the Purchaser. Except as provided in Article 7, no Person other than the parties hereto and their successors and permitted assigns is intended to be a beneficiary of any of the Transaction Documents. 57 11.5 TERMINATION. ----------- (a) This Agreement may be terminated prior to the Closing as follows: (i) at the election of the Company if any one or more of the conditions to its obligation to close has not been fulfilled as of August 31, 1998; (ii) at the election of the Purchaser if any one or more of the conditions to its obligation to close has not been fulfilled as of August 31, 1998; (iii) at the election of the Company if the Purchaser has breached a covenant or agreement contained in this Agreement, which breach cannot be or is not cured by August 31, 1998; (iv) at the election of the Purchaser if the Company has breached a covenant or agreement contained in this Agreement, which breach cannot be or is not cured by August 31, 1998; or (v) at any time on or prior to the Closing Date, by mutual written consent of the Company and the Purchaser. If this Agreement so terminates, it shall become null and void and have no further force or effect, except as provided in Section 11.5(b). (b) If this Agreement is terminated in accordance with Section 11.5(a) and the transactions contemplated by this Agreement are not consummated, this Agreement shall become null and void and of no further force and effect, except for (i) the provisions of Section 2.2(b) relating to the obligation of the Company to pay the Purchaser's reasonable out-of-pocket expenses and (ii) the provisions of Article 7 and this Article 11. If this Agreement is terminated in accordance with Section 11.5(a) and the transactions contemplated by this Agreement are not consummated, none of the parties shall have any liability in respect of a breach of a representation, warranty, covenant or agreement, except to the extent that failure to satisfy the conditions of Article 3 or Article 4, as the case may be, results from the intentional or willful violation by such party of its obligations contained in this Agreement or any documents delivered pursuant to this Agreement. 11.6 AMENDMENT AND WAIVER. -------------------- (a) No failure or delay on the part of any of the parties hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The 58 remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the parties hereto at law in equity, or otherwise. (b) Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement and any consent to any departure by any party from the terms of any provision of this Agreement shall be effective (i) only if it is made or given in writing and signed by all of the parties hereto, and (ii) only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances. 11.7 SIGNATURES; COUNTERPARTS. Telefacsimile transmissions of any ------------------------ executed original document and/or retransmission of any executed telefacsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm telefacsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 11.8 HEADINGS. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof 11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED ------------- IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE. 11.10 DETERMINATIONS, REQUEST OR CONSENTS. All determinations, ----------------------------------- requests, consents, waivers or amendments to be made by the Purchaser in its opinion or judgment or with its approval or otherwise pursuant to the Transaction Documents shall be made (i) if prior to the Closing Date, by the Purchaser in its sole discretion and (ii) if after the Closing Date, by the holders of a majority of the aggregate outstanding principal amount of the Note. 11.11 JURISDICTION, JURY TRIAL WAIVER, ETC.. (A) EACH PARTY TO THIS ------------------------------------- AGREEMENT HEREBY IRREVOCABLY AGREES THAT THE ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS 59 FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 11.3, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING. (B) EACH OF THE COMPANY AND ITS SUBSIDIARIES HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER TRANSACTION DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE COMPANY AND ITS SUBSIDIARIES HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH OF THE COMPANY AND ITS SUBSIDIARIES (1) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE PURCHASER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (2) ACKNOWLEDGES THAT THE PURCHASER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. 11.12 SEVERABILITY. If any one or more of the provisions contained ------------ herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. 11.13 RULES OF CONSTRUCTION. Unless the context otherwise requires, --------------------- "or" is not exclusive, any references to sections or subsections refer to sections or subsections of this Agreement. 11.14 ENTIRE AGREEMENT. This Agreement is intended by the parties as a ---------------- final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings other than those set forth or referred to herein or therein. 60 This Agreement and the other Transaction Documents supersede all prior agreements and understandings between the parties with respect to such subject matter. 11.15 CERTAIN EXPENSES. The Company will pay all expenses of the ---------------- Purchaser (including, without limitation, reasonable fees, charges and disbursements of counsel) in connection with any amendment, supplement, modification or waiver of or to any provision of this Agreement or any of the other Transaction Documents or any documents relating thereto (including, without limitation, a response to a request by the Company for the Purchaser's consent to any action otherwise prohibited hereunder or thereunder), or consent to any departure from, the terms of any provision of this Agreement or such other documents. 11.16 PUBLICITY. Except as may be required by applicable law, none of --------- the parties hereto shall issue a publicity release or announcement or otherwise make any public disclosure concerning this Agreement or the transactions contemplated hereby, without prior approval by the other party hereto. If any announcement is required by law to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other party and shall give the other party an opportunity to comment thereon. 11.17 FURTHER ASSURANCES. Each of the parties shall execute such ------------------ documents and perform such further acts (including, without limitation, obtaining any consents, exemptions. authorizations, or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized as of the date first above written. NITINOL MEDICAL TECHNOLOGIES, INC. By: /s/ Theodore I. Pincus -------------------------------- Name: Theodore I. Pincus Title: EVP/CFO WHITNEY SUBORDINATED DEBT FUND, L.P. By: -------------------------------- Name: A General Partner IN WITNESS WHEREOF, solely for purposes of being bound by Section 2.2, Article 6 and Section 11.2 of this Agreement, J.H. Whitney & Co. has caused this Agreement to be executed and delivered by its officer hereunto duly authorized as of the date first above written. J.H. WHITNEY & CO. By: -------------------------------- Name: Title: 62 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized as of the date first above written. NITINOL MEDICAL TECHNOLOGIES, INC. By: -------------------------------- Name: Title: WHITNEY SUBORDINATED DEBT FUND, L.P. By: /s/ Jeffrey R. Jay -------------------------------- Name: Jeffrey R. Jay A General Partner IN WITNESS WHEREOF, solely for purposes of being bound by Section 2.2, Article 6 and Section 11.2 of this Agreement, J.H. Whitney & Co. has caused this Agreement to be executed and delivered by its officer hereunto duly authorized as of the date first above written. J.H. WHITNEY & CO. By: /s/ Jeffrey R. Jay -------------------------------- Name: Jeffrey R. Jay Title: General Partner 63 Exhibit A - See Exhibit 10.4 to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on July 23, 1998 for a copy of the executed WSDF Note. Exhibit C - See Exhibit 10.5 to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on July 23, 1998 for a copy of the executed Guarantee and Collateral Agreement. Exhibit E - See Exhibit 10.6 to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on July 23, 1998 for a copy of the executed Dutch Pledge Agreement. Exhibit F - See Exhibit 10.7 to the Company's Current Report on Form 8-K as filed with the Securities and Exchange Commission on July 23, 1998 for a copy of the executed Registration Rights Agreement. EXHIBIT B-1 HALE AND DORR LLP Counsellors at Law 60 State Street, Boston, Massachusetts 02109 617-526-6000 * Fax 617-526-5000 July 8, 1998 Whitney Subordinated Debt Fund, L.P. c/o J.H. Whitney & Co., Inc. 177 Broad Street Stamford, Connecticut 06901 Ladies and Gentlemen: We have acted as counsel to Nitinol Medical Technologies, Inc. ("Nitinol" or the "Company"), a Delaware corporation, and certain of its subsidiaries, as listed on Exhibit A (the "Subsidiaries", the Company and the Subsidiaries being --------- collectively referred to herein as the "Borrowers") in connection with the preparation, execution and delivery of (i) the Subordinated Note and Common Stock Purchase Agreement (the "Note Purchase Agreement") by and among Nitinol, Whitney Subordinated Debt Fund, L.P. (the "Lender"), and, for certain purposes, J.H. Whitney & Co. ("J.H. Whitney" or "Agent") providing for, among other things, a $20,000,000 loan from the Lender to the Company and the issuance by the Company of an aggregate of 675,000 shares of common stock, par value $.001 per share (the "Shares"), to the Lender and Whitney, and (ii) the other loan documents, including (a) the Subordinated Promissory Note (the "WSDF Note") executed by Nitinol, (b) the Guarantee and Collateral Agreement (the "Guarantee and Collateral Agreement") made by Nitinol and the Subsidiaries (collectively with Nitinol, the "Grantors") in favor of the Agent, (c) the Agreement and Deed of Pledge of Shares in Yellow Tape B.V. and Nitinol Medical Technologies International, BV (the "Dutch Pledge Agreement") between NMT NeuroSciences (International), Inc. as pledgor of certain shares in Yellow Tape B.V., Nitinol Medical Technologies, Inc. as pledgor of certain shares of Nitinol Medical Technologies International, BV and J.H. Whitney, as security trustee and (d) the Charge Over Shares in NMT NeuroSciences (UK), Ltd. (the "Charge Over Shares") between NMT NeuroSciences (International), Inc., as chargor, and J.H. Whitney, as trustee. The shares pledged to or for the benefit of the Lender under the Guarantee and Collateral Agreement, other than the shares of Nitinol Medical Technologies FSC, Inc., are referred to herein as the "Pledged U.S. Shares." This opinion is furnished to you pursuant to Section 3.5 of the Note Purchase Agreement. All capitalized terms used but not defined herein have the respective meanings given to such terms in the Note Purchase Agreement. WASHINGTON, DC BOSTON, MA LONDON, UK - -------------------------------------------------------------------------------- HALE AND DORR LLP INCLUDES PROFESSIONAL CORPORATIONS BROBECK HALE AND DORR (AN INDEPENDENT JOINT VENTURE LAW FIRM) Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 2 In rendering the opinions expressed below, we have examined: (a) the Note Purchase Agreement; (b) the WSDF Note; (c) the Guarantee and Collateral Agreement; (d) the Dutch Pledge Agreement; (e) the Charge Over Shares; (f) UCC-1 financing statements in the form annexed hereto as Exhibit B --------- (the "Financing Statements") to be filed in the filing offices listed on Schedule I; - ---------- (g) The Certificate of Incorporation or similar charter document of each of the Borrowers, each in effect on the date hereof (collectively, the "Certificates of Incorporation"); (h) the By-laws of each of the Borrowers, each as in effect on the date hereof, provided to us by the Borrowers (collectively, the "By-Laws"); (i) all records contained in the corporate minute books of each of the Borrowers, as provided to us by the Borrowers, relating to the period commencing on January 1, 1997 and ending on the date hereof, and the stock record books of each of the Borrowers (other than the Company), as provided to us by such Borrowers; (j) the certificates of legal existence and corporate good standing listed on Exhibit C hereto for the Company and each of the Subsidiaries, issued by the --------- Secretary of State of the State of Delaware and the Secretaries of State of the other jurisdictions listed thereon; (k) certified copies of resolutions adopted by the Boards of Directors of each of the Borrowers approving the transactions contemplated by the Note Purchase Agreement and authorizing, among other things, the execution, delivery and performance by the Borrowers of each of the Transaction Documents, as defined below (the "Authorizing Resolutions"); (l) authorization, incumbency and signature certificates as to the officers of each of the Borrowers; Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 3 (m) the certificate of Theodore I. Pincus, Executive Vice President of the Company and Treasurer of each of the Subsidiaries, in the form attached hereto as Exhibit D; ---------- (n) such other documents, instruments and certificates (including, but not limited to, certificates of public officials and officers of the Borrowers) as we have considered necessary for purposes of this opinion; and (o) the Acquisition Documents. The documents listed in clauses (a)-(c) and (f) are referred to collectively herein as the "Transaction Documents." We assume, for purposes of this opinion, that the corporate records (referred to in clause (i) above) contain an accurate record of all meetings of the stockholders and directors of each of the Borrowers after January 1, 1997 and that the stock record books of each of the Borrowers are materially complete and accurate. In our examination of the documents described above, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all copies of documents submitted to us, the authenticity of the originals of such latter documents, and the legal capacity of all individual signatories. Insofar as this opinion relates to factual information which is in the possession of the Borrowers, we have relied, with your consent, exclusively upon certificates, statements and representations made to us by one or more officers or employees of the Borrowers and other representatives or agents of the Company and the representations of the Borrowers contained in the Transaction Documents. Nothing has come to our attention which causes us to believe that you are not justified in relying upon such certificates, statements and representations of officers and other representatives or agents of the Company. Any reference to "our knowledge", or to matters "known to us", "coming to our attention", or "of which we are aware", or any variation of any of the foregoing shall mean the conscious awareness of the attorneys in this firm who have rendered substantive attention to this transaction of the existence or absence of any facts which would contradict our opinions set forth below. We have not undertaken any independent investigation to determine the existence or absence of such facts, and no inference as to our knowledge of the existence or absence of such facts should be drawn from the fact of our representation of the Borrowers. Without limiting the foregoing, we have not conducted a search of any computerized or electronic databases or the dockets of any court or administrative or other regulatory agency in any jurisdiction. Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 4 We have assumed that all parties to the Transaction Documents other than the Borrowers have the power and authority and have taken the corporate or partnership action necessary to execute and deliver the Transaction Documents and all other instruments to which they are a party in connection therewith, and that except for the filing of Financing Statements, no consent, approval, authorization, declaration or filing by or with any governmental commission, board or agency is required for each of such parties' valid execution and delivery of such documents. We have assumed each of such parties' due execution and delivery of the Transaction Documents to which they are a party, and that such Transaction Documents constitute such parties' valid and binding obligations, enforceable against them in accordance with their respective terms. We are expressing no opinion herein as to the application of or compliance with any federal or state law or regulation to the power, authority or competence of any party to the documents as to which we are opining herein, other than the Borrowers. We express no opinion herein with respect to the laws of any state or jurisdiction other than the federal laws of the United States of America, the state laws of the Commonwealth of Massachusetts and the General Corporation Law statute of the State of Delaware. To the extent that the laws of any other jurisdiction govern any of the matters as to which we are opining herein, we have assumed that such laws are identical to the state laws of the Commonwealth of Massachusetts, and we are expressing no opinion herein as to whether such assumption is reasonable or correct. We note that the Transaction Documents are governed by the laws of the State of New York. We further note that Cordis Innovasive Systems, Inc. ("CIS") is a Florida corporation and, for purposes of our opinions expressed in paragraphs 2 and 3 below as to no conflict with the charter and by-laws of CIS and the due execution and delivery of the Guarantee and Collateral Agreement, respectively, we have assumed that Massachusetts law governs CIS. We express no opinion herein with respect to compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The opinions expressed in paragraph l below, insofar as they relate to the due organization, valid existence and corporate good standing of the Company and each of the Subsidiaries, and the foreign qualification of certain of the Subsidiaries are based solely upon the certificates listed on Exhibit C and are --------- rendered as of the dates of such certificates and limited accordingly. With respect to our opinions expressed in paragraphs 2, 4 and 9 below, the Contractual Obligations "known to us" include only those documents to which the Company and/or the Subsidiaries is a party and which are filed as exhibits to reports filed by the Company with the Securities and Exchange Commission pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act documents"). The opinion expressed in paragraph 4 as to the Company's issued and outstanding stock is based solely on a certificate dated as of Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 5 July 2, 1998 of American Stock Transfer and Trust Co., the Company's transfer agent. The opinions expressed in the third sentence of paragraph 4 and as to the fully paid and nonassessable nature of the outstanding shares of the Company's and the Subsidiaries' capital stock are based solely on the Officer's Certificate attached hereto as Exhibit D. --------- Our opinions below are qualified to the extent that they may be subject to or affected by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, usury, or similar laws affecting the rights of creditors generally, (ii) statutory or decisional law concerning recourse by creditors to security in the absence of notice or hearing, and (iii) duties and standards imposed on creditors and parties to contracts, including, without limitation, requirements of good faith, reasonableness and fair dealing. Notwithstanding the foregoing, our opinions set forth below are not qualified as to the application of Massachusetts General Laws Chapter 271, Section 49(a)-(c), based solely on our understanding that J.H. Whitney & Co., Inc., as agent, has complied with the notification requirement set forth in (S)49(d) of Chapter 271, and assuming for this purpose that the laws of the Commonwealth of Massachusetts govern the Transaction Documents. Furthermore, we express no opinion as to the availability of any equitable or specific remedy upon any breach of the documents as to which we are opining here or any of the agreements, documents or obligations referred to therein, or as to the successful assertion of any equitable defense, as the availability of such remedies or defenses may be subject to the discretion of a court. We express no opinion as to the enforceability of a waiver of rights granted by the Constitution of the United States of America, or any state thereof, or the vesting of jurisdiction in, or the consent to the exercise of jurisdiction by, any court where the exercise of such jurisdiction is within the discretion of such court, or the court is not a court of general jurisdiction. We are expressing no opinion as to compliance by the Borrowers with the so- called "blue sky" or state securities laws (other than the securities laws of the Commonwealth of Massachusetts), or with state or federal antifraud laws, in connection with the issuance and sale of the WSDF Note or the Shares. We express no opinion as to the enforceability of any right of set-off against any deposit account of a Borrower to the extent that (i) the funds on deposit in said accounts have been accepted by you with an intent to apply such funds to a preexisting claim rather than to hold such funds subject to withdrawals in the ordinary course, (ii) the set-off is directed against checks held by you for collection only and not for deposit, (iii) the funds on deposit in said accounts are in any manner special accounts which, by the express terms on which they are created are made subject to the rights of a third party, or (iv) the obligations against which any deposit account is set-off are not due and payable. Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 6 Based upon and subject to the foregoing, and further subject to the qualifications set forth below, it is our opinion that: 1. The Company and each of its Subsidiaries: (i) is, and after giving effect to the transactions contemplated by the Transaction Documents and the Acquisition Documents, will be a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (ii) has, and after giving effect to the transactions contemplated by the Transaction Documents and the Acquisition Documents, will have all requisite corporate power and authority to own and operate its property (as such property is known to us), to lease the property it operates as lessee (as such property is known to us) and to conduct the business in which it is, to our knowledge, currently engaged; and (iii) has the corporate power and authority to execute, deliver and perform its obligations under each Transaction Document to which it is or will be a party. The Company and NMT Heart Inc. are duly qualified to do business and in good standing in the Commonwealth of Massachusetts. 2. The execution, delivery and performance by the Company and each of the Subsidiaries of each Transaction Document and Acquisition Document to which it is a party and the consummation of the transactions contemplated hereby and thereby, including without limitation the issuance of the WSDF Note and the Shares: (i) has been duly authorized by all necessary corporate action; (ii) does not contravene the terms of the Company's or any of the Subsidiaries' Certificates of Incorporation or By-laws, and (iii) will not violate, conflict with or result in any breach or contravention of or the creation of any Lien under, any Contractual Obligation of the Company or any or the Subsidiaries known to us or any Requirement of Law applicable to the Company or any of the Subsidiaries. 3. Each Transaction Document and Acquisition Document to which the Company and the Subsidiaries are parties has been duly executed and delivered by the Company and each of the Subsidiaries parties thereto. 4. As of the Closing Date, the authorized capital stock of the Company consists of 30,000,000 shares of Common Stock, of which 9,828,210 shares were issued and outstanding as of July 2, 1998 and 3,000,000 shares of preferred stock, $.001 par value per share (the "Preferred Stock"), of which no shares were issued and outstanding. The Company has no shares of capital stock held in treasury. To our knowledge, as of the Closing Date, after giving effect to the transactions contemplated hereby and by the other Transaction Documents and the Acquisition Documents, there will be: (i) no shares of issued and outstanding Preferred Stock; (ii) 10,503,210 shares of Common Stock issued and outstanding; (iii) an aggregate of 1,865,789 shares of Common Stock reserved for issuance pursuant to the exercise of stock options issuable in accordance with the terms of the Company's 1994 Stock Option Plan, 1996 Stock Option Plan, 1996 Stock Option Plan for Non-Employee Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 7 Directors and the 1998 Stock Incentive Plan and an aggregate of 1,320,002 shares of Common Stock reserved for issuance pursuant to the exercise of stock options not issued pursuant to a plan (collectively, the "Options"); (iv) 83,329 shares of Common Stock reserved for issuance upon exercise of the stock purchase warrant issued in June 1998 to Fletcher Spaght, Inc. relating to the acquisition by the Company of certain technology relating to the CardioSEAL Septal Occluder; (v) 28,489 shares of Common Stock reserved for issuance upon exercise of the stock purchase warrant transferred by Fletcher Spaght, Inc. in June 1998 to David Chazanovitz; (vi) 99,660 shares of Common Stock reserved for issuance upon exercise of the stock purchase warrant issued in February 1996 to Junewicz & Co., Inc.; (vii) 5,263 shares of Common Stock reserved for issuance upon exercise of the stock purchase warrant issued in April 1996 to Dr. Lloyd Marks (together with the warrants described above in (iv), (v) and (vi), the "Warrants"); and (viii) 84,973 shares of Common Stock reserved for issuance in connection with the Company's 1997 Employee Stock Purchase Plan. All outstanding shares of capital stock of the Company issued after January 1, 1997 have been duly authorized by all necessary corporate action and are validly issued, fully paid and nonassessable. To our knowledge, the shareholders of the Company have no preemptive or similar rights with respect to the issuance or sale of the Shares under any Contractual Obligation known to us. 5. To our knowledge, except for the Warrants and the Options and as set forth on Schedule 5.19(b) to the Note Purchase Agreement, there are, and after giving effect to the transactions contemplated by the Transaction Documents and the Acquisition Documents, there will be, no outstanding securities convertible into or exchangeable for capital stock of the Company or options, warrants or other rights to purchase or subscribe to capital stock of the Company or contracts, commitments, agreement, understandings or arrangements of any kind to which the Company is a party relating to the issuance of any capital stock of the Company, any such convertible or exchangeable securities or any such options, warrants or rights. 6. To our knowledge, except as disclosed in the Transaction Documents, there are no actions, suits, proceedings, claims or disputes pending or threatened, at law, in equity, in arbitration or before any federal or state court or governmental authority or agency against the Company or any Subsidiary. To our knowledge, no injunction, writ, temporary restraining order, decree or any order of any nature specifically naming the Company or the Subsidiaries has been issued by any court or other governmental authority purporting to enjoin or restrain the execution, delivery and performance of any of the Transaction Documents. 7. Assuming the accuracy of the representations and warranties contained in the Note Purchase Agreement, the offer, sale and issuance of the Shares and the WSDF Note are exempt from the registration requirements under the Securities Act of 1933, as amended and applicable Massachusetts securities laws. Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 8 8. After giving effect to the transactions contemplated by the Acquisition Documents, neither the Company nor any Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 9. To our knowledge, except as provided in the Transaction Documents or disclosed on the Schedules to the Note Purchase Agreement, none of the Contractual Obligations of the Company known to us (i) restricts the voting or transfer or requires the registration of any capital stock of the Company, (ii) requires the Company to repurchase or otherwise acquire, retire or sell any capital stock of the Company or (iii) restricts the payments of dividends on any shares of capital stock of the Company. 10. Each of the Note Purchase Agreement, the WSDF Note, the Guarantee and Collateral Agreement and the Acquisition Documents constitutes the valid and binding obligation of the Company and the Subsidiaries party thereto, enforceable against the Company and the Subsidiaries party thereto in accordance with its terms. 11. The stock certificates representing the Shares are in proper form under all applicable provisions of Delaware law. 12. Except for filings which are necessary to perfect the security interests granted under the Transaction Documents, for filings under United States state and federal securities laws, and any other filings, authorizations or approvals as are specifically provided for in the Transaction Documents, no authorizations or approvals of, and no filings with, any governmental or regulatory authority or agency are necessary under any relevant law for the execution, delivery or performance by the Company or any of the Subsidiaries of the Transaction Documents to which it is a party. 13. If the Guarantee and Collateral Agreement were governed by the laws of the Commonwealth of Massachusetts, then after giving effect to the purchase of the WSDF Note on the Closing Date, the Guarantee and Collateral Agreement would create a valid security interest under the Uniform Commercial Code as enacted in the Commonwealth of Massachusetts (the "Code") in favor of the Agent, for the benefit of the Lender and the Agent, to secure the Obligations (as defined in the Guarantee and Collateral Agreement), in all right, title and interest of the Company and the Grantors (the "Debtors") in and to the Collateral (as defined in the Guarantee and Collateral Agreement exclusive of the Pledged Securities) in which a security interest can be created under the Code. The Agent's security interest in the Collateral will be perfected under Article 9 of the Code upon due filing of the financing statements in the form attached as Exhibit B in the --------- offices listed on Schedule I with respect to filings made in filing offices in ---------- the Commonwealth of Massachusetts, or under the Uniform Commercial Code enacted in the jurisdictions in which such other filing offices are located. Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 9 14. If the Guarantee and Collateral Agreement were governed by the laws of the Commonwealth of Massachusetts, then after giving effect to the purchase of the WSDF Note on the Closing Date and assuming that (i) the Agent has, at the date of this letter, possession of the certificates representing the Pledged U.S. Shares of the Grantors, together with related stock powers which have been duly executed in blank by the Borrower and certain of the Grantors, as the case may be, and maintains continuous possession of the Pledged U.S. Shares and stock powers, and (ii) on the date hereof the Lender and the Agent do not have notice of any adverse claim to the Pledged U.S. Shares, then the Agent has a valid and perfected security interest, for the benefit of the Lender and the Agent, to secure the Obligations (as defined in the Guarantee and Collateral Agreement), in all right, title and interest of the Company and the Grantors in and to the Pledged U.S. Shares, which security interest has priority over any other security interest in the Pledged U.S. Shares which can be perfected under the Code. The foregoing opinions are subject to the following comments and qualifications: i. The enforcement against the Borrowers of any rights and remedies is or may be subject to the effect of certain general principles of contract law that include (a) the unenforceability of provisions of an agreement to the effect that provisions therein may only be amended or waived in writing to the extent that an oral agreement modifying such provisions has been entered into; and (b) the general rule that, where less than all of an agreement is enforceable, the balance is enforceable only when the unenforceable provision is not an essential part of the agreed exchange. ii. We express no opinion in paragraph 13 as to the creation of security interests in property in which a security interest cannot be created under the Code or the perfection of security interests in property in which a security interest cannot be perfected by the filing of UCC-1 Financing Statements pursuant to Article 9 of the Code in the filing offices described in Schedule I ---------- hereto. We express no opinion as to the perfection of security interests in fixtures. iii. We express no opinion as to the priority of any security interests granted by the Borrowers to or for the benefit of the Lender except with respect to Pledged U.S. Shares. We express no opinion as to the existence of, or the right, title or interest of the Borrowers in, to or under any property in which it has granted a security interest. iv. The perfection of the security interests may be terminated as to any Collateral of a Borrower acquired by such Borrower more than four months after such Borrower changes its name, identity or corporate structure so as to make the Financing Statements seriously misleading (within the meaning of Section 9- 402(7) of Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 10 the Code) unless new, appropriate financing statements indicating the new name, identity or corporate structure of such Borrower are properly filed before the expiration of such four-month period and all fees in connection therewith are paid. The perfection of security interests in accounts, including receivables, general intangibles and certain other Collateral of a Borrower may be terminated if such Borrower changes the location of its chief executive offices. v. Pursuant to the Code, continuation statements are required from time to time to be filed in order to preserve valid, perfected security interests. vi. We have assumed that the Collateral of the Borrowers is located at the locations described on Schedule II hereto and that the chief executive ----------- offices of the Borrowers are located as described on Schedule II. ----------- vii. We express no opinion as to the adequacy of the description of the Collateral of the Borrowers as defined in the Note Purchase Agreement insofar as such description includes terms which are not defined under Article 9 of the Code. viii. We express no opinion as to the legal capacity of natural persons. ix. Under certain circumstances, described in Section 9-306 of the Code, the right of a secured party to enforce a perfected security interest in the proceeds of collateral may be limited. x. The grant of, or any realization on, security interests in governmental licenses, permits, authorizations and other rights, in contracts with government or governmental instrumentalities, commissions, boards or agencies and in the proceeds thereof are or may be subject to restrictions or limitations set forth therein or in applicable statutes, laws, rules or regulations, and we express no opinion as to the creation or perfection of security interests in such rights, contracts or proceeds (to the extent affected by such restrictions or limitations). xi. We express no opinion as to the enforceability of prospective waivers of rights to notice, or to a hearing or other right granted by constitution or statute, provisions purporting to relieve parties of the consequences of their own negligence or misconduct, choice of law provisions, or provisions purporting to establish evidentiary standards. This opinion is based upon currently existing statutes, rules, regulations and judicial decisions, and we disclaim any obligation to advise you of any change in any of these sources of law or subsequent legal or factual developments which might affect any matters or opinions set forth herein. Whitney Subordinated Debt Fund, L.P. July 8, 1998 Page 11 Please note that we are opining only as to the matters expressly set forth herein, and no opinion should be inferred as to any other matters. This opinion is solely for your benefit, and the benefit of your counsel, in connection with the consummation of the transactions contemplated by the Note Purchase Agreement, and may not be quoted or relied upon by any other person or used for any other purpose, without our prior written consent. Very truly yours, /s/ HALE AND DORR LLP HALE AND DORR LLP EXHIBIT B-2 [LETTERHEAD OF COLLYER - BRISTOW APPEARS HERE] Our ref: PJS/9687-l/tsc 8 JULY 1998 Your ref: Whitney Subordinated Debt Fund, L.P. and J H Whitney & Co., Inc. 177 Broad Street Stamford Connecticut 06901 USA Dear Ladies and Gentlemen: We have acted as English legal advisers to NMT Neurosciences (International), Inc ("NMT International"), a Delaware corporation and its wholly owned subsidiary, NMT Neurosciences (UK) Limited, a company incorporated in England ("NMT UK") in connection with the preparation, execution and delivery of a Deed of Charge over shares in NMT UK ("the Deed of Charge") between NMT 1nternational and J.H. Whitney & Co., Inc ("Whitney"). In rendering the opinions expressed below, we have examined:- (a) the Deed of Charge; (b) the Certificate of Incorporation of NMT UK; (c) the Memorandum and Articles of Association of NMT UK certified to be in effect by a director of NMT UK on 7th July 1998; (d) the corporate minute books of NMT UK as provided to us by NMT International from the date of its incorporation to the date hereof; (e) such other documents as we have considered necessary for purposes of this opinion. We assume, for purposes of this opinion, that the corporate minute books (referred to in clause (d) above) contain an accurate record of all meetings of the shareholders and directors of NMT UK. In our examination of the documents described above, we have assumed the genuineness of all signatures, the capacity, power and authority of all parties to execute and deliver the Deed of Charge and all other applicable documents, the authenticity of all documents submitted to us as originals, the conformity to original documents of all copies of documents submitted to us as certified or photostatic copies, the authenticity of the originals of such latter documents, the due execution and delivery of the Deed of Charge by NMT International and Whitney, that the Memorandum and Articles of Association of NMT UK were true complete and up-to-date as at the COLLYER - BRISTOW solicitors PAGE 2 J H WHITNEY & CO., INC. 8 JULY 1998 date of this opinion and that the resolutions in the minute books referred to in clause (d) have not been amended or rescinded and are in full force and effect. We have assumed that there are no provisions of the laws of any relevant jurisdiction outside England which would be contravened by the execution, delivery or performance of the Deed of Charge and that, insofar as any obligation under the Deed of Charge fails to be performed in any jurisdiction outside England, its performance will not be illegal or adversely affected by virtue of the laws or regulations of or applicable in that jurisdiction. We express no opinion herein with respects to the laws of any state or jurisdiction other than that of England. Our opinions below are qualified to the extent that the validity or enforceability of the documents referred to or of any of the rights granted to any party pursuant thereto may be subject to or affected by (i) applicable bankruptcy, insolvency, reorganisation, moratorium, fraudulent conveyance, or similar laws affecting the rights of creditors generally and (ii) duties and standards imposed on creditors and parties to contracts, including, without limitation, requirements of good faith, reasonableness and fair dealing. Furthermore, we express no opinion as to the availability of any equitable or specific remedy upon any breach of such documents or any of the agreements, documents or obligations referred to therein, as the availability of such remedies may be subject to the discretion of a court. Based upon and subject to the foregoing, and further subject to the qualifications set forth below, it is our opinion that:- (a) NMT UK is a company duly incorporated in England; (b) The register of members in the corporate minute books of NMT UK records that NMT International is the holder of the entire issued share capital of NMT UK consisting of 100 fully paid ordinary shares of (Pounds)1 each, all of which have been duly issued to NMT International; (c) To the best of our knowledge, there are no actions, suits, proceedings, claims or disputes pending or threatened, at law, in equity, in arbitration or before any court or governmental authority or agency in the UK against NMT International or NMT UK with respect to the Deed of Charge or the transactions contemplated thereby. To the best of our knowledge, no injunction, writ, temporary restraining order, decree or any order of any nature has been issued by any court or other governmental authority in the UK purporting to enjoin or restrain the execution, delivery and performance of the Deed of Charge; (d) The execution, delivery and performance by NMT International of the Deed of Charge and the transactions contemplated thereby does not contravene the terms of NMT's Articles of Association and will not violate, conflict with or result in any breach or contravention of any requirement of English law; (e) The Deed of Charge creates an equitable fixed charge over the shares in NMT UK expressed to be charged thereby; COLLYER - BRISTOW solicitors PAGE 3 J H WHITNEY & CO., INC. 8 JULY 1998 (f) The Deed of Charge creates a valid and binding obligation of NMT International, enforceable in accordance with its terms; (g) Except for filings which are necessary to perfect the security interests granted under the Deed of Charge and any other filings, authorisations or approvals as are specifically provided for in the Deed of Charge, no authorisations or approvals of, and no filings with, any governmental or regulatory authority or agency in England are necessary under English law for the execution, delivery or performance by NMT International of the Deed of Charge. The foregoing opinions are subject to the following comments and qualifications: (i) An English court may not give effect to a purported obligation to pay another party's litigation costs and may make its own order as to costs; (ii) While English courts have power to give judgment expressed as an order to pay a currency other than pounds sterling, they may decline to do so in their discretion and may not enforce the benefit of currency conversion and indemnity clauses; (iii) Claims may become barred under the Limitations Act or may be or become subject to defences of set-off or counterclaim; (iv) The enforcement of the rights and obligations of the parties to the Deed of Charge may be limited by the provisions of English law concerning frustration of contracts; (v) It is beyond the scope of this opinion to deal comprehensively with matters concerning property, assets and rights expressed to be subject to the Deed of Charge and the priority, nature, registration and enforcement of the Deed of Charge and its effectiveness in all circumstances. In particular we express no opinion in this letter as to the following matters: (a) the marketability or value of any of the shares in NMT UK expressed to be subject to the Deed of Charge; (b) the priority of any security or whether any of the shares in NMT UK are or may become subject to any equities, rights or interests in favour of any other person in priority to the Deed of Charge or otherwise; (vi) The enforcement of security interests is subject to certain rules of law; for example a person who holds a charge over property cannot sell the property to himself and owes a duty to take reasonable care to realise the property for a proper price; (vii) Clause 9 of the Deed of Charge (Severability) may not be effective under English law; (viii) Although Clause 10.2 of the Deed of Charge (Waiver) contemplates written waivers, an agreement may be varied, amended or discharged by a further agreement or collateral agreement which may he effected by an oral agreement or a course of dealing; COLLYER - BRISTOW solicitors PAGE 4 J H WHITNEY & CO., INC. 8 JULY 1998 (ix) Notwithstanding Clause l of Schedule 3 of the Deed of Charge, as between NMT International and NMT UK English law entitles NMT International to receive dividends from NMT UK and to exercise the voting and other rights in respect of the shares of NMT UK which are subject to the Deed of Charge while they are registered in the name of NMT International rather than that of Whitney, whether or not any events of default have occurred. Thus in theory NMT International could in future procure the issue of further shares by NMT UK, so diluting the shares which are subject to the Deed of Charge. Further NMT International could in theory transfer the charged shares to a third party while they are registered in the name of NMT International (if NMT International could induce the directors of NMT UK to issue a duplicate share certificate). To perfect its security Whitney need to be registered as the holder of the shares. If it is not so registered, it could protect itself to some extent by serving a stop notice on NMT UK; (x) Although the Articles of Association of NMT UK do not give the Directors of NMT UK the right to refuse registration of any transfer of shares which are fully paid, they do give the Directors the right to refuse registration in the case of shares on which NMT UK has a lien. The Articles of Association could also in theory be amended in the future to make registration more difficult for Whitney. To perfect its security Whitney need to be registered as the holder of the shares. This opinion is based upon currently existing statutes, rules, regulations and judicial decisions, and we disclaim any obligation to advise you of any change in any of these sources of law or subsequent legal or factual developments which might affect any matters or opinions set forth herein. Please note that we are opining only as to the matters expressly set forth herein, and no opinion should be inferred as to any other matters. This opinion is solely for your benefit, and the benefit of your Counsel, in connection with the consummation of the transactions contemplated by the Deed of Charge, and may not be quoted or relied upon by any other person or used for any other purpose, without our prior written consent. Very truly yours, /s/ Collyer-Bristow Collyer-Bristow EXHIBIT B-3 [LETTERHEAD OF NAUTA DUTILH APPEARS HERE] Whitney Subordinated Debt Fund, L.P. 177 Broad Street Stanford, Connecticut 06901 July 9, 1998 Ladies and Gentlemen: This opinion is rendered to you at your request with respect to certain matters of Netherlands Law relating to Yellow Tape B.V. ("Yellow Tape") and Nitinol ----------- Medical Technologies International B.V. ("Nitinol"), each of the companies ------- organized under Netherlands law, in connection with a notarial agreement and deed of pledge dated July 9, 1998 among (i) NMT Neurosciences (International), Inc., a Delaware corporation ("NMT") as pledgor of certain shares in Yellow --- Tape, (ii) Nitinol Medical Technologies, Inc., a Delaware Corporation (the "Borrower") as pledgor of certain shares in Nitinol, (iii) J.H. Whitney & Co., -------- Inc., a Delaware corporation ("Whitney"), acting not for itself but solely in ------- its capacity as security agent of Whitney Subordinated Debt Fund, L.P., a Delaware limited partnership (the "Purchaser") and any holders of any note from --------- time to time pursuant to the Purchase Agreement (as defined below), (Whitney acting in such capacity the "Agent"), (iv) Yellow Tape and (v) Nitinol (such ----- notarial agreement and deed of pledge the "Deed of Pledge"). -------------- As the basis for my opinion, I have exclusively examined the following documents: (i) a copy of the deed of incorporation dated December 2, 1997 of Yellow Tape (the "Yellow Tape Deed of Incorporation"), containing the articles of --------------------------------- association of Yellow Tape (the "Yellow Tape Articles of Association"); ----------------------------------- -2- (ii) a copy of the deed of incorporation dated February 24, 1997 of Nitinol (the "Nitinol Deed of Incorporation"), containing the articles of ----------------------------- association of Nitinol (the "Nitinol Articles of Association"); ------------------------------- (iii) a facsimile copy of an extract dated July 7, 1998 from the Commercial Register of the Chamber of Commerce and Industry of Amsterdam under registration number 33298255 relating to Yellow Tape (the "Yellow Tape ----------- Extract"), confirmed by me by telephone to be correct as of the date ------- hereof, except for the fact that the appointment of Messrs. Thomas M. Tully and Theodore I. Pincus as members of the board of managing directors as of July 7, 1998 has not yet been accounted for in the Yellow Tape Extract; (iv) as extract dated June 26, 1998 from the Commercial Register of the Chamber of Commerce and Industry of Centraal Gelderland under registration number 10148235 relating to Nitinol (the "Nitinol Extract") --------------- confirmed by me by telephone to be correct as of the date hereof; (v) a facsimile copy of the relevant pages of the shareholders' register of Yellow Tape (the "Yellow Tape Shareholdersregister"); -------------------------------- (vi) a facsimile copy of the relevant pages of the shareholders' register of Nitinol (the "Nitinol Shareholdersregister"); ---------------------------- (vii) a facsimile copy of an executed copy of written resolutions of the board of managing directors of Yellow Tape dated July 8, 1998 authorizing the execution of the Deed of Pledge (the "Yellow Tape Resolution"); ---------------------- (viii) a facsimile copy of an executed copy of written resolutions of the board of managing directors of Nitinol dated July 8, 1998 authorizing the execution of the Deed of Pledge (the "Nitinol Resolution"); ------------------ (ix) a copy of a signed statement dated July 8, 1998 by NMT in its capacity as Yellow Tape's sole shareholder confirming that the execution and delivery of the Deed of Pledge and all documents relating thereto are not subject to approval of Yellow Tape's general meeting of -3- shareholders pursuant to article 7.9 of the Yellow Tape Articles of Association (the "NMT Confirmation Statement"); -------------------------- (x) a copy of a signed statement dated July 8, 1998 by the Borrower in its capacity as Nitinol's sole shareholder confirming that the execution and delivery of the Deed of Pledge and all documents relating thereto are not subject to approval of Nitinol's general meeting of shareholders pursuant to article 13.1 of the Nitinol Articles of Association (the "Borrower -------- Confirmation Statement"); ---------------------- (xi) a facsimile copy of a power of attorney granted by Yellow Tape dated July 8, 1998 authorizing the execution of the Deed of Pledge by each lawyer of the lawfirm Stibbe Simont Monahan Duhot in Amsterdam (the "Yellow Tape ----------- Power of Attorney"); ----------------- (xii) a facsimile copy of a power of attorney granted by Nitinol dated July 8, 1998 authorizing the excution of the Deed of Pledge by each lawyer of the lawfirm Stibbe Simont Monahan Duhot in Amsterdam (the "Nitinol Power of ---------------- Attorney"); -------- (xiii) a facsimile copy of the executed copy of the Deed of Pledge. (xiv) a facsimile copy of an executed copy of a subordinated note and common stock purchase agreement dated as of July 8, 1998 among (i) the Borrower, (ii) the Purchaser and (iii) Whitney (the "Purchase Agreement"); ------------------ (xv) a facsimile copy of an executed copy of a guarantee and collateral agreement dated as of July 8, 1998 among (i) the Borrower and (ii) certain of the Borrower's US subsidiaries, in favor of the Agent (the "Guarantee and Collateral Agreement"); and ---------------------------------- (xvi) a facsimile copy of an executed copy of a 10.101% US$20,000,000 subordinated promissory note due September 30, 2003 dated July 8, 1998 by the Borrower (the "Note"). ---- The Purchase Agreement, the Guarantee and Collateral Agreement and the Note shall hereinafter be jointly referred to as the "New York Documents". ------------------ -4- As to matters of fact I have relied upon the documents I have examined and upon statements or certificates of directors or representatives of Yellow Tape, Nitinol, NMT or the Borrower and of public officials. The following opinion is limited in all respects to the laws of (i) the Netherlands with general applicability and (ii) the European Union insofar as they are directly applicable in the Netherlands, as they stand at the date hereof and as they are presently interpreted under published case law of the courts of the Netherlands ("Netherlands Law"). I do not express any opinion on --------------- tax law, on public international law or on the rules promulgated under or by any treaty or treaty organization. In this opinion letter Netherlands legal concepts are expressed in English terms and not always in their original Netherlands terms. The concepts concerned may not be identical to the concepts described by the same English terms as they exist under the laws of other jurisdictions. In rendering this opinion, I have assumed that: (a) all original documents are authentic and the signatures thereon are genuine and all documents submitted to me as final drafts of documents or as photocopy or facsimile copy are in conformity with the executed originals; (b) the Yellow Tape Deed of Incorporation has been signed by a civil law notary (notaris) and the contents of the Yellow Tape Deed of Incorporation are correct and complete; (c) the Nitinol Deed of Incorporation has been signed by a civil law notary (notaris) and the contents of the Nitinol Deed of Incorporation are correct and complete; (d) the Yellow Tape Extract was true, complete and correct on the date of its issue and would be identical and also true, complete and correct if issued on, as applicable, the date of the execution of each of the Deed of Pledge, the Yellow Tape Resolution, the NMT Confirmation Statement and the Yellow Tape Power of Attorney; -5- (e) the Nitinol Extract was true, complete and correct on the date of its issue and would be identical and also true, complete and correct if issued on, as applicable, the date of the execution of each of the Deed of Pledge, the Nitinol Resolution, the Borrower Confirmation Statement and the Nitinol Power of Attorney; (f) immediately prior to the execution of the Deed of Pledge, the information contained in the Yellow Tape Shareholdersregister was true and correct; (g) immediately prior to the execution of the Deed of Pledge, the information contained in the Nitinol Shareholdersregister was true and correct; (h) (i) each of the parties to the New York Documents and the Deed of Pledge, other than Yellow Tape and Nitinol, has been duly incorporated, is and at the time of the execution of the Deed of Pledge was validly existing and, to the extent relevant in such party's jurisdiction, in good standing under the laws applicable to such party, (ii) each of the parties to the New York Documents and the Deed of Pledge, other than Yellow Tape and Nitinol, has and had at the time of the execution of the New York Documents and the Deed of Pledge, all requisite power (corporate and otherwise) to execute and deliver, and to perform its obligations under, each of the New York Documents and the Deed of Pledge to which it is a party, and (iii) under any applicable law, other than Netherlands Law, the New York Documents and the Deed of Pledge have been duly executed and delivered by each of the parties thereto; (i) the New York Documents constitute under any applicable law, other than Netherlands Law, including the laws of the State of New York to which they are expressed to be subject, the valid, legal and binding obligations of all parties thereto, enforceable against such parties in accordance with their respective terms; (j) the jurisdiction provision in the Purchase Agreement and the Guarantee and Collateral Agreement is valid under the laws of the State of New York and the courts of the State of New York would accept jurisdiction on the basis thereof; -6- (k) at the moment of the execution of the Deed of Pledge (i) NMT was the owner (eigenaar) and had full right to dispose (beschikkingsbevoegd) of the Shares 01 (as defined in the Deed of Pledge) and the Rights (as defined in the Deed of Pledge) relating thereto, and (ii) such Shares 01 and Rights were not encumbered by any limited rights (beperkte rechten) or attachments (beslagen); (l) at the moment of the execution of the Deed of Pledge (i) the Borrower was the owner (eigenaar) and had full right to dispose (beschikkingsbevoegd) of the Shares 02 (as defined in the Deed of Pledge) and the Rights (as defined in the Deed of Pledge) relating thereto, and (ii) such Shares 02 and Rights were not encumbered by any limited rights (beperkte rechten) or attachments (beslagen); (m) the description of the Collateral (as defined in the Deed of Pledge) sufficiently identifies (omschrijft met voldoende bepaaldheid) such collateral within the meaning of Article 84, Section 2 of Volume 3 of the Netherlands Civil Code (the "CC"); -- (n) to the extent future goods (toekomstige goederen) including future registered claims (toekomstige vorderingen op naam) are part of the Rights (as defined in the Deed of Pledge), NMT or the Borrower, as applicable, shall at such future date be the proprietor (rechthebbende) and shall, under the law applicable to such Rights have the right to dispose of (beschikkingsbevoegdheid) and shall be validly obligated to pledge such Rights and such Rights shall not be encumbered by any limited rights (beperkte rechten) or attachments (beslagen); (o) the Rights (as defined in the Deed of Pledge) are capable of being pledged under Netherlands Law; (p) the obligations under, or pursuant to, the New York Documents, to the extent secured by the Deed of Pledge, are sufficiently identifiable (voldoende bepaalbaar) within the meaning of Article 231, Section 2 of Volume 3 of the CC; -7- (q) the Yellow Tape Resolution, the Nitinol Resolution, the NMT Confirmation Statement, the Borrower Confirmation Statement, the Yellow Tape Power of Attorney and the Nitinol Power of Attorney have been duly executed, have not been nor will be, wholly or partly, cancelled or revoked, amended, terminated or wholly or partly invalidated or declared null and void by a court of law; (r) at the time of the Yellow Tape Resolution and the NMT Confirmation Statement, no depository receipts of shares in Yellow Tape had been issued and none of the shares in Yellow Tape was pledged or encumbered with a right of usufruct; (s) at the time of the Nitinol Resolution and the Borrower Confirmation Statement, no depository receipts of shares in Nitinol had been issued and none of the shares in Nitinol was pledged or encumbered with a right of usufruct; (t) at the date of the execution of the New York Documents and the Deed of Pledge on the date of this opinion Yellow Tape had/has not been dissolved (ontbonden), granted suspension of payments (surscance van betaling verleend) or declared bankrupt (failliet verklaard); it being hereby confirmed that our today's inquiries with the Trade Register of the Chamber of Commerce and Industry in Amsterdam and the District Court of Amsterdam have not revealed any information that any such event has occurred, but it should be noted that this is not conclusive evidence that no such event has occurred; and (u) at the date of the execution of the New York Documents and the Deed of Pledge on the date of this opinion Nitinol had/has not been dissolved (ontbonden), granted suspension of payments (surscance van betaling verleend) or declared bankrupt (failliet verklaard); it being hereby confirmed that our today's inquiries with the Trade Register of the Chamber of Commerce and Industry in Centraal Gelderland and the District Court of Den Haag have not revealed any information that any such event has occurred, but it should be noted that this is not conclusive evidence that no such event has occurred. -8- Based upon and subject to the foregoing and subject to the qualifications listed below and to any factual matters, documents or events not disclosed to me in the course of my examination referred to above, I am at the date hereof of the opinion that: (1) Yellow Tape has been duly incorporated and is validly existing under Netherlands Law as a legal entity in the form of a besloten vennootschap met beperkte aansprakelijkheid (closed company with limited liability). (2) Nitinol has been duly incorporated and is validly existing under Netherlands Law as a legal entity in the form of besloten vennootschap met beperkte aansprakelijkheid (closed company with limited liability). (3) Yellow Tape has the corporate power to execute, deliver and perform its obligations under the Deed of Pledge. (4) Nitinol has the corporate power to execute, deliver and perform its obligations under the Deed of Pledge. (5) Yellow Tape has taken all necessary corporate action to authorize the execution, delivery and performance of its obligations under the Deed of Pledge and the entry into the Deed of Pledge by Yellow Tape does not violate the Yellow Tape Articles of Association or any applicable provision of Netherlands Law. (6) Nitinol has taken all necessary corporate action to authorize the execution, delivery and performance of its obligations under the Deed of Pledge and the entry into the Deed of Pledge by Nitinol does not violate the Nitinol Articles of Association or any applicable provision of Netherlands Law. (7) The Deed of Pledge has been duly executed and delivered by Yellow Tape. (8) The Deed of Pledge has been duly executed and delivered by Nitinol. -9- (9) The Deed of Pledge creates a valid first ranking right of pledge (eerste pandrecht) on the Shares and the Rights as defined therein, in favor of Agent, which right of pledge is enforceable in the Netherlands in accordance with its terms and the applicable provisions of Netherlands Law. The opinions expressed above are subject to the following qualifications: (A) The opinions expressed in paragraphs (3) and (4) above are limited by any applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application at the time of the execution of the Deed of Pledge, now or hereafter in effect, relating to or effecting the enforcement or protection of creditors' rights. (B) The enforcement of the pledge created pursuant to the Deed of Pledge will not be affected by the bankruptcy (faillissement) or suspension of payments (surseance van betaling) of Yellow Tape or Nitinol, provided that (i) a receiver in bankruptcy (curator) may require the holder of such pledge to foreclose it within a reasonable time, and if such holder fails to do so the receiver can sell the underlying assets himself and pay the proceeds to such holder, and (ii) the foreclosure of such pledge can be suspended by a court, at the request of any interested party, for a period not exceeding two months. (C) Any opinions expressed herein with respect to the validity of the Deed of Pledge or any legal act (rechtshandeling) forming part thereof or contemplated thereby are limited by the protection afforded by Netherlands Law pursuant to rules regarding fraudulent conveyance (Actio Pauliana) to creditors whose interests have been injured. (D) The obligations of a party to an agreement, to the extent Netherlands Law is applicable, are subject to and limited by rules of force majeure (niet toerekenbare tekortkoming), set-off, reasonableness and fairness (redelijkheid en billijkheid), unforeseen circumstances (onvoorziene omstandigheden) and other defenses afforded by Netherlands Law to obligors generally. Under Netherlands Law the remedy of specific performance may not always and in all circumstances be available. -10- (E) The opinion expressed in paragraph (9) above is limited to the extent that (i) no opinion is rendered that the rights of pledge created by means of the Deed of Pledge can be enforced in any jurisdiction other than the Netherlands and that such other jurisdiction would recognize, give such effect or grant such priority to such rights of pledge as would be the case in the Netherlands and (ii) the foreclosure under the rights of pledge, created by the Deed of Pledge, will be subject to certain mandatory share transfer restrictions (blokkeringsregelingen) in Article 5 of the Yellow Tape Articles of Association and Article 8 of the Nitinol Articles of Association. (F) I do not render any opinion on the recognition or enforceability in the Netherlands of the security interests purporting to be created pursuant to the New York Documents. (G) To the extent Netherlands Law is applicable, any provision in the New York Documents or the Deed of Pledge to the effect that such agreement or any of the provisions thereof shall be binding on the successors or assigns of any party thereto may not be valid in the absence of an agreement with any such assign or successor. (H) Any substitution of the Agent as contemplated in Section 8.5 of the Guarantee and Collateral Agreement (Successors and Assigns) will result in the former Agent losing the benefit of the Deed of Pledge without the substitute agent acquiring such benefits. Consequently, in the event of such substitution, (a) the security interests created in favor of the Agent pursuant to the Deed of Pledge and (b) the right to administer (beheren) and dispose of (beschikken) the rights in respects of the Shares (as referred to in the Deed of Pledge) and the Rights (as referred to in the Deed of Pledge) will need to be re-established by way of the re-execution of a replacement Deed of Pledge. (I) In accordance with Netherlands law a power of attorney can only be made irrevocable to the extent its object is the performance of rechtshandelingen (juridical acts) in the interest of the representative appointed thereby or of a third party. In accordance with Netherlands law any power of attorney or mandate will terminate upon the faillissement (bankruptcy) or becomes ineffective upon the surseance van betaling (suspension of payments) of the issuer thereof. -11- (J) Pursuant to Article 7 Volume 2 of the CC any transactions entered in to by a legal entity (such as Yellow Tape and Nitinol) may be nullified if the objects of such entity were transgressed thereby and the other party to the transaction knew or should have known this without independent investigation. The description of the objects of Yellow Tape in Article 2 of the Yellow Tape Articles of Association include "... to provide security for the debts of legal persons or of other companies with which the company is affiliated in a group..." and the description of the objects of Nitinol in Article 2 of the Nitinol Articles of Association include "... to provide guarantees and to bind the company, or assets of the company, for the benefit of enterprises and corporations with which the company is affiliated in a group...". However, there is no case law confirming that this fact alone is sufficient to conclude that the granting of such security, would not be ultra vires. The view is widely expressed in the literature that a transaction which patently violates the interest of a company is ultra vires regardless of the description of the objects in its article of association. The opinion speaks as of its date. It is addressed solely to you and your permitted successors, transferees and assigns. It may not be relied upon by any person other than you and without my prior written consent, its contents may not be disclosed to third parties, save to Yellow Tape's and Nitinol's law legal advisor who may rely upon this opinion as though it were addressed to him. Sincerely, /s/ Richard Norbruis Richard Norbruis EXHIBIT D DATED 1998 ------------------------------ (1) NMT NEUROSCIENCES (INTERNATIONAL), INC, as chargor (2) J. H. WHITNEY & CO., INC, as trustee --------------------------------------- CHARGE OVER SHARES in NMT NEUROSCIENCES (UK) LTD --------------------------------------- ROWE & MAW 20 Black Friars Lane London EC4V 6HD Tel: + 44 (0)171-248 4282 Fax: +44 (0)171-248 2009 Ref: 184 CONTENTS
CLAUSE SUBJECT MATTER PAGE 1. Definitions And Interpretation 1 2. Charging Clause 3 3. Warranties And Covenants 4 4. The Agent's Powers 4 5. Coutinuing Security 4 6. Releases Conditional, Retention Of Security 4 7. Third Party Protection 5 8. Indemnities 5 9. Severability 6 10. Amendments, Waivers And Rights 6 11. Assignment 7 12. Law And Jurisdiction 8 13. Notices 8 14. Counterparts 9 SCHEDULE 1. Representations and Warranties 10 2. Covenants 11 3. The Agent's Powers 14
CHARGE OVER SHARES DATE: PARTIES: (1) NMT NEUROSCIENCES (INTERNATIONAL), INC., a company incorporated in Delaware, whose principal place of business is at 27 Wormwood Street, Boston, Massachusetts 02210 (the "CHARGOR"); and (2) J. H. WHITNEY & CO., INC, a company incorporated in Delaware, whose principal place of business is at 177 Broad Street, Stamford, Connecticut 06901 (the "AGENT") as trustee. BACKGROUND: (A) Pursuant to a subordinated note and common stock purchase agreement (the "NOTE PURCHASE AGREEMENT") made on or about the date of this Charge between (1) Whitney Subordinated Debt Fund, L.P. (the "PURCHASER") and (2) Nitinol Medical Technologies, Inc. ("NITINOL"), Nitinol has agreed to issue and the Purchaser has agreed to purchase the WSDF Note (as defined in the Note Purchase Agreement). (B) Pursuant to a guarantee and collateral agreement (the "GUARANTEE AND COLLATERAL AGREEMENT") made on or about the date of this Charge between (1) various parties, including Nitinol and the Chargor, as grantors and (2) the Agent as agent for the Purchaser, the CHARGOR has (amongst other things) granted security for its obligations relating to the Notes (as defined in the Note Purchase Agreement). (C) It is a condition precedent to the obligation of the Purchaser to purchase the WSDF Note from Nitinol under the Note Purchase Agreement that the Chargor shall have executed and delivered in favour of the Agent this Charge over 65% of the shares held by it in the Company. (D) The Agent holds the benefit of this Charge, including without limitation the security created and other rights granted in it, on trust for the Lenders and itself. (E) This document is the deed of the Chargor even if it has not been duly executed by the Agent or has been duly executed by the Agent, but not as a deed. THIS DEED WITNESSES THAT: 1. DEFINITIONS AND INTERPRETATION 1.1 DEFINED TERMS In this Charge (including time Background): "BORROWER OBLIGATIONS" has the meaning given to it in the Guarantee and Collateral Agreement and for the avoidance of doubt includes, without limitation, any obligation or liability owed by the Charger to the Agent under this Charge. 1 "CHARGED SECURITIES" means the Shares and all other shares and other assets and rights from time to time the subject of this Charge. "COMPANY" means NMT Neurosciences (UK) Limited, a company incorporated in England with limited liability (registered number 3576961); registered office c/o Collyer-Bristow, 4 Bedford Row, London WC1R 4DF. "EVENT OF DEFAULT" shall have the meaning given to it in the Notes. "GUARANTEE AND COLLATERAL AGREEMENT" has the meaning given to it in Background (B). "INTEREST RATE" means the rate applicable to default interest referred to in the Notes. "LENDERS" means the Purchaser and any holder of any Note from time to time. "LOAN DOCUMENT" shall have the meaning given to it in the Guarantee and Collateral Agreement. "LOSSES" means losses, claims, demands, actions, proceedings, damages or other payments, costs, expenses and other liabilities of any kind. "NOTE PURCHASE AGREEMENT" has the meaning given to it in Background (A). "NOTES" and "WSDF NOTE" have the meanings given to them respectively in the Note Purchase Agreement. "PURCHASER" has the meaning given to it in Background (A). "SECURITY INTEREST" means any debenture, mortgage, charge, pledge, lien, assignment, hypothecation, right of set-off, title retention or other arrangement or agreement the effect of which is the creation of security. "SHARES" means the 65 ordinary shares in the capital of the Company numbered 1 to 65, being 65% of the issued share capital of the Company. 1.2 INDEX AND HEADINGS The index and headings are for convenience only and shall not affect the interpretation of this Charge. 1.3 REFERENCES In this Charge, unless the context requires otherwise, any reference to: (a) the AGENT, or the CHARGOR respectively includes its successors in title and assigns and this Charge shall be enforceable notwithstanding any change in the constitution of the Agent, its absorption in or amalgamation with any other person or the acquisition of all or part of its undertaking by any other person; 2 (b) a PARTY or the PARTIES is to a party or the parties (as the case may be) to this Charge; (c) a BACKGROUND, CLAUSE or SCHEDULE is to the relevant statement of the background of, clause of or schedule to this Charge (as the case may be) and references made in a Schedule to PARAGRAPHS are to paragraphs of that Schedule; (d) this CHARGE (including the Schedules, which form part of this Charge for all purposes) is to this Charge and the security created by, pursuant to or supplemental to it; (e) a STATUTE or STATUTORY PROVISION includes any consolidation, re- enactment, modification or replacement of the same and any subordinate legislation in force under the same from time to time; (f) the MASCULINE FEMININE or NEUTER gender respectively includes the other genders, references to the SINGULAR include the PLURAL (and vice versa) and references to PERSONS include firms, corporations and unincorporated associations; and (g) a DOCUMENT is to that document as varied, supplemented or replaced from time to time. 1.4 TERMS DEFINED IN NOTE PURCHASE AGREEMENT Terms defined in the Note Purchase Agreement but not defined in this Charge shall mean the same in this Charge. 2. CHARGING CLAUSE As security for the Borrower Obligations, the Chargor, with full title guarantee, charges to the Agent by way of first fixed charge: (a) the Shares; (b) all allotments, accretions, offers, rights, benefits and advantages whatever at any time accruing, offered or arising in respect of or incidental to the Shares including (without limitation) any dividends or other distributions declared from time to time, and (c) all stocks, shares, rights, money or property accruing to the Shares or offered at any time by way of conversion, redemption, bonus, preference, option or otherwise in respect of the Shares. This is without prejudice to Paragraph 1.1 (Prior to an Event of Default) of Schedule 3 (The Agent's Powers). 3 3. WARRANTIES AND COVENANTS The Chargor represents and warrants to the Agent as set out in Schedule 1 (Representations and Warranties) and covenants with the Agent as set out in Schedule 2 (Covenants). 4. THE AGENT'S POWERS The Agent shall have the powers set out in Schedule 3 (The Agent's Powers). 5 CONTINUING SECURITY 5.1 CONTINUING SECURITY This Charge is a continuing security and shall secure the ultimate balance of the Borrower Obligations, notwithstanding intermediate payment or discharge of the whole or part of the Borrower Obligations to the Agent and also notwithstanding liquidation or other incapacity of the Chargor or the Company, or any change in the constitution, name or style of the Chargor or the Company or any other event, matter or thing. 5.2 ADDITIONAL TO OTHER RIGHTS This Charge is in addition to (and shall not merge with, otherwise prejudice or affect or be prejudiced or affected by) any other remedy, guarantee, indemnity, Security Interest or other right or interest which may be or have been created in favour of the Agent in respect of the Borrower Obligations. Accordingly, this Charge may be enforced notwithstanding: (a) the existence or invalidity of all or any of those rights and interests; and (b) the Agent or any of the Lenders at any time exchanging, releasing, varying, abstaining from perfecting or enforcing or otherwise dealing or omitting to deal with all or any of those rights and interests. 6. RELEASES CONDITIONAL, RETENTION OF SECURITY 6.1 RELEASES CONDITIONAL Any release, settlement, discharge, re-assignment or arrangement (in this Clause 6 a "release") made by the Agent on the faith of any assurance, security or payment shall be conditional on the assurance, security or payment not being avoided, reduced, clawed back or ordered to be repaid under any enactment relating to liquidation, bankruptcy or insolvency. If any avoidance, clawback or reduction occurs or such order is made, the release given by the Agent shall have no effect and shall not prejudice the right of the Agent to enforce this Charge in respect of the Borrower Obligations and, as between the Chargor and the Agent, this Charge shall (notwithstanding the release) be deemed to have remained at all times in effect and held by the Agent as security for the Borrower Obligations. 4 6.2 RETENTION Unless and until the Agent, acting reasonably, is satisfied as to the solvency of the Chargor, the Agent may retain this Charge after the payment, discharge or satisfaction of all of the Borrower Obligations and notwithstanding any such payment, discharge or satisfaction for such period as the Agent, acting reasonably, may consider that any such payment, release or discharge is susceptible of being avoided, reduced or ordered to be repaid under any enactment relating to liquidation, bankruptcy or insolvency. In the event of the commencement of the bankruptcy or winding- up of the person making such payment or effecting such discharge or satisfaction at any time within that period, the Agent shall be entitled to retain any such security for such further period as the Agent, acting reasonably, may determine. 7. THIRD PARTY PROTECTION No purchaser, mortgagee or other person dealing with the Agent shall be concerned: (a) to enquire whether any of the Borrower Obligations have become due or payable or remain unpaid or undischarged or whether the power which the Agent is purporting to exercise has become exercisable: or (b) to see to the application of any money paid to the Agent. 8. INDEMNITIES 8.1 COSTS AND EXPENSES The Chargor shall indemnify the Agent fully (and in the case of legal costs and expenses on a solicitor and own client basis, such legal costs and expenses where incurred prior to an enforcement of this Charge to be limited to reasonable legal costs and expenses) on demand against all Losses incurred by (or made or brought against) it (or any manager or agent appointed by it or him) except Losses arising from a wilful misconduct or gross negligence of the Agent or any Lender: (a) as a result of any failure by the Chargor to perform any of its obligations under this Charge; (b) in the exercise (or purported exercise) of any of the powers or rights conferred by this Charge or by any other Security Interest granted (whether by the Chargor, the Company or any third party) for all or part of the Borrower Obligations; or (c) for any other matter or thing done or omitted relating to the Charged Securities or the assets secured by any such other Security Interest, together in each case with interest calculated on a daily basis from the date it is incurred or becomes payable by the Agent at the Interest Rate, compounded quarterly. 5 8.2 CURRENCY INDEMNITY (1) Any payment by the Chargor under this Charge shall be made in the currency (in this Clause 8.2 the "CONTRACTUAL CURRENCY") in which the relevant Borrower Obligations were denominated or incurred. If in respect of any of the Borrower Obligations the Agent receives payment or that Borrower Obligation is converted into a claim, proof, judgment or order, in either case in a currency other than the Contractual Currency, then: (a) the Chargor shall indemnify the Agent against any loss or liability directly resulting from the conversion; (b) if the amount received by the Agent, when converted into the Contractual Currency by the Agent, is less than the amount of the relevant Borrower Obligation in the Contractual Currency, then the Chargor shall on demand pay to the Agent an amount in the Contractual Currency equal to the difference; and (c) the Chargor shall on demand pay to the Agent any exchange costs and taxes payable in Connection with any conversion referred to in this Clause 8.2. (2) If and to the extent that the Chargor fails to pay on demand any amount due under this Charge, the Agent may in its absolute discretion (and without notice to the Chargor) purchase at any time after that so much of a currency as the Agent considers necessary or desirable to cover any part of the Borrower Obligations denominated or incurred in such currency. That purchase shall be made at the then-prevailing spot rate of exchange obtained by the Agent (as conclusively determined by the Agent) for purchasing such currency with sterling. The Chargor agrees to indemnify the Agent against the full sterling price (including all costs, charges and expenses) paid by the Agent for such currency. (3) All moneys received or held by the Agent from the Chargor or under this Charge may from time to time be converted into such other currency as the Agent considers necessary or desirable to cover any part of the Borrower Obligations denominated or incurred in that currency. That conversion shall be made at the then-prevailing spot rate of exchange obtained by the Agent (as conclusively determined by the Agent) for purchasing tile currency to be acquired with the existing currency. 9. SEVERABILITY If any part of any provision of this Charge shall be or become invalid or unenforceable under any applicable law, then the remainder of that provision and all other provisions of this Charge shall remain valid and enforceable. 10. AMENDMENTS, WAIVERS AND RIGHTS 10.1 AMENDMENTS No amendment or variation of the terms of this Charge shall be effective unless it is made or confirmed in a written document signed by the parties. 6 10.2 WAIVER No delay in the exercise or non-exercise by the Agent of any of its rights under or in connection with this Charge shall operate as a release or waiver of that right. Rather, any such waiver or release must be specifically granted in writing signed by an authorised signatory of the Agent and shall: (a) be confined to the specific circumstances in which it is given; (b) not affect any other enforcement of the same or any other right; and (c) (unless it is expressed to be irrevocable) be revocable at any time in writing. 10.3 RIGHTS AND REMEDIES CUMULATIVE The rights and remedies of the Agent under this Charge are cumulative and not exclusive of any rights or remedies of the Agent under the general law. The Agent may exercise each of its rights as often as it thinks necessary. 10.4 NO DUTY The Agent shall be under no duty of any kind to the Chargor in respect of the exercise or non-exercise of any of its rights under this Charge. The Chargor shall not rely on such exercise or non-exercise in any way. 11. ASSIGNMENT 11.1 ASSIGNMENT BY AGENT The Agent may assign all or any of its rights under this Charge to any successor agent for the Lenders appointed from time to time by the Lenders, without any requirement to notify the Chargor or obtain its further consent. Any assignee or successor in title of the Agent shall be treated for all purposes as if it had been an original party to this Charge in addition to the Agent. 11.2 DISCLOSURE Notwithstanding any confidentiality obligation imposed on the Agent, it may disclose to any assignee, bona fide proposed assignee or person with whom from time to time it has or wishes to enter into an agreement in connection with this Charge such information about the Chargor as it reasonably thinks fit. 11.3 DOCUMENTING ASSIGNMENTS The Chargor shall on demand enter into such documents effecting such assignment as the Agent may require and under which: (a) the Agent will be released from all further liability arising under this Charge; (b) the successor shall undertake all obligations of the Agent with effect from the date of such transfer; and 7 (c) the Chargor will covenant with that successor to observe and perform its obligations under this Charge. 11.4 NO ASSIGNMENT BY CHARGOR This Charge shall be binding on the Chargor's successors and assigns, but the Chargor may not assign, transfer or otherwise dispose of any of its rights or obligations under this Charge. 12. LAW AND JURISDICTION 12.1 LAW This Charge shall be governed by and construed in accordance with English law. 12.2 JURISDICTION For the exclusive benefit of the Agent, the courts of England shall have jurisdiction to settle any disputes which may arise in connection with this Charge; but the Agent may bring proceedings in connection with this Charge in any other court of competent jurisdiction. 12.3 PROCESS AGENT (1) The Chargor shall at all times maintain an agent for service of process in England. (2) The Chargor appoints the Company (at its registered office from time to time) as its agent for that purpose. The Chargor may not revoke such appointment (3) If for any reason an agent appointed under this Clause 12.3 ceases to act as such, the Chargor shall promptly appoint another agent and notify the Agent of its appointment and its name and address. If the Chargor does not make such an appointment within seven days of that cessation, then the Agent may do so on its behalf and shall notify the other parties if it does so. 13. NOTICES All notices, demands and other communications made by the Agent relating to this Charge may (without prejudice to any other effective mode of making the same) be delivered or sent to the agent referred to in Clause 12.3 (Process Agent) or such other address in England and Wales of which the Agent has received no less than 15 business days' prior written actual notice from the Chargor, as the case may be, and shall take effect: (a) if delivered, upon delivery; (b) if posted, at the earlier of the time of delivery and (if posted in the United Kingdom by first class registered post) 10.00am on the second business day after posting; and 8 (c) if sent by facsimile, when a complete and legible copy of the communication, whether that sent by facsimile or a hard copy sent by post or delivered by hand, has been received at the appropriate address, provided that if any communication would otherwise become effective on a non-business day or after 5.00pm on a business day, it shall instead become effective at 10.00am on the next business day. Section 196 of the Law of Property Act 1925 shall not apply to this Charge. 14. COUNTERPARTS This Charge may be executed in any number of counterparts, which shall together constitute one instrument. EXECUTION: The parties have shown their acceptance of the terms of this Charge by executing it, in the case of the Chargor as a deed, at the end of the Schedules. 9 SCHEDULE 1. REPRESENTATIONS AND WARRANTIES 1. TITLE 1.1 TITLE TO THE SHARES The Chargor represents and warrants that with regard to the Shares: (a) it is the sole beneficial and legal owner of them, free from any options or Security Interest; (b) they are fully paid; (c) there are no moneys or liabilities outstanding or payable in respect of them or any of them; (d) it is lawfully entitled to create this Charge over them in favour of the Agent; (e) they constitute 65% of the issued share capital of the Company; and (f) they are fully transferable to the Agent or such other person as the Agent shall direct, without restriction. 1.2 TITLE TO CHARGED SECURITIES The Chargor further represents and warrants that Paragraph 1.1 (a) to (d) and (f) will be true and accurate with regard to securities which become Charged Securities after the execution of this Charge, as at the date on which they become Charged Securities. 2. NON-COMPETITION The Chargor represents and warrants that it has not taken or received and undertakes not to take or receive the benefit of any security (from the Company or any other person) extending to its liabilities under this Charge. 10 SCHEDULE 2 COVENANTS 1. NO DISPOSALS OR SECURITY INTERESTS The Chargor shall not, without the prior written consent of the Agent: (a) sell, transfer or otherwise deal in any way with any of the Charged Securities or any interest in them or permit any other person to be registered as holder of any of them or acquire any rights, including (without limitation) any option or other future or inchoate rights; or (b) create (or permit to continue or to be created) or suffer to subsist any Security Interest over any of the Charged Securities (whether ranking in priority to, pari passu with or subsequent to this Charge). 2. DEPOSIT AND REGISTRATION The Chargor shall: (a) at any time the Agent so requests, transfer (or ensure that there are transferred) all or any of the Charged Securities into the name of the Agent or a nominee of the Agent. The Chargor agrees that the Agent may hold all or any of the Charged Securities in any nominee and that all of the Charged Securities held in the name of a nominee shall be held at the expense, risk and responsibility of the Chargor; (b) immediately upon execution of this Charge, deposit (or ensure that there are deposited) with the Agent and permit the Agent to hold and retain: (i) all stock and share certificates and documents of title relating to the Charged Securities; (ii) transfers of the Charged Securities duly completed in favour of the Agent (or otherwise as it may direct) and stamped at the Chargor's expense; and (iii) such other documents as the Agent may from time to time require for perfecting its title to the Charged Securities (duly executed by or signed on behalf of the registered holder) or for vesting or enabling it to vest the same in itself or its nominee or in any purchaser, to the intent that the Agent may at any time without notice present them for registration; and (c) hold to the order of the Agent and deposit with it forthwith (or ensure that there are so held and deposited) all documents of title and related documents from time to time relating to the Charged Securities. 11 3. NO ISSUE/ALLOTMENT OF SHARES The Chargor shall ensure that no shares or other securities in or of the Company will be issued or allotted and no agreement, option or arrangement to make or call for such issue or allotment will be made or granted without the Agent's prior written consent (which consent may not be unreasonably refused if the Agent will, following the transaction for which consent is sought, retain security over at least 65% of each class of shares in the issued share capital of the Company). 4. THE COMPANY (1) The Chargor shall ensure that the Company does not, unless the Agent's prior written consent has been obtained which consent shall not be unreasonably refused: (a) modify the rights and obligations attached to any of the Shares in any way; (b) increase, consolidate, sub-divide or reduce its share capital; (c) alter its memorandum or articles of association; (d) purchase its own shares or reduce its share capital; or (e) take any step to place itself in liquidation or administration or pass any resolution to wind itself up. (2) The Chargor undertakes that it shall not at any time until the Borrower Obligations shall have been paid and discharged in full take any step to place the Company into liquidation or administration; in particular (but without limitation) the Chargor shall not present or support any petition, or propose or vote in favour of any resolution, for the winding-up or administration of the Company. 5. CALLS AND NOTICES The Chargor shall: (a) duly and promptly pay (or ensure that there are paid) and hold the Agent and any nominee harmless against all calls, instalments or other payments which may be made or become due in respect of any of the Charged Securities as and when they become due; and (b) provide the Agent with a copy of any report, accounts, circular, notice or other item sent or provided to them (or to any person on their behalf) in connection with the Charged Securities or any of them immediately on its receipt. 6. NO PREJUDICE The Chargor shall not do or permit or suffer to be done anything with the primary intention of depreciating, jeopardising or otherwise prejudicing the value of the Charged Securities. The Chargor shall immediately inform the Agent of any such matter of which it becomes aware. 12 7. FURTHER ASSURANCE The Chargor shall execute and do, and ensure that its nominees execute and do, at its own expense all such assurances, acts and things as the Agent may reasonably require from time to time for perfecting or protecting this Charge over the Charged Securities or any of them or for facilitating the realisation of the same and in the proper exercise of all powers, authorities and discretions vested by this Charge in the Agent. The Chargor shall, and shall ensure its nominees shall, in particular (but without limitation) promptly execute all transfers, conveyances, assignments, assurances and legal mortgages of the Charged Securities in such form and to such person as the Agent may from time to time reasonably require and give all notices, orders and directions which the Agent may reasonably require. 8. WAIVERS OF PRE-EMPTION RIGHTS The Chargor shall ensure that all shareholders of the Company from time to time enter into waivers in a form satisfactory to the Agent of all pre- emption rights and restrictions in the Articles of Association of the Company from time to time or otherwise which may in any respect vary, restrict or affect the exercise of any rights which may arise in connection with the enforcement of this Charge or the transfer of the Charged Securities to the Agent or such other person as the Agent may so direct. 13 SCHEDULE 3 THE AGENT'S POWERS 1. VOTING RIGHTS 1.1 PRIOR TO AN EVENT OF DEFAULT Until Paragraph 1.2 applies: (a) the Chargor shall be entitled to receive all distributions paid in respect of the Charged Securities; and (b) the Chargor shall be entitled to exercise all voting and other rights and powers in respect of the Charged Securities; but it shall not do so if the resolution or other action in question could impair the Charged Securities or be inconsistent with, or result in any violation of, any provision of any Loan Document. 1.2 FOLLOWING AN EVENT OF DEFAULT If at any time an Event of Default is continuing and the Agent so notifies the Chargor, then this Paragraph 1.2 applies from then on. When it applies, the Agent or its nominees: (a) shall be entitled to receive any distributions paid in respect of the Charged Securities; and (b) may (and the Chargor may not without the prior written consent of the Agent) exercise in the name of the Chargor or otherwise (without any further consent or authority on the part of the Chargor) in respect of each of the Charged Securities any voting rights and any powers or rights which may be exercisable by the person in whose name the Charged Securities are registered or by their bearer or absolute owner. 2. ENFORCEMENT 2.1 DISAPPLICATION OF LAW OF PROPERTY ACT 1925 Neither Section 93 nor Section 103 of the Law of Property Act 1925 shall apply to this Charge. 2.2 ENFORCEMENT RIGHTS Immediately on the happening of any Event of Default, this Charge shall become enforceable and the Agent may enforce all or any part of this Charge as it thinks fit and may without further notice exercise in relation to the Charged Securities the power of sale and all other powers conferred on mortgagees by the Law of Property Act 1925 (or otherwise by law) as extended, varied or amended by this Charge. All dividends, interest or other payments received or receivable by the Agent or its nominee in respect of any of the Charged Securities (whether before or after any Event of Default) may be applied by the Agent as though they were proceeds of sale. 14 2.3 NO LIABILITY The Agent shall not be liable as a mortgagee in possession either to account as such mortgagee in relation to any of the Charged Securities or for any loss upon realisation or for any other default or omission for which such a mortgagee may be liable and shall not be liable for any failure to make or call for any payment or repayment, to accept or notify the Chargor of any offer or for any other loss of any nature in connection) with the Charged Securities. 2.4 DISCRETION OF AGENT In exercising the power of sale in Paragraph 2.2, the Charged Securities or any part may be sold or disposed of at such times, in such manner and generally on such terms and conditions and for such consideration as the Agent may think fit. Any such sale or disposition may be for cash, debentures or other obligations, shares, stock, securities or other valuable consideration and may be payable immediately or by instalments spread over such period as the Agent shall think fit. 3. APPROPRIATION OF RECEIPTS 3.1 APPLICATION Whether before or after any Event of Default, the Agent shall appropriate amounts received by the Agent under the powers conferred by this Charge in or toward the discharge of the Borrower Obligations in the order set out in section 6.5 (Application of Proceeds) of the Guarantee and Collateral Agreement. 3.2 SUSPENSE ACCOUNT Any moneys received following the exercise of the powers conferred by this Charge may, at the discretion of the Agent, be placed in a suspense or securities realised account prior to or after any appropriation and kept there for so long as the Agent thinks fit. 4. SET-OFF AND ACCOUNTS The Agent may at any time (without notice and notwithstanding any settlement of account or other matter whatever) combine, consolidate or merge all or any of the Chargor's accounts or liabilities to the Agent and may set off or transfer any sums staying in the credit of any such accounts or any sum which the Agent may from time to time owe to the Chargor in or towards the payment, discharge or satisfaction of any of the Borrower Obligations. 5. POWER OF ATTORNEY By way of security, the Chargor irrevocably appoints the Agent to be its attorney and on its behalf and in its name and as its act or deed: (a) to execute and do all such assurances, acts and things which it ought lawfully to do under this Charge; and 15 (b) to seal and deliver and otherwise perfect or do any deed, assurance, agreement, instrument, act or thing which it may deem proper or desirable in or for the purpose of exercising any of the powers, authorities and discretions conferred by this Charge or by law on the Agent. By this Charge, the Chargor ratifies and confirms (and agree to ratify and confirm) whatever the Agent as its attorney shall do in the proper and lawful exercise or purported exercise of all or any of the powers, authorities and discretions referred to in this Paragraph 5. 16 EXECUTION: THE CHARGOR SIGNED AND DELIVERED as ) a deed by THEODORE I. PINCUS, ) duly authorised for and on behalf of ) /s/ Theodore I. Pincus NMT NEUROSCIENCES ) (INTERNATIONAL), INC ) THE AGENT SIGNED by ) duly authorised for and on behalf of ) J. H. WHITNEY & CO., INC ) 17 EXECUTION: THE CHARGOR SIGNED AND DELIVERED as ) a deed by THEODORE I. PINCUS, ) duly authorised for and on behalf of ) NMT NEUROSCIENCES ) (INTERNATIONAL), INC ) THE AGENT SIGNED by ) duly authorised for and on behalf of ) /s/ Daniel J. O'Brien J. H. WHITNEY & CO., INC ) 18 EXHIBIT G --------- NITINOL MEDICAL TECHNOLOGIES, INC. COMPLIANCE CERTIFICATE DATE: ____________, 19__ This certificate is given by Nitinol Medical Technologies, Inc., a Delaware corporation (the "Company"), pursuant to Section 8. 1 (c) of that certain Subordinated Note and Common Stock Purchase Agreement dated as of July 8, 1998 by and among the Company, Whitney Subordinated Debt Fund, L.P. and, for certain purposes, J.H. Whitney & Co., as such agreement may have been amended, restated, supplemented or otherwise modified from time to time (the "Agreement"). Capitalized terms used herein without definition shall have the meanings set forth in the Agreement. The officer executing this certificate is the Chief Financial Officer of the Company and as such is duly authorized to execute and deliver this certificate on behalf of the Company. By executing this certificate such officer hereby certifies that: (a) the financial statements delivered with this certificate in accordance with Section 8. 1 (a) and/or 8. 1 (b) of the Agreement fairly present in all material respects the results of operations and financial condition of the Company and its Subsidiaries as of the dates of such financial statements; (b) he has reviewed the terms of the Agreement and the Note and has made, or caused to be made under his supervision, a review in reasonable detail of the transactions and conditions of the Company and its Subsidiaries during the accounting period covered by such financial statements; (c) such review has not disclosed the existence during or at the end of such accounting period, and he has no knowledge of the existence as of the date hereof, of any condition or event that constitutes an Event of Default, except as set forth in Exhibit A hereto which includes a description of the nature and period of existence of such Event of Default and what action the Company has taken, is undertaking and proposes to take with respect thereto; (d) the Company and its Subsidiaries are in compliance with the covenants contained in Articles 8 and 9 of the Agreement. as demonstrated on the attached worksheets (in substantially the same format as Exhibit H to the Agreement), except as set forth or described in Exhibit A; and (e) (i) Interest Coverage is ___:1.00 (ii) Ratio of Net Funded Indebtedness to Adjusted Operating Cash Flow is __:1.00 (iii) Fixed Charge Coverage is ___:1.00 (iv) Capital Expenditures are $_________. (v) Funded Debt to Cash and Cash Equivalents is ___:1.00 (vi) Current Assets less cash and Cash Equivalents to Current Liabilities is __:1.00 IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its Chief Financial Officer this ___ day of _____________, 19__. By: ---------------------------- Chief Financial Officer 1 EXHIBIT H FINANCIAL COVENANT CALCULATIONS ------------------------------- 1. Calculation of Interest Coverage as set forth in Section 9.8(a). --------------------------------------------------------------- EBITDA: Net income (or loss) of the Company and its Subsidiaries, for the period in question, on a consolidated basis determined in accordance with GAAP, but excluding: (a) the income (or loss) of any Person (other than Subsidiaries of the Company) in which the Company or any of its Subsidiaries has an ownership interest, unless received by the Company or its Subsidiaries in a cash distribution; (b) the income (or loss) of any Person accrued prior to the date it became a Subsidiary of the Company or is merged into or consolidated with the Company; and (c) any extraordinary gains and any insurance proceeds received by the Company or any of its Subsidiaries. $__________ Plus: Any provision for (or less any benefit from) income and franchise Taxes __________ included in the determination of net income Interest Expense (as defined in the Agreement) net of interest income, __________ deducted in the determination of net income Depreciation deducted in the determination of net income __________ Amortization deducted in determining net income __________ Losses (or less gains) from Asset Dispositions (as defined in the __________ Agreement) or other non-cash items included in the determination of net income (excluding sales, expenses or losses related to current assets) Extraordinary losses (or less gains), as defined under GAAP, net of __________ related tax effects included in the determination of net income Expenses of the transactions completed pursuant to the Transaction __________ Documents and the Acquisition Documents included in the determination of net income provided that such expenses were included in the Pro Forma Balance Sheet, or disclosed in the notes thereto Expenses, which must be approved in advance by Whitney, related to any __________ write-down of the Company's investment in ITC One time charges consistent in nature with those set forth on Schedule H, __________ and previously approved by Whitney, reflecting certain one time charges to be taken by the Company in the 12 months following the consummation of the Acquisition and in an amount not to exceed $650,000 in the aggregate __________ EBITDA $__________ INTEREST COVERAGE: INTEREST EXPENSE (as defined in the Agreement), net of interest income, included __________ in the determination of net income of the Company and its Subsidiaries on a consolidated basis
2 Less: Amortization of capitalized fees and expenses incurred with respect to the Transaction Documents and the Acquisition Documents included in interest expense __________ Interest paid in kind (PIK) and included in interest expense __________ INTEREST EXPENSES $__________ ACTUAL INTEREST COVERAGE (EBITDA DIVIDED BY INTEREST EXPENSE) __________ Required Interest Coverage __________ In Compliance __________ Yes/No 2. Calculation of Total Leverage Test as set forth in Section 9.8(b). ------------------------------------------------------------------ NET FUNDED INDEBTEDNESS: Indebtedness as defined in subclauses (a), (b), (f) and (g) of the definition thereof: $__________ Net Funded Indebtedness $__________ ADJUSTED OPERATING CASH FLOW (calculated in accordance with Item No. 4 of this Exhibit): $__________ Actual Total Leverage (Net Funded Indebtedness divided by Adjusted Operating Cash Flow) __________ Required Total Leverage __________ In Compliance __________ Yes/No 3. Calculation of Unfinanced Capital Expenditures ---------------------------------------------- Capital Expenditures (as defined in the Agreement) $__________ Plus: deposits made during such period in connection with property, plant, and equipment; less deposits of a prior period included above. __________ Less: Portion of Capital Expenditures financed under capital leases or other Indebtedness __________ UNFINANCED CAPITAL EXPENDITURES $__________ 4. Calculation of Adjusted Operating Cash Flow ------------------------------------------- ADJUSTED OPERATING CASH FLOW: EBITDA (calculated in accordance with Item No. 1 of this Exhibit) $__________ - ------ Less: Unfinanced Capital Expenditures (calculated in accordance with Item No. 4 of this Exhibit) $__________
3 Other capitalized costs, defined as the gross amount capitalized, for any fiscal period, as long term assets (net of cash received in respect of long term assets), other than (a) Capital Expenditures (as defined in the Agreement) and (b) fees and expenses capitalized with respect to the Transaction Documents and the Acquisition Documents __________ OPERATING CASH FLOW $__________ Plus: Pro Forma Target Operating Cash Flow (defined below) __________ ------------------------------------- PRO FORMA TARGET OPERATING CASH FLOW means the following with respect to any person whose stock or assets were acquired by the Company or any of its Subsidiaries (a "Target") during the 12 month period ending on the date of determination: Operating Cash Flow (calculated as set forth above in this Item 4) for the Target during the portion of the 12 month period ending on the date of determination that occurred prior to consummation of the applicable acquisition $__________ Plus: Addbacks approved by the Purchaser __________ Less: Target Capital Expenditures for the Target during the portion of the 12 month period ending on the date of determination that occurred prior to consummation of the applicable acquisition, calculated as follows: Amount capitalized as capital expenditures for the period, under GAAP, as property, plant and equipment or similar fixed asset accounts, including net present value of multi-year operating leases $__________ Plus: deposits made during the period in connection with property, plant and equipment; less deposits of a prior period included above __________ Less: net proceeds of asset sales included in capital expenditures above, which Target has reinvested __________ Target Capital Expenditures __________ PRO FORMA TARGET OPERATING CASH FLOW: $__________ ADJUSTED OPERATING CASH FLOW (sum of Adjusted Operating Cash Flow plus Pro Forma Target Operating Cash Flow) 5. Calculation of Fixed Charge Coverage as set forth in Section 9.8(b) ------------------------------------------------------------------- FIXED CHARGES: Interest Expense $__________ Plus: Any provision for (benefit from) income or franchise taxes included in the determination of net income, less any increases (decreases) in long- term and short-term deferred tax liabilities and less any decreases (increases) in long-term and short-term deferred tax assets __________ Scheduled payments of principal with respect to all Indebtedness (including the principal portion of scheduled payments of Capital Lease Obligations) of the Company and its Subsidiaries on a consolidated basis, __________ Cash payments of deferred tax liabilities stated on the Pro Forma Balance Sheet (without duplication) __________
4 FIXED CHARGES $__________ OPERATING CASH FLOW: EBITDA $__________ Less: Unfinanced Capital Expenditures (calculated in accordance with Item No. 3 of this Exhibit). __________ Other Capitalized Costs, defined as the gross amount capitalized, for any fiscal period, as long term assets (net of cash received in respect of long term assets), other than (a) Capital Expenditures and (b) fees and expenses capitalized with respect to the Transaction Documents and the Acquisition Documents __________ ADJUSTED OPERATING CASH FLOW $__________ ACTUAL FIXED CHARGE COVERAGE (ADJUSTED OPERATING CASH FLOW DIVIDED BY FIXED CHARGES) __________ Required Fixed Charge Coverage __________ In Compliance __________ Yes/No
5 EX-10.4 6 PROMISSORY NOTE EXHIBIT 10.4 SUBORDINATED PROMISSORY NOTE ---------------------------- THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS NITINOL MEDICAL TECHNOLOGIES, INC. 10.101% SUBORDINATED PROMISSORY NOTE DUE SEPTEMBER 30, 2003 $20,000,000 New York, New York July 8, 1998 FOR VALUE RECEIVED. the undersigned, NITINOL MEDICAL TECHNOLOGIES, INC., a Delaware corporation (the "BORROWER") hereby promises to pay to the order of Whitney Subordinated Debt Fund, L.P. ("WSDF"), a Delaware limited partnership, or its registered assigns (the "HOLDER"), the principal sum of TWENTY MILLION DOLLARS ($20,000,000) on September, 2003 (the "MATURITY DATE"), with interest thereon from time to time as provided herein. 1. Purchase Agreement. This Subordinated Promissory Note (the ------------------ "NOTE") is issued by the Borrower, on the date hereof, pursuant to the Subordinated Note and Common Stock Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of July 8, 1998, by and among the Borrower, WSDF and, for certain purposes, J.H. Whitney & Co. This Note, together with all other notes issued pursuant to paragraph 12 hereof are hereinafter referred to as the "NOTES." The Holder is entitled to the benefits of this Note and the Purchase Agreement, as it relates to the Note, and may enforce the agreements of the Borrower contained herein and therein and exercise the remedies provided for hereby and thereby or otherwise available in respect hereto and thereto. Capitalized terms used herein without definition are used herein with the meanings ascribed to such terms in the Purchase Agreement. 2. Interest. The Borrower promises to pay interest on the principal -------- amount of this Note at the rate of 10.101% per annum. The Borrower shall pay accrued interest quarterly on each March 31, June 30, September 30 and December 31 of each year or, if any such date shall not be a Business Day, on the next succeeding Business Day to occur after such date (each date upon which interest shall be so payable, an "INTEREST PAYMENT DATE"), beginning on September 30, 1998; provided, however, that notwithstanding anything to the contrary contained -------- ------- herein or in the Purchase Agreement, the interest accruing under this Note in respect of the quarterly periods ending September 30, 1998, December 31, 1998 and March 31, 1999 (other than additional interest incurred upon and during the occurrence of an Event of Default) shall be satisfied as specified in Section 8.10 of the Purchase Agreement. Interest on this Note shall be paid by wire transfer of immediately available funds to an account at a bank designated by the Holder. Interest on this Note shall accrue from the date of issuance until repayment of the principal and payment of all accrued interest in full. Interest shall accrue and be computed on the basis of a 360-day year of twelve 30-day months. Notwithstanding the foregoing provisions of this Section 2, but subject to applicable law, any overdue principal of and overdue interest on this Note shall bear interest, payable on demand in immediately available funds, for each day from the date payment thereof was due to the date of actual payment, at a rate equal to the rate of interest otherwise in effect pursuant to the first sentence of this Section 2 plus 2% per annum, and, upon and during the ---- occurrence of an Event of Default (as hereinafter defined) (other than an Event of Default pursuant to Section 6(a)(ii) of this Note), this Note shall bear interest, from the date of the occurrence of such Event of Default until such Event of Default is cured or waived, payable on demand in immediately available funds, at a rate equal to the rate of interest otherwise in effect pursuant to the first sentence of this Section 2 plus 2% per annum. Subject to applicable ---- law, any interest that shall accrue on overdue interest on this Note as provided in the preceding sentence and shall not have been paid in full on or before the next Interest Payment Date to occur after the Interest Payment Date on which the overdue interest became due and payable shall itself be deemed to be overdue interest on this Note to which the preceding sentence shall apply. In the event that any interest rate provided for herein shall be determined to be unlawful, such interest rate shall be computed at the highest rate permitted by applicable law. Any payment by the Borrower of any interest amount in excess of that permitted by law shall be considered a mistake, with the excess being applied to the principal of this Note without prepayment premium or penalty. 3. Mandatory Prepayment. -------------------- (a) Secondary Public Offering. Subject to the subordination ------------------------- provisions of Section 7(b) hereof, upon the consummation of a Secondary Public Offering (as hereinafter defined), the Borrower shall prepay the outstanding principal amount of this Note (together with interest accrued and unpaid thereon), within 5 Business Days after receipt by the Borrower of the proceeds of such Secondary Public Offering. For the purposes hereof, "SECONDARY PUBLIC OFFERING" means the sale by the Borrower of its capital stock pursuant to a registration statement on Form S-1, Form S-3 or otherwise 2 under the Securities Act in which the issuer receives Net Cash Proceeds equal to or in excess of $25 million. For the purposes hereof, "NET CASH PROCEEDS" means (x) the cash proceeds in respect of a Secondary Public Offering minus (y) ----- brokerage commissions or underwriting fees and other fees and expenses (including, without limitation, fees, charges and disbursements of counsel) relating to such Secondary Public Offering. (b) Change of Control. Subject to the subordination provisions of ----------------- Section 7(b) hereof, upon a Change of Control (as hereinafter defined), the Borrower shall prepay the outstanding principal amount of this Note (together with interest accrued and unpaid thereon), within 5 Business Days after the occurrence of such Change of Control. For the purposes hereof, "CHANGE OF CONTROL" means (i) any transaction or series of transactions in which any Person or group, other than WSDF, Whitney Equity Partners, L.P., the Borrower or any affiliates of the foregoing becomes the beneficial owner of 50% or more of the then outstanding capital stock of the Borrower or of any Subsidiary of the Borrower, the operations of which in the reasonable judgment of the Holder would constitute a material part of the business or operations of the Borrower and all of its Subsidiaries, taken as a whole, (ii) the sale of all or substantially all of the assets of the Borrower or any Subsidiary of the Borrower, the operations of which in the reasonable judgment of the Holder would constitute a material part of the business or operations of the Borrower and all of its Subsidiaries, taken as a whole, (iii) the liquidation of the Borrower, or (iv) the combination of the Borrower or of any Subsidiary of the Borrower, the operations of which in the reasonable judgment of the Holder would constitute a material part of the business or operations of the Borrower and all of its Subsidiaries, taken as a whole, with another entity, as a result of which (A) the shareholders of Borrower or any of its Subsidiaries hold less than 50% of the total of all voting shares outstanding or (B) directors of the Borrower or any of its Subsidiaries constitute less than a majority of the Board of Directors of the combined entity; provided, however, that any of the events described in -------- ------- subdivisions (i), (ii) or (iv) as applied to a Subsidiary of the Borrower shall be a Change in Control only if such event is also an Event of Default. (c) Notice. The Borrower shall give written notice to the Holder of ------ any mandatory prepayment pursuant to this Section 3 at least 5 Business Days prior to the date of such prepayment. Such notice shall be given in the manner specified in Section 11.3 of the Purchase Agreement. 3 4. Optional Prepayment. ------------------- (a) Upon notice given to the Holder as provided in Section 4(b), the Borrower, at its option, may prepay all or any portion of this Note at any time, by paying an amount equal to the outstanding principal amount of this Note, or the portion of this Note called for prepayment, together with interest accrued and unpaid thereon to the date fixed for prepayment, together with costs and expenses (including, without limitation, reasonable fees, charges and disbursements of counsel), if any, associated with such prepayment, without penalty or premium; provided, however, each prepayment of less than the full -------- ------- outstanding principal balance of the Note shall be in an aggregate principal amount of $500,000 or a whole multiple thereof. (b) The Borrower may give written notice of prepayment of this Note or any portion thereof not less than 10 nor more than 30 days prior to the date fixed for such prepayment. Such notice of prepayment shall be given in the manner specified in Section 11.3 of the Purchase Agreement. Upon notice of prepayment being given by the Borrower, the Borrower covenants and agrees that it will prepay, on the date therein fixed for prepayment, this Note or, if applicable, the portion hereof so called for prepayment, at the outstanding principal amount thereof or the portion thereof so called for prepayment (less, if applicable, the discount specified in Section 4(b) or 4(c) above), together with interest accrued and unpaid thereon to the date fixed for such prepayment, together with the costs and expenses referred to in Section 4(a), 4(b) or 4(c). (c) All optional prepayments under this Section 4 shall include payment of accrued and unpaid interest on the principal amount so prepaid and shall be applied first to all costs, expenses and indemnities payable under the Purchase Agreement, then to payment of default interest, if any, then to payment of accrued interest, and thereafter to principal. 5. Amendment. Amendments and modifications of this Note may be made --------- only in the manner provided in Section 11.6 of the Purchase Agreement. 6. Defaults and Remedies. --------------------- (a) Events of Default. An "EVENT OF DEFAULT" shall occur if: ----------------- (i) the Borrower shall default in the payment of the principal of this Note, when and as the same shall become due and payable, whether at maturity or at a date fixed for prepayment or by acceleration or otherwise; or (ii) the Borrower shall default in the payment of any installment of interest on this Note according to its terms, when and as the same shall become due and payable and such default shall continue for a period of five days; or 4 (iii) the Borrower shall default in the due observance or performance of any covenant to be observed or performed pursuant to Sections 8.1, 8.2(a), 8.3 (except to the extent otherwise covered in Sections 6(a)(i) and 6(a)(ii) above), 8.7, 8.9 or Article 9 of the Purchase Agreement; or (iv) the Borrower or any of its Subsidiaries shall default in the due observance or performance of any other material covenant, condition or agreement on the part of the Borrower, its parent or any of its Subsidiaries to be observed or performed pursuant to the terms hereof or pursuant to the terms of the Purchase Agreement or any of the Transaction Documents (other than those referred to in clauses (i), (ii) or (iii) of this Section 6(a)), and such default shall continue for 30 days after the earliest of (A) the date the Borrower is required pursuant to the Transaction Documents or otherwise to give notice thereof to the Holder (whether or not such notice is actually given) or (B) the date of written notice thereof, specifying such default and, if such default is capable of being remedied, requesting that the same be remedied, shall have been given to the Borrower by the Holder; or (v) any representation, warranty or certification made by or on behalf of the Borrower or its Subsidiaries in the Purchase Agreement, this Note, the Transaction Documents or in any certificate or other document delivered pursuant hereto or thereto shall have been incorrect in any material respect when made; or (vi) any event or condition shall occur that results in (A) the acceleration of the maturity of any Indebtedness of the Borrower or any of its Subsidiaries, or (B) a default of any Indebtedness of the Borrower or any of its Subsidiaries, in either case in a principal amount aggregating $1,000,000 or more; or (vii) any uninsured damage to or loss, theft or destruction of any assets of the Borrower or any of its Subsidiaries shall occur that is in excess of $250,000; or (viii) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (a) relief in respect of the Borrower or any of its Subsidiaries, or of a substantial part of their property or assets, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (b) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries, or for a substantial part of their property or assets, or (c) the winding up or liquidation of the Borrower or any of its Subsidiaries; and in each case such proceeding or petition shall continue undismissed for 60 days, or an order or decree approving or ordering any of the foregoing shall be entered; or (ix) the Borrower or any of its Subsidiaries shall (a) voluntarily commence any proceeding or file any petition seeking relief under Title 11 5 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (b) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (viii) of this Section 6(a), (c) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any of its Subsidiaries, or for a substantial part of their property or assets, (d) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (e) make a general assignment for the benefit of creditors, (f) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (g) take any action for the purpose of effecting any of the foregoing; or (x) one or more judgments for the payment of money in an aggregate amount in excess of $100,000 (to the extent not covered by insurance) shall be rendered against the Borrower or any of its Subsidiaries and the same shall remain undischarged for a period of 30 days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any of its Subsidiaries to enforce any such judgment; or (xi) any guaranty given by a Guarantor shall at any time after its execution and delivery and for any reason cease to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by any Guarantor or any Guarantor shall deny it has any further liability or obligation thereunder or shall fail to perform its obligations thereunder; or (xii) any Security Agreement shall at any time after its execution and delivery and for any reason cease: (A) to create a valid and perfected first priority security interest in and to the property purported to be subject to such Agreement; or (B) to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by the Borrower or any Guarantor or the Borrower or any Guarantor shall deny it has any further liability or obligation under such Agreement or the Borrower or any Guarantor shall fail to perform any of its obligations thereunder; or (xiii) any Pledge Agreement shall at any time after its execution and delivery and for any reason cease: (A) to create a valid and perfected priority security interest in and to the property purported to be subject to such agreement; or (B) to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by any party thereto, or such party shall deny it has further liability or obligation thereunder or such party shall fail to perform any of its obligations thereunder. (b) Acceleration. If an Event of Default occurs under Section ------------ 6(a)(viii) or (ix), then the outstanding principal of and all accrued interest on this Note 6 shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived. If any other Event of Default occurs and is continuing the Holder, by written notice to the Borrower may declare the principal of and accrued interest on this Note to be immediately due and payable. Upon such declaration, such principal and interest shall become immediately due and payable. The Holder shall rescind an acceleration and its consequences if all existing Events of Default have been cured or waived, except nonpayment of principal or interest that has become due solely because of the acceleration, and if the rescission would not conflict with any judgment or decree. Any notice or rescission shall be given in the manner specified in Section 11.3 of the Purchase Agreement. 7. Subordination. Subject to the limitations set forth in Section ------------- 7(o) below, this Note shall at all times be wholly subordinate and junior in right of payment to all Senior Indebtedness to the extent and in the manner provided in this Section 7. (a) Definitions. As used in this Section 7, the following terms ----------- shall have the following meanings: "INDEBTEDNESS" shall have the meaning assigned to that term in the Purchase Agreement. "SENIOR COVENANT DEFAULT" shall mean any event of default as defined under any agreement pertaining to Senior Indebtedness of the Borrower, other than a Senior Payment Default. "SENIOR INDEBTEDNESS" means all Indebtedness of the Borrower currently outstanding or incurred in the future pursuant to any borrowing by the Borrower from one or more banks or institutional lenders, each having total assets (together with its affiliates) in excess of $500,000,000, and any renewals, extensions, refinancings, modifications or refundings thereof, provided, -------- however, in no event shall the aggregate principal amount of Senior Indebtedness - ------- exceed $10,000,000. "SENIOR DEFAULT" shall mean a Senior Payment Default or a Senior Covenant Default. "SENIOR PAYMENT DEFAULT" shall mean any default in the payment of any Senior Indebtedness. "SUBORDINATED INDEBTEDNESS" shall mean (i) the principal of and interest on this Note; and (ii) any other obligations of the Borrower arising out of or in connection with the Purchase Agreement or this Note. (b) General. Upon the maturity of any Senior Indebtedness by lapse of ------- time, acceleration, required prepayment or otherwise, all Senior Indebtedness shall first be paid in full, or such payment duly provided for in cash or in a manner 7 satisfactory to the holders of such Senior Indebtedness, before any payment is made on account of the Subordinated Indebtedness or by the Borrower or an Affiliate of the Borrower to acquire this Note, except that (i) the Borrower may prepay this Note in accordance with the provisions of Section 3 or Section 4 so long as no Senior Default has occurred and is continuing or would occur as a result of any such prepayment and (ii) the Holder may receive any distributions provided for in Section 7(e)(ii) or 7(e)(iv) hereof. (c) Limitation on Payment. --------------------- (i) Upon receipt by the Borrower and the Holder of a Blockage Notice (as defined below), then unless and until (1) all Senior Defaults that gave rise to the Blockage Notice shall have been remedied or effectively waived or shall have ceased to exist, or (2) the Senior Indebtedness in respect of which such Senior Defaults shall have occurred shall have been paid in full, no direct or indirect payment (in cash, property, securities or by set-off or otherwise) of or on account of the principal of or interest on this Note or as a sinking fund for this Note or in respect of any redemption, retirement, purchase or other acquisition of this Note shall be made during any period prior to the expiration of the Blockage Period (as defined below). Notwithstanding the foregoing, all interest paid with respect to this Note prior to the receipt of the Blockage Notice in question by the Holder hereof may be kept by such Holder. (ii) For purposes of this Section 7, a "BLOCKAGE NOTICE" is a notice of a Senior Default that in fact has occurred and is continuing, given to the Borrower and the Holder by the holders of a majority in principal amount of the Senior Indebtedness then outstanding (or their authorized agent); provided, however, that no such notice shall be effective as a Blockage Notice - -------- ------- if an effective Blockage Notice shall have been given within 360 days prior thereto. (iii) For purposes of this Section 7, a "BLOCKAGE PERIOD" with respect to a Blockage Notice is the period commencing upon the Borrower's receipt of such Blockage Notice and having a duration as follows: (1) 60 days if the Senior Default to which the Blockage Notice refers is a Senior Payment Default; or (2) 30 days if the Senior Default to which the Blockage Notice refers is a Senior Covenant Default. (d) Limitation on Remedies. As long as any Senior Indebted ness ---------------------- remains outstanding, upon the occurrence of an Event of Default under this Note, the Holder shall not, unless the holders of any Senior Indebtedness shall have caused such Senior Indebtedness to become due prior to its stated maturity or any Event of Default pursuant to Section 6(a)(viii) or (ix) of this Note shall have commenced, declare 8 or join in any declaration of this Note to be due and payable by reason of such Event of Default or otherwise take any action against the Borrower (including, without limitation, commencing any legal action against the Borrower or filing or joining in the filing of any insolvency petition against the Borrower) prior to the expiration of 30 days after the written notice of intention to accelerate on account of the occurrence of such Event of Default (a "REMEDY NOTICE") shall have been given by the Holder to the Borrower and the holders of the Senior Indebtedness (a "REMEDY STANDSTILL PERIOD"), provided, that such Remedy Standstill Period shall be extended (i) to 60 days from the date of such Remedy Notice if, at the time the Remedy Standstill Period would otherwise expire, there exists any Senior Covenant Default and (ii) to 90 days from the date of such Remedy Notice if, at the time the Remedy Standstill Period would otherwise expire, there exists any Senior Payment Default. Notwithstanding the foregoing, the Blockage Period shall be inapplicable or cease to be effective if an Event of Default pursuant to Section 6(a)(viii) or (ix) shall have occurred. In addition, any Blockage Period shall cease to be effective if at any time during such period: (i) substantial assets of the Borrower, its parent or its Subsidiaries are sold or otherwise disposed of outside of the ordinary course of business for less than fair value or (ii) payment or any distribution of any character, whether in cash, securities or other property of the Borrower, its parent or its Subsidiaries shall be made to or received by any creditor on any Indebtedness which is on the same level of priority with or junior and subordinate in right of payment to this Note. Upon the expiration or termination of any Blockage Period and/or any Remedy Standstill Period, the Holder shall be entitled to exercise any of its rights with respect to this Note other than any right to accelerate the maturity date of this Note based upon the occurrence of any Event of Default in respect thereto which has been cured or otherwise remedied during the Blockage Period. (e) Subordination Upon Certain Events. Upon the occurrence of any --------------------------------- Event of Default with respect to the Borrower under Sections 6(a)(viii) or (ix) of this Note: (i) Upon any payment or distribution of assets of the Borrower to creditors of such Borrower, holders of Senior Indebtedness shall be entitled to receive indefeasible payment in full of all obligations with respect to the Senior Indebtedness before the Holder shall be entitled to receive any payment in respect of the Subordinated Indebtedness. (ii) Until all Senior Indebtedness is paid in full, any distribution to which the Holder would be entitled but for this Section 7 shall be made to the holders of Senior Indebtedness, as their interests may appear, except that the Holder may, pursuant to a plan of reorganization under Chapter 11 of the Bankruptcy Code of 1978, as amended, or any similar provision of any successor legislation thereto, receive securities that are subordinate to the Senior Indebtedness to at least the same 9 extent as this Note if pursuant to such plan the distributions to the holders of the Senior Indebtedness in the form of cash, securities or other property, by set-off or otherwise, provide for payment of the full amount of the allowed claim of the holders of the Senior Indebtedness. (iii) For purposes of this Section 7, a distribution may consist of cash, securities or other property, by set-off or otherwise. (iv) Notwithstanding the foregoing provisions of Section 7(b),(c) or (e), if payment or delivery by the Borrower of cash, securities or other property to the Holder is authorized by an order or decree giving effect, and stating in such order or decree that effect is given, to the subordination of this Note to the Senior Indebtedness, and made by a court of competent jurisdiction in a proceeding under any applicable bankruptcy or reorganization law, payment or delivery by such Borrower of such cash, securities or other property shall be made to the Holder in accordance with such order or decree. (f) Payments and Distributions Received. If the Holder shall have ----------------------------------- received any payment from or distribution of assets of the Borrower in respect of the Subordinated Indebtedness in contravention of the terms of this Section 7 before all Senior Indebtedness is paid in full, then and in such event such payment or distribution shall be received and held in trust for and shall be promptly paid over or delivered to the holders of Senior Indebtedness to the extent necessary to pay all such Senior Indebtedness in full. (g) Proofs of Claim. If, while any Senior Indebtedness is --------------- outstanding, any Event of Default under Section 6(a)(viii) or (ix) of this Note occurs with respect to the Borrower (but not of any one Subsidiary, the operations of which in the reasonable judgment of the Holder is not material to the operations of the Borrower, its parent and all Subsidiaries taken as a whole), the Holder shall duly and promptly take such action as any holder of Senior Indebtedness may reasonably request to collect any payment with respect to this Note for the account of the holders of the Senior Indebtedness and to file appropriate claims or proofs of claim in respect of this Note. Upon the failure of the Holder to take any such action, each holder of Senior Indebtedness is hereby irrevocably authorized and empowered (in its own name or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to in respect of this Note and to file claims and proofs of claim and take such other action as it may deem necessary or advisable for the exercise or enforcement of any of the rights or interests of the holder with respect to this Note. (h) Subrogation. After all amounts payable under or in respect of ----------- Senior Indebtedness are paid in full, the Holder shall be subrogated to the rights of holders of Senior Indebtedness to receive payments or distributions applicable to Senior Indebtedness to the extent that distributions otherwise payable to the Holder have been 10 applied to the payment of Senior Indebtedness. A distribution made under this Section 7 to a holder of Senior Indebtedness which otherwise would have been made to the Holder is not, as between the Borrower and the Holder, a payment by the Borrower on the Indebtedness held by the Holder. (i) Relative Rights. This Section defines the relative rights of the --------------- Holder and the holders of Senior Indebtedness. Nothing in this Section shall: (1) impair, as between the Borrower and the Holder, the obligation of the Borrower, which is absolute and unconditional, to pay principal of and interest (including default interest) on this Note in accordance with its terms; (2) affect the relative rights of the Holder and creditors of the Borrower other than holders of Senior Indebtedness or (3) prevent the Holder from exercising its available remedies upon a default or Event of Default, subject to the rights, if any, under this Section 7 of holders of Senior Indebtedness. (j) Subordination May Not Be Impaired by the Borrower. No right of ------------------------------------------------- any holder of any Senior Indebtedness to enforce the subordination of the Indebtedness evidenced by this Note shall be impaired by any failure to act by the Borrower or by the failure of the Borrower to comply with this Note. The provisions of this Section 7 shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Senior Indebtedness is rescinded or must otherwise be returned by any holder of Senior Indebtedness as a result of the insolvency, bankruptcy or reorganization of the Borrower or any of its Subsidiaries or otherwise, all as though such payment had not been made. (k) Payments. A payment with respect to principal of or interest on -------- the Subordinated Indebtedness shall include, without limitation, payment of principal of, and interest on this Note, any depositing of funds for the defeasance of the Subordinated Indebtedness, any sinking fund and any payment on account of mandatory prepayment or optional prepayment provisions. (l) Section Not to Prevent Events of Default. The failure to make a ---------------------------------------- payment on account of principal of or interest on or other amounts constituting Subordinated Indebtedness by reason of any provision of this Section 7 shall not be construed as preventing the occurrence of an Event of Default under Section 6. (m) Subordination Not Impaired: Benefit of Subordination. The Holder ---------------------------------------------------- agrees and consents that without notice to or assent by such Holder, and without affecting the liabilities and obligations of the Borrower and the rights and benefits of the holders of the Senior Indebtedness set forth in this Section 7: (i) The obligations and liabilities of the Borrower and any other party or parties for or upon the Senior Indebtedness may, from time to time, be increased, renewed, refinanced, extended, modified, amended, restated, compromised, supplemented, terminated, waived or released, except as prohibited by Sections 9.3 and 9.4 of the Purchase Agreement; 11 (ii) The holders of Senior Indebtedness, and any representative or representatives acting on behalf thereof, may exercise or refrain from exercising any right, remedy or power granted by or in connection with any agreements relating to the Senior Indebtedness; and (iii) Any balance or balances of funds with any holder of Senior Indebtedness at any time outstanding to the credit of the Borrower may, from time to time, in whole or in part, be surrendered or released; all as the holders of the Senior Indebtedness, and any representative or representatives acting on behalf thereof, may deem advisable, and all without impairing, abridging, diminishing, releasing or affecting the subordination of the Subordinated Indebtedness to the Senior Indebtedness provided for herein. (n) Modification of Section 7. The provisions of this Section 7 are ------------------------- for the benefit of the holders from time to time of Senior Indebtedness and, so long as any Senior Indebtedness remains unpaid, may not be modified, rescinded or canceled in whole or in part without the prior written consent thereto of all holders of Senior Indebtedness. (o) Miscellaneous. ------------- (i) To the extent permitted by applicable law, the Holder and the Borrower hereby waive (1) notice of acceptance hereof by the holders of the Senior Indebtedness, and (2) all diligence in the collection or protection of or realization upon the Senior Indebtedness. (ii) The Borrower and the Holder hereby expressly agree that the holders of Senior Indebtedness may enforce any and all rights derived herein by suit, either in equity or law, for specific performance of any agreement contained in this Section 7 or for judgment at law and any other relief whatsoever appropriate to such action or procedure. (iii) The Holder acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of this Agreement, and each holder of Senior Indebtedness shall be deemed conclusively to have relied upon such subordination provisions in acquiring and continuing to hold such Senior Indebtedness. 8. Use of Proceeds. The Borrower shall use the principal from this --------------- Note (a) for the payment of fees and expenses in connection with the transactions contemplated under Transaction Documents and (b) to fund the purchase price of the Acquisition under Elekta Purchase Agreement. 12 9. Suits for Enforcement. --------------------- (a) Subject to Section 7, upon the occurrence of any one or more Events of Default, the Holder of this Note may proceed to protect and enforce its rights hereunder by suit in equity, action at law or by other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in the Purchase Agreement or this Note or in aid of the exercise of any power granted in the Purchase Agreement or this Note, or may proceed to enforce the payment of this Note, or to enforce any other legal or equitable right of the Holders of this Note. (b) In case of any default under this Note, the Borrower will pay to the Holder such amounts as shall be sufficient to cover the reasonable costs and expenses of such Holder due to such default, as provided in Article 7 of the Purchase Agreement. 10. Remedies--Cumulative. No remedy herein conferred upon the Holder -------------------- is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. 11. Remedies Not Waived. No course of dealing between the Borrower ------------------- and the Holder or any delay on the part of the Holder in exercising any rights hereunder shall operate as a waiver of any right. 12. Transfer. -------- (a) The term "HOLDER" as used herein shall also include any transferee of this Note whose name has been recorded by the Borrower in the Note Register. Each transferee of this Note acknowledges that this Note has not been registered under the Securities Act, and may be transferred only pursuant to an effective registration under the Securities Act or pursuant to an applicable exemption from the registration requirements of the Securities Act. (b) The Borrower shall maintain a register (the "NOTE REGISTER") in its principal offices for the purpose of registering the Note and any transfer thereof, which register shall reflect and identify, at all times, the ownership of any interest in the Note. Upon the issuance of this Note, the Borrower shall record the name of the initial purchaser of this Note in the Note Register as the first Holder. Upon surrender for registration of transfer or exchange of this Note at the principal offices of the Borrower, the Borrower shall, at its expense, execute and deliver one or more new Notes of like tenor and of denominations of at least $500,000 (except as may be necessary to reflect any principal amount not evenly divisible by $500,000) of a like aggregate principal amount, registered in the name of the Holder or a transferee or transferees. Every Note surrendered for registration of transfer or exchange shall be duly endorsed, or be 13 accompanied by written instrument of transfer duly executed by the Holder of such Note or such holder's attorney duly authorized in writing. 13. Replacement of Note. On receipt by the Borrower of an affidavit ------------------- of an authorized representative of the Holder stating the circumstances of the loss, theft, destruction or mutilation of this Note (and in the case of any such mutilation, on surrender and cancellation of such Note), the Borrower, at its expense, will promptly execute and deliver, in lieu thereof, a new Note of like tenor. If required by the Borrower, such Holder must provide an indemnity bond or other indemnity sufficient in the judgment of the Borrower to protect the Borrower from any loss which it may suffer if a lost, stolen or destroyed Note is replaced. 14. Covenants Bind Successors and Assigns. All the covenants, ------------------------------------- stipulations, promises and agreements in this Note contained by or on behalf of the Borrower shall bind its successors and assigns, whether so expressed or not. 15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ------------- ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE. 16. Headings. The headings in this Note are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. NITINOL MEDICAL TECHNOLOGIES, INC. By: /s/ Theodore I. Pincus ---------------------------------- Name: Theodore I. Pincus Title: EVP/CFO 14 EX-10.5 7 GUARANTEE & COLLATERAL AGREEMENT EXHIBIT 10.5 ------------------------------------------------------------ GUARANTEE AND COLLATERAL AGREEMENT made by NITINOL MEDICAL TECHNOLOGIES, INC. and certain of its Subsidiaries in favor of J.H. WHITNEY & CO., as Agent Dated as of July 8, 1998 ------------------------------------------------------------ TABLE OF CONTENTS Page ---- SECTION 1. DEFINED TERMS .................................................. 1 1.1 Definitions .......................................................... 1 1.2 Other Definitional Provisions ........................................ 5 SECTION 2. GUARANTEE ...................................................... 5 2.1 Guarantee ............................................................ 5 2.2 Right of Contribution ................................................ 6 2.3 No Subrogation ....................................................... 6 2.4 Amendments, etc. with respect to the Borrower Obligations ............ 7 2.5 Guarantee Absolute and Unconditional ................................. 7 2.6 Reinstatement ........................................................ 8 2.7 Payments ............................................................. 9 2.8 Subordination of Guarantee. .......................................... 9 SECTION 3. GRANT OF SECURITY INTEREST ..................................... 9 SECTION 4. REPRESENTATIONS AND WARRANTIES ................................ 10 4.1 Representations in Note Purchase Agreement .......................... 10 4.2 Title; No Other Liens ............................................... 10 4.3 Perfected First Priority Liens ...................................... 10 4.4 Chief Executive Office .............................................. 10 4.5 Inventory and Equipment ............................................. 11 4.6 Pledged Securities .................................................. 11 4.7 Receivables ......................................................... 11 SECTION 5. COVENANTS ..................................................... 11 5.1 Covenants in Note Purchase Agreement ................................ 11 5.2 Maintenance of Insurance ............................................ 11 5.3 Payment of Obligations .............................................. 12 5.4 Maintenance of Perfected Security Interest; Further Documentation ... 12 5.5 Changes in Locations, Name, etc. .................................... 13 5.6 Notices ............................................................. 13 Page ---- 5.7 Pledged Securities .................................................. 13 5.8 Receivables ......................................................... 15 5.9 Intellectual Property ............................................... 15 SECTION 6. REMEDIAL PROVISIONS ........................................... 17 6.1 Certain Matters Relating to Receivables ............................. 17 6.2 Communications with Obligors; Grantors Remain Liable ................ 17 6.3 Pledged Stock ....................................................... 18 6.4 Proceeds to be Turned Over To Agent ................................. 19 6.5 Application of Proceeds ............................................. 19 6.6 Code and Other Remedies ............................................. 20 6.7 Registration Rights ................................................. 21 6.8 Waiver; Deficiency .................................................. 22 SECTION 7. THE AGENT ..................................................... 22 7.1 Agent's Appointment as Attorney-in-Fact, etc. ....................... 22 7.2 Duty of Agent ....................................................... 24 7.3 Execution of Financing Statements ................................... 24 7.4 Authority of Agent .................................................. 24 SECTION 8. MISCELLANEOUS ................................................. 25 8.1 Amendments in Writing ............................................... 25 8.2 Notices ............................................................. 25 8.3 No Waiver by Course of Conduct; Cumulative Remedies ................. 25 8.4 Enforcement Expenses; Indemnification ............................... 25 8.5 Successors and Assigns .............................................. 26 8.6 Counterparts ........................................................ 26 8.7 Severability ........................................................ 26 8.8 Section Headings .................................................... 26 8.9 Integration ......................................................... 26 8.10 GOVERNING LAW ....................................................... 27 8.11 Submission To Jurisdiction; Waivers ................................. 27 8.12 Acknowledgments ..................................................... 27 8.13 WAIVER OF JURY TRIAL ................................................ 28 8.14 Additional Grantors ................................................. 28 8.15 Releases ............................................................ 28 SCHEDULES 1 Notice Addresses of Guarantors 2 Description of Pledged Securities 3. Filings and Other Actions Required to Perfect Security Interests 4 Location of Offices and Jurisdiction of Incorporation 5. Location of Inventory and Equipment 6. Intellectual Property ANNEX 1 Assumptions GUARANTEE AND COLLATERAL AGREEMENT GUARANTEE AND COLLATERAL AGREEMENT, dated as of July 8, 1998, made by each of the parties listed on Schedule A hereto (together with any other entity that may become a party hereto as provided herein, the "Grantors"), in favor of J.H. WHITNEY & CO., as Agent (in such capacity, the - --------- "Agent") for WHITNEY SUBORDINATED DEBT FUND, L.P. (the "Purchaser") and any - ------ --------- holder of any Note from time to time (such holders, together with the Purchaser, being the "Lenders") pursuant to the Subordinated Note and Common Stock Purchase ------- Agreement (the "Note Purchase Agreement") dated the date hereof among the ----------------------- Purchaser, Nitinol Medical Technologies, Inc. (the "Borrower") and, for certain -------- purposes, the Agent. W I T N E S S E T H: - - - - - - - - - - WHEREAS, pursuant to the Note Purchase Agreement, the Purchaser shall purchase the WSDF Note from the Borrower upon the terms and subject to the conditions set forth therein; WHEREAS, the Borrower is a member of an affiliated group of companies that includes each other Grantor; WHEREAS, the Borrower and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the sale of the WSDF Note under the Note Purchase Agreement; and WHEREAS, it is a condition precedent to the obligation of the Purchaser to purchase the WSDF Note from the Borrower under the Note Purchase Agreement that the Grantors shall have executed and delivered this Agreement to the Agent for the benefit of the Lenders; NOW, THEREFORE, in consideration of the premises and to induce the Purchaser to enter into the Note Purchase Agreement and to purchase the WSDF Note from the Borrower, each Grantor hereby agrees with the Agent, for the benefit of the Lenders, as follows: SECTION 1. DEFINED TERMS 1.1 Definitions. (a) Unless otherwise defined herein, terms defined ----------- in the Note Purchase Agreement and used herein shall have the meanings given to them in the Note Purchase Agreement, and the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are 1 used herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Instruments, Inventory and Investment Property. (b) The following terms shall have the following meanings: "Agreement" means this Guarantee and Collateral Agreement, as the same --------- may be amended, supplemented or otherwise modified from time to time. "Borrower Obligations" means the unpaid principal of and interest on -------------------- (including, without limitation, interest accruing after the maturity of the Notes and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing petition interest is allowed in such proceeding) the Notes and all other obligations and liabilities of the Borrower to the Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred which may arise under, out of, or in connection with, this Agreement, any other Loan Document, or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Agent or to any Lender that are required to be paid by the Borrower pursuant hereto or otherwise). "Capital Stock" means any and all shares, interests, participations or ------------- other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. "Collateral": as defined in Section 3. ---------- "Collateral Account": any collateral account established by the Agent ------------------ as provided in Section 6.1 or 6.4. "Copyrights": (i) all copyrights arising under the laws of the United ---------- States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished (including, without limitation, those listed in Schedule 6), all registrations and ----------- recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, and (ii) the right to obtain all renewals thereof. "Copyright Licenses": any written agreement naming any Grantor as ------------------ licensor or licensee (including, without limitation, those listed in Schedule -------- 6), granting 2 any right under any Copyright, including, without limitation, the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright. "Fully Satisfied" means with respect to any Obligation as of any date, --------------- (i) the principal amount of and interest accrued to such date on such Obligation shall have been paid in full in cash, (ii) all fees, expenses and other amounts then due and payable with respect to such Obligation shall have been paid in full in cash and (iii) if such Obligation relates to the Notes, such Notes shall have expired or irrevocably been terminated. "General Intangibles": all "general intangibles" as such term is ------------------- defined in Section 9106 of the Uniform Commercial Code in effect in the State of New York on the date hereof and, in any event, including, without limitation, with respect to any Grantor, all contracts, agreements, instruments and indentures in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise all remedies thereunder, in each case to the extent the grant by such Grantor of a security interest pursuant to this Agreement in its right, title and interest in such contract, agreement, instrument or indenture is not prohibited by such contract, agreement, instrument or indenture without the consent of any other party thereto, would not give any other party to such contract, agreement, instrument or indenture the right to terminate its obligations thereunder, or is permitted with consent to the extent that all necessary consents to such grant of a security interest have been obtained from the other parties thereto (it being understood that the foregoing shall not be deemed to obligate such Grantor to obtain such consents); provided, that the -------- foregoing limitation shall not affect, limit, restrict or impair the grant by such Grantor of a security interest pursuant to this Agreement in any Receivable or any money or other amounts due or to become due under any such contract, agreement, instrument or indenture. "Guarantor Obligations": with respect to any Guarantor, the collective --------------------- reference to (i) the Borrower Obligations and (ii) all obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement or any other Loan Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Agent or to the Lenders that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Loan Document). 3 "Guarantors": the collective reference to each Grantor other than the ---------- Borrower. "Intellectual Property": the collective reference to all rights, --------------------- priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages from any and all past infringements. "Intercompany Note": any promissory note evidencing loans made by any ----------------- Grantor to any Affiliate thereof. "Issuers": the collective reference to each issuer of a Pledged ------- Security. "New York UCC": the Uniform Commercial Code as from time to time in ------------ effect in the State of New York. "Loan Documents" means this Agreement, the Note Purchase Agreement and -------------- the Notes. "Obligations": (i) in the case of the Borrower, the Borrower ----------- Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations. "Patents": (i) all letters patent of the United States, any other ------- country or any political subdivision thereof, all reissues and extensions thereof and all goodwill associated therewith, including, without limitation, any of the foregoing referred to in Schedule 6, (ii) all applications for ---------- letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including, without limitation, any of the foregoing referred to in Schedule 6, and (iii) all rights to obtain ---------- any reissues or extensions of the foregoing. "Patent License": all agreements, whether written or oral, providing -------------- for the grant by or to any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent, including, without limitation, any of the foregoing referred to in Schedule 6. ---------- "Pledged Notes": all promissory notes listed on Schedule 2, all ------------- ---------- Intercompany Notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor (other than promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business). 4 "Pledged Securities": the collective reference to the Pledged Notes ------------------ and the Pledged Stock. "Pledged Stock": the shares of Capital Stock listed on Schedule 2, ------------- ---------- together with any other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect. "Proceeds": all "proceeds" as such term is defined in Section 9-306(l) -------- of the Uniform Commercial Code in effect in the State of New York on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions or payments with respect thereto. "Receivable": any right to payment for goods sold or leased or for ---------- services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account). "Securities Act": the Securities Act of 1933, as amended. -------------- "Trademarks": (i) all trademarks, trade names, corporate names, ---------- company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, including, without limitation, any of the foregoing referred to in Schedule 6, and (ii) the right to obtain all renewals thereof. ---------- "Trademark License": any agreement, whether written or oral, providing ----------------- for the grant by or to any Grantor of any right to use any Trademark, including, without limitation, any of the foregoing referred to in Schedule 6. ---------- 1.2 Other Definitional Provisions. (a) The words "hereof," "herein," "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified. (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 5 (c) Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof. SECTION 2. GUARANTEE 2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and --------- severally, unconditionally and irrevocably, guarantees to the Agent, for the benefit of the Lenders and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations. (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2). (c) Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Agent or any Lender hereunder. (d) The guarantee contained in this Section 2 shall remain in full force and effect until all the Borrower Obligations and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by payment in full. (e) No payment made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Borrower Obligations are Fully Satisfied. 6 2.2 Right of Contribution. Each Guarantor hereby agrees that to the --------------------- extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Agent and the Lenders, and each Guarantor shall remain liable to the Agent and the Lenders for the full amount guaranteed by such Guarantor hereunder. 2.3 No Subrogation. Notwithstanding any payment made by any Guarantor -------------- hereunder or any set-off or application of funds of any Guarantor by the Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Agent or any Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Agent or any Lender for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Agent and the Lenders by the Borrower on account of the Borrower Obligations are Fully Satisfied. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been Fully Satisfied, such amount shall be held by such Guarantor in trust for the Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured, in such order as the Agent may determine. 2.4 Amendments, etc. with respect to the Borrower Obligations. Each --------------------------------------------------------- Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Borrower Obligations made by the Agent or any Lender may be rescinded by the Agent or such Lender and any of the Borrower Obligations continued, and the Borrower Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Agent or any Lender, and the Note Purchase Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Agent (or the Lenders pursuant to the Note Purchase Agreement, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Agent or any Lender for the 7 payment of the Borrower Obligations may be sold, exchanged, waived, surrendered or released. Neither the Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower Obligations or for the guarantee contained in this Section 2 or any property subject thereto. 2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any ------------------------------------ and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations and notice of or proof of reliance by the Agent or any Lender upon the guarantee contained in this Section 2, or acceptance of the guarantee contained in this Section 2. The Borrower Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2. All dealings between the Borrower and any of the Guarantors, on the one hand, and the Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Borrower Obligations. Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Note Purchase Agreement or any other Loan Document, any of the Borrower Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower or any other Person against the Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Borrower Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations or any right of offset with respect thereto, and any failure by the Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from the Borrower, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available 8 as a matter of law, of the Agent or any Lender against any Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 2.6 Reinstatement. The guarantee contained in this Section 2 shall ------------- continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Borrower Obligations is rescinded or must otherwise be restored or returned by the Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 2.7 Payments. Each Guarantor hereby guarantees that payments -------- hereunder will be paid to the Agent without set-off or counterclaim in United States dollars, if possible, at the office of the Agent, at 177 Broad Street, Stamford, Connecticut or as otherwise designated to the Guarantor from time to time. 2.8 Subordination of Guarantee. Notwithstanding any other provision -------------------------- of the guarantee contained in this Section 2, the guarantee set forth herein is subordinate and junior in right of payment to all Senior Indebtedness (as defined in the Notes) to the extent and as provided in Section 7 of the Notes. SECTION 3. GRANT OF SECURITY INTEREST Each Grantor hereby assigns and transfers to the Agent, and hereby grants to the Agent, for the benefit of the Lenders, a security interest in, all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"), as ---------- collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor's Obligations: (a) all Accounts; (b) all Chattel Paper; (c) all Documents; (d) all Equipment; (e) all General Intangibles; 9 (f) all Instruments; (g) all Intellectual Property; (h) all Inventory; (i) all Pledged Securities; (j) all Investment Property; (k) all books and records pertaining to the Collateral; and (l) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Purchaser to enter into the Note Purchase Agreement and to induce the Lenders to purchase the Notes, each Grantor hereby represents and warrants to the Agent and each Lender that: 4.1 Representations in Note Purchase Agreement. In the case of each ------------------------------------------ Guarantor, the representations and warranties set forth in Article 5 of the Note Purchase Agreement as they relate to such Guarantor or to the Loan Documents to which such Guarantor is a party, each of which is hereby incorporated herein by reference, are true and correct, and the Agent and each Lender shall be entitled to rely on each of them as if they were fully set forth herein, provided that -------- each reference in each such representation and warranty to the Borrower's knowledge shall, for the purposes of this Section 4.1, be deemed to be a reference to such Guarantor's knowledge. 4.2 Title; No Other Liens. Except for the security interest granted --------------------- to the Agent for the benefit of the Lenders pursuant to this Agreement and the other Liens permitted to exist on the Collateral by the Note Purchase Agreement, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Agent, for the ratable benefit of the Lenders, pursuant to this Agreement or as are permitted by the Note Purchase Agreement. 10 4.3 Perfected First Priority Liens. The security interests granted ------------------------------ pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 3 (which, in the case of all filings and other documents ---------- referred to on said Schedule, have been delivered to the Agent in completed and duly executed form) will constitute valid perfected security interests in all of the Collateral in favor of the Agent, for the benefit of the Lenders, as collateral security for such Grantor's Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof except for (i) Liens permitted by the Note Purchase Agreement. 4.4 Chief Executive Office. On the date hereof, such Grantor's ---------------------- jurisdiction of organization and the location of such Grantor's chief executive office or sole place of business are specified on Schedule 4. ---------- 4.5 Inventory and Equipment. On the date hereof, the Inventory and ----------------------- the Equipment (other than mobile goods) are kept at the locations listed on Schedule 5. - ---------- 4.6 Pledged Securities. (a) The shares of Pledged Stock pledged by ------------------ such Grantor hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of each Issuer owned by such Grantor except that, if the Issuer is organized under the laws of any jurisdiction outside the United States, then the shares of Pledged Stock pledged by such Grantor hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of such Issuer owned by such Grantor up to 65% of such shares of each class of Capital Stock of such Issuer. (b) All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable. (c) Each of the Pledged Notes constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (d) Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Pledged Securities pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement. 4.7 Receivables. None of the obligors on any Receivables is a ----------- Governmental Authority. 11 SECTION 5. COVENANTS Each Grantor covenants and agrees with the Agent and the Lenders that, from and after the date of this Agreement until the Obligations shall have been Fully Satisfied. 5.1 Covenants in Note Purchase Agreement. In the case of each ------------------------------------ Guarantor, such Guarantor shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor or any of its Subsidiaries. 5.2 Maintenance of Insurance. (a) Such Grantor will maintain, with ------------------------ financially sound and reputable companies, insurance policies (i) insuring the Inventory and Equipment against loss by fire, explosion, theft and such other casualties as may be reasonably satisfactory to the Agent and (ii) insuring such Grantor, the Agent and the Lenders against liability for personal injury and property damage relating to such Inventory and Equipment, such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to the Agent and the Lenders. (b) As soon as practicable following the Closing Date, all such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Agent of written notice thereof, (ii) name the Agent as insured party or loss payee, (iii) if reasonably requested by the Agent, include a breach of warranty clause and (iv) be reasonably satisfactory in all other respects to the Agent. (c) The Borrower shall deliver to the Agent and the Lenders a report of a reputable insurance broker with respect to such insurance during the month of June in each calendar year and such supplemental reports with respect thereto as the Agent may from time to time reasonably request. 5.3 Payment of Obligations. Such Grantor will pay and discharge or ---------------------- otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings, reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor and such proceedings could not reasonably be expected to result in the sale, forfeiture or loss of any material portion of the Collateral or any interest 12 therein. Notwithstanding anything to the contrary in the foregoing sentence, the Borrower shall not be in default under this Section 5.3 unless the aggregate amount of non-contested Indebtedness or obligations which the Borrower and its Subsidiaries have so failed to pay, discharge or satisfy before they become delinquent and which remain delinquent at the time of determination is more than $50,000 in the aggregate. 5.4 Maintenance of Perfected Security Interest; Further Documentation. ----------------------------------------------------------------- (a) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 4.3 and shall defend such security interest against the claims and demands of all Persons whomsoever. (b) Such Grantor will furnish to the Agent and the Lenders from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request, all in reasonable detail. (c) At any time and from time to time, upon the written request of the Agent and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby. 5.5 Changes in Locations, Name, etc. Such Grantor will not, except -------------------------------- upon 15 days' prior written notice to the Agent and delivery to the Agent of (a) all additional executed financing statements and other documents reasonably requested by the Agent to maintain the validity, perfection and priority of the security interests provided for herein and (b) if applicable, a written supplement to Schedule 5 showing any additional location at which Inventory or ---------- Equipment shall be kept: (i) permit any of the Inventory or Equipment to be kept at a location other than those listed on Schedule 5; ---------- (ii) change the location of its chief executive office or sole place of business from that referred to in Section 4.4; or (iii) change its name, identity or corporate structure to such an extent that any financing statement filed by the Agent in connection with this Agreement would become misleading. 13 5.6 Notices. Such Grantor will advise the Agent and the Lenders ------- promptly, in reasonable detail, of: (a) any Lien (other than security interests created hereby or Liens permitted under the Note Purchase Agreement) on any of the Collateral which would adversely affect the ability of the Agent to exercise any of its remedies hereunder, and (b) of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby. 5.7 Pledged Securities. (a) If such Grantor shall become entitled to ------------------ receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Agent and the Lenders, hold the same in trust for the Agent and the Lenders and deliver the same forthwith to the Agent in the exact form received, duly indorsed by such Grantor to the Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor and with, if the Agent so requests, signature guaranteed, to be held by the Agent, subject to the terms hereof, as additional collateral security for the Obligations. Any sums paid upon or in respect of the Pledged Securities upon the liquidation or dissolution of any Issuer shall be paid over to the Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Securities or any property shall be distributed upon or with respect to the Pledged Securities pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Agent, be delivered to the Agent to be held by it hereunder as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Pledged Securities shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Agent hold such money or property in trust for the Lenders, segregated from other funds of such Grantor, as additional collateral security for the Obligations. (b) Without the prior written consent of the Agent, such Grantor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other 14 equity securities of any nature of any Issuer, except to the extent such stock or other equity securities are pledged to the Lenders pursuant hereto, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Pledged Securities or Proceeds thereof (except pursuant to a transaction expressly permitted by the Note Purchase Agreement), (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Pledged Securities or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Agent to sell, assign or transfer any of the Pledged Securities or Proceeds thereof. (c) In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Securities issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Agent promptly in writing of the occurrence of any of the events described in Section 5.7(a) with respect to the Pledged Securities issued by it and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may be ---------------- required of it pursuant to Section 6.3(c) or 6.7 with respect to the Pledged Securities issued by it. 5.8 Receivables. (a) Other than in the ordinary course of business ----------- consistent with its past practice or with the prior written consent of the Agent, such Grantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify any Receivable in any manner that could adversely affect the value thereof. (b) Such Grantor will deliver to the Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables. 5.9 Intellectual Property. (a) Such Grantor (either itself or --------------------- through licensees) will (i) continue to use each material Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (ii) maintain as in the past the quality of products and services offered under such Trademark, (iii) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Agent, for the benefit of 15 the Lenders, shall obtain a perfected security interest in such mark pursuant to this Agreement, and (v) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way. (b) Such Grantor (either itself or through licensees) will not do any act, or omit to do any act, whereby any material Patent may become forfeited, abandoned or dedicated to the public. (c) Such Grantor (either itself or through licensees) (i) will employ each material Copyright and (ii) will not (and will not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material portion of the Copyrights may become invalidated or otherwise impaired. Such Grantor will not (either itself or through licensees) do any act whereby any material portion of the Copyrights may fall into the public domain. (d) Such Grantor (either itself or through licensees) will not do any act that knowingly infringes the intellectual property rights of any other Person. (e) Such Grantor will notify the Agent and the Lenders immediately if it knows, or has reason to know, that any application or registration relating to any material Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding such Grantor's ownership of, or the validity of, any material Intellectual Property or such Grantor's right to register the same or to own and maintain the same. (f) Whenever such Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to the Agent within five Business Days after the last day of the fiscal quarter in which such filing occurs. Upon request of the Agent, such Grantor shall execute and deliver, and have recorded, any and all agreements, instruments, documents, and papers as the Agent may request to evidence the Agent's and the Lenders' security interest in any Copyright, Patent or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby. (g) Such Grantor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and 16 Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the material Intellectual Property, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability. (h) In the event that any material Intellectual Property is infringed, misappropriated or diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such Intellectual Property is of material economic value, promptly notify the Agent after it learns thereof. SECTION 6. REMEDIAL PROVISIONS 6.1 Certain Matters Relating to Receivables. (a) The Agent shall --------------------------------------- have the right to make test verifications of the Receivables in any manner and through any medium that it reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Agent may require in connection with such test verifications. At any time and from time to time, upon the Agent's reasonable request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others reasonably satisfactory to the Agent to furnish to the Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables. (b) The Agent hereby authorizes each Grantor to collect such Grantor's Receivables (or enter into arrangements with a third party for such collection), subject to the Agent's reasonable direction and control and the Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Agent if required, in a Collateral Account maintained under the sole dominion and control of the Agent, subject to withdrawal by the Agent for the account of the Lenders only as provided in Section 6.5, and (ii) until so turned over, shall be held by such Grantor in trust for the Agent and the Lenders, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit. (c) At the Agent's request, each Grantor shall deliver to the Agent all original and other documents evidencing, and relating to, the agreements and 17 transactions which gave rise to the Receivables, including, without limitation, all original orders, invoices and shipping receipts. 6.2 Communications with Obligors; Grantors Remain Liable. (a) The ---------------------------------------------------- Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under the Receivables to verify with them to the Agent's satisfaction the existence, amount and terms of any Receivables. (b) Upon the request of the Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables that the Receivables have been assigned to the Agent for the benefit of the Lenders and that payments in respect thereof shall be made directly to the Agent. (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of the Receivables to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the Agent nor any Lender shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Agent or any Lender of any payment relating thereto, nor shall the Agent or any Lender be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. 6.3 Pledged Stock. (a) Unless an Event of Default shall have ------------- occurred and be continuing and the Agent shall have given notice to the relevant Grantor of the Agent's intent to exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive all cash dividends paid in respect of the Pledged Stock and all payments made in respect of the Pledged Notes, in each case paid in the normal course of business of the relevant Issuer and consistent with past practice, to the extent permitted in the Note Purchase Agreement, and to exercise all voting and corporate rights with respect to the Pledged Securities; provided, however, that no vote shall be -------- ------- cast or corporate right exercised or other action taken which, in the Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Note Purchase Agreement, this Agreement or any other Loan Document. 18 (b) If an Event of Default shall occur and be continuing and the Agent shall give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Pledged Securities and make application thereof to the Obligations in the order set forth in Section 6.5, and (ii) any or all of the Pledged Securities shall be registered in the name of the Agent or its nominee, and the Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Pledged Securities at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Pledged Securities as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Securities upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by any Grantor or the Agent of any right, privilege or option pertaining to such Pledged Securities, and in connection therewith, the right to deposit and deliver any and all of the Pledged Securities with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Agent may determine), all without liability except to account for property actually received by it, but the Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (c) Each Grantor hereby authorizes and instructs each Issuer of any Pledged Securities pledged by such Grantor hereunder to (i) comply with any instruction received by it from the Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Securities directly to the Agent. 6.4 Proceeds to be Turned Over To Agent. In addition to the rights of ----------------------------------- the Agent and the Lenders specified in Section 6.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor consisting of cash, checks and other near-cash items shall be held by such Grantor in trust for the Agent and the Lenders, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Agent, if required). All Proceeds received by the Agent hereunder shall be held by the Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the Agent in a Collateral Account (or by such Grantor in trust for the Agent and the Lenders) shall continue to be held as collateral security for all the 19 Obligations and shall not constitute payment thereof until applied as provided in Section 6.5. 6.5 Application of Proceeds. At such intervals as may be agreed upon ----------------------- by the Borrower and the Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Agent's election, the Agent may apply all or any part of Proceeds constituting Collateral, whether or not held in any Collateral Account, and any proceeds of the guarantee set forth in Section 2, in payment of the Obligations in the following order: First, to pay incurred and unpaid fees and expenses of the Agent ----- under the Loan Documents; Second, to the Agent, for application by it towards payment of ------ amounts then due and owing and remaining unpaid in respect of the Obligations, pro rata among the Lenders according to the amounts of the Obligations then due - --- ---- and owing and remaining unpaid to the Lenders; Third, to the Agent, for application by it towards prepayment of the ----- Obligations, pro rata among the Lenders according to the amounts of the --- ---- Obligations then held by the Lenders; and Fourth, any balance of such Proceeds remaining after the obligations ------ of the Loan Parties under the Loan Documents have been paid in full shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same. 6.6 Code and Other Remedies. If an Event of Default shall occur and ----------------------- be continuing, the Agent, on behalf of the Lenders, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the New York UCC or any other applicable law. Without limiting the generality of the foregoing, the Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any 20 such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released. Each Grantor further agrees, at the Agent's request, to assemble the Collateral and make it available to the Agent at places which the Agent shall reasonably select, whether at such Grantor's premises or elsewhere. The Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Agent and the Lenders hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Agent may elect, and only after such application and after the payment by the Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(l)(c) of the New York UCC, need the Agent account for the surplus, if any, to any Grantor. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Agent or any Lender arising out of the exercise by them of any rights hereunder except any such claims arising out of the Agent or any Lender's gross negligence or wilful misconduct. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. 6.7 Registration Rights. (a) If the Agent shall determine to ------------------- exercise its right to sell any or all of the Pledged Stock pursuant to Section 6.6, and if in the opinion of the Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act or other similar law of any jurisdiction in which an Issuer is located, the relevant Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the reasonable opinion of the Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act or other similar law of any jurisdiction in which an Issuer is located, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Stock, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which, in the opinion of the Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission or other similar law of any jurisdiction in which an Issuer is located, applicable thereto. Each Grantor agrees to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will in the case of 21 United States resident Issuers, satisfy the provisions of Section 11(a) of the Securities Act. (b) Each Grantor recognizes that the Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so. (c) Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Stock pursuant to this Section 6.7 valid and binding and in compliance with any and all other applicable Requirements of Law. Each Grantor further agrees that a breach of any of the covenants contained in this Section 6.7 will cause irreparable injury to the Agent and the Lenders, that the Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.7 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Note Purchase Agreement. 6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert ------------------ any rights or privileges which it may acquire under Section 9-112 of the New York UCC. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations and the fees and disbursements of any attorneys employed by the Agent or any Lender to collect such deficiency. SECTION 7. THE AGENT 7.1 Agent's Appointment as Attorney-in-Fact, etc. (a) Each Grantor --------------------------------------------- hereby irrevocably constitutes and appoints the Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in- fact with full 22 irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following: (i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Agent for the purpose of collecting any and all such moneys due under any Receivable or with respect to any other Collateral whenever payable; (ii) in the case of any Intellectual Property, execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as the Agent may request to evidence the Agent's and the Lenders' security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby; (iii) pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof; (iv) execute, in connection with any sale provided for in Section 6.6 or 6.7, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and (v) (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Agent or as the Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such 23 Grantor with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Agent shall in its sole discretion determine; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Agent were the absolute owner thereof for all purposes, and do, at the Agent's option and such Grantor's expense, at any time, or from time to time, all acts and things which the Agent deems necessary to protect, preserve or realize upon the Collateral and the Agent's and the Lenders' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. Anything in this Section 7.1(a) to the contrary notwithstanding, the Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1(a) unless an Event of Default shall have occurred and be continuing. (b) If any Grantor fails to perform or comply with any of its agreements contained herein, the Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement. (c) The reasonable expenses of the Agent incurred in connection with actions undertaken as provided in this Section 7.1, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due payments of principal under the Notes from the date of payment by the Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Agent on demand. (d) Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released pursuant to Section 8.16(a) hereof. 7.2 Duty of Agent. The Agent's sole duty with respect to the custody, ------------- safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the Agent deals with similar property for its own account. Neither the Agent, any Lender nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for 24 any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Agent and the Lenders hereunder are solely to protect the Agent's and the Lenders' interests in the Collateral and shall not impose any duty upon the Agent or any Lender to exercise any such powers. The Agent and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. 7.3 Execution of Financing Statements. Pursuant to Section 9-402 of --------------------------------- the New York UCC and any other applicable law, each Grantor authorizes the Agent to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Agent reasonably determines appropriate to perfect the security interests of the Agent under this Agreement. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any jurisdiction. 7.4 Authority of Agent. Each Grantor acknowledges that the rights and ------------------ responsibilities of the Agent under this Agreement with respect to any action taken by the Agent or the exercise or non-exercise by the Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Agent and the Lenders, be governed by such agreements with respect thereto as may exist from time to time among them, but, as between the Agent and the Grantors, the Agent shall be conclusively presumed to be acting as agent for the Lenders with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. SECTION 8. MISCELLANEOUS 8.1 Amendments in Writing. None of the terms or provisions of this --------------------- Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 11.6 of the Note Purchase Agreement. 8.2 Notices. All notices, requests and demands to or upon the Agent ------- or any Grantor hereunder shall be effected in the manner provided for in Section 11.3 of the Subordinated Note and Stock Purchase Agreement; provided that any -------- such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 1. ---------- 25 8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the --------------------------------------------------- Agent nor any Lender shall by any act (except by a written instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Agent or such Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees ------------------------------------- to pay or reimburse each Lender and the Agent for all its reasonable costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of counsel to each Lender and of counsel to the Agent. (b) Each Guarantor agrees to pay, and to save the Agent and the Lenders harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. (c) Each Guarantor agrees to pay, and to save the Agent and the Lenders harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement to the extent the Borrower would be required to do so pursuant to Article 7 of the Note Purchase Agreement. (d) The agreements in this Section 8.4 shall survive repayment of the Obligations and all other amounts payable under the Note Purchase Agreement and the other Loan Documents. 8.5 Successors and Assigns. This Agreement shall be binding upon the ---------------------- successors and assigns of each Grantor and shall inure to the benefit of the Agent and the Lenders and their successors and assigns; provided that no Grantor -------- may assign, 26 transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Agent. 8.6 Counterparts. This Agreement may be executed by one or more of ------------ the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 8.7 Severability. Any provision of this Agreement which is prohibited ------------ or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 8.8 Section Headings. The Section headings used in this Agreement are ---------------- for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 8.9 Integration. This Agreement and the other Loan Documents ----------- represent the agreement of the Grantors, the Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Agent or any Lender relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Loan Documents. 8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 8.11 Submission To Jurisdiction; Waivers. Each Grantor hereby ----------------------------------- irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or 27 proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Grantor at its address referred to in Section 8.2 or at such other address of which the Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 8.12 Acknowledgments. Each Grantor hereby acknowledges that: --------------- (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party; (b) neither the Agent nor any Lender has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Agent and Lenders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Grantors and the Lenders. 8.13 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND -------------------- UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 8.14 Additional Grantors. Each Subsidiary of the Borrower that is ------------------- required to become a party to this Agreement pursuant to Section 8.1(j) of the Note Purchase Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement in the form of Annex 1 hereto. 28 8.15 Releases. (a) At such time as the Obligations shall have been -------- Fully Satisfied, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Agent shall deliver to such Grantor any Collateral held by the Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. (b) If any of the Collateral shall be sold, transferred or otherwise disposed of by any Grantor in a transaction permitted by the Note Purchase Agreement, then the Agent, at the request and sole expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral. At the request and sole expense of the Borrower, a Guarantor shall be released from its obligations hereunder in the event that all the Capital Stock of such Guarantor shall be sold, transferred or otherwise disposed of in a transaction permitted by the Note Purchase Agreement; provided that the -------- Borrower shall have delivered to the Agent, at least ten Business Days prior to the date of the proposed release, a written request for release identifying the relevant Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Borrower stating that such transaction is in compliance with the Note Purchase Agreement and the other Loan Documents. IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and Collateral Agreement to be duly executed and delivered as of the date first above written. NITINOL MEDICAL TECHNOLOGIES, INC. By: /s/ Theodore I. Pincus ---------------------------------- Name: Theodore I. Pincus Title: EVP/CFO 29 NMT NEUROSCIENCES (INTERNATIONAL), INC. By: /s/ Theodore I. Pincus ---------------------------------- Name: Theodore I. Pincus Title: Treasurer and Secretary NMT INVESTMENTS CORP. By: /s/ Theodore I. Pincus ---------------------------------- Name: Theodore I. Pincus Title: Treasurer and Clerk NMT NEUROSCIENCES (US), INC. By: /s/ Theodore I. Pincus ---------------------------------- Name: Theodore I. Pincus Title: Treasurer and Secretary 30 NMT NEUROSCIENCES (IP), INC. By: /s/ Theodore I. Pincus ---------------------------------- Name: Theodore I. Pincus Title: Treasurer and Secretary CORDIS INNOVASIVE SYSTEMS, INC. By: /s/ Theodore I. Pincus ---------------------------------- Name: Theodore I. Pincus Title: Treasurer and Secretary NMT HEART, INC. By: /s/ Theodore I. Pincus ---------------------------------- Name: Theodore I. Pincus Title: Treasurer and Secretary 31 SCHEDULE A THE GRANTORS ------------ Nitinol Medical Technologies, Inc. NMT NeuroSciences (International), Inc. NMT Investments Corp. NMT NeuroSciences (US), Inc. NMT NeuroSciences (IP), Inc. Cordis Innovasive Systems, Inc. NMT Heart, Inc. 32 Annex I to Guarantee and Collateral Agreement ---------------------------------- ASSUMPTION AGREEMENT, dated as of ___________________, 199 , made by - ____________________________, a _______________ corporation (the "Additional ---------- Grantor"), in favor of J.H. Whitney & Co., as agent (in such capacity, the - ------- "Agent") for the Lenders, as defined in the Guarantee and Collateral Agreement - ------ referred to below. All capitalized terms not defined herein shall have the meaning ascribed to them in such Note Purchase Agreement. W I T N E S S E T H: - - - - - - - - - - WHEREAS, Nitinol Medical Technologies, Inc. (the "Borrower"), the -------- Lenders and the Agent have entered into a Subordinated Note and Common Stock Purchase Agreement, dated as of July 8, 1998 (as amended, supplemented or otherwise modified from time to time, the "Note Purchase Agreement"); ----------------------- WHEREAS, in connection with the Subordinated Note and Common Stock Purchase Agreement, the Borrower and certain of its Affiliates (other than the Additional Grantor) have entered into the Guarantee and Collateral Agreement, dated as of July 8, 1998 (as amended, supplemented or otherwise modified from time to time, the "Guarantee and Collateral Agreement") in favor of the Agent ---------------------------------- for the benefit of the Lenders; WHEREAS, the Note Purchase Agreement requires the Additional Grantor to become a party to the Guarantee and Collateral Agreement; and WHEREAS, the Additional Grantor has agreed to execute and deliver this Assumption Agreement in order to become a party to the Guarantee and Collateral Agreement; NOW, THEREFORE, IT IS AGREED: 1. Guarantee and Collateral Agreement. By executing and delivering ---------------------------------- this Assumption Agreement, the Additional Grantor, as provided in Section 8.14 of the Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and Collateral Agreement as a Grantor thereunder with the same force and effect as if originally named therein as a Grantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Grantor thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in Schedules ___________/1/ to the Guarantee and Collateral Agreement. The Additional - Grantor hereby represents and warrants that each of the representations and warranties contained in Section 4 of the Guarantee and Collateral Agreement is true and correct on and as the date hereof (after giving effect to this Assumption Agreement) as if made on and as of such date. ___________ /1/ Refer to each Schedule which needs to be supplemented. - 33 2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, ------------- AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written. [ADDITIONAL GRANTOR] By: ------------------------- Name: Title: 34 EX-10.6 8 AGREEMENT & DEED OF PLEDGE OF SHARES EXHIBIT 10.6 -1- AGREEMENT AND DEED OF PLEDGE OF SHARES DI/BK/682857A.agr IN YELLOW TAPE B.V. AND NITINOL MEDICAL TECHNOLOGIES INTERNATIONAL B.V. Today, the ninth of July ------------------------------------------------------- nineteen hundred and ninety-eight, appeared before me, -- Hajo Bart Hendrik Kraak, civil law notary officiating in Amsterdam: ------------------------------ 1. Neeltje Jansen, prospective civil law notary, residing in Amsterdam, Javakade 594, born in Harlingen on the seventeenth day of February nineteen hundred and sixty-five, married, holder of a Dutch passport with number N08541854, ----------------------------------------------------------------------------- acting for the purpose hereof as attorney-in-writing of: J.H. WHITNEY & CO., a limited partnership organized and existing under the laws of the State of New York, United States of America, having its registered office at 177 Broad Street, Stanford, Connecticut 06901, ---- acting not for itself but solely in its capacity as pledgee for and as agent in the name and for the ratable benefit of the following Lenders as defined in the Guarantee and Collateral Agreement (as defined below) (in such capacity herein called the "Security Trustee") : ---------------------------------------------------------------- (a) WHITNEY SUBORDINATED DEBT FUND, L.P., a limited partnership organized and existing under the laws of the State of Delaware, United States of America, having its principal place of business at 177 Broad Street, Stanford, Connecticut 06901, ----------------------- acting in its capacity as the Purchaser as such term is defined in the Subordinated Note and Common -2- Stock Purchase Agreement (as defined below) and the Guarantee and Collateral Agreement; --------------------------------------------------- (b) any holder of any Note from time to time pursuant to the Subordinated Note and Common Stock Purchase Agreement dated as of the eighth day of July nineteen hundred and ninety-eight among the Purchaser, the Agent and Nitinol Medical Technologies, Inc. (the "Subordinated Note and Common Stock Purchase Agreement"), --------------------------------------------- the Security Trustee and all of such Lenders, hereinafter collectively called the "Secured Parties"; and -------------------------------------------------- 2. Katelijne Jacqueline Ribbink, prospective civil law notary, residing in Amsterdam, Patroclosstraat 9 huis, born in Deventer on the fourth day of October nineteen hundred and seventy-two, unmarried nor registered as a partner, holder of a Dutch passport with number ----------------------------- M927735, -------------------------------------------------------------------- acting for the purpose hereof as attorney-in-writing of:--------------------- a. NMT NEUROSCIENCES (INTERNATIONAL), INC., a corporation organized and existing under the laws of the State of Delaware, United States of America, having its registered office and principal place of ------------ business at 27 Wormwood Street, Boston, Massachusetts 02210,------------- (hereinafter called the "Pledgor 0l"); ---------------------------------- b. YELLOW TAPE B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), with official seat in Amsterdam, having its registered office at Frederik Roeskestraat 123 first floor, 1076 EE Amsterdam, ------------ The Netherlands, registered with the Trade Register of the Chamber of Commerce and Industry in Amsterdam under number 33298255,----------------------------------------- -3- (hereinafter called the "Company 01");----------------------------------- c. NITINOL MEDICAL TECHNOLOGIES, INC., a corporation organized and existing under the laws of the State of Delaware, United States of America, having its registered office and principal place of ---------------- business at 27 Wormwood Street, Boston, Massachusetts 02210,------------------------- (hereinafter called the "Pledgor 02");----------------------------------- d. NITINOL MEDICAL TECHNOLOGIES INTERNATIONAL B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), with official seat in The Hague, having its registered office at Hogewaldstraat 1-B, 6641 KD Beuningen (Gelderland), The Netherlands, registered with the Trade Register of the Chamber of Commerce and Industry in Arnhem under number 10148235, ----------------- (hereinafter called the "Company 02"),--------------------------------------------- the Pledgor 0l and Pledgor 02 hereinafter jointly referred to as "Pledgors"; and - -------------------------------- the Company 0l and Company 02 hereinafter jointly referred to as "Companies". -------------------------------------------- The persons appearing before me, civil law notary, declared as follows:-------- A. On the date hereof:---------------------------------------------------------- (a) the Purchaser, the Agent and the Pledgor 02 have entered or will enter into the Subordinated Note and Common Stock Purchase Agreement; --------- (b) the Grantors and the Agent, acting not for itself but solely as agent for the Purchaser and the Lenders, have entered or will enter into the Guarantee and Collateral Agreement (the "Guarantee and Collateral Agreement"); and -------------------------------------------------------- (c) each of the Pledgors will hereby enter into the Covenants to Pay as referred to in Section 1 hereof -4- with the Security Trustee (the "Covenants to Pay"), the Subordinated Note and Common Stock Purchase Agreement, the Guarantee and Collateral Agreement and the Notes hereinafter collectively referred to as the "Documents". ----- ---------------------------------------------------------------------------- B. All capitalised terms and expressions used but not defined in this Agreement and Deed of Pledge of Shares (the "Agreement") shall have the meaning as defined in the Subordinated Note and Common Stock Purchase Agreement and the Guarantee and Collateral Agreement.------------------------ C. To induce the Secured Parties to enter into the Subordinated Note and Common Stock Purchase Agreement and the Guarantee and Collateral Agreement and as a condition precedent to the obligations of the respective Secured Parties thereunder, the Pledgor 01 has agreed to pledge and grant for the ratable benefit of the Secured Parties a first priority right of pledge of sixty-five percent (65%) of the issued shares in the share capital of the Company 01, being twenty-six (26) fully paid-up common shares each having a par value of one thousand Dutch Guilders (NLG 1,000.--), numbered 1 to 26 inclusive, hereinafter referred to as the "Shares 01" and the Pledgor 02 has agreed to pledge and grant for the ratable benefit of the Secured Parties a first priority right of pledge of sixty-five percent (65%) of the issued shares in the share capital of the Company 02, being twenty-six (26) fully paid-up common shares each having a par value of one thousand Dutch Guilders (NLG 1,000.--), numbered 1 to 26 inclusive, hereinafter referred to as the "Shares 02", -------------------- the Shares 01 and Shares 02 hereinafter jointly referred to as "Shares". ---------------------------------------------------- D. For the purpose of effecting the pledge as referred to under C. herein, each of the Pledgors, the Companies -5- and the Security Trustee have agreed to enter into this Agreement and the Pledgor 01 has agreed to pledge the Shares 01 and the Pledgor 02 has agreed to pledge the Shares 02 to the Security Trustee, in its aforesaid capacity as described in paragraph 1 hereinabove, for the ratable benefit and in the name of the Secured Parties, to secure the prompt and complete payment and performance when due of each of the Pledgors' Guarantor Obligations as defined in the Guarantee and Collateral Agreement and the Covenant Obligation (as defined below), which shall for the time being be due, owing or incurred to the Secured Parties under the Documents and the Covenant to Pay (collectively, the "Secured Obligations"), ---------------------------------- NOW, THEREFORE, each of the Pledgors hereby agrees with and hereby pledges to the Security Trustee for the ratable benefit and in the name of the Secured Parties, and the Security Trustee hereby agrees with each of the Pledgors and accepts such pledge, as follows:------------------------------------------------ SECTION 1. --------------------------------------------------------------------- COVENANTS TO PAY.--------------------------------------------------------------- - ---------------- a. Each of the Pledgors hereby agrees and covenants with the Security Trustee, solely in its capacity as pledgee for and as agent in the name and for the ratable benefit of the Lenders (in such capacity herein called the "Security Agent") that it shall pay directly to the Security Agent on its first demand, any and all amounts equal to any and all amounts which each of the Pledgors is now or may at any time and from time to time hereafter be obligated to pay to the Secured Parties or any one or more of them under any of the Documents to which the Pledgors are now or may at any time become a party, if and when such amounts become due and payable (such agreement and covenant the "Covenant Obligation"). ---- -6- b. Each of the Pledgors and the Security Agent agree and acknowledge that (i) each of the Pledgors' Covenant Obligation consists of the obligations and liabilities of each of the Pledgors to J.H. Whitney & Co., as Security Agent, separate and independent from and without prejudice to the other Guarantor Obligations which each of the Pledgors has or may have at any time to the Lenders (including Whitney Subordinated Debt Fund, L.P.) and the Security Agent under this Agreement or any of the other Documents or otherwise, and (ii) each of the Pledgors' Covenant Obligation represents the Security Agent's own claim ("vordering op naam") to receive payment of the Pledgor's ----------------- Covenant Obligation, separate and independent from any claims of the Secured Parties on each of the Pledgors; provided that the total liability of each of the Pledgors under its Covenant Obligation and under its Guarantor Obligation shall never exceed the total liability of the Pledgors' liability under the Guarantor Obligations and that the total liability of the Pledgors under their respective Covenant Obligations shall be decreased from time to time by the amount that any of the Pledgors shall have permanently paid either toward its Guarantor Obligation or its Covenant to Pay. --------------------------- c. If, after foreclosure of all collateral in which a security interest or lien has been granted or will be granted by each of the Pledgors, the proceeds are not sufficient to satisfy and discharge each of the Pledgors' Covenant Obligation, the remainder of such Covenant Obligation shall then cease to exist, but without prejudice to any other Guarantor Obligations which any of the Pledgors may have and without prejudice to any other remedies which the Secured Parties may have under any of the Documents. ------------------------ -7- d. Without limitation of the foregoing provisions of this Section 1, nothing contained in this Section shall in any way negate or affect any Guarantor Obligations other than the Covenant Obligation which each of the Pledgors has or at any time may have under the Documents or otherwise to the Lenders and the Security Agent. --------------------------------------------------------- SECTION 2. --------------------------------------------------------------------- PLEDGE OF THE SHARES AND OTHER COLLATERAL -------------------------------------- - ----------------------------------------- 2.1 - As security for the payment in full, when due, of its Secured Obligations, the Pledgor 01 hereby pledges (vestigt hierbij een recht van pand op) the Shares 01 to the Security Trustee for the ratable benefit and in the name of the Secured Parties, which pledge is hereby accepted by the Security Trustee for the ratable benefit and in the name of the Secured Parties, and the Pledgor 01 hereby assigns to the Security Trustee for the ratable benefit and in the name of the Secured Parties all voting rights pertaining to the Shares 01 upon the terms and subject to the conditions of subsection 5.1 and Section 7 of this Agreement.----- - As security for the payment in full, when due, of its Secured Obligations, the Pledgor 02 hereby pledges (vestigt hierbij een recht van pand op) the Shares 02 to the Security Trustee for the ratable benefit and in the name of the Secured Parties, which pledge is hereby accepted by the Security Trustee for the ratable benefit and in the name of the Secured Parties, and the Pledgor 02 hereby assigns to the Security Trustee for the ratable benefit and in the name of the Secured Parties all voting rights pertaining to the Shares 02 upon the terms and subject to the conditions of subsection -8- 5.1 and Section 7 of this Agreement. ----------------------------------- 2.2 Subject to subsection 5.1 hereof with respect to dividends and other distributions, each of the Pledgors, to the extent such pledge is not included in the pledge of the Shares, and to the fullest extent possible as permitted by applicable law, hereby pledges to the Security Trustee for the ratable benefit and in the name of the Secured Parties as security for the prompt and complete payment and performance when due of its Secured Obligations, all rights to or under dividends, cash distributions, proceeds, options, warrants, claim rights and other similar rights other than shares in the capital of the Companies currently existing or in the future arising or received with respect to or out of its Shares (all such collateral pledged to the Security Trustee under this subsection 2.2 being collectively called the "Rights"). --------------------------------------- 2.3 To the extent no valid pledge of the Rights is created hereunder, each of the Pledgors irrevocably and unconditionally undertakes to pledge to the Security Trustee and to assign to the Security Trustee for the ratable benefit and in the name of the Secured Parties the Rights subject to subsection 5.1 (all of the collateral granted to the Security Trustee under subsections 2.1, 2.2 and 2.3 of this Section 2 in respect of the Pledgors to be collectively called the "Collateral"). ---------------------------- 2.4 Each of the Pledgors undertakes to procure that at all times, so long as this Agreement has not been terminated, the Companies shall include in its shareholders register appropriate entries confirming the pledge of its Shares granted hereunder. --------------------------- For the purpose of this Agreement the term "Shares" shall be construed so as to include any and all future -9- shares in the capital of the Companies that may be acquired by each of the Pledgors and pledged to the Security Trustee pursuant to this Agreement after the date hereof. ---------------------------------------------------- 2.5 Each of the Pledgors covenants and warrants that in the event any new shares (of any class, description, kind and denomination) are issued to it by the Companies, except if and to the extent the Security Trustee shall in advance otherwise agree in writing: (i) all such new shares shall be fully paid-up and shall be validly issued only to each of the Pledgors, (ii) sixty-five percent (65%) of such new shares shall be pledged by each of the Pledgors to the Security Trustee, for the ratable benefit and in the name of the Secured Parties, as a valid and first ranking pledge, by execution and delivery to the Security Trustee of an additional agreement and deed of pledge (an "Additional Agreement"), the terms and conditions of which shall be in form and substance the same as the terms and conditions of this Agreement, (iii) it shall cause the Companies immediately upon issuance of all such new shares to acknowledge the pledge made under such Additional Agreement and to include in its shareholders register appropriate entries confirming the pledge made by the Pledgors under such Additional Agreement, and (iv) it shall procure that prior to the issuance of any such new shares the general meeting of shareholders of the Companies shall approve the pledge of such new shares as well as the assignment of voting rights in respect thereof to the Security Trustee. -- 2.6 Each of the Pledgors hereby grants to the Security Trustee an irrevocable power of attorney to perform on behalf and in the name of each respective Pledgor, after the occurrence of an Event of Default that is -10- continuing, any and all of its obligations under this Agreement, which irrevocable power shall survive, to the fullest extent permitted by law, any and all circumstances affecting the Pledgors, including dissolution of the Pledgors. ------------------------------------------------------------- SECTION 3. --------------------------------------------------------------------- NO RELEASE; FURTHER ASSURANCES ------------------------------------------------- - ------------------------------ 3.1 Nothing set forth in this Agreement shall (a) relieve the Pledgors from the performance of any term, covenant, condition or agreement on its part to be performed, or observed under or in respect of any of the Secured Obligations, (b) impose any obligation on the Security Trustee to perform or observe any such term, covenant, condition or agreement on the part of the Pledgors to be so performed or observed, or (c) impose any liability on the Security Trustee for any act or omission on the part of the Pledgors relating thereto or for any breach of any representation or warranty on the part of the Pledgors contained in this Agreement or in respect of the Collateral or made in connection herewith or therewith. ------------------- 3.2 If and to the extent that at any time, and from time to time, in the reasonable opinion of the Security Trustee it shall be necessary or appropriate that further instruments be executed in order to create or perfect a valid pledge in favour of the Security Trustee with respect to the Collateral or any part thereof, each of the Pledgors shall execute such further instruments, to be made up in form and substance reasonably satisfactory to the Security Trustee. ------------------------------------- SECTION 4. --------------------------------------------------------------------- REPRESENTATIONS AND WARRANTIES ------------------------------------------------- - ------------------------------ - - Without limitation to the representations and warranties -11- in the Subordinated Note and Common Stock Purchase Agreement or the Guarantee and Collateral Agreement, the Pledgor 01 represents and warrants for the ratable benefit of the Secured Parties as follows: --------------------------- (i) the Shares 01 constitute sixty-five percent (65%) of the issued and outstanding shares of any class and kind in the capital of the Company 01, are fully paid-up and are free and clear of any Liens; and ----------------------------------------------------------------- (ii) no depositary receipts ("certificaten van aandelen") have been issued by the Company 01. ------------------------------------------- - - Without limitation to the representations and warranties in the Subordinated Note and Common Stock Purchase Agreement or the Guarantee and Collateral Agreement, the Pledgor 02 represents and warrants for the ratable benefit of the Secured Parties as follows:----------------------------------------------- (i) the Shares 02 constitute sixty-five percent (65%) of the issued and outstanding shares of any class and kind in the capital of the Company 02, are fully paid-up and are free and clear of any Liens; and ----------------------------------------------------------------- (ii) no depositary receipts ("certificaten van aandelen") have been issued by the Company 02. ------------------------------------------- SECTION 5. ------------------------------------------------------------------- RIGHTS IN RESPECT OF THE COLLATERAL ------------------------------------------ - ----------------------------------- 5.1 So long as no Event of Default shall have occurred and be continuing, each of the Pledgors shall remain entitled and authorized to exercise the voting rights attached to the Shares, provided that such voting rights shall not be exercised, and each of the Pledgors covenants that it shall not exercise such voting rights for any purpose inconsistent with the terms and conditions of this Agreement, the Subordinated Note and Common Stock Purchase Agreement or the Guarantee -12- and Collateral Agreement. -------------------------------------------------- 5.2 Each of the Pledgors shall be entitled to receive, retain and utilize any and all dividends and other distributions in respect of the Collateral until the occurrence of an Event of Default that is continuing. 5.3 It is understood and agreed that both the Security Trustee and the Pledgors shall have the rights which Netherlands law affords the holders of depositary receipts of shares ("certificaten van aandelen") that are issued with the cooperation of a company as referred to in Section 2:198 subsection 4 of the Netherlands Civil Code. ------------------------------------------- SECTION 6. --------------------------------------------------------------------- COVENANTS AS TO THE COLLATERAL ------------------------------------------------- - ------------------------------ Except as otherwise permitted under the Subordinated Note and Common Stock Purchase Agreement or the Guarantee and Collateral Agreement, so long as any of the Secured Obligations shall remain outstanding, the Pledgors will be bound by the covenants set forth in such agreements. ------------------------------------ SECTION 7. --------------------------------------------------------------------- VOTING RIGHTS, DIVIDENDS AND OTHER DISTRIBUTIONS UPON -------------------------- - ----------------------------------------------------- EVENT OF DEFAULT --------------------------------------------------------------- - ---------------- 7.1 Subject to the amendment to the articles of association of each of the Companies for the purpose of establishing that the voting rights attached to the Shares may be transferred and the rights which Netherlands law affords the holders of depositary receipts of shares ("certificaten van aandelen") that are issued with the cooperation of a company as referred to in Section 2:198 subsection 4 of the Netherlands Civil Code may be attributed to a pledgee, the following provision shall apply: ------------- Upon the occurrence of an Event of Default that is continuing and upon written notice thereof from the -13- Security Trustee to the Pledgors: ----------------------------------------- a. any and all rights of the Pledgors under subsection 5.1 shall automatically cease and the Security Trustee shall be fully entitled, to the exclusion of the Pledgors, to exercise the voting rights pertaining to its respective Shares; ---------------------------------- b. all rights of the Pledgors to receive the dividends and other distributions, which it would otherwise be authorized to receive and retain pursuant to subsection 5.2 hereof, shall automatically cease, and thereupon the Security Trustee shall have the sole right to receive and hold as Collateral such dividends and other distributions; -------- c. the Security Trustee shall be entitled to collect all liquidation proceeds, if any, which are to be distributed on the Shares upon dissolution and liquidation of the Companies or otherwise; and -------- d. all dividends and other distributions which are received by the Pledgors contrary to the provisions of this subsection 7.1 shall be received on behalf and for the benefit of the Security Trustee, shall be segregated from the other assets of the Pledgors and shall be immediately paid over or delivered (with any necessary endorsements) to the Security Trustee or its authorized designee as Collateral in the exact form as received, to be held by the Security Trustee as Collateral and as further collateral security for the Secured Obligations. ---------------------------------------------------------- 7.2 Until the amendments to the articles of association as referred to in subsection 7.1 have become effective, each of the Pledgors hereby irrevocably agrees to exercise the voting rights attached to the Shares, in the case of an Event of Default shall have occurred and be continuing, in accordance with the instructions -14- given by the Security Trustee. -------------------------------------------- SECTION 8. --------------------------------------------------------------------- REMEDIES ----------------------------------------------------------------------- - -------- 8.1 Upon the occurrence of an Event of Default that is continuing the Security Trustee may, except as provided otherwise in the Subordinated Note and Common Stock Purchase Agreement and the Guarantee and Collateral Agreement, without demand, presentation or notice to the Pledgors, take any and all action as permitted by Netherlands law for the purpose of foreclosing upon and exercising its rights as pledgee. Without prejudice to the generality of the foregoing, upon the occurrence of an Event of Default that is continuing and after at least ten (10) days notice to the Pledgors and the Companies, the Security Trustee shall have the right (i) to have the Shares sold in a public sale and to apply the proceeds of such public sale as provided in the Subordinated Note and Common Stock Purchase Agreement and the Guarantee and Collateral Agreement, or (ii) to request the competent Netherlands court to order that the Shares be sold or the pledges established by or pursuant to this Agreement be otherwise realized in a manner prescribed or authorized by such court and to apply the proceeds of such sale or realization as provided above, all of the foregoing under (i) and (ii) subject to and to the extent permitted by the applicable provisions of Netherlands law and of the Articles of Association of the Companies as the same shall read at the relevant time. -------------------- 8.2 To the extent necessary, each of the Pledgors agrees that upon the occurrence of an Event of Default it shall be deemed to be in default ("in verzuim") within the meaning of Section 3:248 of the Netherlands Civil -15- Code. --------------------------------------------------------------------- 8.3 In case of a public or private sale of all or any of the Shares by or on behalf of the Security Trustee pursuant to this Agreement, each of the Pledgors, to the fullest extent permitted under applicable law, hereby agrees that it shall upon such sale (i) waive, irrevocably and unconditionally, any and all rights of first refusal that it may have, or (ii) grant, irrevocably and unconditionally, any and all approvals that may be requisite, as the case may be. ----------------------------------------- SECTION 9. --------------------------------------------------------------------- No Waiver ---------------------------------------------------------------------- - --------- 9.1 Except as otherwise provided by Netherlands law, no failure on the part of the Security Trustee to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Security Trustee of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. ---------------------------------------------------------------- The remedies herein provided are to the fullest extent permitted by law cumulative and are not exclusive of any remedies provided by law. --------- Discontinued Proceedings ------------------------------------------------------- - ------------------------ 9.2 In the event the Secured Parties shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason, then and in every such case the Pledgor, the Security Trustee and each other Secured Party shall be restored to their respective former positions and rights hereunder with respect to the Collateral, and all rights, remedies -16- and powers of the Security Trustee and any other Secured Party shall continue as if no such proceeding had been instituted. -------------------- SECTION 10. -------------------------------------------------------------------- The Security Trustee and Replacement of the Security Trustee ------------------- - ------------------------------------------------------------ 10.1 The Security Trustee has been appointed as Security Trustee hereunder pursuant to and upon the terms set forth in the Guarantee and Collateral Agreement. --- The Security Trustee may be replaced and a successor Security Trustee may be appointed in the manner provided in the Guarantee and Collateral Agreement. --- Upon the acceptance of any appointment as a Security Trustee by a successor Security Trustee, the Security Trustee shall assign all of its rights under the Documents and this Agreement to such successor Security Trustee who shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Security Trustee and it shall thereupon be discharged from its duties and obligations under this Agreement. ---------------------------------------------------------------- Indemnification ---------------------------------------------------------------- - --------------- 10.2 Each of the Pledgors hereby agrees and undertakes to indemnify the Security Trustee and each other Secured Party for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, disbursements of any kind and character whatsoever, which may be imposed on, incurred by or asserted against the Security Trustee or any other Secured Party relating directly or indirectly to the dealings by the Security Trustee or any other Secured Party with the Pledgors arising out of the Documents, or any other documents contemplated by or referred to herein or therein or the transactions -17- contemplated hereby or thereby or the enforcement of any of the terms hereof or of any such other documents; subject to any limitations on recoverability under the Subordinated Note and Common Stock Purchase Agreement and the Guarantee and Collateral Agreement and provided, however, that the Pledgors shall not be liable for any of the foregoing to the extent they arise from (i) any breach by the Security Trustee of its obligations hereunder, or (ii) the gross negligence or wilful misconduct of the Security Trustee and any other Secured Party. --------------------- SECTION 11. -------------------------------------------------------------------- AMENDMENTS --------------------------------------------------------------------- - ---------- This Agreement may not be amended, modified, terminated or waived except in accordance with the provisions of the Subordinated Note and Common Stock Purchase Agreement and the Guarantee and Collateral Agreement. ----------------- Any amendment, modification or supplement of or to any provision of this Agreement, any termination or waiver of any provision of this Agreement, and any consent to any departure by the Pledgors from the terms of any provision of this Agreement shall be effective only after the execution of a deed before a Dutch civil law notary setting forth any such amendment, modification, supplement, termination or waiver. --------------------------------------------------------- No notice to or demand upon the Pledgors in any instance hereunder shall entitle the Pledgors to any other or further notice or demand in similar or other circumstances. ----------------------------------------------------------------- SECTION 12. -------------------------------------------------------------------- TERMINATION -------------------------------------------------------------------- - ----------- This Agreement and the right of pledge on the Shares created thereby shall remain in full force and effect until the Security Trustee shall have confirmed in writing -18- to the Pledgors that all Secured Obligations have been fully and finally satisfied. SECTION 13. -------------------------------------------------------------------- NOTICES ------------------------------------------------------------------------ - ------- All notices, demands, instructions and other communications required or permitted to be given to or made upon any party hereto shall be given in accordance with the provisions of the Subordinated Note and Common Stock Purchase Agreement and the Guarantee and Collateral Agreement. ---------------- For the purposes hereof, the addresses of the Secured Parties and the Security Trustee shall be the addresses in effect from time to time under the Subordinated Note and Common Stock Purchase Agreement and the Guarantee and Collateral Agreement. ---------------------------------------------------------- SECTION 14. -------------------------------------------------------------------- CONTINUING SECURITY INTEREST --------------------------------------------------- - ---------------------------- This Agreement shall (i) create a continuing security interest in the Collateral which shall remain in full force and effect until termination of this Agreement in accordance with Section 11 hereof, (ii) be binding upon each of the Pledgors, its successors and assigns, and (iii) inure, together with the rights and remedies of the Security Trustee hereunder, to the ratable benefit of the respective Secured Parties and for each of their respective successors, transferees and assigns; no other persons (including without limitation, any other creditor of the Pledgor) shall have any interest herein or any right or benefit with respect hereto. --------------------------------------------------- For the avoidance of doubt it is understood and agreed that the parties to this Agreement shall procure that any successor, transferee or assign of any of the Secured Parties shall become a party to this Agreement. ------------------------ SECTION 15. -------------------------------------------------------------------- SECURITY INTEREST ABSOLUTE ----------------------------------------------------- - -------------------------- -19- All rights of the Security Trustee and the other Secured Parties and the security interests hereby created or to be created pursuant hereto and all obligations of the Pledgors hereunder shall be absolute and unconditional irrespective of: --------------------------------------------------------------- (i) any change in the time, manner or place of payment of all or any of the Secured Obligations or any change of the Subordinated Note and Common Stock Purchase Agreement, the Guarantee and Collateral Agreement, or any other agreement or instrument relating to any of them, provided that such change or changes shall not result in a discharge, waiver or novation of the Secured Obligations; or ---------------------------------------------------------------------- (ii) any exchange, release or non perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any other collateral for all or any of the Secured Obligations. ---------------------------------------------------------------------- SECTION 16. -------------------------------------------------------------------- GOVERNING LAW AND JURISDICTION ------------------------------------------------- - ------------------------------ 16.1 This Agreement shall be governed by and construed in accordance with the laws of the Netherlands.----------------------------------------- 16.2 For the ratable benefit of the Security Trustee and the other Secured Parties, each of the Pledgors hereby irrevocably agrees that the Courts of the State of New York shall have jurisdiction to settle any disputes which may arise in connection with the interpretation, execution or performance of this Agreement, as well as any documents executed in connection therewith, without prejudice to the right of the Security Trustee and the other Secured Parties to take action against the Pledgors in any other court of competent jurisdiction. ---------------------------------------------------------------------- SECTION 17. -------------------------------------------------------------------- SEVERABILITY OF PROVISIONS ----------------------------------------------------- - -------------------------- -20- Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. ----------------------------------------------------- SECTION 18. -------------------------------------------------------------------- HEADINGS ----------------------------------------------------------------------- - -------- Section headings used in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement. ----------------------- SECTION 19. -------------------------------------------------------------------- NO DISSOLUTION ----------------------------------------------------------------- - -------------- The Pledgors and the Security Trustee each waive any rights it may have to dissolve this Agreement pursuant to Section 265 of Book 6 of the Netherlands Civil Code or on any other ground and further agrees that the Security Trustee shall not have the obligations referred to in Sections 249 and 252 of Book 3 of the Netherlands Civil Code. ---------------------------------------------------- SECTION 20. -------------------------------------------------------------------- SHAREHOLDER APPROVAL ----------------------------------------------------------- - -------------------- - - With due observance of article 13 of the Articles of Association of the Company 01, the Pledgor 01 as holder of all of the issued share capital of the Company 01, hereby resolves, without holding a meeting, to approve the assignment of the voting rights as referred to in subsection 2.1 of this Agreement. ------------------------------------------------------------------- - - With due observance of article 22 of the Articles of Association of the Company 02, the Pledgor 02 as holder of all of the issued share capital of the Company 02, hereby resolves, without holding a meeting, to approve the assignment of the voting rights as referred to in subsection 2.1 of this Agreement. ------------------------------------------------------------------- -21- FINAL STATEMENTS --------------------------------------------------------------- - - The Company 01 hereby declares that: ---------------------------------------- * it has reviewed this Agreement; ------------------------------------------ * it hereby acknowledges the pledge of the Shares set forth in this Agreement; --------------------------------------------------------------- * it shall act in accordance with the provisions of this Agreement and, in particular, without limitation, shall notify the Security Trustee timely and in writing of every general meeting of its shareholders; ------------- * it shall without delay register the pledging of the Shares 01 in its shareholders register and the exact date and time of this pledge and shall issue to the Security Trustee as soon as practically possible an extract from such register relating to the pledge of the Shares 01. ------ - - The Company 02 hereby declares that: ---------------------------------------- * it has reviewed this Agreement; ------------------------------------------ * it hereby acknowledges the pledge of the Shares set forth in this Agreement; --------------------------------------------------------------- * it shall act in accordance with the provisions of this Agreement and, in particular, without limitation, shall notify the Security Trustee timely and in writing of every general meeting of its shareholders; ------------- * it shall without delay register the pledging of the Shares 02 in its shareholders register and the exact date and time of this pledge and shall issue to the Security Trustee as soon as practically possible an extract from such register relating to the pledge of the Shares 02. -------------- - - The Pledgor 01 hereby declares that: ---------------------------------------- ------------------------------------ it acquired the Shares 01 by virtue of a transfer following an agreement of sale and purchase by deed executed on the third day of July nineteen hundred and ninety-eight before R. Pfeiffer, civil law notary in -22- Rotterdam, which transfer was acknowledged by the Company 01 in the same deed.------------------------------------------------------------- - The Pledgor 02 hereby declares that: ---------------------------------- ----------------------------------- it acquired the Shares 02 by virtue of a subscription upon incorporation by deed executed on the twenty-fourth day of February nineteen hundred and ninety-seven before M.G. van Ravesteyn, civil law notary in Rotterdam. -------------------------------------------------- Sufficient proof of the existence of the powers of attorney has been given to me, notary. ------------------------------------------------------------ ./. The written powers of attorney are evidenced by five private instruments, copies of which are attached to this deed. --------------------------------- Wherefrom this deed, executed in Amsterdam in the form to be kept under a civil law notary's custody on the date stated in the heading of this deed at three hours twenty-five minutes post meridiem. ----------------------------- After the contents of this deed were briefly summed up for the appearers, they declared to have noted the contents of this deed and not to require a full reading thereof. ------------------------------------------------------ After it had been read in outline, this deed was then signed by the appearers, who are known to me, civil law notary, and by me, civil law notary. -------------------------------------------------------------------- (Signed): N. Jansen, K.J. Ribbink, H.B.H. Kraak. --------------------------- EX-10.7 9 REGISTRATION RIGHTS AGREEMENT ================================================================================ EXHIBIT 10.7 REGISTRATION RIGHTS AGREEMENT among NITINOL MEDICAL TECHNOLOGIES, INC., WHITNEY SUBORDINATED DEBT FUND, L.P. and J.H. WHITNEY & CO. ___________________________________ Dated as of July 8, 1998 __________________________________ TABLE OF CONTENTS Page ---- 1. Definitions............................................................ 1 2. Securities Subject to this Agreement................................... 3 (a) Registrable Securities.......................................... 3 (b) Holders of Registrable Securities............................... 3 3. Demand Registration.................................................... 3 (a) Request for Demand Registration................................. 3 (b) Effective Demand Registration................................... 4 (c) Expenses........................................................ 4 (d) Underwriting Procedures......................................... 4 (e) Selection of Underwriters....................................... 5 (f) Limitations on Demand Registrations............................. 5 4. Piggy-Back Registration................................................ 6 (a) Piggy-Back Rights............................................... 6 (b) Priority of Registrations....................................... 7 (c) Expenses........................................................ 7 (d) Conditions and Limitations on Piggyback Registrations........... 7 5. Holdback Agreements.................................................... 8 (a) Restrictions on Public Sale by Holders.......................... 8 (b) Restrictions on Public Sale by the Company...................... 8 6. Registration Procedures................................................ 8 (a) Obligations of the Company...................................... 8 (b) Seller Information.............................................. 11 (c) Notice to Discontinue........................................... 11 7. Registration Expenses.................................................. 11 8. Indemnification; Contribution.......................................... 12 (a) Indemnification by the Company.................................. 12 (b) Indemnification by Holders...................................... 12 (c) Conduct of Indemnification Proceedings.......................... 13 (d) Contribution.................................................... 14 9. Rule 144; Other Exemptions............................................. 14 10. Certain Limitations on Registration Rights............................. 15 -i- Page ---- 11. Miscellaneous.......................................................... 15 (a) Recapitalizations, Exchanges, etc............................... 15 (b) No Inconsistent Agreements; Other Registration Rights........... 15 (c) Remedies........................................................ 15 (d) Amendments and Waivers.......................................... 15 (e) Notices......................................................... 16 (f) Successors and Assigns.......................................... 17 (g) Counterparts.................................................... 17 (h) Headings........................................................ 17 (i) Governing Law................................................... 17 (j) Jurisdiction.................................................... 17 (k) Severability.................................................... 18 (l) Rules of Construction........................................... 18 (m) Entire Agreement................................................ 18 (n) Further Assurances.............................................. 18 -ii- REGISTRATION RIGHTS AGREEMENT ----------------------------- REGISTRATION RIGHTS AGREEMENT, dated as of July 8, 1998, among NITINOL MEDICAL TECHNOLOGIES, INC., a Delaware corporation (the Company"), WHITNEY SUBORDINATED DEBT FUND, L.P., a Delaware limited partnership ("WSDF") and J.H. WHITNEY & CO. ("Whitney"). WHEREAS, the Company, WSDF and Whitney have entered into that certain Subordinated Note and Common Stock Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant to which the Company has (i) sold to WSDF a subordinated promissory note, due September 30, 2003, in the principal amount of $20,000,000 (the "Note") and 113,793 shares of Common Stock and (ii) paid to Whitney a transaction fee of 561,207 shares of Common Stock. In order to induce WSDF to purchase the Note, the Company has agreed to provide registration rights with respect to the Registrable Securities (as hereinafter defined) as set forth in this Agreement. The parties hereby agree as follows: 1. Definitions. As used in this Agreement, and unless the context ----------- requires a different meaning, the following terms have the meanings indicated: "Act" means the Securities Act of 1933, as amended, and the rules --- and regulations of the SEC promulgated hereunder. "Approved Underwriter" has the meaning assigned such term in -------------------- Section 3(e). "Approved Underwriter Amount" has the meaning assigned such term --------------------------- in Section 3(d). "Business Day" means any day other than a Saturday, Sunday or ------------ other day on which commercial banks in the City of New York are authorized or required by law or executive order to close. "Common Stock" means the Common Stock, $0.001 par value, of the ------------ Company, or any other capital stock of the Company into which such stock is reclassified or reconstituted. "Company Underwriter" has the meaning assigned such term in ------------------- Section 4(a). "Demand Registration" has the meaning assigned such term in ------------------- Section 3(a). "Designated Holder" means WSDF and Whitney and any of their ----------------- respective transferees to whom Registrable Securities have been transferred other than the transferee to whom such securities have been transferred pursuant to a registration statement under the Act or Rule 144 under the Act. "Exchange Act" means the Securities and Exchange Act of 1934, as ------------ amended, and the rules and regulations of the SEC thereunder. "Holder" has the meaning assigned such term in Section 2(b). ------ "Holders' Counsel" means (a) with respect to any Demand ---------------- Registration that has been requested pursuant to Section 3, the one counsel selected by the Initiating Holders holding a majority of the Registrable Securities held by all Initiating Holders being registered in such registration, and (b) with respect to a request for registration of Registrable Securities pursuant to Section 4, the one counsel selected by the Holders holding a majority of the Registrable Securities being registered in such registration. "Indemnified Party" has the meaning assigned such term in Section ----------------- 8(c). "Indemnifying Party" has the meaning assigned such term in ------------------ Section 8(c). "Initiating Holders" has the meaning assigned to such term in ------------------ Section 3(a). "Inspector" has the meaning assigned such term in Section --------- 6(a)(viii). "NASD" has the meaning assigned such term in Section 6(a)(xv). ---- "Other Investors" means holders of the Common Stock of the --------------- Company not entitled to distribute such shares of Common Stock to the public pursuant to Rule 144(k) (or any successor provision then in effect) under the Act. "Person" means any individual, firm, corporation, partnership, ------ trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of any such entity. "Registrable Securities" means, subject to Section 2(a), each of ---------------------- the following: (a) the 561,207 shares of Common Stock issued to WSDF pursuant to the Purchase Agreement, (b) the 113,793 shares of Common Stock issued to Whitney pursuant to the Purchase Agreement and (c) any shares of Common Stock issued or issuable in respect of shares of Common Stock issued pursuant to clauses (a) and (b) -2- above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. "Registration Expenses" has the meaning assigned such term in --------------------- Section 7. "SEC" means the Securities and Exchange Commission. --- "Shares" means the Common Stock, any class of common stock of the ------ Company authorized after the date of this Agreement, or any other class of stock resulting from successive changes or reclassifications of the Shares. "Total Securities" has the meaning assigned such term in Section ---------------- 4(a). "Underwriters" has the meaning assigned such term in Section ------------ 6(d). "Valid Business Reason" has the meaning assigned such term in --------------------- Section 3(f). 2. Securities Subject to this Agreement. ------------------------------------ (a) Registrable Securities. For the purposes of this Agreement, ---------------------- Registrable Securities will cease to be Registrable Securities when (i) a registration statement covering such Registrable Securities has been declared effective under the Act by the SEC and such Registrable Securities have been disposed of pursuant to such effective registration statement or (ii) the entire amount of Registrable Securities proposed to be sold in a single sale are or, in the opinion of counsel satisfactory to the Company and the Holder, each in their reasonable judgment, may, be distributed to the public pursuant to Rule 144 in compliance with the requirements of paragraphs (c), (e), (f) and (g) of Rule 144 (notwithstanding the provisions of paragraph (k) of such Rule) (or any successor provision then in effect) under the Act. (b) Holders of Registrable Securities. A Person is deemed to be --------------------------------- a holder of Registrable Securities (a "HOLDER") whenever such Person (i) is a ------ party to this Agreement (or a permitted transferee thereof) and (ii) owns of record Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more persons with respect to the same Registrable Securities, the Company may act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities. 3. Demand Registration. ------------------- (a) Request for Demand Registration. Subject to Section 3(f) ------------------------------- below, at any time the Designated Holders holding at least 25% of the Registrable Securities held by all of the Designated Holders (the "INITIATING ---------- HOLDERS") may request in writing the registration of Registrable Securities - ------- under the Act, and under -3- the securities or blue sky laws of any jurisdiction designated by such holder or holders (each such registration under this Section 3(a) that satisfies the requirements set forth in Section 3(b) is referred to herein as a "DEMAND ------ REGISTRATION"). Notwithstanding the foregoing, in no event shall the Company be - ------------ required to effect more than three Demand Registrations. Two or more registrations filed in response to one demand shall be counted as one registration statement. Each request for a Demand Registration by the Initiating Holders in respect thereof shall specify the amount of the Registrable Securities proposed to be sold, the intended method of disposition thereof and the jurisdictions in which registration is desired. Upon a request for a Demand Registration, the Company shall promptly take such steps as are necessary or appropriate to prepare for the registration of the Registrable Securities to be registered. Within fifteen (15) days after the receipt of such request, the Company shall give written notice thereof to all other Designated Holders and include in such registration all Registrable Securities held by a Designated Holder from whom the Company has received a written request for inclusion therein at least ten (10) days prior to the filing of the registration statement. Each such request will also specify the number of Registrable Securities to be registered, the intended method of disposition thereof and the jurisdictions in which registration is desired. Subject to Section 3(d), the Company shall be entitled to include in any registration statement and offering made pursuant to a Demand Registration, authorized but unissued shares of Common Stock, shares of Common Stock held by the Company as treasury shares or shares of Common Stock held by Stockholders other than the Holders; provided, that such inclusion shall be permitted only to the extent that it is pursuant to and subject to the terms of the underwriting agreement or arrangements, if any, entered into by the Initiating Holders exercising the Demand Registration rights. (b) Effective Demand Registration. The Company shall use its best ----------------------------- efforts to cause any such Demand Registration to become effective not later than ninety (90) days after it receives a request under Section 3(a). A registration requested pursuant to Section 3(a) hereof shall not count as one of the three demands to which the Designated Holders are entitled thereunder unless such registration statement is declared effective and remains effective for at least ninety (90) days. (c) Expenses. In any registration initiated as a Demand Registration, -------- the Company shall pay all Registration Expenses in connection therewith, whether or not such requested Demand Registration becomes effective. (d) Underwriting Procedures. If the Initiating Holders holding a ----------------------- majority of the Registrable Securities held by all Initiating Holders to which the requested Demand Registration relates so elect, the offering of such Registrable Securities pursuant to such requested Demand Registration shall be in the form of a firm commitment underwritten offering and the managing underwriter or underwriters selected for such offering shall be the Approved Underwriter selected in accordance with Section 3(e). In such event, if the Approved Underwriter advises the Company in writing that, in its opinion, the aggregate amount of such Registrable Securities requested to be included in such offering (including those securities requested by the Company to be included in such registration) is sufficiently large to have an adverse effect on the success of such offering, then the Company shall include in such registration -4- only the aggregate amount of Registrable Securities that in the opinion of the Approved Underwriter may be sold without any such effect on the success of such offering (the "APPROVED UNDERWRITER AMOUNT"), and (i) each Designated Holder --------------------------- shall be entitled to have included in such registration Registrable Securities equal to its pro rata portion of the Approved Underwriter Amount, as based on the amounts of Registrable Securities sought to be registered by the Designated Holders in their requests for participation in the requested Demand Registration and (ii) to the extent that the number of Registrable Securities to be included by the Designated Holders is less than the Approved Underwriter Amount, securities that the Company proposes to register shall also be included. If, as a result of the proration provision of this Section 3(d), any Designated Holder shall not be entitled to include all Registrable Securities in a registration that such Designated Holder has requested to be included, such Designated Holder may elect to withdraw his request to include Registrable Securities in such registration or may reduce the number requested to be included; provided, however, that (x) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (y) such withdrawal or reduction shall be irrevocable. (e) Selection of Underwriters. If any requested Demand Registration ------------------------- is in the form of an underwritten offering, the Initiating Holders holding a majority of the Registrable Securities held by all Initiating Holders to be included in the requested Demand Registration shall select and obtain an investment banking firm of national reputation to act as the managing underwriter of the offering (the "APPROVED UNDERWRITER"); provided, that such -------------------- underwriter shall be reasonably satisfactory to the Company. (f) Limitations on Demand Registrations. The Demand Registration ----------------------------------- rights granted to the Holders in Section 3(a) are subject to the following limitations: (i) each registration in respect of a Demand Registration must include Registrable Securities having an aggregate market value of at least $5,000,000.00, which market value shall be determined by multiplying the number of Registrable Securities to be included in the Demand Registration by the proposed per share offering price (provided that the limitation set forth in this clause (i) shall not be in effect at any time the Holders' Registrable Securities are not able to be sold under Rule 144 under the Act because of the Company's failure to comply with the information requirements thereunder, unless at such time, the Company's outside counsel (which shall be reasonably acceptable to the Holders requesting such registration) delivers a written opinion of counsel to such Holders to the effect that such Holders' Registrable Securities may be publicly offered and sold without registration under the Act); (ii) the Company shall not be required to cause a registration pursuant to Section 3(a) to be declared effective within a period of 150 days after the effective date of any registration statement of the Company effected in connection with a Demand Registration; and (iii) if the Board of Directors of the Company, in its good faith judgment, determines that any registration of Registrable Securities should not be made or continued because it would materially interfere with any material financing, acquisition, corporate reorganization or merger or other -5- transaction involving the Company or any of its subsidiaries (a "VALID BUSINESS -------------- REASON"), the Company may (x) postpone filing a registration statement relating - ------ to a Demand Registration until such Valid Business Reason no longer exists, but in no event for more than ninety (90) days, and,(y) in case a registration statement has been filed relating to a Demand Registration, if the Valid Business Reason has not resulted from actions taken by the Company, the Company, upon the approval of a majority of the Company's Board of Directors, such majority to include at least one director affiliated with WSDF, may cause such registration statement to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such registration statement; the Company shall give written notice of its determination to postpone or withdraw a registration statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof. Notwithstanding anything to the contrary contained herein, the Company may not postpone or withdraw a filing under Section 3(f)(iii) hereof more than once in any twelve-month period. Each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company that the Company has determined to withdraw any registration statement pursuant to clause (iii) above, such Holder will discontinue its disposition of Registrable Securities pursuant to such registration statement and, if so directed by the Company, will deliver to the Company (at the Company's expenses) all copies, other than permanent file copies, then in such Holder's possession, of the prospectus covering such Registrable Securities that was in effect at the time of receipt of such notice. If the Company shall give any notice of postponement or withdrawal of a registration statement, the Company shall, at such time as the Valid Business Reason that caused such postponement or withdrawal no longer exists (but in no event no later than ninety (90) days after the date of the postponement), use its best efforts to promptly effect the registration under the Act of the Registrable Securities covered by the postponed or withdrawn registration statement in accordance with this Section 3 (unless the Holder(s) delivering the Demand Registration request shall have withdrawn such request, in which case the Company shall not be considered to have effected an effective registration for the purposes of this Agreement), and such registration shall not be postponed or withdrawn pursuant to clause (iii) above. 4. Piggy-Back Registration. ----------------------- (a) Piggy-Back Rights. If the Company proposes to file a ----------------- registration statement under the Act with respect to an offering by the Company for its own account of any class of security (other than a registration statement on Form S-4 or S-8 (or any successor form thereto)) under the Act, then the Company shall give written notice of such proposed filing to each of the Holders at least twenty (20) days before the anticipated filing date, and such notice shall describe in detail the proposed registration and distribution (including those jurisdictions where registration under the securities or blue sky laws is intended) and offer such Holders the opportunity to register the number of Registrable Securities as each such Holder may request. The Company shall use its best efforts (within ten (10) days of the notice provided for in the preceding sentence) to permit the Holders who have requested to participate in the registration for such offering to include such Registrable Securities in such offering on -6- the same terms and conditions as the securities of the Company included therein. Notwithstanding the foregoing, if such registration involves an underwritten offering and the managing underwriters or underwriters (the "COMPANY ------- UNDERWRITER") shall advise the Holders of Registrable Securities in writing - ----------- that, in its opinion, the total amount of securities requested to be included in such offering (the "TOTAL SECURITIES") is sufficiently large so as to have an ---------------- adverse effect on the success of the distribution of the Total Securities, then the Company shall include in such registration, to the extent of the number of Registrable Securities which the Company is so advised can be sold in (or during the time of) such offering, first, all Common Stock or securities convertible ----- into, or exchangeable or exercisable for, Common Stock that the Company proposed to register for its own account, second, all securities proposed to be ------ registered by all Designated Holders and Other Investors, pro rata among such Designated Holders and Other Investors, and third, all other securities proposed ----- to be registered. (b) Priority of Registrations. Subject to the provisions of Section ------------------------- 3(f)(iii), if the Company proposes to register securities pursuant to Section 4(a) hereof on the same day that the Designated Holders request a registration pursuant to Section 3(a) hereof, then the Demand Registration requested pursuant to Section 3(a) hereof shall be given priority. (c) Expenses. The Company shall bear all Registration Expenses in -------- connection with any registration pursuant to this Section 4. (d) Conditions and Limitations on Piggyback Registrations. If, at any ----------------------------------------------------- time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to all Holders of record of Registrable Securities and (i) in the case of a determination not to register, shall be relieved of its obligation to register the Registrable Securities in connection with such abandoned registration, without prejudice, however, to the rights of Holders under Section 3, and (ii) in the case of a determination to delay the registration of its securities, shall be permitted to delay the registration of such Registrable Securities for the same period as the delay in registering such other equity securities. Any Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 4 by giving written notice to the Company of its request to withdraw; provided, however, that (i) such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (ii) such withdrawal shall be irrevocable and, after making such withdrawal, a Holder shall no longer have any right to include Registrable Securities in the registration as to which such withdrawal was made. -7- 5. Holdback Agreements. ------------------- (a) Restrictions on Public Sale by Holders. To the extent not -------------------------------------- inconsistent with applicable law, each Holder agrees not to effect any public sale or distribution of any Registrable Securities being registered or of any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 under the Act, during the ninety (90) day period beginning on the effective date of such Demand Registration or Piggy-Back Registration or other underwritten offering (except as part of such registration), if and to the extent requested by any other Holder, in the case of a non-underwritten public offering, or if and to the extent requested by the Company Underwriter, in the case of an underwritten public offering. (b) Restrictions on Public Sale by the Company. The Company ------------------------------------------ agrees not to effect any public sale or distribution of any of its securities for its own account (except pursuant to registrations on Form S-4 or S-8 (or any successor form thereto) under the Act) during the ninety (90) day period beginning on the effective date of any registration statement in which the Holders are participating. 6. Registration Procedures. ----------------------- (a) Obligations of the Company. Whenever registration of -------------------------- Registrable Securities has been requested pursuant to Section 3 or 4 of this Agreement, the Company shall use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of distribution thereof as quickly as practicable, and in connection with any such request, the Company shall, as expeditiously as possible: (i) prepare and file with the SEC (in any event not later than sixty (60) Business Days after receipt of a request to file a registration statement with respect to Registrable Securities) a registration statement on any form on which registration is requested for which the Company then qualifies, which counsel for the Company and Holders' Counsel shall deem appropriate and which shall be available for the sale of such Registrable Securities in accordance with the intended method of distribution thereof, and use its best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or - -------- ------- any amendments or supplements thereto, the Company shall (A) provide Holders' Counsel with an adequate and appropriate opportunity to participate in the preparation of such registration statement and each prospectus included therein (and each amendment or supplement thereto) to be filed with the SEC, which documents shall be subject to the review of Holders' Counsel, and (B) notify Holders' Counsel and each seller of Registrable Securities pursuant to such registration statement of any stop order issued or threatened by the SEC and take all reasonable action required to prevent the entry of such stop order or to remove it if entered; (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection -8- therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Act with respect to the disposition of all Registrable Securities covered by such registration statement until the earlier of (a) such time as all of such Registrable Securities and other securities have been disposed of in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement and (b) 180 days after the effective date of such registration statement, except with respect to any such registration statement filed pursuant to Rule 415 (or any successor Rule) under the Act if the Company is eligible to file a registration statement on Form S-3, in which case such period shall be two (2) years; (iii) as soon as reasonably possible, furnish to each seller of Registrable Securities, prior to filing a registration statement, copies of such registration statement as it is proposed to be filed, and thereafter such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as each such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (iv) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller of Registrable Securities may request, and to continue such qualification in effect in each such jurisdiction for as long as is permissible pursuant to the laws of such jurisdiction, or for as long as any such seller requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other acts and things which may be reasonably necessary or advisable to enable any such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller; provided, however, that the Company shall not be required to (A) qualify -------- ------- generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 6(a)(iv), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction; (v) use its best efforts to obtain all other approvals, covenants, exemptions or authorizations from such governmental agencies or authorities as may be necessary to enable the sellers of such Registrable Securities to consummate the disposition of such Registrable Securities; (vi) notify each seller of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, and the Company shall promptly prepare a supplement or amendment to such prospectus and furnish to each such seller a reasonable number of copies of a supplement to or amendment of such prospectus as may be necessary so that, after delivery to the purchasers of such Registrable Securities, such prospectus -9- shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made; (vii) enter into and perform customary agreements (including an underwriting agreement in customary form with the Approved Underwriter or Company Underwriter, if any, selected as provided in Section 3 or 4; provided, that the underwriting agreement, if any, shall be reasonably satisfactory in form and substance to the Company) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; (viii) make available for inspection by any seller of Registrable Securities, any managing underwriter participating in any disposition pursuant to such registration statement, Holders' Counsel and any attorney, accountant or other agent retained by any such seller or any managing underwriter (each, an "INSPECTOR" and, collectively, the "INSPECTORS"), all --------- ---------- financial and other records, per tinent corporate documents and properties of the Company and any subsidiaries thereof as may be in existence at such time (collectively, the "RECORDS") as shall be reasonably necessary to enable them to ------- exercise their due diligence responsibility, and cause the Company's and any subsidiaries' officers, directors and employees, and the independent public accountants of the Company, to supply all information reasonably requested by any such Inspector in connection with such registration statement; provided, that such Inspector agrees to keep all such information confidential. (ix) obtain a "cold comfort" letter from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by "cold comfort" letters, as Holders' Counsel or the managing underwriter reasonably request; (x) furnish, at the request of any seller of Registrable Securities on the date such securities are delivered to the underwriters for sale pursuant to such registration or, if such securities are not being sold through underwriters, on the date the registration statement with respect to such securities becomes effective, an opinion, dated such date, of counsel representing the Company for the purposes of such registration, addressed to the underwriters, if any, and to the seller making such request, covering such legal matters with respect to the registration in respect of which such opinion is being given as such seller may reasonably request and as are customarily included in such opinions; (xi) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable but no later than fifteen (15) months after the effective date of the registration statement, an earnings statement covering a period of twelve (12) months beginning after the effective date of the registration statement, in a manner which satisfies the provisions of Section 11(a) of the Act; (xii) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then -10- listed (if any) if the listing of such Registrable Securities is then permitted under the rules of such exchange or, if no similar securities are then so listed, cause all such Registrable Securities to be listed on an exchange on which the Initiating Holders request that such Registrable Securities be listed, subject to the satisfaction of the applicable listing requirements of each such exchange; (xiii) keep each seller of Registrable Securities advised in writing as to the initiation and progress of any registration under Section 3 or 4 hereunder; (xiv) provide officers' certificates and other customary closing documents; (xv) cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"); and ---- (xvi) use its best efforts to take all other steps necessary to effect the registration of the Registrable Securities contemplated hereby. (b) Seller Information. The Company may require as a condition ------------------ precedent of the Company's obligations under this Section 6 that each seller of Registrable Securities as to which any registration is being effected furnish to the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing. (c) Notice to Discontinue. Each Holder agrees that, upon receipt of --------------------- any notice from the Company of the happening of any event of the kind described in Section 6(a)(vi), such Holder shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6(a)(vi) and, if so directed by the Company, such Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period during which such registration statement shall be maintained effective pursuant to this Agreement (including, without limitation, the period referred to in Section 6(a)(ii)) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(a)(vi) to and including the date when the Holder shall have received the copies of the supplemented or amended prospectus contem plated by and meeting the requirements of Section 6(a)(vi). 7. Registration Expenses. The Company shall pay all expenses (other --------------------- than underwriting discounts and commissions) arising from or incident to the performance of, or compliance with, this Agreement, including, without limitation, (a) SEC, stock exchange and NASD registration and filing fees, (b) all fees and -11- expenses incurred in complying with securities or blue sky laws (including, without limitation, reasonable fees, charges and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (c) all printing, messenger and delivery expenses, (d) the fees, charges and disbursements of counsel to the Company and of its independent public accountants and any other accounting and legal fees, charges and expenses incurred by the Company (including, without limitation, any expenses arising from any special audits incident to or required by any registration or qualification) and (e) the reasonable fees, charges and expenses of any special experts retained by the Company in connection with any requested Demand Registration or piggy-back registration pursuant to the terms of this Agreement, regardless of whether the registration statement filed in connection with such registration is declared effective. In connection with each registration hereunder, the Company shall reimburse the Holders of Registrable Securities being registered in such registration for the reasonable fees, charges and disbursements of not more than one Holders' Counsel. All of the expenses described in this Section 7 are referred to in this Agreement as "REGISTRATION ------------ EXPENSES." Notwithstanding the foregoing provisions of this Section 7, in - -------- connection with any registration hereunder, each Holder of Registrable Securities being registered shall pay all underwriting discounts and commissions and any capital gains, income or transfer taxes, if any, attributable to the sale of such Registrable Securities, pro rata with respect to payments of --- ---- discounts and commissions in accordance with the number of shares sold in the offering. 8. Indemnification; Contribution. ----------------------------- (a) Indemnification by the Company. In the event of any proposed ------------------------------ registration of securities of the Company pursuant to Section 3 or Section 4, the Company agrees to indemnify and hold harmless each Holder, its directors, officers, partners, employees, advisors and agents, and each Person who controls (within the meaning of the Act or the Exchange Act) such Holder, to the extent permitted by law, from and against any and all losses, claims, damages, expenses (including, without limitation, reasonable costs of investigation and fees, disbursements and other charges of counsel) or other liabilities resulting from or arising out of or based upon any untrue, or alleged untrue, statement of a material fact contained in any registration statement, prospectus or preliminary prospectus or notification or offering circular (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by or on behalf of such Holder expressly for use therein. The Company shall also indemnify any underwriters of the Registrable Securities, their officers, directors and employees, and each Person who controls any such underwriter (within the meaning of the Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders of Registrable Securities. (b) Indemnification by Holders. In connection with any proposed -------------------------- registration in which a Holder is participating pursuant to Section 3 or 4 -12- hereof, each such Holder shall furnish to the Company in writing such information with respect to such Holder as the Company may reasonably request or as may be required by law for use in connection with any registration statement or prospectus to be used in connection with such registration and each Holder agrees to indemnify and hold harmless the Company, any underwriter retained by the Company and their respective directors, officers, employees and each Person who controls (within the meaning of the Act and the Exchange Act) the Company or such underwriter to the same extent as the foregoing indemnity from the Company to the Holders (subject to the proviso to this sentence and applicable law), but only with respect to any such information furnished in writing by or on behalf of such Holder expressly for use therein; provided, however, that the liability -------- ------- of any Holder under this Section 8(b) shall be limited to the amount of the net proceeds received by such Holder in the offering giving rise to such liability. (c) Conduct of Indemnification Proceedings. Any Person entitled to -------------------------------------- indemnification hereunder (the "INDEMNIFIED PARTY") agrees to give prompt ----------------- written notice to the indemnifying party (the "INDEMNIFYING PARTY") after the ------------------ receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; provided, that, the failure so to notify the -------- ---- Indemnifying Party shall not relieve the Indemnifying Party of any liability that it may have to the Indemnified Party hereunder. If notice of commencement of any such action is given to the Indemnifying Party as above provided, the Indemnifying Party shall be entitled to participate in and, to the extent it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and satisfactory to such Indemnified Party. The Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel (other than reasonable costs of investigation) shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense of such action with counsel satisfactory to the Indemnified Party in its reasonable judgment, (iii) the named parties to any such action (including any impleaded parties) have been advised by such counsel that either (A) representation of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct or (B) there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party; provided, however, that the Indemnifying Party shall only have to pay the fees and expenses of one firm of counsel for all Indemnified Parties in each jurisdiction, except to the extent representation of all Indemnified Parties by the same counsel is inappropriate under applicable standards of professional conduct. In either of such cases the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party. No Indemnifying Party shall be liable for any settlement entered into without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the written consent of the Indemnified Party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may -13- be sought hereunder (whether or not the Indemnified Party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (A) includes an unconditional release of the Indemnified Party from all liability arising out of such action or claim and (B) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Indemnified Party. The rights accorded to any Indemnified Party hereunder shall be in addition to any rights that such Indemnified Party may have at common law, by separate agreement or otherwise. (d) Contribution. If the indemnification provided for in Section 8(a) ------------ from the Indemnifying Party is unavailable to an Indemnified Party in respect of any losses, claims, damages, expenses or other liabilities referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, expenses or other liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such losses, claims, damages, expenses or other liabilities, as well as any other relevant equitable considerations. The relative faults of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, was made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the Indemnifying Party's and Indemnified Party's relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, expenses or other liabilities referred to above shall be deemed to include, subject to the limitations set forth in Section 8(a), 8(b) and 8(c), any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable con siderations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution pursuant to this Section 8(d). 9. Rule 144; Other Exemptions. The Company covenants that it shall -------------------------- file any reports required to be filed by it under the Exchange Act and the rules and regulations adopted by the SEC thereunder, and that it shall take such further action as each Holder may reasonably request (including, but not limited to, providing any information necessary to comply with Rules 144 and 144A under the Act), all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Act within the limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the Act, as such rules may be amended from time to time, or (b) any other rules or regulations now existing or hereafter adopted by the SEC. The Company shall, upon the request of any Holder, deliver to -14- such Holder a written statement as to whether the Company has complied with such requirements. 10. Certain Limitations on Registration Rights. In the case of a ------------------------------------------ registration under Section 4 if the Company has determined to enter into an underwriting agreement in connection therewith, no person may participate in such registration unless such person (a) agrees to sell such person's securities on the basis provided therein and (b) completes and executes all questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other documents reasonably required under the terms of such underwriting agreements. 11. Miscellaneous. ------------- (a) Recapitalizations, Exchanges, etc. The provisions of this --------------------------------- Agreement shall apply, to the full extent set forth herein with respect to the Shares, to any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for or in substitution of, the Shares and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. (b) No Inconsistent Agreements; Other Registration Rights. The ----------------------------------------------------- Company shall not enter into any agreement with respect to its securities that is inconsistent with or adversely affects the rights granted to the Holders in this Agreement other than any lock-up agreement with the underwriters in connection with an underwritten offering pursuant to which the Company agrees, for a period not in excess of 90 days, not to register for sale, and not to sell or otherwise dispose of, Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock. The Company shall not grant any other Person registration rights without the written consent of the Designated Holders holding at least a majority of the Registrable Securities held by all of the Designated Holders. If the Company shall at any time hereafter provide to any holder of any securities of the Company rights with respect to the registration of such securities and such rights are provided on terms or conditions more favorable to such holder than the terms and conditions applicable to the Designated Holders herein, the Company shall provide (by way of amendment to this Agreement or otherwise) such more favorable terms or conditions to the Designated Holders under this Agreement. (c) Remedies. The Holders, in addition to being entitled to -------- exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of their rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive in any action for specific performance the defense that a remedy at law would be adequate. (d) Amendments and Waivers. Except as otherwise provided herein ---------------------- the provisions of this Agreement may not be amended, modified or supplemented, -15- and waivers or consents to departures from the provisions of such section may not be given unless the Company has obtained the prior written consent of (i) the Designated Holders holding at least a majority of the Registrable Securities held by all of the Designated Holders and (ii) the Holders holding at least a majority of the Registrable Securities. (e) Notices. All notices, demands and other communications ------- provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery: (i) if to Whitney Subordinated Debt Fund, L.P. or J.H. Whitney & Co.: c/o J.H. Whitney & Co. 177 Broad Street Stamford, Connecticut 06901 Telecopier No.: (203) 973-1422 Attention: Jeffrey R. Jay, M.D. with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Telecopier No.: (212) 757-3990 Attention: Bruce A. Gutenplan, Esq. -16- (ii) if to the Company: Nitinol Medical Technologies, Inc. 27 Wormwood Street South Boston, Massachusetts 02210 Telecopier No.: (617) 737-0924 Attention: Chief Executive Officer with a copy to: Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 Telecopier No.: (617) 526-5000 Attention: Steven D. Singer, Esquire All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if telecopied. (f) Successors and Assigns. This Agreement shall inure to the benefit ---------------------- of and be binding upon the successors and assigns of the parties hereto; provided, however, that the registration rights and the other obligations of the - -------- ------- Company contained in this Agreement shall, with respect to any Registrable Security, be automatically transferred from a Holder to any subsequent holder of such Registrable Security (including any pledgee). Notwithstanding any transfer of such rights, all of the obligations of the Company hereunder shall survive any such transfer and shall continue to inure to the benefit of all transferees. (g) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of New York, without regard to the principles of conflicts of law of such State. (j) Jurisdiction. Each party to this Agreement hereby irrevocably ------------ agrees that any legal action or proceeding arising out of or relating to this Agreement or any agreements or transactions contemplated hereby may be brought in the courts of the State of New York or of the United States of America for the -17- Southern District of New York and hereby expressly submits to the personal jurisdiction and venue of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the address set forth in Section 10(e), such service to become effective 10 days after such mailing. (k) Severability. If any one or more of the provisions contained ------------ herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, it being intended that all of the rights and privileges of the Holders shall be enforceable to the fullest extent permitted by law. (l) Rules of Construction. Unless the context otherwise requires, --------------------- "or" is not exclusive, and references to sections or subsections refer to sections or subsections of this Agreement. (m) Entire Agreement. This Agreement is intended by the parties as a ---------------- final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings in respect of the subject matter contained herein, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (n) Further Assurances. Each of the parties shall execute such ------------------ documents and perform such further acts as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. -18- IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized on the date first above written. NITINOL MEDICAL TECHNOLOGIES, INC. By: /s/ Thomas M. Tully -------------------------------------- Name: Thomas M. Tully Title: President and Chief Executive Officer WHITNEY SUBORDINATED DEBT FUND, L.P. By: /s/ Daniel J. O'Brien -------------------------------------- Name: Daniel J. O'Brien Title: A General Partner J.H. WHITNEY & CO. By: /s/ Daniel J. O'Brien -------------------------------------- Name: Daniel J. O'Brien Title: -19- EX-99.1 10 PRESS RELEASE, DATED JULY 8, 1998 Exhibit 99.1 [LETTERHEAD OF NITINOL MEDICAL TECHNOLOGIES APPEARS HERE] AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD - --------------- -------------------------------- Thomas M. Tully General Info: Paula Schwartz (212)661-8030 President & CEO Analyst Info: Kathy Brunson (312)266-7800 (617)737-0930 Brian Gill (212)661-8030 Media Info: Deanne Eagle (212)661-8030 FOR IMMEDIATE RELEASE - --------------------- July 8, 1998 NITINOL MEDICAL TECHNOLOGIES CLOSES ACQUISITION OF ELEKTA --------------------------------------------------------- NEUROSURGICAL INSTRUMENTS FOR $33 MILLION ----------------------------------------- BOSTON, MA, JULY 8, 1998 -- Nitinol Medical Technologies, Inc. (Nasdaq/NMS:NMTI) today announced the closing of its acquisition of Elekta Neurosurgical Instruments (ENI) from Elekta AB of Sweden for $33 million. The acquisition will operate as a division of Nitinol Medical under the name NMT Neurosciences and will be managed by David C. Chazanovitz, formerly President of the Septal Repair Division of Nitinol Medical. Sales of the division are derived from a broad range of specialty implants and instruments for neurosurgery, including cerebral spinal fluid (CSF) shunts, the Selector(R) Ultrasonic Aspirator, Ruggles/TM/ Surgical Instruments, the Spetzler/TM/ Titanium Aneurysm Clip, and endoscopes and instrumentation for minimally invasive neurosurgery. NMT Neurosciences has a leadership position in each of these product categories. Sales of this division for the fiscal year ended April 30, 1998 were $38.0 million worldwide. NMT Neurosciences employs 267 people at locations primarily in the United Kingdom, France, and Atlanta, Georgia. On a pro forma combined basis for the calendar year 1997, including NMT Neurosciences, Nitinol Medical would have had revenues of nearly $50 million. Commenting on the acquisition, Thomas M. Tully, President and CEO of Nitinol Medical Technologies, said, "NMT Neurosciences represents a profitable, growing, fully integrated global business platform which we plan to further build through additional acquisitions, licensing agreements and internal product developments. With 38 sales and marketing employees around the world, and a high-quality product line, we believe that we will have the most intensive focus on the neurosurgeon of any company. Additionally, the important new technology platforms and Nitinol Medical Technologies Closes Acquisition of Elekta Neurosurgical Instruments for $33 Million page 2 manufacturing capabilities we are acquiring will significantly broaden our product development opportunities. "This acquisition advances Nitinol Medical to the next level of medical device companies, and expands our offering of minimally invasive products. With the significant increase in revenues and diversification of our product line accomplished by this acquisition, we believe we are better positioned for continued significant growth in revenue and profits." The transaction was financed with $13 million of the Company's cash and $20 million of subordinated debt from an affiliate of JH Whitney & Co., a significant stockholder of the Company. The subordinated debt is due September 30, 2003, with interest payable quarterly at 10.101% per annum. A total of 675,000 shares of common stock were issued to JH Whitney & Co. and its affiliates in connection with the transaction. Nitinol Medical Technologies, Inc. designs, develops, and markets innovative medical devices that utilize advanced technologies and are delivered by minimally invasive procedures. The Company's products are designed to offer alternative approaches to existing complex treatments, thereby reducing patient trauma, shortening procedure, hospitalization and recovery times, and lowering overall treatment costs. The Company's patented medical devices include self-expanding stents, vena cava filters and septal repair devices. Elekta AB is a leading international supplier of advanced medical technology for treatment of neurological disorders and radiation of cancer. To receive Nitinol's latest news release and other corporate documents via FAX--at no cost--please dial 1-800-PRO-INFO. Enter Nitinol's ticker-NMTI. This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties that could cause actual results to differ from predicted results. Achieving the anticipated benefits of the merger will depend in part upon whether the integration of the two companies' businesses is accomplished in an efficient manner, and there can be no assurance that this will occur. The combination of the two companies will require, among other things, integration of the companies' respective product offerings, coordination of their sales and marketing organizations, and the research and development efforts. There can be no assurance that integration will be accomplished smoothly or successfully. The difficulties of such integration may be increased by the necessity of coordinating geographically-separated organizations. The integration of certain operations following the merger will require the dedication of management resources which may temporarily distract attention from the day-to-day business of the respective companies. The inability of management to successfully integrate the operations of the two companies could have an adverse affect on the business and results of operations of the combined companies. In addition, there can be no assurance that present and potential customers of Elekta and Nitinol will continue their current buying patterns and any significant delay or reduction in orders could have an adverse affect on the results of operations. Further information on factors that could affect the combined company's results are included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 1997, and from time to time in Nitinol's other filings with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----