10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2007

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission file number: 000-51348

ev3 Inc.

(Exact name of registrant as specified in its charter)

Delaware	32-0138874
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9600 54^th Avenue North, Suite 100
Plymouth, Minnesota 55442
(Address of principal executive offices)

(763) 398-7000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer: o                Accelerated filer: þ                Non-accelerated filer: o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

As of August 1, 2007, there were 60,966,451 shares of common stock, par value $0.01 per share, of the registrant outstanding.

ev3 Inc.
FORM 10-Q
For the Quarterly Period Ended July 1, 2007

TABLE OF CONTENTS

Description	Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets as of July 1, 2007 (unaudited) and December 31, 2006		1
Consolidated Statements of Operations for the three and six months ended July 1, 2007 and July 2, 2006 (unaudited)		2
Consolidated Statements of Cash Flows for the six months ended July 1, 2007 and July 2, 2006 (unaudited)		3
Notes to the Consolidated Financial Statements		4
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk		30
ITEM 4. Controls and Procedures		31
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings		32
ITEM 1A. Risk Factors		32
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		33
ITEM 3. Defaults Upon Senior Securities		34
ITEM 4. Submission of Matters to a Vote of Security Holders		35
ITEM 5. Other Information		35
ITEM 6. Exhibits		35
SIGNATURE PAGE		36
Exhibit Index		37
Underwriting Agreement
Certification of CEO
Certification of CFO
Certification of CEO
Certification of CFO

This report contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by those sections. We refer you to the information under the heading “Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements.”

In this report, references to “ev3,” the “company,” “we,” “our” or “us,” unless the context otherwise requires, refer to ev3 Inc. and its subsidiaries.

All trademarks or trade names referred to in this report are the property of their respective owners.

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

ev3 Inc.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	July 1,			December 31,
	2007			2006
	(unaudited)
Assets
Current assets
Cash and cash equivalents	$	57,919		$	24,053
Short-term investments		7,800			14,700
Accounts receivable, less allowance of $3,877 and $3,924, respectively		56,046			45,137
Inventories, net		44,297			42,124
Prepaid expenses and other assets		4,913			7,162
Other receivables		2,446			2,669
Total current assets		173,421			135,845
Restricted cash		1,310			2,022
Property and equipment, net		23,960			24,072
Goodwill		149,061			149,061
Other intangible assets, net		41,650			40,014
Other assets		730			1,812
Total assets	$	390,132		$	352,826
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	10,782		$	13,140
Accrued compensation and benefits		15,676			16,382
Accrued liabilities		14,745			10,102
Current portion of long-term debt		3,346			2,143
Total current liabilities		44,549			41,767
Long-term debt		8,095			5,357
Other long-term liabilities		902			468
Total liabilities		53,546			47,592
Stockholders’ equity
Common stock, $0.01 par value, 100,000,000 shares authorized, shares issued and outstanding: 60,889,666 shares at July 1, 2007 and 57,594,742 at December 31, 2006		609			576
Additional paid in capital		972,743			919,221
Accumulated deficit		(636,660	)		(614,578	)
Accumulated other comprehensive income (expense)		(106	)		15
Total stockholders’ equity		336,586			305,234
Total liabilities and stockholders’ equity	$	390,132		$	352,826

The accompanying notes are an integral part of these consolidated financial statements

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ev3 Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(unaudited)

	Three Months Ended						Six Months Ended
	July 1, 2007			July 2, 2006			July 1, 2007			July 2, 2006
Net sales	$	65,396		$	50,620		$	126,895		$	92,857
Operating expenses:
Cost of goods sold (a)		22,362			18,179			42,819			34,667
Sales, general and administrative (a)		40,882			35,808			80,019			73,669
Research and development (a)		11,323			6,047			18,756			12,821
Amortization of intangible assets		3,864			4,282			7,964			8,525
(Gain) loss on sale of assets, net		(1,004	)		(46	)		(988	)		124
Acquired in-process research and development		—			—			—			1,786
Total operating expenses		77,427			64,270			148,570			131,592
Loss from operations		(12,031	)		(13,650	)		(21,675	)		(38,735	)
Other income:
Gain on sale of investments, net		—			(1,063	)		—			(1,063	)
Interest income, net		(297	)		(514	)		(406	)		(1,213	)
Other income, net		(195	)		(1,327	)		(512	)		(1,381	)
Loss before income taxes		(11,539	)		(10,746	)		(20,757	)		(35,078	)
Income tax expense		332			77			608			246
Net loss	$	(11,871	)	$	(10,823	)	$	(21,365	)	$	(35,324	)
Earnings per share:
Net loss per common share (basic and diluted)	$	(0.20	)	$	(0.19	)	$	(0.37	)	$	(0.63	)
Weighted average shares outstanding		59,543,827			56,698,043			58,529,041			56,319,427

(a) Includes stock based compensation charges of:

Cost of goods sold	$	187	$	155	$	345	$	369
Sales, general and administrative		2,207		1,799		4,066		3,165
Research and development		266		158		448		372
	$	2,660	$	2,112	$	4,859	$	3,906

The accompanying notes are an integral part of these consolidated financial statements

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ev3 Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per share amounts)

(unaudited)

	Six Months Ended
	July 1, 2007			July 2, 2006
Operating activities
Net loss	$	(21,365	)	$	(35,324	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		11,574			11,097
Provision for bad debts and sales returns		661			234
Provision for inventory obsolescence		2,175			1,739
Acquired in-process research and development		—			1,786
Gain on sale of investments		—			(1,063	)
(Gain) loss on disposal of assets		(988	)		124
Stock compensation expense		4,859			3,906
Change in operating assets and liabilities:
Accounts receivable		(11,587	)		(7,435	)
Inventories		(4,349	)		(2,070	)
Prepaids and other assets		646			(83	)
Accounts payable		(2,365	)		(700	)
Accrued expenses and other liabilities		3,520			(3,654	)
Net cash used in operating activities		(17,219	)		(31,443	)
Investing activities
Purchase of short-term investments		—			(6,750	)
Proceeds from sale of short-term investments		6,900			300
Purchase of property and equipment		(3,519	)		(7,360	)
Purchase of intangible assets		(7,579	)		(500	)
Proceeds from sale of property and equipment		2,005			68
Proceeds from sale of minority investment		—			1,063
Acquisitions, net of cash acquired		—			(170	)
Change in restricted cash		722			(108	)
Net cash used in investing activities		(1,471	)		(13,457	)
Financing activities
Proceeds from issuance of common stock		44,653			—
Proceeds from issuance of debt		5,000			—
Payments on long-term debt		(1,072	)		—
Payments on capital lease obligations		(68	)		(60	)
Proceeds from exercise of stock options		4,043			3,890
Net cash provided by financing activities		52,556			3,830
Effect of exchange rate changes on cash		—			261
Net increase (decrease) in cash and cash equivalents		33,866			(40,809	)
Cash and cash equivalents, beginning of period		24,053			69,592
Cash and cash equivalents, end of period	$	57,919		$	28,783
Supplemental non-cash disclosure:
Net assets acquired in conjunction with MTI step acquisition (see Note 6)	$	—		$	95,438
Financed insurance policies (see Note 18)	$	—		$	3,500

The accompanying notes are an integral part of these consolidated financial statements

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ev3 Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

ev3 Inc. (“we,” “our” or “us”) is a global medical device company focused on catheter-based technologies for the endovascular treatment of vascular diseases and disorders. We develop, manufacture and/or market a wide range of products that include stents, embolic protection devices, thrombectomy devices, balloon angioplasty catheters, foreign object retrieval devices, guidewires, embolic coils, liquid embolics, microcatheters and occlusion balloon systems. We market our products in the United States, Europe and Canada through a direct sales force, and through distributors in certain other international markets.

2. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America (U.S.) for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for any interim period may not be indicative of results for the full year. These unaudited consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2006.

Subsequent to the end of the second quarter of 2007, we entered into an agreement and plan of merger with FoxHollow Technologies, Inc. Unless otherwise indicated, references to ev3 in the notes to these unaudited consolidated financial statements relate to ev3 as a stand-alone entity and do not reflect the impact of the potential business combination with FoxHollow (see Note 21).

We operate on a manufacturing calendar with our fiscal year ending on December 31. Each quarter is 13 weeks, consisting of one five-week and two four-week periods. Accordingly, the second fiscal quarters of 2007 and 2006 ended on July 1 and July 2, respectively.

3. Stock-Based Compensation

We have several stock-based compensation plans under which stock options and other equity incentive awards have been granted. Under the ev3 Inc. Second Amended and Restated 2005 Incentive Stock Plan, eligible employees, outside directors and consultants may be awarded options, stock grants, stock units or stock appreciation rights. The terms and conditions of an option, stock grant, stock unit or stock appreciation right (including any vesting or forfeiture conditions) are set forth in the certificate evidencing the grant. Subject to adjustment as provided in the plan, 8,000,000 shares of our common stock are available for issuance under the plan.

Options, other than those granted to outside consultants, generally vest over a four-year period and expire within a period of not more than 10 years from the date of grant. Vested options generally expire 90 days after termination of employment. Options granted to outside consultants generally vest over the term of their consulting contract and generally expire 90 days after termination of the consulting relationship. The exercise price per share for each option is set by the board of directors or the compensation committee at the time of grant and pursuant to the terms of the plan may not be less than the fair market value per share on the grant date.

In addition to our 2005 Incentive Stock Plan, we maintain the ev3 Inc. Employee Stock Purchase Plan (“ESPP”). The maximum number of shares of our common stock available for issuance under the ESPP is 750,000 shares, subject to adjustment as provided in the ESPP. The ESPP provides for six-month offering periods beginning on January 1 and July 1 of each year. The first offering period was commenced on January 1, 2007. The purchase price of the shares is equal to 85% of the lower of the fair market value of our common stock at the beginning or end of the offering period. This

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discount may not exceed the maximum discount rate permitted for plans of this type under Section 423 of the Internal Revenue Code of 1986, as amended. The ESPP is compensatory for financial reporting purposes and approximately $102 thousand and $267 thousand of compensation expense was recorded during the three and six months ended July 1, 2007, respectively.

On January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” (SFAS 123(R)) using the modified prospective method. SFAS 123(R) requires companies to measure and recognize the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of those awards. Compensation cost under SFAS 123(R) is recognized ratably using the straight-line attribution method over the expected vesting period, which is considered to be the requisite service period. In addition, pursuant to SFAS 123(R), we are required to estimate the amount of expected forfeitures when calculating the compensation costs, instead of accounting for forfeitures as incurred, which was our previous method. All of our options previously awarded were classified as equity instruments and continue to maintain their equity classification under SFAS 123(R).

The fair value of options are estimated at the date of grant using the Black-Scholes option pricing model with the assumptions listed below. Risk free interest rate is based on U.S. Treasury rates appropriate for the expected term. Expected volatility is based on a combination of historical factors related to our common stock since our June 2005 initial public offering and the volatility rates of a set of guideline companies. The guideline companies consist of public and recently public medical technology companies. Dividend yield is zero, as we do not expect to declare any dividends in the foreseeable future. The expected term is based on the weighted average time between grant and employee exercise. The fair value of stock granted to employees is based upon the closing market value of our common stock on the date of grant.

Three Months Ended	July 1, 2007			July 2, 2006
Risk free interest rate		4.6	%		4.9	%
Expected dividend yield		0.0	%		0.0	%
Expected volatility		43.7	%		51.2	%
Expected option term	3.85 years			4 years

Six Months Ended	July 1, 2007			July 2, 2006
Risk free interest rate		4.7	%		4.5	%
Expected dividend yield		0.0	%		0.0	%
Expected volatility		45.0	%		50.0	%
Expected option term	3.85 years			4 years

     A summary of option activity for all plans (dollars in thousands, except per share amounts) during the six months ended July 1, 2007 is as follows:

				Weighted-Average		Aggregate
	Awarded Shares			Exercise Price Per		Intrinsic
	Outstanding			Share		Value
Balance at January 1, 2007		5,359,248		$	12.47
Granted (1)		1,020,516		$	17.72
Exercised		(386,077	)	$	10.47
Forfeited		(297,227	)	$	14.27
Expired		(43,145	)	$	17.98
Balance at July 1, 2007		5,653,315		$	13.41	$	21,816
Options exercisable at July 1, 2007		2,934,713		$	11.73	$	16,372

(1) The weighted average fair value for options granted was $7.10.

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As of July 1, 2007, the total compensation cost for nonvested options not yet recognized in our consolidated statements of operations was $19.6 million, net of estimated forfeitures. This amount is expected to be recognized over a weighted average vesting period of 2.4 years.

The intrinsic value of a stock option award is the amount by which the fair market value of the underlying stock exceeds the exercise price of the award. The total intrinsic value of options exercised was $1.1 million and $3.2 million during the three and six months ended July 1, 2007, respectively.

     A summary of restricted stock award activity for all plans during the six months ended July 1, 2007 is as follows:

	Awarded			Weighted-Average
	Shares			Grant Date Fair
	Outstanding			Value
Nonvested balance at January 1, 2007		217,774		$	15.42
Granted		533,809		$	17.79
Vested		(2,500	)	$	13.99
Forfeited		(56,591	)	$	16.78
Nonvested balance at July 1, 2007		692,492		$	17.05

The value of these shares of restricted stock was measured at the closing market price of our common stock on the grant date. The unamortized compensation expense for these awards was $11.2 million as of July 1, 2007, which will be recognized over the remaining weighted average vesting period of approximately 3.1 years.

4. Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS 157, “Fair Value Measurement.” The standard provides guidance for using fair value to measure assets and liabilities. SFAS 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. The statement is effective for us beginning in 2008; however, early adoption is permitted. We have not yet determined the impact, if any, that the implementation of SFAS 157 will have on our results of operations and financial condition.

On February 15, 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (SFAS No. 159). SFAS No. 159 creates a “fair value option” under which an entity may elect to record certain financial assets or liabilities at fair value upon their initial recognition. Subsequent changes in fair value would be recognized in earnings as those changes occur. The election of the fair value option would be made on a contract-by-contract basis and would need to be supported by concurrent documentation or a preexisting documented policy. SFAS No. 159 requires an entity to separately disclose the fair value of these items on the balance sheet or in the footnotes to the financial statements and to provide information that would allow the financial statement user to understand the impact on earnings from changes in the fair value. SFAS No. 159 is effective for us beginning in 2008; however, early adoption is permitted. We do not believe that the implementation of SFAS 159 will have a material impact on our results of operations and financial condition.

In June 2006, the FASB issued Emerging Issues Task Force Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (EITF 06-3). EITF 06-3 indicates that the presentation of taxes within the scope of this issue on either a gross or net basis is an accounting policy decision that should be disclosed. Our policy is to present the taxes collected from customers and remitted to governmental authorities on a net basis and are not material to our results of operations and financial condition.

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5. Liquidity and Capital Resources

Since inception, we have generated significant operating losses. Historically, our liquidity needs have been met through debt and equity offerings. In mid-2005, we completed an initial public offering in which we sold 11,970,800 shares of our common stock at $14.00 per share for net cash proceeds of $154.9 million, net of underwriting discounts and other offering costs.

On June 28, 2006, our operating subsidiaries, ev3 Endovascular, Inc., ev3 International, Inc. and Micro Therapeutics, Inc. (collectively, the “Borrowers”), entered into a Loan and Security Agreement (“Loan Agreement”) with Silicon Valley Bank (“SVB”), consisting of a two-year $30.0 million revolving line of credit and a 48-month $7.5 million equipment financing line. On March 15, 2007, we entered into an amendment to our existing Loan Agreement with SVB. The amendment added an additional $5 million of equipment financing, increasing the total available equipment financing to $12.5 million. Pursuant to the terms of the Loan Agreement, and subject to specified reserves, we may borrow under the revolving line of credit up to $12 million without any borrowing base limitations. Aggregate borrowings under the revolving line of credit that exceed $12 million will subject the revolving line to borrowing base limitations. These limitations allow us to borrow, subject to specified reserves, up to 80% of eligible domestic and foreign accounts receivables plus up to 30% of eligible inventory. Additionally, borrowings against the eligible inventory may not exceed the lesser of 33% of the amount advanced against accounts receivable or $7.5 million. Borrowings under the revolving line bear interest at a variable rate equal to SVB’s prime rate. Borrowings under the equipment financing bear interest at a variable rate equal to SVB’s prime rate plus 1.0%. Accrued interest on any outstanding balance under the revolving line is payable monthly in arrears. Amounts outstanding under the equipment financing will be payable in 42 consecutive equal monthly installments of principal, beginning on January 31, 2007 for amounts outstanding as of December 31, 2006 and as of September 30, 2007 for amounts outstanding under the amendment to the equipment financing. As of July 1, 2007, we had $11.4 million in outstanding borrowings under the equipment financing, as amended, and no outstanding borrowings under the revolving line of credit; however, we had approximately $2 million of outstanding letters of credit issued by SVB, which reduces the amount available under our revolving line of credit to approximately $28 million.

On April 19, 2007, we completed a secondary offering issuing 2,500,000 shares of our common stock which generated approximately $44.7 million in net proceeds. We have used and expect to continue to use the net proceeds for general corporate purposes.

Our future liquidity and capital requirements will be influenced by numerous factors, including extent and duration of future operating losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs, working capital to support our sales growth, receipt of and time required to obtain regulatory clearances and approvals, sales and marketing programs, continuing acceptance of our products in the marketplace, competing technologies, market and regulatory developments, acquisitions and the future course of intellectual property and other litigation. We believe that our current resources, together with funds available under our revolving line of credit, are sufficient to meet our liquidity requirements through at least the next 12 months. However, there is no assurance that additional funding will not be needed. Further, if additional funding were needed, there is no assurance that such funding will be available to us or our subsidiaries on acceptable terms, or at all. If we require additional working capital but are not able to raise additional funds, we may be required to significantly curtail or cease ongoing operations.

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The following summarizes the changes in stockholders’ equity (dollars in thousands) since December 31, 2006:

											Accumulated
											Other			Total
	Common Stock				Additional Paid in			Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Capital			Deficit			Income (Loss)			Equity
Balance December 31, 2006		57,594,742	$	576	$	919,221		$	(614,578	)	$	15		$	305,234
Cumulative effect of adoption of FIN 48		—		—		—			(717	)		—			(717	)
Adjusted Balance December 31, 2006		57,594,742	$	576	$	919,221		$	(615,295	)	$	15		$	304,517
Common stock issued in conjunction with secondary offering		2,500,000		25		44,628			—			—			44,653
Compensation expense on equity awards and stock purchase plan		—		—		4,859			—			—			4,859
Exercise of options		386,077		4		4,039			—			—			4,043
Restricted stock grants, net of cancellations		408,847		4		(4	)								—
Comprehensive (loss):
Net loss									(21,365	)		—			(21,365	)
Cumulative translation adjustment									—			(121	)		(121	)
Comprehensive (loss)		—		—		—			—			—			(21,486	)
Balance July 1, 2007		60,889,666	$	609	$	972,743		$	(636,660	)	$	(106	)	$	336,586

6. MTI Step Acquisition

On January 6, 2006, we completed the acquisition of the outstanding shares of Micro Therapeutics, Inc. (“MTI”) that we did not already own through the merger of Micro Investment, LLC (“MII”), with and into MTI, with MTI continuing as the surviving corporation and a wholly owned subsidiary of ev3 Inc. As a result of the merger, each share of common stock of MTI outstanding at the effective time of the merger was automatically converted into the right to receive 0.476289 of a share of our common stock (the “Exchange Ratio”) and cash in lieu of any fractional share of our common stock. We issued approximately 7.0 million new shares of our common stock to MTI’s public stockholders in the merger. Fair value of the shares issued was measured as the average closing price per share of our stock on the NASDAQ National Market System for the five day trading period centered around the date that the terms of the acquisition were agreed to and announced. In addition, each outstanding option to purchase shares of MTI common stock was converted into an option to purchase shares of our common stock on the same terms and conditions (including vesting) as were applicable under such MTI option. The exercise price and number of shares for which each such MTI option is (or will become) exercisable was adjusted based on the Exchange Ratio. The fair value of the replacement stock options was estimated at the closing date. The unvested portion of the replacement stock options will be recognized as compensation expense over the remaining service period.

The investment was accounted for using the step acquisition method prescribed by ARB 51, Consolidated Financial Statements. Step acquisition accounting requires the allocation of the excess purchase price to the fair value of net assets acquired. The excess purchase price is determined as the difference between the cash paid and the historical book value of the interest in net assets acquired. The effects of the acquisition do not materially change our results of operations. Therefore, pro forma disclosures are not included.

The following table presents the purchase price for the acquisition (in thousands) on January 6, 2006:

	2006
Fair value of shares/options issued	$	95,438
Interest acquired in historical book value of MTI		(12,850	)
Excess purchase price over historical book values	$	82,588

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The following summarizes the allocation of the excess purchase price over historical book values (in thousands) arising from the acquisition:

	2006
Inventory	$	668
Developed technology		15,548
Customer relationships		9,964
Trademarks and tradenames		2,029
Acquired in-process research and development		1,786
Goodwill		54,605
Accrued liabilities		(2,012	)
Total	$	82,588

The weighted average life of the acquired intangibles, excluding goodwill, was seven years. The acquired in-process research and development charge was estimated considering an appraisal and represents the estimated fair value of the in-process projects at the date of acquisition of the MTI shares. As of the acquisition date, the in-process projects had not yet reached technological feasibility and had no alternative use. The primary basis for determining technological feasibility of these projects is obtaining regulatory approval to market the products. Accordingly, the value attributable to these projects, which had yet to obtain regulatory approval, was expensed in conjunction with the acquisition. If the projects are not successful, or completed in a timely manner, we may not realize the financial benefits expected from these projects.

The income approach was used to determine the fair value of the acquired in-process research and development. This approach establishes fair value by estimating the after-tax cash flows attributable to any in-process project over its useful life and then discounting these after-tax cash flows back to the present value. The costs to complete each project were based on estimated direct project expenses as well as the remaining labor hours and related overhead costs. In arriving at the value of acquired in-process research and development projects, we considered the project’s stage of completion, the complexity of the work to be completed, the costs already incurred, the remaining costs to complete the project, the contribution of core technologies, the expected introduction date and the estimated useful life of the technology. The discount rate used to arrive at the present value of acquired in-process research and development as of the acquisition date was based on the time value of money and medical technology investment risk factors. The discount rate used was approximately 14%. We believe that the estimated acquired in-process research and development amount determined represents the fair value at the date of acquisition and does not exceed the amount a third party would pay for the project.

7. Short-Term Investments

Short-term investments consist of debt securities, which have investment grade credit ratings. The debt securities are classified and accounted for as available-for-sale and are reported at fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income. Management determines the appropriate classification of its investments in securities at the time of purchase and reevaluates such determination at each balance sheet date. The short-term investments consist of floating rate taxable municipal bonds with maturities from 2019 to 2036. We have the option to put the bonds to the remarketing agent who is obligated to repurchase the bonds at par. As of July 1, 2007 and December 31, 2006, our cost approximated fair value related to these investments.

8. Inventories

Inventory consists of the following (in thousands):

	July 1, 2007			December 31, 2006
Raw materials	$	7,365		$	7,100
Work in-progress		2,820			3,271
Finished goods		38,619			36,478
		48,804			46,849
Inventory reserve		(4,507	)		(4,725	)
Inventory, net	$	44,297		$	42,124

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9. Property and Equipment, Net

Property and equipment consists of the following (in thousands):

	July 1, 2007			December 31, 2006
Machinery and equipment	$	23,079		$	20,472
Office furniture and equipment		12,710			11,440
Leasehold improvements		10,099			9,750
Construction in progress		1,093			2,040
		46,981			43,702
Less:
Accumulated depreciation and amortization		(23,021	)		(19,630	)
Property and equipment, net	$	23,960		$	24,072

Total depreciation expense for property and equipment was $1.8 million and $3.6 million for the three and six months ended July 1, 2007, respectively, and $1.3 million and $2.6 million for the three and six months ended July 2, 2006, respectively.

10. Goodwill and Other Intangible Assets

The balance at July 1, 2007 is as follows (in thousands):

	Cardio
	Peripheral		Neurovascular		Total
Balance as of July 1, 2007	$	71,307	$	77,754	$	149,061

There have been no changes in the carrying amount of goodwill by operating segment in the three and six months ended July 1, 2007.

Other intangible assets consist of the following (in thousands):

	Weighted		July 1, 2007							December 31, 2006
	Average		Gross					Net		Gross					Net
	Useful Life		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	(in years)		Amount		Amortization			Amount		Amount		Amortization			Amount
Patents and licenses		5.0	$	11,696	$	(4,394	)	$	7,302	$	11,435	$	(4,009	)	$	7,426
Developed technology		6.0		63,616		(43,972	)		19,644		63,616		(40,119	)		23,497
Trademarks and tradenames		7.0		5,122		(2,960	)		2,162		5,122		(2,634	)		2,488
Customer relationships		5.0		16,094		(10,971	)		5,123		16,094		(9,491	)		6,603
Distribution rights		2.5		9,274		(1,855	)		7,419		—		—			—
Other intangible assets			$	105,802	$	(64,152	)	$	41,650	$	96,267	$	(56,253	)	$	40,014

Intangible assets are amortized using methods which approximate the benefit provided by the utilization of the assets. Patents and licenses, developed technology and trademarks and tradenames are amortized on a straight line basis. Customer relationships are amortized using accelerated methods. We continually evaluate the amortization period and carrying basis of intangible assets to determine whether events and circumstances warrant a revised estimated useful life or reduction in value.

On February 15, 2007, we executed a new distribution agreement with Invatec Technology Center GmbH appointing us as a non-exclusive distributor of certain of Invatec’s products for the United States and Puerto Rico (the “Distribution Agreement”). In connection with the execution of the Distribution Agreement, we paid Invatec $9.3 million for the distribution rights that will be accounted for as an intangible asset and amortized over the term of the agreement. This payment was comprised of a one time sign-up fee of $6.5 million paid in cash and retainage by Invatec of the remaining unamortized portion of the recoverable sign-up fee from our previous agreement with Invatec of $2.8 million as additional consideration. The term of the Distribution Agreement extends until December 31, 2008 and we are permitted to continue to sell our inventory of Invatec products for a period of up to six months after the termination of the Distribution Agreement.

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Total amortization of other intangible assets was $3.9 million and $8.0 million for the three and six months ended July 1, 2007, respectively, and $4.3 million and $8.5 million for the three and six months ended July 2, 2006, respectively. The estimated amortization expense (inclusive of amortization expense already recorded for the six months ended July 1, 2007) for the next five years ending December 31 is as follows (in thousands):

2007	$	15,074
2008		11,490
2009		6,904
2010		3,906
2011		2,492

12. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	July 1, 2007		December 31, 2006
Accrued professional services	$	4,828	$	1,900
Accrued royalties		2,399		845
Accrued clinical studies		318		359
Office closure		235		345
Accrued other		6,695		6,653
Total accrued liabilities	$	14,475	$	10,102

13. Long-Term Debt

Long-term debt consists of the following (in thousands):

	July 1, 2007			December 31, 2006
Equipment term loan	$	11,441		$	7,500
Less: current portion		(3,346	)		(2,143	)
Total long-term debt	$	8,095		$	5,357

On June 28, 2006, our operating subsidiaries, ev3 Endovascular, Inc., ev3 International, Inc. and Micro Therapeutics, Inc., entered into a Loan and Security Agreement, with Silicon Valley Bank, or SVB, consisting of a two-year $30.0 million revolving line of credit and a 48-month $7.5 million equipment financing line. On March 15, 2007, we entered into an amendment to our existing Loan Agreement with SVB. The amendment added an additional $5 million of equipment financing, increasing the total available equipment financing to $12.5 million. Borrowings under the revolving line bear interest at a variable rate equal to SVB’s prime rate. Borrowings under the equipment financing bear interest at a variable rate equal to SVB’s prime rate plus 1.0%. Accrued interest on any outstanding balance under the revolving line is payable monthly in arrears. Amounts outstanding under the equipment financing will be payable in 42 consecutive equal monthly installments of principal, beginning on January 31, 2007 for amounts outstanding as of December 31, 2006 and beginning on September 30, 2007 for amounts outstanding under the amendment to the equipment financing.

Annual maturities of our long-term debt (inclusive of amounts already paid in the six months ended July 1, 2007) are as follows (in thousands):

2007	$	1,561
2008		3,571
2009		3,571
2010		2,500
2011		238
Total	$	11,441

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14. Gain (Loss) on Sale of Assets

On June 15, 2007, we entered into an Intellectual Property Transfer Agreement with Atritech, Inc. pursuant to which ev3 sold and licensed, on a royalty-free perpetual basis, certain intellectual property relating to percutaneously delivered implants within the left atrial appendage for prevention of emboli migration out of the appendage.

In exchange for the assets and license, we received $2.0 million in cash, shares of Atritech common stock representing approximately 8% of the equity of Atritech on a fully diluted basis and an unsecured, subordinated, non-interest-bearing promissory note in the principal amount of $5.6 million, the unpaid principal balance of which will become immediately due and payable only upon an initial public offering by Atritech or a sale transaction, in each case resulting in gross proceeds of less than a certain amount. During the second quarter of 2007, we recognized a gain of $1.0 million representing the amount of the $2.0 million cash payment received in excess of the net book value of the assets sold to Atritech. In accordance with Staff Accounting Bulletin Topic 5.U., we have deferred the potential gain related to the equity and debt consideration received and the deferred gain will be recognized when it becomes realized or probable of realization.

15. Interest (Income) Expense

Interest (income) expense consists of the following (in thousands):

	Three Months Ended						Six Months Ended
	July 1, 2007			July 2, 2006			July 1, 2007			July 2, 2006
Interest expense	$	393		$	67		$	668		$	101
Interest (income)		(690	)		(581	)		(1,074	)		(1,314	)
Total interest (income) expense, net	$	(297	)	$	(514	)	$	(406	)	$	(1,213	)

16. Other Comprehensive Income (Loss)

The following table provides a reconciliation of net loss to comprehensive income (loss) (in thousands):

	Three Months Ended						Six Months Ended
	July 1, 2007			July 2, 2006			July 1, 2007			July 1, 2006
Net loss	$	(11,871	)	$	(10,823	)	$	(21,365	)	$	(35,324	)
Changes in foreign currency translation		(48	)		(346	)		(121	)		(254	)
Total comprehensive income (loss)	$	(11,919	)	$	(11,169	)	$	(21,486	)	$	(35,578	)

17. Income Taxes

On January 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) an interpretation of FASB Statement No. 109. FIN 48 clarifies when tax benefits should be recorded in financial statements, requires certain disclosures of uncertain tax matters and indicates how any tax reserves should be classified in a balance sheet. The provisions of FIN 48 are applied to all tax positions upon initial adoption, with the cumulative effect adjustment reported as an adjustment to the opening balance of retained earnings. Upon adoption of FIN 48, we recorded a $717 thousand liability for uncertain tax positions as an adjustment to the 2007 opening balance of retained earnings.

As of the date of adoption, the total amount of unrecognized tax benefits was $4.7 million, of which approximately $872 thousand would affect our effective income tax rate if recognized. We recognize interest and penalties related to uncertain tax positions as income tax expense. As of January 1, 2007, accrued interest and penalties related to uncertain tax positions totaled approximately $216 thousand and did not materially change during the six months ended July 1, 2007.

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Management believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease between $160 thousand and $501 thousand due to the closure of the tax examinations in foreign jurisdictions within the next 12 months.

We or one of our subsidiaries file income tax returns in the U.S. Federal jurisdiction and in various U.S. State and foreign jurisdictions. With few exceptions, we are subject to U.S. Federal or state and local income tax examinations by tax authorities for years after 1995, and for years after 2002 in foreign jurisdictions.

18. Commitments and Contingencies

Letters of Credit

As of July 1, 2007, we had $2.8 million of outstanding letters of credit, of which approximately $836 thousand were collateralized by restricted cash and $2.0 million were backed by our revolving line of credit.

Financed Insurance Policies

In fiscal year 2006 and prior, we routinely entered into agreements to finance insurance premiums for periods not to exceed the terms of the related insurance policies. In the three months ended July 2, 2006, we entered into an agreement to finance $3.5 million in insurance-related premiums associated with the annual renewal of certain of our insurance policies. The amount financed accrued interest at a 6.4% annual rate and was payable in monthly installments over an 11 month period. During the third quarter 2006, we agreed to pay a portion of the insurance premiums directly to the carrier thereby reducing the amount financed by $1.4 million. The remaining outstanding balance under this agreement was $665 thousand as of December 31, 2006, and is included in accrued liabilities on our consolidated balance sheet. As of July 1, 2007, there is no outstanding balance under this type of agreement.

Earn-Out Contingencies

Under the terms of the stock purchase agreement we entered into in connection with our acquisition of Dendron in September 2000, we may be required to make additional payments which are contingent upon Dendron products achieving certain revenue targets between 2003 and 2008. In 2003, the $4.0 million revenue target for sales of Dendron products during 2003 was met. Accordingly, an additional payment to the former Dendron stockholders of $3.75 million was made in 2004. In 2004, the $5.0 million revenue target for sales of Dendron products during 2004 was met. Accordingly, a payment to the former Dendron stockholders of $3.75 million was accrued in 2004 and was paid during the second quarter 2005. We may be required to make a final payment of $7.5 million, which is contingent upon Dendron products achieving annual revenues of $25 million in any year during the period between 2003 and 2008. Any such final payment would be due in the year following the year of target achievement.

Contingencies

We are from time to time subject to, and are presently involved in, litigation or other legal proceedings.

In September 2000, Dendron, which was acquired by MTI in 2002, was named as the defendant in three patent infringement lawsuits brought by the Regents of the University of California, as the plaintiff, in the District Court (Landgericht) in Dusseldorf, Germany. The complaints requested a judgment that Dendron’s EDC I coil device infringed three European patents held by the plaintiff and asked for relief in the form of an injunction that would prevent Dendron from producing and selling the devices, as well as an award of damages caused by Dendron’s alleged infringement, and other costs, disbursements and attorneys’ fees. In August 2001, the court issued a written decision that EDC I coil devices did infringe the plaintiff’s patents, enjoined Dendron from producing and selling the devices, and requested that Dendron disclose the individual products’ costs as the basis for awarding damages. In September 2001, Dendron appealed the decision. In addition, Dendron instituted challenges to the validity of each of these patents by filing opposition proceedings with the European Patent Office, or EPO, against one of the patents (MTI joined Dendron in this action in connection with its acquisition of Dendron), and by filing nullity proceedings with the German Federal Patents Court against the German component of the other two patents. The opposition proceedings with the EPO on the one patent are complete, and the EPO has rejected the opposition and has upheld the validity of the one patent. Dendron retains the right to file a nullity action in Germany against the patent. All three appeal proceedings are currently stayed on the basis of the validity challenges brought by Dendron.

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On July 4, 2001, the University of California filed another suit against Dendron alleging that the EDC I coil device infringed another European patent held by the plaintiff. The complaint was filed in the District Court of Dusseldorf, Germany seeking additional monetary and injunctive relief. In April 2002, the court found that EDC I coil devices did infringe the plaintiff’s patent. The patent involved is the same patent that was involved in the case before the English Patents Court discussed below and that was ruled by a Dutch court to be invalid, also as discussed below. The opposition proceedings on the patent are complete, and the EPO has rejected the opposition and has upheld the validity of the patent.

Dendron has now filed a domestic German nullity action against that patent. A hearing has been scheduled in the German Federal Patent Court in October 2007. The infringement case is under appeal. The appeal has been stayed pending the outcome of the nullity action filed against the patent.

An accrual for the matters discussed above was included in the balance sheet of Dendron as of the date of its acquisition by MTI. Related to this matter, approximately $884 thousand and $863 thousand as of July 1, 2007 and December 31, 2006, respectively, was recorded in accrued liabilities in our consolidated financial statements included in this report. Dendron ceased all activities with respect to the EDC I coil device prior to MTI’s October 2002 acquisition of Dendron.

Concurrent with MTI’s acquisition of Dendron, MTI initiated a series of legal actions related to our Sapphire coils in the Netherlands and the United Kingdom, which included a cross-border action that was heard by a Dutch court, as further described below. The primary purpose of these actions was to assert both invalidity and non-infringement by MTI of certain patents held by others. The range of patents at issue are held by the Regents of the University of California, with Boston Scientific Corporation subsidiaries named as exclusive licensees, collectively referred to as the “patent holders,” related to detachable coils and certain delivery catheters.

In October 2003, the Dutch court ruled the three patents at issue related to detachable coils are valid and that our Sapphire coils do infringe such patents. The Dutch court also ruled that the patent holders’ patent at issue related to the delivery catheter was invalid. Pursuant to the court’s ruling, we have been enjoined by the patent holders from engaging in infringing activities related to our Sapphire coils in most countries within the European Union, and may be liable for then-unspecified monetary damages for our activities since September 27, 2002. In February 2005, we received an initial claim from the patent holders with respect to monetary damages, amounting to €3.6 million, or approximately $4.8 million as of July 1, 2007, with which we disagree. Court hearings will be held regarding these claims. We have filed an appeal with the Dutch court, and believe that since the date of injunction in each separate country we are in compliance with the Dutch court’s injunction. On September 5, 2006, we received a letter from the patent holders’ counsel stating that, pursuant to a recent decision in the European Court dated July 13, 2006, they are no longer enforcing the injunction outside of The Netherlands. A decision on the appeal is expected in the second half of 2007. The patent holders have requested a delay in the hearing on claims damages until a decision on the appeal has been rendered. Because we believe that we have valid legal grounds for appeal, we have determined that a loss is not probable at this time as defined by SFAS 5, “Accounting for Contingencies.” However, there can be no assurance that the ultimate resolution of this matter will not result in a material adverse effect on our business, financial condition or results of operations.

In January 2003, we initiated a legal action in the English Patents Court seeking a declaration that a patent held by the patent holders related to delivery catheters was invalid, and that our products did not infringe this patent. The patent in question was the U.K. designation of the same patent that was found by the Dutch court in October 2003 to be invalid, as discussed above. The patent holders counterclaimed for alleged infringement by us. In February 2005, the court approved an interim settlement between the parties under which the patent holders were required to surrender such patent to the U.K. Comptroller of Patents, and to pay our costs associated with the legal action, including interest. As a result, the patent was surrendered and we received interim payments from the patent holders aggregating £500 thousand (equivalent to approximately $900 thousand based on the dates of receipt), which we recorded as a reduction of litigation expense upon receipt of such funds during the first quarter 2005. The parties initiated proceedings before a costs judge regarding payment by the patent holders of the remaining costs incurred by us in such litigation. We have reached a final settlement with the patent holders and on October 31, 2006, received the final payment of £600 thousand (equivalent to approximately $1.1 million), which we recorded as a reduction of litigation expense in the fourth quarter of 2006. As a result of the settlement, we anticipate that we will no longer be involved in litigation on this matter in the United Kingdom, although no assurance can be given that no other litigation involving us may arise in the United Kingdom.

In the United States, concurrent with the FDA’s marketing clearance of our Sapphire line of embolic coils received in July 2003, we, through our subsidiary MTI, initiated a declaratory judgment action against the patent holders in the United States District Court for the Western District of Wisconsin. The action included assertions of non-infringement by us and invalidity of a range of patents held by the patent holders related to detachable coils and certain delivery catheters. In

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October 2003, the court dismissed our actions for procedural reasons without prejudice and without decision as to the merits of the parties’ positions. In December 2003, the University of California filed an action against us in the United States District Court for the Northern District of California alleging infringement by us with respect to a range of patents held by the University of California related to detachable coils and certain delivery systems. We filed a counterclaim against the University of California asserting non-infringement by us, invalidity of the patents and inequitable conduct in the procurement of certain patents. In addition, we filed a claim against the University of California and Boston Scientific Corporation for violation of federal antitrust laws, with the result that the court has subsequently decided to add Boston Scientific as a party to the litigation. Motions for summary judgment made by all parties, have been denied by the court. A trial date has been set for October 2007. In addition, there are various related actions, such as requests for re-examination and reissues, pending from time to time in the U.S. Patent and Trademark Office that may or may not have a material effect on these actions. We cannot estimate the possible loss or range of loss, if any, associated with the resolution of these matters. There can be no assurance that the ultimate resolution of these matters will not result in a material adverse effect on our business, financial condition or results of operations.

On March 30, 2005, we were served with a complaint by Boston Scientific Corporation and one of its affiliates which claims that some of our products, including our SpideRX Embolic Protection Device, infringe certain of Boston Scientific’s patents. This action was brought in the United States District Court for the District of Minnesota. Subsequently, we added counterclaims for infringement of three of our patents, Boston Scientific has added two patents into its claims, as well as a claim against us for misappropriation of trade secrets. We intend to vigorously defend and prosecute respectively the claims in this action. Because these matters are in early stages and because of the complexity of the case, we cannot estimate the possible loss or range of loss, if any, associated with their resolution. However, there can be no assurance that the ultimate resolution of these matters will not result in a material adverse effect on our business, financial condition or results of operations.

The acquisition agreement relating to our acquisition of Appriva Medical, Inc. contains four milestones to which payments relate. The first milestone was required by its terms to be achieved by January 1, 2005 in order to trigger a payment equal to $50 million. We have determined that the first milestone was not achieved by January 1, 2005 and that the first milestone is not payable. On May 20, 2005, Michael Lesh, as an individual seller of Appriva stock and purporting to represent certain other sellers of Appriva stock, filed a complaint in the Superior Court of the State of Delaware with individually specified damages aggregating $70 million and other unspecified damages for several allegations, including that we, along with other defendants, breached the acquisition agreement and an implied covenant of good faith and fair dealing by willfully failing to take the steps necessary to meet the first milestone under the agreement, and thereby also failing to meet certain other milestones, and further that one milestone was actually met. The complaint also alleges fraud, negligent misrepresentation and violation of state securities laws in connection with the negotiation of the acquisition agreement. We believe these allegations are without merit and intend to vigorously defend this action. We filed a motion to dismiss the complaint, which the court granted in June 2006 on standing grounds. The plaintiff filed a petition for reargument, which was denied on October 31, 2006. On November 29, 2006, the plaintiff filed a notice of appeal of the trial court’s decision granting our motion to dismiss. Briefing of plaintiff’s appeal was completed in early March 2007. The Delaware Supreme Court has ordered that this appeal be consolidated (for purposes of appeal only) with the Appriva Shareholder Litigation Company matter discussed below and has scheduled an en banc oral argument for September 5, 2007.

On or about November 21, 2005, a second lawsuit was filed in Delaware Superior Court relating to the acquisition of Appriva Medical, Inc. The named plaintiff is Appriva Shareholder Litigation Company, LLC, which according to the complaint was formed for the purpose of pursuing claims against us. The complaint alleges that Erik van der Burg and three unidentified institutional investors have assigned their claims as former shareholders of Appriva to Appriva Shareholder Litigation Company, LLC. The complaint alleges specified damages in the form of the second milestone payment ($25 million), which is claimed to be due and payable, and further alleges unspecified damages to be proven at trial. The complaint alleges the following claims: misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory relief. We believe these allegations and claims are without merit and intend to vigorously defend this action. We filed a motion to dismiss the complaint. On August 24, 2006, the trial court converted our motion to dismiss into a motion for summary judgment, which motion was granted. The trial court ruled that Appriva Shareholder Litigation Company, LLC did not have standing. The trial court did not address the merits of the claims. Appriva Shareholder Litigation Company, LLC has filed a notice of appeal of the trial court’s ruling. The Delaware Supreme Court heard oral arguments on January 16, 2007. As indicated above, this case has been consolidated, for purposes of appeal only, with the Lesh appeal and oral argument on the consolidated appeal has been scheduled for September 5, 2007.

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Because both of these Appriva acquisition related matters are in early stages, we cannot estimate the possible loss or range of loss, if any, associated with their resolution. However, there can be no assurance that the ultimate resolution of these matters will not result in a material adverse effect on our business, financial condition or results of operations.

On October 11, 2005, a purported stockholder class action lawsuit purportedly on behalf of MTI’s minority stockholders was filed in the Delaware Court of Chancery against MTI, MTI’s directors and us challenging our exchange offer with MTI. The complaint alleged the then-proposed transaction constituted a breach of defendants’ fiduciary duties. The complaint sought an injunction preventing the completion of the transaction with MTI or, if the transaction were to be completed, rescission of the transaction or rescissory damages, unspecified damages, costs and attorneys’ fees and expenses. On January 6, 2006, we completed an acquisition of the publicly held shares of MTI through a merger transaction. We believe this lawsuit is without merit and plan to defend it vigorously if the plaintiff decides to pursue it. However, there can be no assurance that the ultimate resolution of this matter will not result in a material adverse effect on our business, financial condition or results of operations.

19. Segment and Geographic Information

We report and manage our operations in two reportable business segments based on similarities in the products sold, customer base and distribution system. The cardio peripheral operating segment includes cardiovascular products which are used to treat coronary artery disease, atrial fibrillation and other disorders in the heart and peripheral vascular products which are used to treat vascular disease in the legs, kidney (or renal), neck (or carotid), and generally all vascular diseases other than in the brain or the heart. The neurovascular operating segment includes products that are used to treat vascular disease and disorders in the brain, including aneurysms and arterial-venous malformations. Management measures segment profitability on the basis of gross profit calculated as net sales less cost of goods sold excluding amortization of intangible assets. Other operating expenses are not allocated to individual operating segments for internal decision making activities.

The following is segment information (in thousands):

	Three Months Ended						Six Months Ended
	July 1, 2007			July 2, 2006			July 1, 2007			July 2, 2006
Net sales
Cardio Peripheral:
Stents	$	22,153		$	16,020		$	41,959		$	29,066
Thrombectomy and embolic protection		8,443			5,642			14,661			9,679
Procedural support and other	$	10,035		$	8,919		$	20,502		$	17,168
Total Cardio Peripheral	$	40,631		$	30,581		$	77,122		$	55,913
Neurovascular:
Embolic products		12,827			9,412			25,753			16,795
Neuro access and delivery products and other		11,938			10,627			24,020			20,149
Total Neurovascular	$	24,765		$	20,039		$	49,773		$	36,944
Total net sales	$	65,396		$	50,620		$	126,895		$	92,857
Gross profit
Cardio Peripheral	$	24,119		$	17,208		$	46,081		$	30,135
Neurovascular		18,915			15,233			37,995			28,055
Total	$	43,034		$	32,441		$	84,076		$	58,190
Operating expense		55,065			46,091			105,751			96,925
Loss from operations	$	(12,031	)	$	(13,650	)	$	(21,675	)	$	(38,735	)

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	July 1,		December 31,
Total assets	2007		2006
Cardio Peripheral	$	240,327	$	209,414
Neurovascular		149,805		143,412
Total	$	390,132	$	352,826

The following table presents net sales and long-lived assets by geographic area (in thousands):

	Three Months Ended				Six Months Ended
	July 1, 2007		July 2, 2006		July 1, 2007		July 2, 2006
Geographic Data
Net Sales
United States	$	39,576	$	30,689	$	74,716	$	55,463
International		25,820		19,931		52,179		37,394
Total net sales	$	65,396	$	50,620	$	126,895	$	92,857

	July 1,		December 31,
Long-lived Assets	2007		2006
United States	$	23,159	$	23,422
International		801		650
Total long-lived assets	$	23,960	$	24,072

20. Related Party Transaction

During the second quarter of 2007, we entered into a distribution agreement with Beijing Lepu Medical Device, Inc. (“Lepu”), a Chinese domiciled manufacturer and distributor of interventional cardiology and peripheral products. The two year agreement allows Lepu to sell certain of our embolic protection devices and stents in China. We believe that having access to Lepu and their sub-distributor network is a strategic way for us to quickly gain access and market share in these strategic markets. Warburg Pincus Equity Partners, L.P. and certain of its affiliates (“Warburg Pincus”), who collectively own over 50% of our outstanding common stock, owns an approximate 20% ownership interest in Lepu and has a designee on Lepu’s board of directors. During the second quarter of 2007, Lepu had purchased from us cardio peripheral products totaling approximately $750 thousand, that we have recognized as revenue and, as of July 2, 2007, owed us approximately $525 thousand that is included in accounts receivable.

21. Subsequent Event

On July 21, 2007, we entered into an agreement and plan of merger with FoxHollow Technologies, Inc. Under the terms of the merger agreement, FoxHollow stockholders will receive 1.45 shares of our common stock plus $2.75 in cash for each share of FoxHollow common stock they own. Alternatively, FoxHollow stockholders may elect to receive either $25.92 in cash or 1.62 shares of our common stock for each share of FoxHollow common stock by making an all-cash or an all-stock election, respectively. Cash and stock elections are subject to pro-ration to preserve an overall mix of 1.45 shares of ev3 common stock and $2.75 in cash for all of the outstanding shares of FoxHollow common stock in the aggregate. We expect to issue in the aggregate approximately 43.7 million shares of our common stock and pay approximately $82.8 million in cash to FoxHollow stockholders in the merger. We expect to use cash acquired by us in the merger to pay the cash portion of the merger consideration. Upon completion of the transaction, FoxHollow stockholders would own approximately 41 percent of the combined company, and our stockholders would own approximately 59 percent.

The transaction is subject to approval of FoxHollow’s stockholders, effectiveness of a Form S-4 registration statement to be filed with the Securities and Exchange Commission, expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and clearance under any applicable foreign antitrust laws, and other customary closing conditions. The transaction is intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended. The transaction is expected to be completed in the fourth quarter of 2007. See “Part II – Other Information – Item 1A Risk Factors” for a discussion of the risk factors related to the merger.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis provides material historical and prospective disclosures intended to enable investors and other users to assess our results of operations and financial condition. Statements that are not historical are forward-looking and involve risks and uncertainties discussed under the heading “Forward-Looking Statements” below. The following discussion of our results of operations and financial condition should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this report.

Overview

We are a leading global medical device company focused on catheter-based technologies for the endovascular treatment of vascular diseases and disorders. Our name signifies our commitment to, and engagement in, the peripheral vascular, neurovascular and cardiovascular markets and the physician specialties that serve them. We sell over 100 products consisting of over 1,000 styles and sizes in more than 60 countries through a direct sales force in the United States, Canada, Europe and other countries and distributors in selected other international markets.

We believe the overall market for endovascular devices will grow as the demand for minimally invasive treatment of vascular diseases and disorders continues to increase. We intend to capitalize on this market opportunity by the continued introduction of new products. We expect to originate these new products primarily through our internal research and development and clinical efforts, but we may supplement them with acquisitions or other external collaborations. On July 21, 2007, we entered into an agreement and plan of merger with FoxHollow Technologies, Inc., a company that develops and markets minimally invasive devices for the removal of plaque and thrombus for the treatment of peripheral artery disease. We refer you to the information under the heading “—Recent Development” below. Additionally, our growth has been, and will continue to be, impacted by our expansion into new geographic markets and the expansion of our direct sales organization in existing geographic markets.

We report and manage our operations in two reportable business segments based on similarities in the products sold, customer base and distribution system. Our cardio peripheral segment contains products that are used in both peripheral vascular and cardiovascular procedures by radiologists, vascular surgeons and cardiologists. Our neurovascular segment contains products that are used primarily by neuroradiologists and neuro surgeons. Our sales activities and operations are aligned closely with our business segments. We generally have dedicated cardio peripheral sales teams in the United States and Europe that target customers who often perform procedures in both anatomic areas (cardiovascular and peripheral vascular). We generally have separate, dedicated neurovascular sales teams in the United States and Europe that are specifically focused on our neurovascular business customer base.

We have corporate infrastructure and direct sales capabilities in the United States, Canada, Europe and other countries and have established distribution relationships in selected other international markets. Our corporate headquarters and our manufacturing, research and development, and U.S. sales operations for our peripheral vascular and cardiovascular product lines are located in Plymouth, Minnesota. Our manufacturing, research and development, and U.S. sales operations for our neurovascular product lines are located in Irvine, California. Outside of the United States, our primary office is in Paris, France. During the three and six months ended July 1, 2007, approximately 39.5% and 41.1% of our net sales, respectively, were generated outside of the United States. As a result, we are sensitive to risks related to fluctuation in exchange rates and other risks associated with international operations which could affect our business results. During the three and six months ended July 1, 2007, changes in foreign currency exchange rates had a positive impact of approximately $1.1 million and $2.5 million, respectively, as compared to our net sales for the three and six months ended July 2, 2006.

Since our inception, we have focused on building our U.S. and international direct sales and marketing infrastructure that includes a worldwide sales force of approximately 265 sales professionals as of July 1, 2007 in the United States, Canada and Europe. Our direct sales representatives accounted for approximately 87% and 85% of our net sales during the three and six months ended July 1, 2007, respectively, with the balance generated by independent distributors. In order to drive sales growth, we have invested heavily throughout our history in new product development, clinical trials to obtain regulatory approvals and the expansion of our global distribution system. As a result, our cumulative costs and expenses have significantly exceeded our net sales, resulting in an accumulated deficit of $636.7 million at July 1, 2007. Consequently, we have financed our operations through debt and equity offerings. We expect to continue to generate operating losses for at least the next nine months, which as discussed under the heading “Recent Development” below, would not reflect any impact of our potential business combination with FoxHollow.

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Our cash, cash equivalents and short-term investments available to fund our current operations were $65.7 million at July 1, 2007. On April 19, 2007, we completed a secondary offering issuing 2,500,000 shares of our common stock which generated approximately $44.7 million in net proceeds. We have used and expect to continue to use the net proceeds for general corporate purposes.

On June 28, 2006, our operating subsidiaries, ev3 Endovascular, Inc., ev3 International, Inc. and Micro Therapeutics, Inc., entered into a Loan and Security Agreement with Silicon Valley Bank, consisting of a two-year $30.0 million revolving line of credit and a 48-month $7.5 million equipment financing line. On March 15, 2007, we entered into an amendment to our existing Loan Agreement with SVB. The amendment added an additional $5 million line of equipment financing, increasing the total available equipment financing to $12.5 million. The additional $5 million of equipment financing has a four-year maturity and bears interest at a variable rate equal to SVB’s prime rate plus 1.0%. The additional borrowing under the amendment to the equipment financing is payable in 42 consecutive equal monthly installments of principal, beginning on September 30, 2007. As of July 1, 2007, we had $11.4 million in outstanding borrowings under the equipment financing and no outstanding borrowings under the revolving line of credit; however, we had approximately $2.0 million of outstanding letters of credit issued by SVB, which reduces the amount available under our revolving line of credit to approximately $28.0 million.

We believe our cash, cash equivalents, short-term investments and funds available under our revolving line of credit will be sufficient to meet our liquidity requirements through at least the next 12 months.

Recent Development

On July 21, 2007, we entered into an agreement and plan of merger with FoxHollow Technologies, Inc. Under the terms of the merger agreement, FoxHollow stockholders will receive 1.45 shares of our common stock plus $2.75 in cash for each share of FoxHollow common stock they own. Alternatively, FoxHollow stockholders may elect to receive either $25.92 in cash or 1.62 shares of our common stock for each share of FoxHollow common stock by making an all-cash or an all-stock election, respectively. Cash and stock elections are subject to pro-ration to preserve an overall mix of 1.45 shares of ev3 common stock and $2.75 in cash for all of the outstanding shares of FoxHollow common stock in the aggregate. We expect to issue in the aggregate approximately 43.7 million shares of our common stock and pay approximately $82.8 million in cash to FoxHollow stockholders in the merger. We expect to use cash acquired by us in the merger to pay the cash portion of the merger consideration. Upon completion of the transaction, FoxHollow stockholders would own approximately 41 percent of the combined company, and our stockholders would own approximately 59 percent.

The transaction is subject to approval of FoxHollow’s stockholders, effectiveness of a Form S-4 registration statement to be filed with the Securities and Exchange Commission, expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and clearance under any applicable foreign antitrust laws, and other customary closing conditions. The transaction is intended to qualify as a tax-free reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended. The transaction is expected to be completed in the fourth quarter of 2007. See “Part II – Other Information – Item 1A Risk Factors” for a discussion of the risk factors related to the merger.

Unless otherwise indicated, references to ev3 in this filing relate to ev3 as a stand-alone entity and do not reflect the impact of the potential business combination with FoxHollow.

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Results of Operations

The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts (dollars in thousands, except per share amounts), and the changes between the specified periods expressed as percent increases or decreases:

	Three Months Ended						Percent			Six Months Ended						Percent
	July 1, 2007			July 2, 2006			Change			July 1, 2007			July 2, 2006			Change
Results of Operations:
Net sales	$	65,396		$	50,620			29.2	%	$	126,895		$	92,857			36.7	%
Operating expenses:
Cost of goods sold (a)		22,362			18,179			23.0	%		42,819			34,667			23.5	%
Sales, general and administrative (a)		40,882			35,808			14.2	%		80,019			73,669			8.6	%
Research and development (a)		11,323			6,047			87.2	%		18,756			12,821			46.3	%
Amortization of intangible assets		3,864			4,282			(9.8	)%		7,964			8,525			(6.6	)%
(Gain) loss on sale of assets, net		(1,004	)		(46	)	NM				(988	)		124		NM
Acquired in-process research and development		—			—		NM				—			1,786		NM
Total operating expenses		77,427			64,270			20.5	%		148,570			131,592			(12.9	)%
Loss from operations		(12,031	)		(13,650	)		(11.9	)%		(21,675	)		(38,735	)		(44.0	)%
Other income:
Gain on sale of investments, net		—			(1,063	)	NM				—			(1,063	)	NM
Interest income, net		(297	)		(514	)		(42.2	)%		(406	)		(1,213	)		(66.5	)%
Other income, net		(195	)		(1,327	)		(85.3	)%		(512	)		(1,381	)		(62.9	)%
Loss before income taxes		(11,539	)		(10,746	)		7.4	%		(20,757	)		(35,078	)		(40.8	)%
Income tax expense		332			77		NM				608			246		NM
Net loss	$	(11,871	)	$	(10,823	)		(9.7	)%	$	(21,365	)	$	(35,324	)		(39.5	)%
Net loss per common share (basic and diluted)	$	(0.20	)	$	(0.19	)				$	(0.37	)	$	(0.63	)
Weighted average shares outstanding		59,543,827			56,698,043						58,529,041			56,319,427
(a)  Includes stock-based compensation charges of:
Cost of goods sold	$	187		$	155					$	345		$	369
Sales, general and administrative		2,207			1,799						4,066			3,165
Research and development		266			158						448			372
	$	2,660		$	2,112					$	4,859		$	3,906

The following tables set forth, for the periods indicated, our net sales by segment and geography expressed as dollar amounts (in thousands) and the changes in net sales between the specified periods expressed as percentages:

	Three Months Ended				Percent			Six Months Ended				Percent
NET SALES BY SEGMENT:	July 1, 2007		July 2, 2006		Change			July 1, 2007		July 2, 2006		Change
Cardio Peripheral:
Stents	$	22,153	$	16,020		38.3	%	$	41,959	$	29,066		44.4	%
Thrombectomy and embolic protection		8,443		5,642		49.6	%		14,661		9,679		51.5	%
Procedural support and other		10,035		8,919		12.5	%		20,502		17,168		19.4	%
Total Cardio Peripheral	$	40,631	$	30,581		32.9	%	$	77,122	$	55,913		37.9	%
Neurovascular:
Embolic products		12,827		9,412		36.3	%		25,753		16,795		53.3	%
Neuro access and delivery products and other		11,938		10,627		12.3	%		24,020		20,149		19.2	%
Total Neurovascular	$	24,765	$	20,039		23.6	%	$	49,773	$	36,944		34.7	%
Total	$	65,396	$	50,620		29.2	%	$	126,895	$	92,857		36.7	%

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	Three Months Ended				Percent			Six Months Ended				Percent
NET SALES BY GEOGRAPHY:	July 1, 2007		July 2, 2006		Change			July 1, 2007		July 2, 2006		Change
United States	$	39,576	$	30,689		29.0	%	$	74,716	$	55,463		34.7	%
International
Before foreign exchange impact		24,694		19,931		23.9	%		49,685		37,394		32.9	%
Foreign exchange impact		1,126		—		—			2,494		—		—
Total		25,820		19,931		29.5	%		52,179		37,394		39.5	%
Total	$	65,396	$	50,620		29.2	%	$	126,895	$	92,857		36.7	%

Comparison of the Three Months Ended July 1, 2007 to the Three Months Ended July 2, 2006

Net sales. Net sales increased 29.2% to $65.4 million in the three months ended July 1, 2007 compared to $50.6 million in the three months ended July 2, 2006, primarily as a result of continued improvements in sales force productivity and increased market penetration of products introduced during the past two years.

Net sales of cardio peripheral products. Net sales of cardio peripheral products increased 32.9% to $40.6 million in the three months ended July 1, 2007 compared to $30.6 million in the three months ended July 2, 2006. This sales growth was primarily the result of sales growth in our stent products and sales of our SpiderFX Embolic Protection Device. Net sales in our stent product line increased 38.3% to $22.1 million in the three months ended July 1, 2007 compared to $16.0 million in the three months ended July 2, 2006. This increase is attributable to increased market penetration of the EverFlex, Protégé RX Carotid Stent, partially offset by sales declines in older generation products. Net sales of our thrombectomy and embolic protection devices increased 49.6% to $8.4 million in the three months ended July 1, 2007 compared to $5.6 million in the same period of 2006, largely due to increased market penetration of the SpiderFX Embolic Protection Device, partially offset by sales declines in older generation products. Net sales of our procedural support and other products increased 12.5% to $10.0 million in the three months ended July 1, 2007 compared to $8.9 million in the three months ended July 2, 2006, largely due to the increased market penetration of PTA balloon catheters in the United States. We expect cardio peripheral net sales to increase during the remainder of 2007 as a result of new product introductions and continued market penetration of products released during the past two years.

Net sales of neurovascular products. Net sales of our neurovascular products increased 23.6% to $24.8 million in the three months ended July 1, 2007 compared to $20.0 million in the three months ended July 2, 2006, primarily as a result of increased penetration of existing products and sales growth in virtually all of our neurovascular access and delivery products. Net sales of our embolic products increased 36.3% to $12.8 million in the three months ended July 1, 2007 compared to $9.4 million in the same period of 2006, primarily due to increased market penetration of our Nexus coil and Onyx Liquid Embolic System for the treatment of brain arterial-venous malformations, partially offset by sales declines in older generation products. Sales of our neuro access and delivery products and other increased 12.3% to $12.0 million in the three months ended July 1, 2007 compared to $10.6 million in the same period in 2006, largely as a result of volume increases across virtually all product lines. We expect our neurovascular net sales to increase during the remainder of 2007 as a result of market growth, continued market penetration of products released during the past two years and the introduction of new products.

Net sales by geography. Net sales in the United States increased 29.0% to $39.6 million in the three months ended July 1, 2007 compared to $30.7 million in the three months ended July 2, 2006. International net sales increased 29.5% to $25.8 million in the three months ended July 1, 2007 compared to $19.9 million in the three months ended July 2, 2006 and represented 39.5% and 39.4% of our total net sales during the three months ended July 1, 2007 and July 2, 2006, respectively. This growth was driven in part by an increase in market penetration within our historical international markets as well as continued expansion into several new or emerging markets in various Pacific Rim countries. Our international net sales in the three months ended July 1, 2007 includes a favorable currency impact of approximately $1.1 million principally resulting from the relationship of the Euro to the U.S. dollar in comparison with the year-ago quarter.

Cost of goods sold. As a percentage of net sales, cost of goods sold decreased to 34.2% of net sales in the three months ended July 1, 2007 compared to 35.9% of net sales in the three months ended July 2, 2006. This decrease was primarily attributable to our continued growth in sales volume, ongoing investments in in-house manufacturing capabilities and cost savings achieved related to our implementation and use of lean manufacturing initiatives. In our cardio peripheral segment, cost of goods sold as a percent of net sales decreased to 40.6% in the three months ended July 1, 2007 compared to 43.7% in the three months ended July 2, 2006 primarily attributable to on-going investments in in-house manufacturing capabilities and increased sales volume. In our neurovascular segment, cost of goods sold as a percent of net sales

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decreased to 23.6% in the three months ended July 1, 2007 compared to 24.0% in the three months ended July 2, 2006 primarily attributable to increased production volumes and on-going cost savings programs. We expect cost of goods sold as a percentage of net sales to continue to decline slightly during 2007 due to higher volume in our manufacturing facilities and efficiency improvements from manufacturing initiatives, offset in part by royalty payments required under the license agreement with Medtronic and anticipated conversion costs associated with new product launches occurring during 2007.

Sales, general and administrative expense. Sales, general and administrative expenses increased 14.2% to $40.9 million in the three months ended July 1, 2007 compared to $35.8 million in the three months ended July 2, 2006. The increase was partially due to the unfavorable impact of foreign currency on international related operating expenses of $840 thousand, increases in litigation related expenses of $1.3 million, increases in personnel costs due to increased headcount of $1.8 million, and a $408 thousand increase in non-cash stock-based compensation costs. Although sales, general and administrative expenses increased in absolute dollars, as a percentage of net sales, sales, general and administrative expenses decreased to 62.5% of net sales in the three months ended July 1, 2007 compared to 70.7% of net sales in the three months ended July 2, 2006. We expect sales, general and administrative expenses, excluding litigation related charges, for the remaining quarters of 2007 to remain relatively consistent with second quarter 2007 levels but continue to decline as a percentage of net sales as we believe that our current infrastructure can support a higher level of sales.

Research and development. Research and development expense increased 87.2% to $11.3 million in the three months ended July 1, 2007 compared to $6.0 million in the three months ended July 2, 2006. This increase was due to increased spending on clinical trials. We expect research and development expenses for the remaining quarters of 2007 to remain relatively consistent with second quarter 2007 levels as we continue to invest in as many as six clinical trials.

Amortization of intangible assets. Amortization of intangible assets decreased 9.8% to $3.9 million in the three months ended July 1, 2007 compared to $4.3 million in the three months ended July 2, 2006 primarily due to certain intangible assets becoming fully amortized, substantially offset by the amortization of the recently acquired Invatec distribution rights intangible asset (see Note 10). We expect amortization of intangible assets for the remaining quarters of 2007 to remain consistent to slightly declining when compared with second quarter 2007 levels.

Gain (loss) on sale of assets, net. Gain (loss) on sale of assets, net was a gain of $1.0 million in the three months ended July 1, 2007 and primarily resulted from the sale of certain intellectual property to Atritech, Inc., partially offset by losses on other asset disposals during the quarter (see Note 14). Gain (loss) on sale of assets, net was a gain of $46 thousand in the three months ended July 1, 2006 and resulted from the sale of miscellaneous fixed assets.

Interest income, net. Interest income, net was $297 thousand in the three months ended July 1, 2007 compared to $514 thousand in the three months ended July 2, 2006. This decrease was due primarily to interest charges incurred on our outstanding borrowings under our equipment financing. See Note 15 to the consolidated financial statements included elsewhere in this report.

Other income, net. Other income, net was $195 thousand in the three months ended July 1, 2007 compared to $1.3 million in the three months ended July 2, 2006. The other income, net in each of the three months ended July 1, 2007 and July 2, 2006 was primarily due to foreign exchange gains and losses.

Income tax expense. We incurred modest levels of income tax expense in each of the three months ended July 1, 2007 and July 2, 2006 related to certain European sales offices. We recorded no provision or benefit for U.S. income taxes in either of the three months ended July 1, 2007 or July 2, 2006 due to our history of operating losses. We adopted FIN 48, “Accounting for Uncertainty in Income Taxes” on January 1, 2007. See Note 17 to the consolidated financial statements included elsewhere in this report.

Comparison of the Six Months Ended July 1, 2007 to the Six Months Ended July 2, 2006

Net sales. Net sales increased 36.7% to $126.9 million in the six months ended July 1, 2007 compared to $92.9 million in the six months ended July 2, 2006, primarily as a result of continued improvements in sales force productivity and increased market penetration of products introduced during the past two years.

Net sales of cardio peripheral products. Net sales of cardio peripheral products increased 37.9% to $77.1 million in the six months ended July 1, 2007 compared to $55.9 million in the six months ended July 2, 2006. This sales growth was primarily the result of sales growth in our stent products and sales of our SpiderFX Embolic Protection Device. Net sales

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in our stent product line increased 44.4% to $41.9 million in the six months ended July 1, 2007 compared to $29.1 million in the six months ended July 2, 2006. This increase is attributable to increased market penetration of the EverFlex and Protégé RX Carotid Stent, partially offset by sales declines in older generation products. Net sales of our thrombectomy and embolic protection devices increased 51.5% to $14.7 million in the six months ended July 1, 2007 compared to $9.7 million in the same period of 2006, largely due to increased market penetration of the SpiderFX Embolic Protection Device, partially offset by sales declines in older generation products. Net sales of our procedural support and other products increased 19.4% to $20.5 million in the six months ended July 1, 2007 compared to $17.2 million in the six months ended July 2, 2006, largely due to the increased market penetration of PTA balloon catheters in the United States.

Net sales of neurovascular products. Net sales of our neurovascular products increased 34.7% to $49.8 million in the six months ended July 1, 2007 compared to $36.9 million in the six months ended July 2, 2006, primarily as a result of increased penetration of existing products and sales growth in virtually all of our neurovascular access and delivery products. Net sales of our embolic products increased 53.3% to $25.8 million in the six months ended July 1, 2007 compared to $16.8 million in the same period of 2006, primarily due to increased market penetration of our Nexus coil and Onyx Liquid Embolic System for the treatment of brain arterial-venous malformations, partially offset by sales declines in older generation products. Sales of our neuro access and delivery products and other increased 19.2% to $24.0 million in the six months ended July 1, 2007 compared to $20.1 million in the same period in 2006, largely as a result of volume increases across virtually all product lines.

Net sales by geography. Net sales in the United States increased 34.7% to $74.7 million in the six months ended July 1, 2007 compared to $55.5 million in the six months ended July 2, 2006. International net sales increased 39.5% to $52.2 million in the six months ended July 1, 2007 compared to $37.4 million in the six months ended July 2, 2006 and represented 41.1% and 40.3% of our total net sales during the six months ended July 1, 2007 and July 2, 2006, respectively. This growth was driven in part by an increase in market penetration within our historical international markets as well as continued expansion into several new or emerging markets in various Pacific Rim countries. Our international net sales in the six months ended July 1, 2007 includes a favorable currency impact of approximately $2.5 million principally resulting from the relationship of the Euro to the U.S. dollar in comparison with the year-ago quarter.

Cost of goods sold. As a percentage of net sales, cost of goods sold decreased to 33.7% of net sales in the six months ended July 1, 2007 compared to 37.3% of net sales in the six months ended July 2, 2006. This decrease was primarily attributable to our continued growth in sales volume, ongoing investments in in-house manufacturing capabilities and cost savings achieved related to our implementation and use of lean manufacturing initiatives. In our cardio peripheral segment, cost of goods sold as a percent of net sales decreased to 40.2% in the six months ended July 1, 2007 compared to 46.1% in the six months ended July 2, 2006 primarily attributable to on-going investments in in-house manufacturing capabilities and increased sales volume. In our neurovascular segment, cost of goods sold as a percent of net sales decreased to 23.7% in the six months ended July 1, 2007 compared to 24.1% in the six months ended July 2, 2006 primarily attributable to increased production volumes and on-going cost savings programs.

Sales, general and administrative expense. Sales, general and administrative expenses increased 8.6% to $80.0 million in the six months ended July 1, 2007 compared to $73.7 million in the six months ended July 2, 2006. The increase was partially due to the unfavorable impact of foreign currency on international related operating expenses of $1.7 million, increases in personnel costs due to increased headcount of $2.6 million, increases in litigation related expenses of $4.2 million and a $901 thousand increase in non-cash stock-based compensation costs and partially offset by acquisition related expenses that occurred in six months ended July 2, 2006 that did not recur in the six months ended July 1, 2007. Although sales, general and administrative expenses increased in absolute dollars, as a percentage of net sales, sales, general and administrative expenses decreased to 63.1% of net sales in the six months ended July 1, 2007 compared to 79.3% of net sales in the six months ended July 2, 2006.

Research and development. Research and development expense increased 46.3% to $18.8 million in the six months ended July 1, 2007 compared to $12.8 million in the six months ended July 2, 2006. This increase was due to increased spending on clinical trials.

Amortization of intangible assets. Amortization of intangible assets decreased 6.6% to $8.0 million in the six months ended July 1, 2007 compared to $8.5 million in the six months ended July 2, 2006 primarily due to certain intangible assets becoming fully amortized, substantially offset by the amortization of the recently acquired Invatec distribution rights intangible asset (see Note 10).

Gain (loss) on sale of assets, net. Gain (loss) on sale of assets, net was a gain of $988 thousand in the six months ended July 1, 2007 and resulted primarily from the sale of certain intellectual property to Atritech Inc., partially offset by losses

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on other asset disposals during the year (see Note 14). Gain (loss) on sale of assets, net was a loss of $124 thousand in the six months ended July 1, 2006 and resulted from the sale of miscellaneous fixed assets.

Interest income, net. Interest income, net was $406 thousand in the six months ended July 1, 2007 compared to $1.2 million in the six months ended July 2, 2006. This decrease was due primarily to interest charges incurred on our outstanding borrowings under our equipment financing. See Note 15 to the consolidated financial statements included elsewhere in this report.

Other income, net. Other income, net was $512 thousand in the six months ended July 1, 2007 compared to $1.4 million in the six months ended July 2, 2006. The other income, net in each of the six months ended July 1, 2007 and July 2, 2006 was primarily due to foreign exchange gains and losses.

Income tax expense. We incurred modest levels of income tax expense in each of the six months ended July 1, 2007 and July 2, 2006 related to certain European sales offices. We recorded no provision or benefit for U.S. income taxes in either of the six month periods ended July 1, 2007 or July 2, 2006 due to our history of operating losses. We adopted FIN 48, “Accounting for Uncertainty in Income Taxes” on January 1, 2007. See Note 17 to the consolidated financial statements included elsewhere in this report.

Liquidity and Capital Resources

	July 1,		December 31,
Balance Sheet Data	2007		2006
	(in thousands)
Cash and cash equivalents	$	57,919	$	24,053
Short-term investments		7,800		14,700
Total current assets		173,421		135,845
Total assets		390,132		352,826
Total current liabilities		44,549		41,767
Total liabilities		53,546		47,592
Total stockholders’ equity		390,132		305,234

Financing history. We have generated significant operating losses since our inception. These operating losses, including cumulative non-cash charges for acquired in-process research and development of $128.7 million, have resulted in an accumulated deficit of $636.7 million as of July 1, 2007. We completed an initial public offering of our common stock in mid-2005 in which we sold 11,970,800 shares of our common stock at $14.00 per share, resulting in net proceeds to us of approximately $154.9 million, after deducting underwriting discounts and commissions and offering expenses. We used $36.5 million of these net proceeds to repay a portion of the accrued and unpaid interest on certain demand notes held by Warburg Pincus and The Vertical Group, L.P. and certain of its affiliates (“Vertical”) and the remaining funds for general corporate purposes. See Part II, Item 2 under the heading “Use of Proceeds” included elsewhere in this report. In April 2007, we completed a secondary offering issuing 2,500,000 shares of our common stock which generated approximately $44.7 million in net proceeds. We have used and expect to continue to use these funds for general corporate purposes.

Cash, cash equivalents and short-term investments. Our cash, cash equivalents and short-term investments available to fund current operations totaled approximately $65.7 million at July 1, 2007. We expect to continue to use cash to fund our operations for the remainder of 2007.

Credit facility. In June 2006, our operating subsidiaries, ev3 Endovascular, Inc., ev3 International, Inc. and Micro Therapeutics, Inc., which we refer to as the “borrowers”, entered into a Loan and Security Agreement, which we refer to as the loan agreement, with Silicon Valley Bank, or SVB, consisting of a two-year $30.0 million revolving line of credit and a 48-month $7.5 million equipment financing line. Pursuant to the terms of the loan agreement and subject to specified reserves, we may borrow under the revolving line of credit up to $12 million without any borrowing base limitations. Aggregate borrowings under the revolving line of credit that exceed $12 million will subject the revolving line to borrowing base limitations. These limitations allow us to borrow, subject to specified reserves up to 80% of eligible domestic and foreign accounts receivables plus up to 30% of eligible inventory. Additionally, borrowings against the eligible inventory may not exceed the lesser of 33% of the amount advanced against accounts receivable or $7.5 million. Borrowings under the revolving line bear interest at a variable rate equal to SVB’s prime rate. Borrowings under the equipment financing bear interest at a variable rate equal to SVB’s prime rate plus 1.0%. Accrued interest on any outstanding balance under the revolving line is payable monthly in arrears. Amounts outstanding under the equipment financing as of December 31, 2006 are payable in 42 consecutive equal monthly installments of principal, beginning on

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January 31, 2007. In March 2007, we entered into an amendment to our existing Loan Agreement with SVB. The amendment added an additional $5 million of equipment financing, increasing the total available equipment financing to $12.5 million. The additional $5 million of equipment financing has a four-year maturity and bears interest at a variable rate equal to SVB’s prime rate plus 1.0%. The additional borrowing under the amendment to the equipment financing is payable in 42 consecutive equal monthly installments of principal, beginning on September 30, 2007. As of July 1, 2007, we had $11.4 million in outstanding borrowings under the equipment financing, as amended, and no outstanding borrowings under the revolving line of credit; however, we had approximately $2.0 million of outstanding letters of credit issued by SVB, which reduces the amount available under our revolving line of credit to approximately $28 million.

Both the revolving line of credit and equipment financing are secured by a first priority security interest in substantially all of our assets, excluding intellectual property, which is subject to a negative pledge, and are guaranteed by ev3 Inc. and all of our domestic direct and indirect subsidiaries. The loan agreement requires the borrowers to maintain a specified liquidity ratio and a tangible net worth level. The loan agreement imposes certain limitations on the borrowers, their subsidiaries and ev3 Inc., including without limitation, on their ability to: (i) transfer all or any part of their business or properties; (ii) permit or suffer a change in control; (iii) merge or consolidate, or acquire any entity; (iv) engage in any material new line of business; (v) incur additional indebtedness or liens with respect to any of their properties; (vi) pay dividends or make any other distribution on or purchase of, any of their capital stock; (vii) make investments in other companies; or (viii) engage in related party transactions, subject in each case to certain exceptions and limitations. The loan agreement requires us to maintain on deposit or invested with SVB or its affiliates the lesser of $15.0 million or 50% of our aggregate cash and cash equivalents. The borrowers are required to pay customary fees with respect to the facility, including a fee on the average unused portion of the revolving line.

The loan agreement contains customary events of default, including the failure to make required payments, the failure to comply with certain covenants or other agreements, the occurrence of a material adverse change, failure to pay certain other indebtedness and certain events of bankruptcy or insolvency. Upon the occurrence and continuation of an event of default, amounts due under the loan agreement may be accelerated.

We believe our cash, cash equivalents, short-term investments and funds available under our revolving line of credit will be sufficient to meet our liquidity requirements through at least the next 12 months.

Operating activities. Cash used in operations during the six months ended July 1, 2007 was $17.2 million compared to $31.4 million during the six months ended July 2, 2006, reflecting primarily our net loss and increased working capital requirements during the periods. During the six months ended July 1, 2007, our net loss included approximately $16.4 million of non-cash charges for depreciation and amortization and non-cash stock-based compensation expense as compared with $15.0 million in the first half of 2006. During the first half of 2006, we incurred $1.8 million of acquired in-process research and development expense that did not recur in the six months ended July 1, 2007. We expect that our operations will continue to use cash during the remainder of 2007.

Investing activities. Cash used in investing activities was $1.5 million and $13.5 million during the six months ended July 1, 2007 and July 2, 2006, respectively. During the six months ended July 1, 2007, we purchased $3.5 million of property and equipment and $6.5 million of distribution rights related our agreement with Invatec. We also received $6.9 million in proceeds from the sale of short-term investments. During the six months ended July 2, 2006, we purchased $6.8 million of short-term investments and $7.4 million of property and equipment. Historically, our capital expenditures have consisted of purchased manufacturing equipment, research and testing equipment, computer systems and office furniture and equipment. We expect to continue to make investments in property and equipment and to incur approximately an additional $14 million in capital expenditures during the balance of 2007.

Financing activities. Cash provided by financing activities was $52.6 million during the six months ended July 1, 2007, generated primarily from proceeds from our secondary public offering, stock option exercises and borrowings under our amended equipment term loan with Silicon Valley Bank. During the six months ended July 2, 2006, cash provided by financing activities was $3.8 million and was generated primarily from proceeds from stock option exercises.

Contractual cash obligations. Our contractual cash obligations as of April 1, 2007 are set forth in our quarterly report on Form 10-Q for the quarter ended April 1, 2007. There have been no material changes in our contractual cash obligations and commercial commitments since such date.

Other liquidity information. On July 21, 2007, we entered into an agreement and plan of merger with FoxHollow Technologies, Inc. We expect to issue in the aggregate approximately 43.7 million shares of our common stock and pay

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approximately $82.8 million in cash to FoxHollow stockholders in the merger. We expect to use cash acquired by us in the merger to pay the cash portion of the merger consideration. The transaction is expected to be completed in the fourth quarter of 2007. We refer you to the information under the heading “—Recent Development” above.

The acquisition agreements relating to our purchase of Dendron GmbH and Appriva Medical, Inc. require us to make additional payments to the sellers of these businesses if certain milestones related to regulatory steps in the product commercialization process are achieved. The potential milestone payments total $15.0 million and $175.0 million with respect to the Dendron and Appriva acquisitions, respectively, during the period of 2003 to 2009. Under the terms of the stock purchase agreement we entered into in connection with our acquisition of Dendron, we may be required to make additional payments which are contingent upon Dendron products achieving certain revenue targets between 2003 and 2008. In 2003, the $4.0 million revenue target for sales of Dendron products during 2003 was met. Accordingly, an additional payment to the former Dendron stockholders of $3.75 million was made in 2004. In 2004, the $5.0 million revenue target for sales of Dendron products during 2004 was met. Accordingly, a payment to the former Dendron stockholders of $3.75 million was accrued in 2004 and was paid during the second quarter 2005. We may be required to make a final payment of $7.5 million, which is contingent upon Dendron products achieving annual revenues of $25 million in any year during the period between 2003 and 2008. Any such final payment would be due in the year following the year of target achievement. With respect to the Appriva agreement, we have determined that the first milestone was not achieved by the January 1, 2005 milestone date and that the first milestone is not payable. In September 2005, we announced that we had decided to discontinue the development and commercialization of the technology we acquired in the Appriva transaction. We are currently involved in litigation regarding this agreement as described in more detail in Note 18 to our consolidated financial statements included elsewhere in this report.

In June 2007, we sold and licensed, on a royalty-free perpetual basis, certain intellectual property relating to percutaneously delivered implants within the left atrial appendage for prevention of emboli migration out of the appendage. In connection with the sale, we also obtained a royalty-free perpetual license from the purchaser that allows us to use certain of the intellectual property sold to the purchaser outside of the left atrial appendage market. In exchange for the assets and license, we received $2.0 million in cash, shares of common stock of the purchaser representing approximately 8% of its equity on a fully diluted basis and an unsecured, subordinated, non-interest-bearing promissory note in the principal amount of $5.6 million, the unpaid principal balance of which will become immediately due and payable only upon an initial public offering by the purchaser or a sale transaction, in each case resulting in gross proceeds of less than a certain amount.

Our future liquidity and capital requirements will be influenced by numerous factors, including extent and duration of future operating losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs, working capital to support our sales growth, receipt of and time required to obtain regulatory clearances and approvals, sales and marketing programs, continuing acceptance of our products in the marketplace, competing technologies, market and regulatory developments, acquisitions and the future course of intellectual property and other litigation. We believe that our current resources, together with funds available under our revolving credit facility, are sufficient to meet our liquidity requirements through at least the next 12 months. In the event that we require additional working capital to fund future operations and any future acquisitions, we may negotiate a financing arrangement with an independent institutional lender, sell notes to public or private investors or sell additional shares of stock or other equity securities. There is no assurance that any financing transaction will be available on terms acceptable to us, or at all, or that any financing transaction will not be dilutive to our current stockholders. If we require additional working capital, but are not able to raise additional funds, we may be required to significantly curtail or cease ongoing operations. From time to time, we may also sell a given technology or intellectual property having a development timeline or development cost that is inconsistent with our investment horizon or which does not adequately complement our existing product portfolio. See Note 5 and Note 18 to our consolidated financial statements included elsewhere in this report.

Credit Risk. At July 1, 2007, our accounts receivable balance was $56.0 million, compared to $45.1 million at December 31, 2006. We monitor the creditworthiness of our customers to which we grant credit terms in the normal course of business. We believe that concentrations of credit risk with respect to our accounts receivable are limited due to the large number of customers and their dispersion across many geographic areas. However, a significant amount of our accounts receivable are with national healthcare systems in many countries. Although we do not currently foresee a credit risk associated with these receivables, repayment depends upon the financial stability of the economies of those countries. As of July 1, 2007, no customer represented more than 10% of our outstanding accounts receivable. From time to time, we offer certain distributors in foreign markets who meet our credit standards extended payment terms, which may result in a longer collection period and reduce cash flow from operations. Subsequent to our initial public offering in June 2005, we

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have not experienced significant losses with respect to the collection of accounts receivable from groups of customers or any particular geographic area nor experienced any material cash flow reductions as a result of offering extended payment terms.

Related Party Transaction

We refer you to the information contained in Note 20 to our consolidated financial statements.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our annual report on Form 10-K for the year ended December 31, 2006, except as follows:

Accounting for Income Taxes

On January 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) an interpretation of FASB Statement No. 109. FIN 48 clarifies when tax benefits should be recorded in financial statements, requires certain disclosures of uncertain tax matters and indicates how any tax reserves should be classified in a balance sheet. The provisions of FIN 48 are applied to all tax positions upon initial adoption, with the cumulative effect adjustment reported as an adjustment to the opening balance of retained earnings. Upon adoption of FIN 48, we recorded a $717 thousand liability for uncertain tax positions as an adjustment to the 2007 opening balance of retained earnings.

As of the date of adoption, the total amount of unrecognized tax benefits was $4.7 million, of which approximately $872 thousand would affect our effective income tax rate if recognized. We recognize interest and penalties related to uncertain tax positions as income tax expense. As of January 1, 2007, accrued interest and penalties related to uncertain tax positions totaled approximately $216 thousand and did not materially change during the six months ended July 1, 2007.

Management believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease between $160 thousand and $501 thousand due to the closure of the tax examinations in foreign jurisdictions within the next 12 months.

We or one of our subsidiaries file income tax returns in the U.S. Federal jurisdiction and in various U.S. State and foreign jurisdictions. With few exceptions, we are subject to U.S. Federal or state and local income tax examinations by tax authorities for years after 1995, and for years after 2002 in foreign jurisdictions.

Seasonality

Our business is seasonal in nature. Historically, demand for our products has been the highest in our fourth fiscal quarter. We traditionally experience lower sales volumes in our third fiscal quarter than throughout the rest of the year as a result of the European holiday schedule during the summer months.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined by the rules and regulations of the Securities and Exchange Commission, that have or are reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. As a result, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these arrangements.

Recent Accounting Pronouncements

On January 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 clarifies when tax benefits should be recorded in financial statements, requires certain disclosures of uncertain tax matters and indicates how any tax reserves should be classified in a balance sheet. As a result of the implementation of this standard, we recorded a charge of $716 thousand against beginning retained earnings.

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In September 2006, the FASB issued SFAS 157, “Fair Value Measurement.” This standard provides guidance on using fair value to measure assets and liabilities. SFAS 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. The statement is effective for us beginning in 2008; however, early adoption is permitted. We have not yet determined the impact, if any, that the implementation of SFAS 157 will have on our results of operations and financial condition.

On February 15, 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (SFAS No. 159). SFAS No. 159 creates a “fair value option” under which an entity may elect to record certain financial assets or liabilities at fair value upon their initial recognition. Subsequent changes in fair value would be recognized in earnings as those changes occur. The election of the fair value option would be made on a contract-by-contract basis and would need to be supported by concurrent documentation or a preexisting documented policy. SFAS No. 159 requires an entity to separately disclose the fair value of these items on the balance sheet or in the footnotes to the financial statements and to provide information that would allow the financial statement user to understand the impact on earnings from changes in the fair value. SFAS No. 159 is effective for us beginning in 2008; however, early adoption is permitted. We have not yet determined the impact, if any, that the implementation of SFAS 159 will have on our results of operations and financial condition.

In June 2006, the FASB issued Emerging Issues Task Force Issue No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (EITF 06-3). EITF 06-3 indicates that the presentation of taxes within the scope of this issue on either a gross or net basis is an accounting policy decision that should be disclosed. Our policy is to present the taxes collected from customers and remitted to governmental authorities on a net basis and are not material to our results of operations and financial condition.

Forward-Looking Statements

This quarterly report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are subject to the safe harbor created by those sections. In addition, we or others on our behalf may make forward-looking statements from time to time in oral presentations, including telephone conferences and/or web casts open to the public, in press releases or reports, on our Internet web site or otherwise. All statements other than statements of historical facts included in this report or expressed by us orally from time to time that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements including, in particular, the statements about our plans, objectives, strategies, the outcome of contingencies such as legal proceedings, and prospects regarding, among other things, our financial condition, results of operations and business. We have identified some of these forward-looking statements in this report with words like “believe,” “may,” “could,” “would,” “might,” “forecast,” “possible,” “potential,” “project,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate,” “approximate” or “continue” or the negative of these words or other words and terms of similar meaning. These forward-looking statements may be contained in the notes to our consolidated financial statements and elsewhere in this report, including under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors that affect all businesses operating in a global market as well as matters specific to us. These uncertainties and factors are difficult to predict and many of them are beyond our control. The following are some of the uncertainties and factors known to us that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements:

• Risks associated with our proposed merger with FoxHollow Technologies, Inc., as described in more detail under the heading “Part II – Item 1A. Risk Factors” contained elsewhere in this report.

• History of operating losses and negative cash flow;

• Lack of market acceptance of new products;

• Delays in product introduction;

• Exposure to assertions of intellectual property claims and failure to protect our intellectual property;

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• Effects of litigation, including threatened or pending litigation, on matters relating to patent infringement, employment, and commercial disputes;

• Failure of our business strategy, which relies on assumptions about the market for our products;

• Failure to obtain additional capital when needed or on acceptable terms;

• Disruption in our ability to manufacture our products or the ability of our key suppliers to provide us products or components or raw materials for products resulting in our inability to supply market demand for our products;

• Increases in prices for raw materials;

• Failure to retain senior management or replace lost senior management;

• Employee slowdowns, strikes or similar actions;

• Significant and unexpected claims under our EverFlex self-expanding stent worldwide fracture-free guarantee program in excess of our reserves;

• Failure to integrate effectively newly acquired operations;

• Incurrence of additional debt, contingent liabilities and expenses in connection with future acquisitions;

• Failure of our customers or patients to obtain third party reimbursement for their purchases of our products;

• Consolidation in the healthcare industry, which could lead to demands for price concessions or to the exclusion of some suppliers from certain of our markets;

• Failure to comply with applicable laws and regulations and to obtain and maintain required regulatory approvals for our products in a cost-effective manner or at all;

• Adverse changes in applicable laws or regulations;

• Exposure to product liability claims;

• Risks inherent in operating internationally and selling and shipping our products and purchasing our products and components internationally;

• Fluctuations in foreign currency exchange rates and interest rates;

• Obligation to make significant milestone payments not currently reflected in our financial statements;

• Reliance on independent sales distributors and sales associates to market and sell our products in certain foreign countries, including our reliance on Medtronic for sales of our products in Japan;

• Loss of customers;

• Disruption in the supply of products of Invatec S.r.l. that we distribute or our relationship with Invatec;

• Dependence upon a few of our products to generate a large portion of our net sales and exposure if drug-eluting stents become a dominant therapy in the peripheral vascular stent market and we are not able to develop or acquire a drug-eluting stent to market and sell;

• Failure to develop innovative and successful new products and technologies;

• Highly competitive nature of the markets in which we sell our products and the introduction of competing products;

• Inability to meet performance enhancement objectives, including efficiency and cost reduction strategies;

• Reliance on our management information systems for inventory management, distribution and other functions and to maintain our research and development and clinical data;

• Failure to comply with our covenants under our loan and security agreement with Silicon Valley Bank;

• Inability to use net operating losses to reduce tax liability if we become profitable;

• Absence of expected returns from the amount of intangible assets we have recorded;

• Changes in generally accepted accounting principles;

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• Conditions and changes in medical device industry or in general economic and business conditions;

• Conflicts of interests due to our ownership structure; or

• Ineffectiveness of our internal controls.

For more information regarding these and other uncertainties and factors that could cause our actual results to differ materially from what we have anticipated in our forward-looking statements or otherwise could materially adversely affect our business, financial condition or operating results, see our annual report on Form 10-K for the fiscal year ended December 31, 2006 under the heading “Part I – Item 1A. Risk Factors” on pages 25 through 46 of such report and information under the heading “Part II – Item 1A. Risk Factors” contained elsewhere in this report.

All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. We wish to caution readers not to place undue reliance on any forward-looking statement that speaks only as of the date made and to recognize that forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the uncertainties and factors described above, as well as others that we may consider immaterial or do not anticipate at this time. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we do not know whether our expectations will prove correct. Our expectations reflected in our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown uncertainties and factors, including those described above. The risks and uncertainties described above are not exclusive and further information concerning us and our business, including factors that potentially could materially affect our financial results or condition, may emerge from time to time. We assume no obligation to update, amend or clarify forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. We advise you, however, to consult any further disclosures we make on related subjects in our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K we file with or furnish to the Securities and Exchange Commission.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, which are potential losses arising from adverse changes in market rates and prices, such as interest rates and foreign exchange fluctuations. We may enter into derivatives or other financial instruments for trading or speculative purposes; however, our policy is to only enter into contracts that can be designated as normal purchases or sales.

Interest Rate Risk

Borrowings under our revolving line of credit bear interest at a variable rate equal to SVB’s prime rate. Borrowings under the equipment financing bear interest at a variable rate equal to SVB’s prime rate plus 1.0%. We currently do not use interest rate swaps to mitigate the impact of fluctuations in interest rates. As of July 1, 2007, we had no borrowings under our revolving line of credit and had $11.4 million in borrowings under the equipment financing. Based upon this debt level, a 10% increase in the interest rate on such borrowings would cause us to incur an increase in interest expense of approximately $106 thousand on an annual basis.

Foreign Currency Exchange Rate Risk

Fluctuations in the rate of exchange between the U.S. dollar and foreign currencies could adversely affect our financial results. In the three and six months ended July 1, 2007, approximately 29% of our net sales were denominated in foreign currencies. We expect that foreign currencies will continue to represent a similarly significant percentage of our net sales in the future. Selling, marketing and administrative costs related to these sales are largely denominated in the same respective currency, thereby limiting our transaction risk exposure. However, for sales not denominated in U.S. dollars, if there is an increase in the rate at which a foreign currency is exchanged for U.S. dollars, it will require more of the foreign currency to equal a specified amount of U.S. dollars than before the rate increase. In such cases and if we price our products in the foreign currency, we will receive less in U.S. dollars than we did before the rate increase went into effect. If we price our products in U.S. dollars and competitors price their products in local currency, an increase in the relative strength of the U.S. dollar could result in our price not being competitive in a market where business is transacted in the local currency.

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Approximately 77% and 76% of our net sales denominated in foreign currencies in the three and six months ended July 1, 2007, respectively, were derived from European Union countries and were denominated in the Euro. Additionally, we have significant intercompany receivables from our foreign subsidiaries, which are denominated in foreign currencies, principally the Euro and the Yen. Our principal exchange rate risks therefore exist between the U.S. dollar and the Euro and between the U.S. dollar and the Yen. Fluctuations from the beginning to the end of any given reporting period result in the remeasurement of our foreign currency-denominated receivables and payables, generating currency transaction gains or losses that impact our non-operating income/expense levels in the respective period and are reported in other (income) expense, net in our consolidated financial statements. We recorded foreign currency transaction gains of $194 thousand and $512 thousand in the three and six months ended July 1, 2007, respectively, compared to foreign currency transaction gains of $1.3 million and $1.4 million in the three and six months ended July 2, 2006, related to the translation of our foreign denominated net receivables into U.S. dollars. We do not currently hedge our exposure to foreign currency exchange rate fluctuations. We may, however, hedge such exposure to foreign currency exchange rates in the future.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to reasonably ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives and we necessarily are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered in this quarterly report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of such period to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that material information relating to our company and our consolidated subsidiaries is made known to management, including our Chief Executive Officer and Chief Financial Officer, particularly during the period when our periodic reports are being prepared.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during our quarter ended July 1, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

A description of our legal proceedings in Note 18 of our consolidated financial statements included within this report is incorporated herein by reference.

ITEM 1A. RISK FACTORS

We are affected by risks specific to us as well as factors that affect all businesses operating in a global market. In addition to the other information set forth in this report, careful consideration should be taken of the factors described in our annual report on Form 10-K for the fiscal year ended December 31, 2006 under the heading “Part I – Item 1A. Risk Factors” and the following additional risks and uncertainties related to our proposed merger with FoxHollow Technologies, Inc., which could materially adversely affect our business, financial condition or operating results.

Our merger with FoxHollow Technologies, Inc. is subject to certain conditions to closing that could result in the merger not being consummated or being delayed, either of which could negatively impact our stock price and future business and results of operations.

Consummation of the merger is subject to a number of customary conditions, including, but not limited to, the approval of the agreement and plan of merger by the stockholders of FoxHollow, the effectiveness of a Form S-4 registration statement to be filed by us with the Securities and Exchange Commission to register the shares of our common stock to be issued in connection with the merger and expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. There is no assurance that we will receive the necessary approvals or satisfy the other conditions necessary for completion of the merger. If any of the conditions to the merger are not satisfied or, where waiver is permissible, not waived, the merger will not be consummated. Failure to complete the merger would prevent us from realizing the anticipated benefits of the merger. We have already and expect to continue to incur significant costs associated with transaction fees, professional services, taxes and other costs related to the merger. In the event that the merger is not completed, we will remain liable for these costs and expenses. In addition, the current market price of our common stock may reflect a market assumption that the merger will occur, and a failure to complete the merger could result in a negative perception by the market of us generally and a resulting decline in the market price of our common stock. Any delay in the consummation of the merger or any uncertainty about the consummation of the merger could also negatively impact our stock price and future business and results of operations. We cannot assure you that the merger will be consummated, that there will be no delay in the consummation of the merger or that the merger will be consummated on the terms contemplated by the merger agreement.

Whether or not the merger is completed, the announcement and pendency of the merger could impact or cause disruptions in our business, which could have an adverse effect on our business and results of operations.

Whether or not the merger is consummated, the announcement and pendency of the merger could cause disruptions in or otherwise negatively impact our business and results of operations. Among others:

• our employees may experience uncertainty about their future roles with the combined company, which might adversely affect our ability to retain and hire key personnel and other employees;

• the attention of our management may be directed toward the completion of the merger and transaction-related considerations and may be diverted from the day-to-day operations and pursuit of other opportunities that could have been beneficial to our business; and

• distributors or other vendors or suppliers may seek to modify or terminate their business relationships with us.

These disruptions could be exacerbated by a delay in the completion of the merger or termination of the merger agreement and could have an adverse effect on our business, results of operations or prospects if the merger is not completed or the business, results of operations or prospects of the combined company if the merger is completed.

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We may be unable to successfully integrate our operations with FoxHollow’s or to realize the anticipated cost savings and other potential benefits of the merger in a timely manner or at all. As a result, the value of our common stock may be adversely affected.

We entered into the merger agreement with FoxHollow because we believe that the merger will be beneficial to us and our stockholders. Achieving the anticipated potential benefits of the merger will depend in part upon whether we are able to integrate FoxHollow’s business with our business in an efficient and effective manner. We may not be able to accomplish this integration process smoothly or successfully. The necessity of coordinating geographically separated organizations, systems and facilities and addressing possible differences in business backgrounds, corporate cultures and management philosophies may increase the difficulties of integration. We and FoxHollow operate numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, payroll, employee benefits and regulatory compliance. We and FoxHollow may also have inconsistencies in standards, controls, procedures or policies that could affect our ability to maintain relationships with customers and employees after the merger or to achieve the anticipated benefits of the merger. The integration of certain operations following the merger will require the dedication of significant management resources, which may temporarily distract management’s attention from our day-to-day business. Employee uncertainty and lack of focus during the integration process may also disrupt our business. Any inability of management to integrate successfully the operations of the two companies or to do so within a longer time frame than what we expect could have a material adverse effect on our business and results of operations. We may not be able to achieve the anticipated operating and cost synergies or long-term strategic benefits of the merger. An inability to realize the full extent of, or any of, the anticipated benefits of the merger, as well as any delays encountered in the integration process, could have an adverse effect on our business and results of operations, which may affect the value of the shares of our common stock after the completion of the merger.

The success of the combined company after the merger will depend in part upon the ability of us and FoxHollow to retain key employees of both companies. Competition for qualified personnel can be very intense. In addition, key employees may depart because of issues relating to the uncertainty or difficulty of integration or a desire not to remain with the combined company. Accordingly, no assurance can be given that key employees will be retained.

We have been able to conduct only limited planning regarding the integration of the two companies following the merger and have not yet determined the exact nature of how the businesses and operations of the two companies will be combined after the merger. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized.

The issuance of shares of our common stock to FoxHollow stockholders in the merger will substantially dilute the aggregate voting power and reduce the percentage interests of our current stockholders.

     If the merger is completed, based on the number of shares of FoxHollow common stock outstanding and the number of shares of our common stock outstanding, as of July 18, 2007, we will issue approximately 43.7 million shares of our common stock in the merger. Immediately after the merger, FoxHollow stockholders will own approximately 41%, and our current stockholders will own approximately 59% of the then outstanding shares of our common stock. The issuance of shares of our common stock to FoxHollow stockholders in the merger and to holders of assumed options and restricted stock units to acquire shares of FoxHollow common stock will cause a significant reduction in the relative percentage interest of our current stockholders in earnings, voting, liquidation value and book and market value. If the merger fails to produce the results we anticipate, our stockholders may not receive benefits sufficient to offset the dilution of their ownership interest.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Equity Securities

During the three months ended July 1, 2007, we did not issue any shares of our common stock or other equity securities of ours that were not registered under the Securities Act of 1933, as amended.

Use of Proceeds

On June 15, 2005, our registration statement on Form S-1 (Registration No. 333-123851) was declared effective. Our initial public offering resulted in gross proceeds to us of $167.6 million. Expenses related to the initial public offering

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were as follows: approximately $8.4 million for underwriting discounts and commissions and approximately $4.2 million for other expenses, for total expenses of approximately $12.6 million. None of the offering expenses resulted in direct or indirect payments to any of our directors, officers or their associates, to persons owning 10% or more of our common stock or to any of our affiliates. All of the offering expenses were paid to others.

After deduction of offering expenses, we received net proceeds of approximately $154.9 million in our initial public offering, including shares sold by us pursuant to the underwriters’ over-allotment option. As of July 1, 2007, the net proceeds from our initial public offering were used as follows: $36.5 million of the net proceeds were used to repay a portion of the accrued and unpaid interest on the demand notes and the remaining $118.4 million in net proceeds for general corporate purposes. Other than $36.5 million of the net proceeds used to repay a portion of the accrued and unpaid interest on demand notes held by Warburg Pincus, which is our majority stockholder, and Vertical, which is one of our stockholders, none of the net proceeds from our initial public offering resulted in direct or indirect payments to directors, officers or their associates, to persons who owned 10% or more of our common stock or to any of our affiliates.

Issuer Purchases of Equity Securities

We did not purchase any shares of our common stock or other equity securities of ours registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, during the three months ended July 1, 2007.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)	Our Annual Meeting of Stockholders was held on May 15, 2007.
(b)	The results of the stockholder votes were as follows:

		For		Against/Withhold		Abstain		Broker Non-Votes
1.	Election of Directors – for terms expiring at the 2010 Annual Meeting of Stockholders
	John K. Bakewell		56,402,775		118,661		—		—
	Richard B. Emmitt		56,283,462		237,974		—		—
	Dale A. Spencer		53,891,262		2,630,174		—		—
2.	Approval of ev3 Inc. Second Amended and Restated 2005 Incentive Stock Plan		44,850,940		7,856,784		18,154		3,795,558
3.	Ratification of Independent Registered Public Accounting Firm		56,460,975		58,427		2,034		—

Douglas W. Kohrs and Elizabeth H. Weatherman will continue to serve as directors of ev3 for terms expiring at our 2008 Annual Meeting of Stockholders.

James M. Corbett, Daniel J. Levangie and Thomas E. Timbie will continue to serve as directors of ev3 for terms expiring at our 2009 Annual Meeting of Stockholders.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

The following exhibits are being filed or furnished with this quarterly report on Form 10-Q:

Exhibit No.	Description
10.1	Underwriting Agreement dated April 19, 2007 among ev3 Inc., the Selling Stockholders listed on Schedule B thereto and Banc of America Securities LLC, Piper Jaffray & Co., JP Morgan Securities Inc., as Representatives of the Several Underwriters (Filed herewith)
10.2	ev3 Inc. Second Amended and Restated 2005 Incentive Stock Plan (Incorporated by reference to Exhibit 10.1 to ev3’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 17, 2007 (File No. 000-51348))
10.3	Intellectual Property Transfer Agreement dated as of June 15, 2007 between Atritech, Inc. and ev3 Endovascular, Inc. (Incorporated by reference to Exhibit 10.1 to ev3’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 21, 2007 (File No. 000-51348))
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and SEC Rule 13a-14(a) (Filed herewith)
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and SEC Rule 13a-14(a) (Filed herewith)
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Furnished herewith)
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Furnished herewith)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

August 8, 2007	ev3 Inc.
	By:	/s/ James M. Corbett
		James M. Corbett
		President and Chief Executive Officer (principal executive officer)

By:	/s/ Patrick D. Spangler
	Patrick D. Spangler
	Chief Financial Officer and Treasurer (principal financial and accounting officer)

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ev3 Inc.
QUARTERLY REPORT ON FORM 10-Q

EXHIBIT INDEX

Exhibit No.	Description	Method of Filing
10.1	Underwriting Agreement dated April 19, 2007 among ev3 Inc., the Selling Stockholders listed on Schedule B thereto and Banc of America Securities LLC, Piper Jaffray & Co., JP Morgan Securities Inc., as Representatives of the Several Underwriters	Filed herewith
10.2	ev3 Inc. Second Amended and Restated 2005 Incentive Stock Plan	Incorporated by reference to Exhibit 10.1 to ev3’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 17, 2007 (File No. 000-51348)
10.3	Intellectual Property Transfer Agreement dated as of June 15, 2007 between Atritech, Inc. and ev3 Endovascular, Inc.	Incorporated by reference to Exhibit 10.1 to ev3’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on June 21, 2007 (File No. 000-51348)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and SEC Rule 13a-14(a)	Filed herewith
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and SEC Rule 13a-14(a)	Filed herewith
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith

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EX-10.1

EXHIBIT 10.1

EXECUTION COPY

ev3 Inc.
8,750,000 Shares

Common Stock:

UNDERWRITING AGREEMENT

dated April 19, 2007

Banc of America Securities LLC
Piper Jaffray & Co.
J.P. Morgan Securities Inc.

UNDERWRITING AGREEMENT

April 19, 2007

BANC OF AMERICA SECURITIES LLC
PIPER JAFFRAY & CO.
J.P. MORGAN SECURITIES INC.
   As Representatives of the several Underwriters
c/o BANC OF AMERICA SECURITIES LLC
9 West 57th Street
New York, NY 10019

Ladies and Gentlemen:

          Introductory. ev3 Inc., a Delaware corporation (the “Company”), proposes to issue and sell to the several underwriters named in Schedule A (the “Underwriters”) an aggregate of 2,500,000 shares (the “Company Common Shares”) of its common stock, par value $0.01 per share (the “Common Stock”) and the stockholders of the Company named in Schedule B (collectively, the “Selling Stockholders”) severally propose to sell to the Underwriters an aggregate of 6,250,000 shares of Common Stock (the “Selling Stockholders Common Shares”), each Selling Stockholder selling up to the amount set forth opposite such Selling Stockholder’s name in Schedule B. The Company Common Shares and the Selling Stockholders Common Shares are collectively called the “Firm Common Shares”. Furthermore, one of the Selling Stockholders, Warburg, Pincus Equity Partners, L.P. (together with its two affiliated partnerships, Warburg, Pincus Netherlands Equity Partners I, C.V. and Warburg, Pincus Netherlands Equity Partners III, C.V.) (“Warburg Pincus”) has granted to the Underwriters an option to purchase up to an additional 1,312,500 shares of Common Stock (the “Optional Common Shares”), as provided in Section 2, as set forth in Schedule B. The Firm Common Shares and, if and to the extent such option is exercised, the Optional Common Shares are collectively called the “Common Shares”. Banc of America Securities LLC (“BAS”), Piper Jaffray & Co. (“Piper”) and J.P. Morgan Securities Inc. (“JPMorgan”) have agreed to act as representatives of the several Underwriters (in such capacity, the “Representatives”) in connection with the offering and sale of the Common Shares.

          The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-3 (File No. 333-141826), which contains a form of prospectus to be used in connection with the public offering and sale of the Common Shares. Such registration statement, as amended, including the financial statements, exhibits and schedules thereto or incorporated by reference therein, in the form in which it was declared effective by the Commission under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the “Securities Act”), including any information deemed to be a part thereof at the time of effectiveness pursuant to Rules 430A, 430B or 430C under the Securities Act, is called the “Registration Statement”. Any registration statement filed by the Company pursuant to Rule 462(b) under the Securities Act is called the “Rule 462(b) Registration Statement”, and from and after the date and time of filing of the Rule 462(b) Registration Statement the term “Registration Statement” shall

include the Rule 462(b) Registration Statement. Any preliminary prospectus included in the Registration Statement or filed with the Commission pursuant to Rule 424(a) under the Securities Act is hereinafter called a “Preliminary Prospectus.” The term “Prospectus” shall mean the final prospectus relating to the Common Shares that is first filed pursuant to Rule 424(b) after the date and time that this Agreement is executed and delivered by the parties hereto (the “Execution Time”) or, if no filing pursuant to Rule 424(b) is required, shall mean the form of final prospectus relating to the Shares included in the Registration Statement at the effective date. Any reference herein to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act to the extent such documents are so incorporated and as such documents may be modified or superseded by such Preliminary Prospectus or the Prospectus. All references in this Agreement to the Registration Statement, the Rule 462(b) Registration Statement, any Preliminary Prospectus or the Prospectus, or any amendments or supplements to any of the foregoing, shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

          The Company and each of the Selling Stockholders hereby confirm their respective agreements with the Underwriters as follows:

          Section 1. Representations and Warranties.

          A. Representations and Warranties of the Company. The Company hereby represents and warrants to and covenants with, each Underwriter as follows:

     (a) Compliance with Registration Requirements. The Registration Statement has been declared effective by the Commission under the Securities Act. The Company has complied with all requests of the Commission for additional or supplemental information. No stop order suspending the effectiveness of the Registration Statement is in effect, the Commission has not issued any order or notice preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus and no proceedings for such purpose have been instituted or are pending or, to the best knowledge of the Company, are threatened by the Commission. Each Preliminary Prospectus and the Prospectus when filed complied in all material respects with the Securities Act and the rules thereunder. Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective and at the date hereof, complied and will comply in all material respects with the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. The Prospectus (including any Prospectus wrapper), as amended or supplemented, as of its date, at the date hereof, at the time of any filing pursuant to Rule 424(b), at the Closing Date (as defined herein) and at any Subsequent Closing Date (as defined herein), did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except in each case if the Company

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notifies the Representatives in writing of an event or condition as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and the Company so amends or supplements the Prospectus in compliance with the terms of this Agreement. The representations and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions from the Registration Statement or any post-effective amendment thereto, or the Prospectus (including any Prospectus wrapper), or any amendments or supplements thereto, made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by the Representatives expressly for use therein, it being understood and agreed that the only such information furnished by the Representatives consists of the information described as such in Section 8(c) hereof. There are no contracts or other documents of the Company or its subsidiaries required to be described in the Disclosure Package (defined below) and the Prospectus or to be filed as exhibits to the Registration Statement which have not been described or filed as required.

     (b) The documents incorporated by reference in the Disclosure Package and the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the “Exchange Act”).

     (c) Disclosure Package. The term “Disclosure Package” shall mean (i) any Preliminary Prospectus, if any, as amended or supplemented, as of the Applicable Time (defined below), (ii) any issuer free writing prospectuses, as defined in Rule 433 of the Securities Act (each, an “Issuer Free Writing Prospectus”), if any, identified in Schedule D hereto, (iii) any other free writing prospectus as defined in Rule 405 of the Securities Act (a “Free Writing Prospectus”) that the parties hereto shall hereafter expressly agree in writing to treat as part of the Disclosure Package as scheduled on Schedule E hereto and (iv) a schedule indicating the number of Common Shares being sold and the price at which the Common Shares will be sold to the public. As of 9:00 p.m. (Eastern time) on the date of execution and delivery of this Agreement (the “Applicable Time”), the Disclosure Package did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Disclosure Package based upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives (or on behalf of such Underwriter by counsel) specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of any Underwriter consists of the information described as such in Section 8(c) hereof.

     (d) Company Not Ineligible Issuer. (i) At the time of filing the Registration Statement and (ii) as of the date of the execution and delivery of

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this Agreement (with such date being used as the determination date for purposes of this clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405 of the Securities Act), without taking account of any determination by the Commission pursuant to Rule 405 of the Securities Act that it is not necessary that the Company be considered an Ineligible Issuer.

     (e) Issuer Free Writing Prospectuses. Each Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the offering of Common Shares under this Agreement or until any earlier date that the Company notified or notifies the Representatives as described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, including any prospectus or prospectus supplement that is or becomes part of the Registration Statement. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, the Company has promptly notified or will promptly notify the Representatives and has promptly amended or supplemented or will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict. The foregoing two sentences do not apply to statements in or omissions from any Issuer Free Writing Prospectus based upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 8(c) hereof.

     (f) Offering Materials Furnished to Underwriters. The Company has delivered to the Representatives three complete copies of the manually signed Registration Statement and of each consent and certificate of experts filed as a part thereof, and conformed copies of the Registration Statement (without exhibits) and copies of any Preliminary Prospectus and the Prospectus, as amended or supplemented, in such quantities and at such places as the Representatives have reasonably requested for each of the Underwriters.

     (g) Distribution of Offering Material By the Company. The Company has not distributed and will not distribute, prior to the later of the last Subsequent Closing Date (as defined below) and the completion of the Underwriters’ distribution of the Common Shares, any offering material in connection with the offering and sale of the Common Shares other than any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus reviewed and consented to by the Representatives or included in Schedule D hereto or the Registration Statement.

     (h) The Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement

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of, the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights and remedies of creditors generally and by the effect of general principles of equity and except that any rights to indemnity and contribution pursuant to Sections 8 and 9 hereof may be limited by federal and state securities laws and public policy considerations.

     (i) Authorization of the Common Shares. The Common Shares to be purchased by the Underwriters from the Company have been duly authorized for issuance and sale pursuant to this Agreement and, when issued and delivered by the Company against payment therefor pursuant to this Agreement, will be validly issued, fully paid and nonassessable.

     (j) No Applicable Registration or Other Similar Rights. There are no persons with registration or other similar rights to have any equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by this Agreement, other than the Selling Stockholders with respect to the Firm Common Shares and Optional Common Shares offered by them included in the Registration Statement, except for such rights as have been duly waived or have been described in the Disclosure Package and Prospectus.

     (k) No Material Adverse Change. Except as otherwise disclosed in the Disclosure Package and Prospectus, subsequent to the respective dates as of which information is given in the Disclosure Package: (i) there has been no material adverse change, or any development that could reasonably be expected to result in a material adverse change, in the condition, financial or otherwise, or in the earnings, business, operations or prospects, whether or not arising from transactions in the ordinary course of business, of the Company and its subsidiaries, considered as one entity (any such change is called a “Material Adverse Change”); (ii) the Company and its subsidiaries, considered as one entity, have not incurred any material liability or obligation, indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not in the ordinary course of business; and (iii) there has been no dividend or distribution of any kind declared, paid or made by the Company or, except for dividends paid to the Company or other wholly owned subsidiaries, any of its subsidiaries on any class of capital stock or repurchase or redemption by the Company or any of its subsidiaries of any class of their capital stock.

     (l) Independent Registered Public Accountants. PricewaterhouseCoopers LLP and Ernst & Young LLP, which have expressed their respective opinions with respect to certain portions (as indicated therein) of the consolidated financial statements (which term as used in this Agreement includes the related notes thereto) filed with the Commission as a part of the Registration Statement and included in the Disclosure Package and the

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Prospectus, are each an independent registered public accounting firm as required by the Securities Act.

     (m) Preparation of the Financial Statements. The consolidated financial statements filed with the Commission and incorporated by reference in the Registration Statement and included or incorporated by reference in the Disclosure Package and the Prospectus present fairly the consolidated financial position of the Company and its subsidiaries as of and at the dates indicated and the results of their operations and cash flows for the periods specified. The financial statement schedule included or incorporated by reference in the Registration Statement presents fairly the information required to be stated therein. Such consolidated financial statements and financial statement schedule comply in form with the applicable accounting requirements of the Securities Act and have been prepared in conformity with generally accepted accounting principles as promulgated in the United States applied on a consistent basis throughout the periods involved, except as may be expressly stated in the related notes thereto and subject, in the case of unaudited financial statements, to year-end adjustments. No other financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement. The consolidated financial data set forth in any Preliminary Prospectus and the Prospectus under the captions “Prospectus Summary — Summary Consolidated Financial Data,” and “Capitalization” fairly present the information set forth therein on a basis consistent with that of the consolidated audited financial statements contained or incorporated by reference in the Registration Statement.

     (n) Incorporation and Good Standing of the Company and its Subsidiaries. Each of the Company and its subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation and has corporate power and authority to own, lease and operate its properties and to conduct its business as it is currently conducted and as described in the Disclosure Package and the Prospectus and, in the case of the Company, to enter into and perform its obligations under this Agreement. Each of the Company and each subsidiary of the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except for such jurisdictions where the failure to so qualify or to be in good standing would not, individually or in the aggregate, result in a Material Adverse Change. All of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued, is fully paid and nonassessable and is owned by the Company, directly or through its subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim, except for such security interests, mortgages, pledges, liens, encumbrances or claims (1) which would not individually or in the aggregate result in a Material Adverse Change or (2) pursuant to that certain Loan and Security Agreement, dated as of June 28, 2006 and amended as of

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March 15, 2007, between Silicon Valley Bank and ev3 Endovascular, Inc., ev3 International, Inc. and Micro Therapeutics, Inc. The Company does not own, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21.1 to the Company’s 2006 Annual Report on Form 10-K, except for any such corporation, association or other entity which is not a “significant subsidiary” as defined by Rule 1-02 of Regulation S-X under the Securities Act.

     (o) Capitalization and Other Capital Stock Matters. (i) The authorized, issued and outstanding capital stock of the Company is as set forth in the Disclosure Package and the Prospectus under the column “Actual” under the caption “Capitalization” as of the date specified therein; (ii) the authorized, issued and outstanding capital stock of the Company after giving effect to the sale of the Firm Common Shares, on a pro forma basis as of the date specified therein, is as set forth in the Prospectus and Disclosure Package under the column “As Adjusted” under the caption “Capitalization”, in each case, other than for subsequent issuances, if any, pursuant to employee benefit plans described in the Disclosure Package and the Prospectus or upon exercise of outstanding convertible securities, options or warrants described in the Disclosure Package and the Prospectus, as the case may be. The Common Stock (including the Common Shares) conforms in all material respects to the description thereof contained in the Company’s registration statement on Form 8-A incorporated by reference in the Disclosure Package and Prospectus. All of the issued and outstanding shares of Common Stock (including the shares of Common Stock owned by the Selling Stockholders) have been duly authorized and validly issued, are fully paid and nonassessable and have been issued in compliance with federal and state securities laws as of the Closing Date and as of the Subsequent Closing Date (as defined herein), if applicable. Except as set forth in that certain Holders Agreement, dated as of August 29, 2003, among the investors named therein and the Company, there are no authorized or outstanding options, warrants, preemptive rights, rights of first refusal or other rights to purchase, or equity or debt securities convertible into or exchangeable or exercisable for, any capital stock of the Company or any of its subsidiaries other than those described in the Disclosure Package and the Prospectus or issued or granted after the date thereof. The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, set forth or incorporated by reference in the Disclosure Package and the Prospectus accurately and fairly presents in all material respects the information required to be shown with respect to such plans, arrangements, options and rights.

     (p) Quotation. The Common Shares have been approved for inclusion on the NASDAQ Global Select Market, subject only to official notice of issuance.

     (q) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals Required. Neither the Company nor any of its

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subsidiaries is in violation of its charter, by-laws or other organizational documents or is in default (or, with the giving of notice or lapse of time, would be in default) (“Default”) under any indenture, mortgage, loan or credit agreement, note, contract, lease or other instrument to which the Company or any of its subsidiaries is a party or by which any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject (each, an “Existing Instrument”), except for such Defaults as would not, individually or in the aggregate, result in a Material Adverse Change. Each of the Company’s execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby and by the Disclosure Package and by the Prospectus (i) have been duly authorized by all necessary corporate action and will not result in any violation of the provisions of the Company’s charter or by-laws, or the organizational documents of any of its subsidiaries, (ii) will not conflict with or constitute a breach of, or Default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, or require the consent of any other party to, any Existing Instrument, except for such consents which have been obtained and for such conflicts, breaches, Defaults, liens, charges or encumbrances as would not, individually or in the aggregate, result in a Material Adverse Change and (iii) will not result in any violation of any law, administrative regulation or administrative or court decree applicable to the Company or any of its subsidiaries except for such violations as would not, individually or in the aggregate, result in a Material Adverse Change. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental or regulatory authority or agency, is required for the Company’s execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby and by the Disclosure Package and by the Prospectus, except such as have been obtained or made by the Company and are in full force and effect under the Securities Act and applicable state securities or blue sky laws.

     (r) No Material Actions or Proceedings. Except as otherwise disclosed in the Disclosure Package and the Prospectus, there are no legal or governmental actions, suits or proceedings (including, without limitation, any actions, suits or proceedings by the Food and Drug Administration (the “FDA’)) pending or, to the best of the Company’s knowledge, threatened (i) against the Company or any of its subsidiaries, (ii) which has as the subject thereof any officer or director of, or property owned or leased by, the Company or any of its subsidiaries or (iii) relating to environmental or discrimination matters, where in any such case (A) there is a reasonable possibility that such action, suit or proceeding would be determined adversely to the Company or such subsidiary and (B) any such action, suit or proceeding, if so determined adversely, would reasonably be expected to result in a Material Adverse Change or materially and adversely affect the Company’s ability to consummate the transactions contemplated by this Agreement. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the best of the Company’s

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knowledge, is threatened or imminent which would, individually or in the aggregate, be reasonably expected to result in a Material Adverse Change.

     (s) Intellectual Property Rights. Each of the Company and its subsidiaries own or possess the right to use sufficient trademarks, trade names, patent rights, copyrights, domain names, licenses, approvals, trade secrets and other similar rights (collectively, “Intellectual Property Rights”) reasonably necessary to conduct their businesses as now conducted, except as such failure to own, possess the right to use or acquire such rights would not have a Material Adverse Change and the expected expiration of any of such Intellectual Property Rights would not result in a Material Adverse Change. Except as disclosed in the Disclosure Package and the Prospectus, none of the Company or any of its subsidiaries has received any notice of infringement or conflict with asserted Intellectual Property Rights of others, which infringement or conflict, if the subject of an unfavorable decision, would result in a Material Adverse Change. None of the Company or any of its subsidiaries is a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be described in the Disclosure Package and the Prospectus and are not described in all material respects. None of the Intellectual Property Rights owned by the Company or any of its subsidiaries have been obtained or are being used by the Company or any of its subsidiaries in violation of any contractual obligation binding on the Company, any of its subsidiaries or, to the Company’s knowledge, any of their respective officers, directors or employees or otherwise in violation of the rights of any persons, except where such violations would not, individually or in the aggregate, result in a Material Adverse Change.

     (t) All Necessary Permits, etc. The Company and each of its subsidiaries possess such valid and current certificates, authorizations or permits issued by the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct their respective businesses, except where the failure to so possess would not, individually or in the aggregate, result in a Material Adverse Change and none of the Company or any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of, or non-compliance with, any such certificate, authorization or permit which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Change.

     (u) Title to Properties. The Company and each of its subsidiaries has good and marketable title to all the properties (whether real or personal) and assets reflected as owned in the financial statements referred to in Section l(A)(m) above (or elsewhere in the Disclosure Package and the Prospectus), in each case free and clear of any security interests, mortgages, liens, encumbrances, equities, claims and other defects to title, except such as are described in the Prospectus or would not, individually or in the aggregate, be reasonably expected to result in a Material Adverse Change. The real property, improvements, equipment and personal property held under lease by the

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Company or any subsidiary are held under valid and enforceable leases, with such exceptions as would not, individually or in the aggregate, be reasonably expected to result in a Material Adverse Change.

     (v) Tax Law Compliance. Each of the Company and its subsidiaries has filed all necessary federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes due thereon and, if due and payable, any related or similar assessment, fine or penalty levied against any of them, except in each case as would not, individually or in the aggregate, result in a Material Adverse Change or which the Company or any such subsidiary is contesting in good faith. As of the Closing Date and the Subsequent Closing Date, if any, the Company and its subsidiaries will have filed all necessary federal, state, local, and foreign income and franchise tax returns required to be filed through the Closing Date and the Subsequent Closing Date (as defined herein), as applicable, and have paid all taxes due thereon and, if due and payable, any related or similar assessment, fine or penalty levied against any of them, except in each case as would not, individually or in the aggregate, result in a Material Adverse Change or which the Company or any such subsidiary is contesting in good faith. The Company has made adequate charges, accruals and reserves in the applicable financial statements referred to in Section 1(A)(m) above in respect of all federal, state, local and foreign income and franchise taxes for all periods as to which the tax liability of the Company or any of its subsidiaries has not been finally determined.

     (w) Company Not an “Investment Company.” The Company is not and, after giving effect to the offering and the sale of the Common Shares and the application of the proceeds thereof as described in the Disclosure Package and the Prospectus, will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “Investment Company Act”).

     (x) Insurance. Each of the Company and its subsidiaries are insured with policies in such amounts and with such deductibles and covering such risks as are generally deemed adequate and customary for their businesses including, but not limited to, policies covering real and personal property owned or leased by the Company or its subsidiaries against theft, damage, destruction and acts of vandalism. The Company has no reason to believe that it or any of its subsidiaries will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change. Neither the Company nor any of its subsidiaries has been denied any insurance coverage which it has sought or for which it has applied.

     (y) No Price Stabilization or Manipulation. The Company has not taken and will not take, directly or indirectly, any action designed to or that

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might be reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Common Shares.

     (z) Related Party Transactions. There are no business relationships or related-party transactions involving the Company or any of its subsidiaries or any other person required to be described in any Preliminary Prospectus or the Prospectus which have not been described as required.

     (aa) Disclosure Controls. The Company maintains an effective system of “disclosure controls and procedures” (as defined in Rule 13a-15 of the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure. The Company has carried out evaluations of the effectiveness of their disclosure controls and procedures for the period ended December 31, 2006 as required by Rule 13a-15 of the Exchange Act. There have been no material changes to the Company’s disclosure controls and procedures since December 31, 2006.

     (bb) No Unlawful Contributions or Other Payments. None of the Company, its subsidiaries or, to the best of the Company’s knowledge, any employee or agent of the Company or any of their respective subsidiaries, has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any law or of the character required to be disclosed in the Prospectus.

     (cc) Internal Controls and Procedures. The Company maintains (i) effective internal control over financial reporting as defined in Rule 13a-15 under the Exchange Act and (ii) a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management’s general or specific authorizations; (B) transactions are recorded as necessary to permit preparation of financial statements of the Company in conformity with generally accepted accounting principles as applied in the United States and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

     (dd) No Material Weakness in Internal Controls. Since the end of the Company’s most recent audited fiscal year, there has been (i) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (ii) no change in the Company’s internal control over

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financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company has remedied all material weaknesses disclosed in its prior filings under the Exchange Act with the SEC.

     (ee) Compliance with Environmental Laws. Except as would not, individually or in the aggregate, result in a Material Adverse Change (i) none of the Company or any of its subsidiaries is in violation of any applicable federal, state, local or foreign law or regulation relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including without limitation, applicable laws and regulations relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum and petroleum products (collectively, “Materials of Environmental Concern”), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environment Concern (collectively, “Environmental Laws”), which violation includes, but is not limited to, noncompliance with any applicable permits or other governmental authorizations required for the operation of the business of the Company or its subsidiaries under applicable Environmental Laws, nor has the Company or any of its subsidiaries received any written communication, whether from a governmental authority, citizens group, employee or otherwise, that alleges that the Company or any of its subsidiaries is in violation of any applicable Environmental Law; (ii) there is no claim, action or cause of action filed with a court or governmental authority, no investigation with respect to which the Company has received written notice, and no written notice by any person or entity alleging potential liability for investigatory costs, cleanup costs, governmental responses costs, natural resources damages, property damages, personal injuries, attorneys’ fees or penalties arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location owned, leased or operated by the Company or any of its subsidiaries, now or in the past (collectively, “Environmental Claims’), pending or, to the best of the Company’s knowledge, threatened against the Company or any of its subsidiaries or any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law; and (iii) to the Company’s knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents related to the Company or any of its subsidiaries, including, without limitation, the release, emission, discharge, presence or disposal of any Material of Environmental Concern, that would result in a violation of any Environmental Law or form the basis of a potential Environmental Claim against the Company or any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed either contractually or by operation of law.

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     (ff) ERISA Compliance. The Company, its subsidiaries and any “employee benefit plan” (as defined under Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company, its subsidiaries or their “ERISA Affiliates” (as defined below) are in compliance with ERISA, except where the failure to be so in compliance would not result in a Material Adverse Change. “ERISA Affiliate” means, with respect to the Company or a subsidiary, any member of any group of organizations described in Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company or such subsidiary is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates, except where such occurrence would not have a Material Adverse Change. No “employee benefit plan” established or maintained by the Company, its subsidiaries or any of their ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA), except where such liabilities would not have a Material Adverse Change. None of the Company, its subsidiaries nor any of their ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code, except where such liabilities would not have a Material Adverse Change. Each “employee benefit plan” established or maintained by the Company or its subsidiaries or any of their ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code satisfies the qualification requirements under Section 401(a) of the Code except where the failure to satisfy such requirements would not result in a Material Adverse Change and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification under Section 401(a) of the Code.

     (gg) Brokers. Other than as contemplated by this Agreement, there is no broker, finder or other party that is entitled to receive from the Company or its subsidiaries any brokerage or finder’s fee or other fee or commission as a result of any transactions contemplated by this Agreement.

     (hh) No Outstanding Loans or Other Indebtedness. There are no material outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company to or for the benefit of any of the officers or directors of the Company except as disclosed in the Disclosure Package and the Prospectus.

     (ii) Compliance with Laws. The Company has not been advised, nor has reason to believe, that it and each of its subsidiaries are not conducting business in compliance with all applicable laws, rules and

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regulations of the jurisdictions in which they are conducting business, including, without limitation, the rules and regulations of the FDA, the Federal Food, Drug and Cosmetic Act, as amended, the Biologic Products provisions of the Public Health Service Act, as amended, and the Comprehensive Drug Abuse Prevention and Control Act of 1970, as amended, except as disclosed in the Disclosure Package and the Prospectus or except where failure to be so in compliance would not result in a Material Adverse Change.

     (jj) FDA Proceedings. To the best of the Company’s knowledge, there are no rulemakings or similar proceedings before the FDA or any similar entity in any other jurisdiction which involve the Company or any of its subsidiaries or any of the processes or products which the Disclosure Package or the Prospectus discloses the Company or any of its subsidiaries has developed, is developing or proposes to develop, or uses or proposes to use which, if the subject of an action unfavorable to the Company or any of its subsidiaries, would result in a Material Adverse Change.

     (kk) Sarbanes-Oxley Compliance. There is and has been no failure on the part of the Company and, to the Company’s knowledge, any of the Company’s directors or officers, in their capacities as such, to comply with any applicable provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including Section 402 related to loans and Sections 302 and 906 related to certifications.

     (ll) Lending Relationship. Except as disclosed in the Disclosure Package and the Prospectus, the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of any Underwriter required to be disclosed in the Disclosure Package and Prospectus and (ii) does not intend to use any of the proceeds from the sale of the Common Shares hereunder to repay any outstanding debt owed to any affiliate of any Underwriter.

     (mm) Statistical and Market Related Data. Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data included or incorporated by reference in the Disclosure Package and the Prospectus is not based on or derived from sources that are reliable and accurate in all material respects.

     (nn) Accuracy of Statements in the Disclosure Package and the Prospectus. The statements in the Disclosure Package and the Prospectus under the headings, “Government Regulation” and “Legal Proceedings” and risk factors related thereto insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries in all material respects of such legal matters, agreements, documents or proceedings.

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     (oo) No Rated Debt Securities. The Company has no rated debt securities.

          Any certificate signed by an officer of the Company and delivered to the Representatives or to counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to each Underwriter as to the matters set forth therein.

          The Company acknowledges that the Underwriters and, for purposes of the opinions to be delivered pursuant to Section 5 hereof, counsel to the Company and counsel to the Underwriters, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance.

          B. Representations and Warranties of the Selling Stockholders. Each Selling Stockholder severally and not jointly represents, warrants and covenants to each Underwriter as follows:

     (a) The Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by or on behalf of such Selling Stockholder and is a valid and binding agreement of such Selling Stockholder, enforceable against such Selling Stockholder in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights and remedies of creditors generally and by the effect of general principles of equity and except that any rights to indemnity and contribution pursuant to Sections 8 and 9 hereof may be limited by federal and state securities laws and public policy considerations.

     (b) The Custody Agreement and Power of Attorney. Each of the (i) Custody Agreement signed by such Selling Stockholders and Wells Fargo Shareowner Services, as custodian (the “Custodian”), relating to the deposit of the Common Shares to be sold by such Selling Stockholder (the “Custody Agreement”) and (ii) Power of Attorney appointing certain individuals named therein as such Selling Stockholder’s attorneys-in-fact (each, an “Attorney-in-Fact”) to the extent set forth therein relating to the transactions contemplated hereby and by the Disclosure Package and the Prospectus (the “Power of Attorney”), of such Selling Stockholder has been duly authorized, executed and delivered by such Selling Stockholder and is a valid and binding agreement of such Selling Stockholder, enforceable against such Selling Stockholder in accordance with its terms, except as rights to indemnification thereunder may be limited by applicable law and except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights and. remedies of creditors or by general equitable principles.

     (c) Title to Common Shares to be Sold. Such Selling Stockholder is, on the Closing Date and on any Subsequent Closing Date (as defined herein), the record and beneficial owner of, and has good and valid title to the Common Shares to be sold by such Selling Stockholder pursuant to this

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Agreement free and clear of all liens, encumbrances, equities or claims (other than the transfer restrictions of the lock-up agreement executed by such Selling Stockholder) and has duly indorsed such Common Shares in blank and, assuming that the Underwriters acquire their interest in the Common Shares they have purchased without notice of any adverse claim (within the meaning of Section 8-105 of the Uniform Commercial Code (the “UCC”), such Underwriters that have purchased Common Shares on the date hereof to The Depository Trust Company (“DTC”) by making payment thereof, as provided herein, and that have had such Common Shares credited to the securities account or accounts of such Underwriters maintained with DTC will have acquired a security entitlement (within the meaning of Section 8-102(a)(17) of the UCC) to such Common Shares purchased by such Underwriters, and no action based on an adverse claim, may be asserted against such Underwriters with respect to such Common Shares.

     (d) All Authorizations Obtained. Such Selling Stockholder has the legal right and power, and all authorizations and approvals required by law and under its partnership agreement or other organizational document to enter into this Agreement and its Custody Agreement and Power of Attorney to sell, transfer and deliver all of the Common Shares which may be sold by such Selling Stockholder pursuant to this Agreement and to comply with its other obligations hereunder and thereunder.

     (e) Delivery of the Common Shares to be Sold. Delivery of and payment for the Common Shares which are sold by such Selling Stockholder pursuant to this Agreement will pass good and valid title to such Common Shares, free and clear of any security interest, mortgage, pledge, lien, encumbrance or other claim.

     (f) Non-Contravention; No Further Authorizations or Approvals Required. The execution and delivery by such Selling Stockholder of, and the performance by such Selling Stockholder of its obligations under this Agreement, the Custody Agreement and the Power of Attorney will not contravene or conflict with, result in a breach of, or constitute a Default under, or require the consent (except for such consents that have been obtained) of any other party to any agreement or instrument to which such Selling Stockholder is a party or by which it is bound or under which it is entitled to any right or benefit, any provision of applicable law or any judgment, order, decree or regulation applicable to such Selling Stockholder of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over such Selling Stockholder, except for such conflicts, breaches, or defaults that would not affect the ability of the Selling Stockholder to consummate the transactions contemplated hereby. No consent, approval, authorization or other order of, or registration or filing with, any court or other governmental authority or agency, is required for the consummation by such Selling Stockholder of the transactions contemplated in this Agreement, except such as have been obtained

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or made and are in full force and effect under the Securities Act, applicable state securities or blue sky laws and from the NASD.

     (g) No Registration or Other Similar Rights. Such Selling Stockholder does not have any registration or other similar rights to have any equity or debt securities registered for sale by the Company under the Registration Statement or included in the offering contemplated by this Agreement, except for such rights as are described in the Company’s Annual Report on Form 10-K, which is incorporated by reference in the Disclosure Package and the Prospectus, under “Item 13. Certain Relationships and Related Transactions—Registration Rights Agreement”.

     (h) No Further Consents, etc. No consent, approval or waiver is required under any instrument or agreement to which such Selling Stockholder is a party or by which it is bound or under which it is entitled to any right or benefit, in connection with the offering, sale or purchase by the Underwriters of any of the Common Shares which may be sold by such Selling Stockholder under this Agreement or the consummation by such Selling Stockholder of any of the other transactions contemplated hereby, except for such consents, approvals or waivers that have been obtained.

     (i) Disclosure Made by such Selling Stockholder in the Prospectus. All information furnished by or on behalf of such Selling Stockholder in writing expressly for use in the Registration Statement, the Disclosure Package, the Prospectus or any Free Writing Prospectus or any amendment or supplement thereto used by the Company or any Underwriter, as the case may be, was, as of the Applicable Time, and on the Closing Date and any Subsequent Closing Date will be true, correct and complete in all material respects, and as of the Applicable Time does not, and on the Closing Date and any Subsequent Closing Date will not, contain any untrue statement of a material fact or omit to state any material fact necessary to make such information, in light of the circumstances under which they were made, not misleading, it being understood and agreed that the only information furnished by or on behalf of such Selling Stockholder is its legal name, address and the number of shares of Common Stock owned by such Selling Stockholder before and after the offering as set forth in the table in the Disclosure Package and the Prospectus under the caption “Selling Stockholders”. Such Selling Stockholder confirms as accurate the number of shares of Common Stock set forth opposite such Selling Stockholder’s name in the Disclosure Package and the Prospectus under the caption “Selling Stockholders” (both prior to and after giving effect to the sale of the Common Shares).

     (j) No Price Stabilization or Manipulation. Such Selling Stockholder has not taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Common Shares.

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          Any certificate signed by or on behalf of any Selling Stockholder and delivered to the Representatives or to counsel for the Underwriters pursuant to Section 5(k) hereof shall be deemed to be a representation and warranty by such Selling Stockholder to each Underwriter as to the matters covered thereby.

          Each Selling Stockholder acknowledges that the Underwriters and, for purposes of the opinions to be delivered pursuant to Section 5 hereof, counsel to the Company and counsel to the Underwriters, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance.

          Section 2. Purchase, Sale and Delivery of the Common Shares.

     (a) The Firm Common Shares. Upon the terms but subject to the conditions herein set forth, (i) the Company agrees to issue and sell to the several Underwriters an aggregate of 2,500,000 Firm Common Shares and (ii) the Selling Stockholders agree to sell to the several Underwriters an aggregate of 6,250,000 Firm Common Shares, each Selling Stockholder selling the number of Firm Common Shares set forth opposite such Selling Stockholder’s name on Schedule B. On the basis of the representations, warranties and agreements herein contained, and upon the terms but subject to the conditions herein set forth, the Underwriters agree, severally and not jointly, to purchase from the Company and the Selling Stockholders the respective number of Firm Common Shares set forth opposite their names on Schedule A, plus any additional number of Firm Common Shares which the Underwriters may become obligated to purchase pursuant to the provisions of Section 10 hereof. The purchase price per Firm Common Share to be paid by the several Underwriters to the Company shall be $18.145 per share.

     (b) The Closing Date. Delivery of certificates or book-entry transfers for the Firm Common Shares to be purchased by the Underwriters and payment therefor shall be made at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY, 10019, Attention: Steven J. Gartner (or such other place as may be agreed to by the Company and the Representatives) at 9:00 a.m. New York time, on April 25, 2007, the third (fourth, if the determination of the purchase price of the Firm Common Shares occurs after 4:30 p.m. New York time) business day after the date hereof (unless another time and date shall be agreed to by the Representatives and the Company) (the time and date of such closing are called the “Closing Date”). The Company hereby acknowledges that circumstances under which the Representatives may provide notice to postpone the Closing Date as originally scheduled include, but are in no way limited to, any determination by the Company or the Representatives to recirculate to the public copies of an amended or supplemented Preliminary Prospectus or Prospectus or a delay as contemplated by the provisions of Section 10.

     (c) The Optional Common Shares, the Subsequent Closing Date. In addition, on the basis of the representations, warranties and agreements

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herein contained, and upon the terms but subject to the conditions herein set forth, Warburg Pincus hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to an aggregate of 1,312,500 Optional Common Shares as set forth on Schedule B. The purchase price per Optional Common Share to be paid by the several Underwriters to Warburg Pincus shall be $18.145 per share. The option granted hereunder is for use by the Underwriters solely in covering any over-allotments in connection with the sale and distribution of the Firm Common Shares. No Optional Common Shares shall be sold or delivered unless the Firm Common Shares previously have been, or simultaneously are, sold and delivered. The option granted hereunder may be exercised at any time (but not more than once) upon notice by the Representatives to Warburg Pincus (with a copy to the Company), which notice may be given at any time within 30 days from the date of the Prospectus. Such notice shall set forth (i) the aggregate number of Optional Common Shares as to which the Underwriters are exercising the option, (ii) the names and denominations in which the certificates or the book-entry transfers for the Optional Common Shares are to be registered and (iii) the time, date and place at which such certificates or book-entry transfers will be delivered (which time and date may be simultaneous with, but not earlier than, the Closing Date; and in such case the term “Closing Date” shall refer to the time and date of delivery of certificates or the book-entry transfers for the Firm Common Shares and the Optional Common Shares). Such time and date of delivery, if subsequent to the Closing Date, is called the “Subsequent Closing Date” and shall be determined by the Representatives and shall not be earlier than three nor later than five full business days after delivery of such notice of exercise. If any Optional Common Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Optional Common Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of Optional Common Shares to be purchased as the number of Firm Common Shares set forth on Schedule A opposite the name of such Underwriter bears to the total number of Firm Common Shares. The Representatives may cancel the option at any time prior to any notice of exercise of such option and prior to the expiration of such option by giving written notice of such cancellation to Warburg Pincus (with a copy to the Company).

     (d) Public Offering of the Common Shares. The Representatives hereby advise the Company and the Selling Stockholders that the Underwriters intend to offer for sale to the public, as described in the Disclosure Package and the Prospectus, their respective portions of the Common Shares as soon after this Agreement has been executed and the Registration Statement has been declared effective as the Representatives, in their sole judgment, have determined is advisable and practicable.

     (e) Payment for the Common Shares. Payment for the Firm Common Shares to be sold by the Company shall be made at the Closing Date by wire transfer of immediately available funds to the order of the Company.

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Payment for the Common Shares to be sold by the Selling Stockholders shall be made at the Closing Date (and, if applicable, at any Subsequent Closing Date) by wire transfer of immediately available funds to the order of each Selling Stockholder.

          It is understood that the Representatives have been authorized, for their own accounts and the accounts of the several Underwriters, to accept delivery of and receipt for, and make payment of the purchase price for, the Firm Common Shares and any Optional Common Shares the Underwriters have agreed to purchase. BAS, Piper and JPMorgan, individually and not as the Representatives of the Underwriters, may (but shall not be obligated to) make payment for any Common Shares to be purchased by any Underwriter whose funds shall not have been received by the Representatives by the Closing Date or the Subsequent Closing Date, as the case may be, for the account of such Underwriter, but any such payment shall not relieve such Underwriter from any of its obligations under this Agreement.

          Each Selling Stockholder hereby agrees that (i) it will pay all applicable stock transfer taxes, stamp duties and other similar taxes, if any, payable upon the sale or delivery of the Common Shares to be sold by such Selling Stockholder to the several Underwriters, in connection with the performance of such Selling Stockholder’s obligations hereunder and the respective Underwriters will pay any such taxes involved in further transfers and (ii) the Custodian is authorized to deduct for such payment any such amounts from the proceeds to the Selling Stockholder hereunder and to hold such amounts for the account of the Selling Stockholder with the Custodian under the Custody Agreement.

     (f) Delivery of the Common Shares. The Company and each of the Selling Stockholders shall deliver, or cause to be delivered, to the Representatives for the accounts of the several Underwriters book-entry transfers or certificates for the Firm Common Shares at the Closing Date, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. Warburg Pincus shall also deliver, or cause to be delivered, to the Representatives for the accounts of the several Underwriters, book-entry transfers or certificates for the Optional Common Shares the Underwriters have agreed to purchase from it at the Closing Date or the Subsequent Closing Date, as the case may be, against the irrevocable release of a wire transfer of immediately available funds for the amount of the purchase price therefor. The book-entry transfers or certificates for the Common Shares shall be registered in such names and denominations as the Representatives shall have requested at least two full business days prior to the Closing Date (or the Subsequent Closing Date, as the case may be) and the form of certificate shall be made available for inspection on the business day preceding the Closing Date (or the Subsequent Closing Date, as the case may be) at a location in New York City as the Representatives may designate. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Underwriters.

     (g) Delivery of Prospectus to the Underwriters. Not later than 12:00 p.m. on the second business day following the date the Common Shares

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are first released by the Underwriters for sale to the public, the Company shall deliver or cause to be delivered, copies of the Prospectus in such quantities and at such places as the Representatives shall request.

          Section 3. Additional Covenants.

          A. Covenants of the Company. The Company further covenants and agrees with each Underwriter as follows:

     (a) Representatives’ Review of Proposed Amendments and Supplements. During such period beginning on the Applicable Time and ending on the later of the Closing Date or such date, as in the opinion of counsel for the Underwriters, the Prospectus is no longer required by law to be delivered in connection with sales by an Underwriter or dealer (the “Prospectus Delivery Period”), prior to amending or supplementing the Registration Statement, the Disclosure Package or the Prospectus, subject to Section 3(A)(e), the Company shall furnish to the Representatives for review a copy of each such proposed amendment or supplement, and the Company shall not file or use any such proposed amendment or supplement to which the Representatives reasonably object.

     (b) Securities Act Compliance. After the date of this Agreement and during the Prospectus Delivery Period, the Company shall promptly advise the Representatives in writing (i) when the Registration Statement, if not effective at the Execution Time, shall have become effective, (ii) of the receipt of any comments of, or requests for additional or supplemental information from, the Commission, (iii) of the time and date of any filing of any post-effective amendment to the Registration Statement or any amendment or supplement to any Preliminary Prospectus or the Prospectus, (iv) of the time and date that any post-effective amendment to the Registration Statement becomes effective and (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of any order or notice preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus, or of any proceedings to remove, suspend or terminate from listing or quotation the Common Stock from any securities exchange upon which it is listed for trading or included or designated for quotation, or of the threatening or initiation of any proceedings for any of such purposes. The Company shall use its reasonable best efforts to prevent the issuance of any such stop order or notice of prevention or suspension of such use. If the Commission shall enter any such stop order or issue any such notice at any time, the Company will use its commercially reasonable efforts to obtain the lifting of such order or notice as soon as is reasonably possible or reversal of such order or notice at the earliest possible moment, or subject to Section 3(A)(a), will file an amendment to the Registration Statement or will file a new registration statement and use its commercially reasonable efforts to have such amendment or new registration statement declared effective as soon as practicable. Additionally, the Company

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agrees that it shall comply with the provisions of Rules 424(b), 430A and 430C, as applicable, under the Securities Act, including with respect to the timely filing of documents thereunder, and will use its commercially reasonable efforts to confirm that any filings made by the Company under such Rule 424(b) were received in a timely manner by the Commission.

     (c) Exchange Act Compliance. During the Prospectus Delivery Period, the Company will file all documents required to be filed with the Commission pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within the time periods required by the Exchange Act.

     (d) Amendments and Supplements to the Registration Statement, Disclosure Package and Prospectus and Other Securities Act Matters. If, during the Prospectus Delivery Period, any event or development shall occur or condition exist as a result of which the Disclosure Package or the Prospectus, as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made or then prevailing, as the case may be, not misleading, or if it is necessary to amend or supplement the Disclosure Package or the Prospectus, or to file under the Exchange Act any document incorporated by reference in the Disclosure Package or the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made or then prevailing, as the case may be, not misleading, or if in the opinion of the Representatives it is otherwise necessary or advisable to amend or supplement the Registration Statement, the Disclosure Package or the Prospectus or to file under the Exchange Act any document incorporated by reference in the Disclosure Package or the Prospectus, or to file a new registration statement containing the Prospectus, in order to comply with law, including in connection with the delivery of the Prospectus, the Company agrees to (i) notify the Representatives of any such event or condition and (ii) promptly prepare (subject to Section 3(A)(a) and 3(A)(e) hereof), file with the Commission (and use its commercially reasonable efforts to have any amendment to the Registration Statement or any new registration statement to be declared effective) and furnish at its own expense to the Underwriters and to dealers, amendments or supplements to the Registration Statement, the Disclosure Package or the Prospectus, any new registration statement, necessary in order to make the statements in the Disclosure Package or the Prospectus as so amended or supplemented, in the light of the circumstances under which they were made or then prevailing, as the case may be, not misleading or so that the Registration Statement, the Disclosure Package or the Prospectus, as amended or supplemented, will comply with the law.

     (e) Permitted Free Writing Prospectuses. The Company represents that it has not made, and agrees that, unless it obtains the prior written consent of the Representatives, it will not make, any offer relating to the Common Shares that constitutes or would constitute an Issuer Free Writing

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Prospectus or that otherwise constitutes or would constitute a Free Writing Prospectus or a portion thereof required to be filed by the Company with the Commission or retained by the Company under Rule 433 of the Securities Act; provided that the prior written consent of the Representatives hereto shall be deemed to have been given in respect of the Free Writing Prospectuses included in Schedule D hereto and any electronic road show. Any such Free Writing Prospectus consented to by the Representatives is hereinafter referred to as a “Permitted Free Writing Prospectus”. The Company agrees that (i) it has treated and will treat, as the case may be, each Permitted Free Writing Prospectus as an Issuer Free Writing Prospectus, and (ii) has complied and will comply, as the case may be, with the requirements of Rules 164 and 433 of the Securities Act applicable to any Permitted Free Writing Prospectus, including in respect of timely filing with the Commission, legending and record keeping.

     (f) Copies of any Amendments and Supplements to the Registration Statement, Disclosure Package and Prospectus. The Company agrees to furnish the Representatives, without charge, signed copies of the Registration Statement and during the Prospectus Delivery Period, as many copies of the Prospectus and any amendments and supplements thereto and the Disclosure Package as the Representatives may reasonably request.

     (g) Blue Sky Compliance. The Company shall cooperate with the Representatives and counsel for the Underwriters to qualify or register the Common Shares for sale under (or obtain exemptions from the application of) the state securities or blue sky laws or Canadian provincial Securities laws or other foreign laws of those jurisdictions reasonably designated by the Representatives, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as required for the distribution of the Common Shares. Notwithstanding the preceding sentence, the Company shall not be required to qualify as a foreign corporation or to take any action that would subject it to general service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a foreign corporation. The Company will advise the Representatives promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Common Shares for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company shall use its commercially reasonable efforts to obtain the withdrawal thereof as soon as is reasonably possible.

     (h) Use of Proceeds. The Company shall apply the net proceeds from the sale of the Common Shares sold by it in the manner described under the caption “Use of Proceeds” in the Disclosure Package and the Prospectus.

     (i) Transfer Agent. The Company shall continue to maintain, at its expense, a registrar and transfer agent for the Common Stock.

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     (j) Earnings Statement. The Company will timely file such reports pursuant to the Exchange Act as are necessary to make generally available to its security holders and to the Representatives as soon as practicable an earnings statement (which need not be audited) covering a period of at least twelve months beginning after the effective date of the Registration Statement that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act.

     (k) Periodic Reporting Obligations. During the Prospectus Delivery Period, the Company shall file, on a timely basis, with the Commission and the NASDAQ Global Select Market all reports and documents required to be filed under the Exchange Act.

     (l) Company to Provide Interim Financial Statements. Prior to the Closing Date, the Company will furnish the Underwriters, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for any quarterly period subsequent to the period covered by the most recent financial statements appearing in the Company’s Annual Report on Form 10-K incorporated by reference in the Registration Statement.

     (m) Quotation. The Company will use its best efforts to include, subject to notice of issuance, the Common Shares on the NASDAQ Global Select Market.

     (n) Agreement Not to Offer or Sell Additional Securities. During the period commencing on the date hereof and ending on the 90th day following the date of the Prospectus, the Company will not, without the prior written consent of BAS, Piper and JPMorgan (which consent may be withheld at the sole discretion of BAS, Piper and JPMorgan), directly or indirectly, sell, offer, contract or grant any option to sell, pledge, transfer or establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of or transfer, or announce the offering of, or file any registration statement under the Securities Act in respect of, any shares of Common Stock, options or warrants to acquire shares of the Common Stock or securities exchangeable or exercisable for or convertible into shares of Common Stock or publicly announce the intention to do any of the foregoing (other than as contemplated by this Agreement with respect to the Common Shares); provided, however, that the Company may (a) issue shares of its Common Stock upon exercise of options or warrants, granted pursuant to any warrant, stock option, stock bonus or other stock plan or arrangement described or incorporated by reference in the Disclosure Package and the Prospectus, (b) issue options to purchase its Common Stock pursuant to any stock option, stock bonus or other stock plan or arrangement described or incorporated by reference in the Disclosure Package and the Prospectus, but only if such options are not exercisable by their terms during the period commencing on the date hereof and ending on the 90th day following the date of the Prospectus, as such period may

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be extended pursuant to this Section 3(A)(n), or (c) file a registration statement on Form S-8 with respect to the shares of Common Stock subject to the stock options issued or to be issued pursuant to any stock option, stock bonus or other stock plan or arrangement described in the Prospectus. Notwithstanding the foregoing, if (x) during the last 17 days of the 90-day restricted period the Company issues an earnings release or material news or a material event relating to the Company occurs, or (y) prior to the expiration of the 90-day restricted period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the 90-day period, the restrictions imposed in this clause shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event.

     (o) Compliance with Sarbanes-Oxley Act. The Company will comply with all applicable securities and other laws, rules and regulations, including, without limitation, the Sarbanes-Oxley Act, and use its reasonable best efforts to cause the Company’s directors and officers, in their capacities as such, to comply with such laws, rules and regulations, including, without limitation, the provisions of the Sarbanes-Oxley Act.

     (p) Future Reports to the Representatives. During the period of five years hereafter the Company will furnish to the Representatives at 9 West 57^th Street, New York, NY 10022, Attention: Thomas M. Morrison: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, stockholders’ equity and cash flows for the year then ended and the opinion thereon of the Company’s independent public or certified public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its capital stock; provided, however, that the Company shall not be required to furnish copies of such reports, documents or communications that are filed with the Commission and available through EDGAR.

     (q) Investment Limitation. The Company shall not invest, or otherwise use the proceeds received by the Company from its sale of the Common Shares, in such a manner as would require the Company or any of its subsidiaries to register as an investment company under the Investment Company Act.

     (r) No Manipulation of Price. The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, under the Exchange

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Act or otherwise, the stabilization or manipulation of the price of any securities of the Company to facilitate the sale or resale of the Common Shares.

     (s) Existing Lock Up Agreement. The Company will enforce all existing agreements between the Company and any of its security holders that prohibit the sale, transfer, assignment, pledge or hypothecation of any of the Company’s securities in connection with the Company’s public offering. In addition, the Company will direct the transfer agent to place stop transfer restrictions upon any such securities of the Company that are bound by such existing “lock up” agreements for the duration of the periods contemplated in such agreements.

          B. Covenants of the Selling Stockholders. Each Selling Stockholder further covenants and agrees with each Underwriter:

     (a) Agreement Not to Offer or Sell Additional Sales. Such Selling Stockholder will execute and deliver on the Closing Date the lock up agreement in the form of Exhibit E hereto.

     (b) Delivery of Forms W-8 and W-9. To deliver to the Representatives prior to the Closing Date a properly completed and executed United States Treasury Department Form W-8 (if the Selling Stockholder is a non-United States person) or Form W-9 (if the Selling Stockholder is a United States person).

     (c) No Free Writing Prospectuses. Such Selling Stockholder agrees that it will not prepare or have prepared on its behalf or use or refer to, any Free Writing Prospectus, and agrees that it will not distribute any written materials in connection with the offer or sale of the Common Shares.

          BAS, Piper and JPMorgan, on behalf of the several Underwriters, may, in their sole discretion, waive in writing the performance by the Company or any Selling Stockholder of any one or more of the foregoing covenants or extend the time for their performance. Notwithstanding the foregoing, BAS, Piper and JPMorgan, for the benefit of each of the other Representatives, agree not to consent to any action proposed to be taken by the Company, the Selling Stockholders or any other holder of the Company’s securities that would otherwise be prohibited by, or to waive compliance by the Company, the Selling Stockholder or any such other security holder with the provisions of Section 3(A)(n) above or any lock-up agreement delivered pursuant to Section 5(m) below without giving each of the other Underwriters such prior notice as each of the Representatives deem acceptable to permit compliance by the Representatives and other Underwriters with applicable provisions of NASD Conduct Rule 2711(f) restricting publication and distribution of research and public appearances by research analysts before and after the expiration, waiver or termination of a lock-up agreement.

          Section 4. Payment of Expenses. The Company agrees to pay all costs, fees and expenses incurred in connection with the performance by the Company of its obligations hereunder and in connection with the transactions contemplated hereby, including without

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limitation (i) all expenses incident to the issuance and delivery of the Common Shares (including all printing and engraving costs), (ii) all fees and expenses of the registrar and transfer agent of the Common Stock, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Common Shares to the Underwriters, (iv) all fees and expenses of the Company’s counsel, independent public or certified public accountants and other advisors engaged by the Company, (v) fees and expenses of one counsel for both of the Selling Stockholders; (vi) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Registration Statement (including financial statements, exhibits, schedules, consents and certificates of experts), each Issuer Free Writing Prospectus, each Preliminary Prospectus (including any Prospectus wrapper) and the Prospectus (including any Prospectus wrapper), and all amendments and supplements thereto, and this Agreement, (vii) all filing fees, attorneys’ fees and expenses reasonably incurred by the Company or the Underwriters in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Common Shares for offer and sale under the state securities or blue sky laws or the provincial securities laws of Canada, and, if requested by the Representatives, preparing and printing a “Blue Sky Survey” or memorandum, and any supplements thereto, advising the Underwriters of such qualifications, registrations and exemptions, (viii) the filing fees incident to, and the reasonable fees and expenses of counsel for the Underwriters in connection with, the NASD’s review and approval of the Underwriters’ participation in the offering and distribution of the Common Shares, (ix) the fees and expenses associated with including the Common Stock on the NASDAQ Global Select Market, (x) all other fees, costs and expenses referred to in Item 14 of Part II of the Registration Statement, and (xi) any travel expenses of the Company’s officers and employees and any other expenses of the Company in connection with attending or hosting meetings with prospective purchasers of the Common Shares, provided that the Company and the Underwriters agree that expenses for any charter air travel in connection with such meetings shall be borne equally by the Company and the Underwriters. Except as provided in this Section 4, Section 6, Section 8 and Section 9 hereof, the Underwriters shall pay their own expenses, including the fees and disbursements of their counsel.

          Each Selling Stockholder further agrees with each Underwriter to pay (directly or by reimbursement) its individual fees and expenses incident to the performance of its respective obligations under this Agreement which are not otherwise specifically provided for herein, including but not limited to (i) fees and expenses of counsel (beyond one counsel for both of the Selling Stockholders) and other advisors for such Selling Stockholder and (ii) expenses and taxes incident to the sale and delivery of the Common Shares to be sold by such Selling Stockholder to the Underwriters hereunder.

          This Section 4 shall not affect or modify any separate, valid agreement relating to the allocation of payment of expenses between the Company, on the one hand, and the Selling Stockholders, on the other hand.

          Section 5. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Common Shares as provided herein on the Closing Date and, with respect to the Optional Common Shares, the Subsequent Closing Date, shall be subject to the accuracy of the representations and warranties on the part of the Company and the Selling Stockholders set forth in Sections 1(A) and 1(B), respectively, hereof as of the

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date hereof and the Company and the Selling Stockholders as of the Closing Date as though then made and, with respect to the Optional Common Shares, as of the Subsequent Closing Date as though then made, to the timely performance by the Company and the Selling Stockholders of their respective covenants and other obligations hereunder, and to each of the following additional conditions:

         (a) Accountants’ Comfort Letters. On the date hereof, the Representatives shall have received from each of PricewaterhouseCoopers LLP and Ernst & Young LLP, independent registered public accounting firms for the Company, a letter dated the date hereof addressed to the Underwriters, in form and substance satisfactory to the Representatives, containing statements and information of the type ordinarily included in accountant’s “comfort letters” to underwriters, delivered according to Statement of Auditing Standards No. 72 (or any successor bulletin), with respect to the audited and unaudited financial statements and certain financial information contained in the Registration Statement, the Disclosure Package and the Prospectus (and the Representatives shall have received an additional three conformed copies of such accountants’ letter for each of the several Underwriters). On the date hereof, PricewaterhouseCoopers LLP shall have furnished a letter, dated the date of delivery thereof, in form and substance satisfactory to the Underwriters and PricewaterhouseCoopers LLP, to the effect that:

        (i) They are an independent registered public accounting firm with respect to the Company within the meaning of the Securities Act and the applicable rules and regulations thereunder adopted by the Commission and the Public Company Accounting Oversight Board (United States) (“PCAOB”).

        (ii) For the periods in which PricewaterhouseCoopers LLP has expressed their opinion on the consolidated financial statements of the Company — the information set forth in the Company’s Form 10-K for the year ended December 31, 2006 under the captions “Company Overview” “Research & Development”, “Risk Factors”, “Use of Proceeds”. “Selected Financial Data”, “Managements Discussion and Analysis of Financial Condition and Results of Operation”, “Liquidity and Capital Resources”, “Allowance for Doubtful Accounts”, “Excess and Obsolete Inventory”, “Valuation of Acquired In-Process Research and Development, Goodwill and Other Intangible Assets”, “Accounting for Income Taxes”, “Foreign Currency Exchange Rate Risk”, which is expressed in dollars (or percentages derived from such dollar amounts) and has been obtained from accounting records which are subject to control over financial reporting or which has been derived directly from such accounting records by analysis or computation, is in agreement with such records or computations made therefrom.

        (iii) For the periods in which PricewaterhouseCoopers LLP has expressed their opinion on the consolidated financial statements of the Company — the information set forth in the Company’s Preliminary Prospectus and Prospectus under the captions “Prospectus Summary”, “Key Accomplishments Since Our Initial Public Offering”, “Summary Consolidated Financial Data”, “Risk Factors”, “Managements Discussion and Analysis of Financial Condition and Results of Operation”, “Liquidity

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and Capital Resources”, “Allowance for Doubtful Accounts”, “Excess and Obsolete Inventory”, “Valuation of Acquired In-Process Research and Development, Goodwill and Other Intangible Assets”, “Accounting for Income Taxes”, “Business”, “Research and Development”, which is expressed in dollars (or percentages derived from such dollar amounts) and has been obtained from accounting records which are subject to control over financial reporting or which has been derived directly from such accounting records by analysis or computation, is in agreement with such records or computations made therefrom.

         (b) Compliance with Registration Requirements; No Stop Order; No Objection from NASD. For the period from and after effectiveness of this Agreement and prior to the Closing Date and, with respect to the Optional Common Shares, the Subsequent Closing Date:

        (i) the Company shall have filed the Prospectus with the Commission (including the information required by Rule 430A and 430C under the Securities Act) in the manner and within the time period required by Rule 424(b) under the Securities Act, or the Company shall have filed a post-effective amendment to the Registration Statement containing the-information required by such Rule 430A and 430C, and such post-effective amendment shall have become effective;

        (ii) all material required to be filed by the Company pursuant to Rule 433(d) under the Securities Act shall have been filed with the Commission within the applicable time periods prescribed for such filings under such Rule 433;

        (iii) no stop order suspending the effectiveness of the Registration Statement, any Rule 462(b) Registration Statement, or any post-effective amendment to the Registration Statement, shall be in effect and no proceedings for such purpose shall have been instituted or threatened by the Commission; and

        (iv) the NASD shall have raised no objection to the fairness and reasonableness of the underwriting terms and arrangements.

         (c) No Material Adverse Change. For the period from and after the date of this Agreement and prior to the Closing Date and, with respect to the Optional Common Shares, the Subsequent Closing Date, in the judgment of the Representatives there shall not have occurred any Material Adverse Change.

         (d) Opinions of Counsel for the Company. On each of the Closing Date and the Subsequent Closing Date, the Representatives shall have received the opinion of Oppenheimer Wolf & Donnelly LLP, counsel for the Company, dated as of such closing date, the form of which is attached as Exhibit A (and the Representatives shall have received an additional three conformed copies of such counsel’s legal opinion for each of the several Underwriters).

         (e) Opinion of Special Regulatory Counsel for the Company. On each of the Closing Date and the Subsequent Closing Date, the

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Representatives shall have received the opinion of Taylor Wessing, special foreign regulatory counsel for the Company, dated as of such closing date, the form of which is attached as Exhibit B (and the Representatives shall have received an additional three conformed copies of such counsel’s legal opinion for each of the several Underwriters).

         (f) Opinion of Special Patent Counsel for the Company. On each of the Closing Date and the Subsequent Closing Date, the Representatives shall have received the opinion of Glenn Edwards, inside patent counsel for the Company, dated as of such closing date, the form of which is attached as Exhibit C (and the Representatives shall have received an additional three conformed copies of such counsel’s legal opinion for each of the several Underwriters).

         (g) Opinion of Counsel for the Underwriters. On each of the Closing Date and the Subsequent Closing Date, the Representatives shall have received the favorable opinion of Willkie Farr & Gallagher LLP, counsel for the Underwriters, dated as of such closing date, in form and substance satisfactory to the Underwriters (and the Representatives shall have received an additional two conformed copies of such counsel’s legal opinion for each of the several Underwriters).

         (h) Officers’ Certificate. On each of the Closing Date and the Subsequent Closing Date, the Representatives shall have received a written certificate executed by the Chairman of the Board, Chief Executive Officer or President of the Company and the Chief Financial Officer or Chief Accounting Officer of the Company, dated as of such closing date, to the effect set forth in subsection (b)(ii) and (b)(iii) of this Section 5, and further to the effect that:

        (i) for the period from and after the date of this Agreement and prior to such closing date, there has not occurred any Material Adverse Change;

        (ii) the representations and warranties of the Company set forth in Section 1(A) of this Agreement are true and correct with the same force and effect as though expressly made on and as of such closing date; and

        (iii) the Company has complied with all of its covenants and agreements hereunder and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to such closing date.

         (i) Bring-down Comfort Letters. On each of the Closing Date and the Subsequent Closing Date, the Representatives shall have received from each of PricewaterhouseCoopers LLP and Ernst & Young LLP, independent registered public accounting firms for the Company, a letter dated such date, in form and substance satisfactory to the Representatives, to the effect that they reaffirm the statements made in the letter furnished by them pursuant to subsection (a) of this Section 5, except that the specified date referred to therein for the carrying out of procedures shall be no more than three business days prior

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to the Closing Date or Subsequent Closing Date, as the case may be (and the Representatives shall have received an additional three conformed copies of such accountants’ letter for each of the several Underwriters).

         (j) Opinions of Counsel for Selling Shareholders. On each of the Closing Date and the Subsequent Closing Date, the Representatives shall have received the opinion of (i) Oppenheimer Wolf & Donnelly LLP, counsel for Warburg Pincus, dated as of such closing date, the form of which is attached as Exhibit D-1 (and the Representatives shall have received an additional three conformed copies of such counsel’s legal opinion for each of the several Underwriters) and (ii) Wilentz Goldman & Spitzer P.A., counsel for Vertical Fund I, L.P. and Vertical Fund II, L.P., dated as of such closing date, the form of which is attached as Exhibit D-2 (and the Representatives shall have received an additional three conformed copies of such counsel’s legal opinion for each of the several Underwriters).

         (k) Selling Stockholder’s Certificate. On each of the Closing Date and the Subsequent Closing Date, the Representatives shall receive a written certificate executed by each Selling Stockholder, dated as of such closing date, to the effect that:

        (i) the representations, warranties and covenants of such Selling Stockholder set forth in Section 1(B) of this Agreement are true and correct with the same force and effect as though expressly made by such Selling Stockholder on and as of such closing date; and

        (ii) such Selling Stockholder has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such closing date.

         (l) Selling Stockholder’s Documents. On the date hereof, the Company and the Selling Stockholders shall have furnished for review by the Representatives copies of the Power of Attorney and Custody Agreement executed by the Selling Stockholder and such further information, certificates and documents as the Representatives may reasonably request.

         (m) Lock-Up Agreement from Certain Securityholders of the Company. On or prior to the date hereof, the Company shall have furnished to the Representatives an agreement in the form of Exhibit E hereto from the persons on Exhibit F hereto, and such agreement shall be in full force and effect on each of the Closing Date and the Subsequent Closing Date.

         (n) Listing of Shares. The Common Shares shall have been listed and admitted and authorized for trading on the NASDAQ Global Select Market, and satisfactory evidence of such actions shall have been provided to the Representatives.

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         (o) Additional Documents. On or before each of the Closing Date and the Subsequent Closing Date, the Representatives and counsel for the Underwriters shall have received such information, documents and opinions as they may reasonably require for the purposes of enabling them to pass upon the issuance and sale of the Common Shares as contemplated herein, or in order to evidence the accuracy of any of the representations and warranties, or the satisfaction of any of the conditions or agreements, herein contained.

          If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Representatives by notice to the Company and the Selling Stockholders at any time on or prior to the Closing Date and, with respect to the Optional Common Shares, at any time prior to the Subsequent Closing Date, which termination shall be without liability on the part of any party to any other party, except that Section 4, Section 6, Section 8 and Section 9 shall at all times be effective and shall survive such termination.

          Section 6. Reimbursement of Underwriters’ Expenses. If this Agreement is terminated by the Representatives pursuant to Section 5, Section 7, Section 10 (to the extent the termination pursuant to Section 10 is not as a result of (a) a default by an Underwriter that is a Representative (a “Defaulting Representative”) or (b) a default by a Defaulting Representative and one or more other defaulting Underwriters that is not a Defaulting Representative), Section 11 or Section 18, or if the sale to the Underwriters of the Common Shares on the Closing Date is not consummated because of any refusal, inability or failure on the part of the Company or the Selling Stockholders to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse the Representatives and the other Underwriters (or such Underwriters as have terminated this Agreement with respect to themselves), severally, upon demand for all out-of-pocket expenses that shall have been reasonably incurred by the Representatives and the Underwriters in connection with the proposed purchase and the offering and sale of the Common Shares, including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges.

          Section 7. Effectiveness of this Agreement. This Agreement shall not become effective until the later of (i) the execution of this Agreement by the parties hereto and (ii) notification by the Commission to the Company and the Representatives of the effectiveness of the Registration Statement under the Securities Act.

          Prior to such effectiveness, this Agreement may be terminated by any party by notice to each of the other parties hereto, and any such termination shall be without liability on the part of (a) the Company or the Selling Stockholders to any Underwriter, except that if this Agreement is terminated by the Company or the Selling Stockholders, the Company and the Selling Stockholders shall be obligated to reimburse the expenses of the Representatives and the Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the Company or the Selling Stockholders, or (c) any party hereto to any other party except that the provisions of Section 8 and Section 9 shall at all times be effective and shall survive such termination.

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          Section 8. Indemnification.

     (a) Indemnification of the Underwriters by the Company. The Company agrees to indemnify and hold harmless each Underwriter, its directors, officers, employees, and agents and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Underwriter, director, officer, employee, agent or controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any amendment thereto, including any information deemed to be a part thereof pursuant to Rule 430A and 430C under the Securities Act, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading; or (ii) upon any untrue statement or alleged untrue statement of a material fact contained in any Issuer Free Writing Prospectus, any Preliminary Prospectus, the Prospectus (or any amendment or supplement thereto) or any “road show” (as defined in Rule 433) not constituting an Issuer Free Writing Prospectus (a “Non-IFWP Road Show”), or the omission or alleged omission therefrom of a material fact, in each case, necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (iii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein; or (iv) in whole or in part upon any failure of the Company to perform its obligations hereunder or under law; and to reimburse each Underwriter, its directors, officers, employees, agents and each such controlling person for any and all expenses (including the fees and disbursements of counsel chosen by BAS, Piper and JPMorgan) as such expenses are reasonably incurred by such Underwriter, or its officers, directors, employees, agents or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by the Representatives expressly for use in the Registration Statement, any Issuer Free Writing Prospectus, any Preliminary Prospectus, the Prospectus (or any amendment or supplement thereto) or any Non-IFWP Road Show. The indemnity agreement set forth in this Section 8(a) shall be in addition to any liabilities that the Company may otherwise have.

     (b) Indemnification of the Underwriters by the Selling Stockholders. Each Selling Stockholder agrees to indemnify and hold harmless

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each Underwriter, its directors, officers, employees and agents, and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any loss, claim, damage, liability or expense, as incurred, to which such Underwriter, director, officer, employee, agent or controlling person may become subject, under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Selling Stockholder), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based (i) upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or any amendment thereto, including any information deemed to be a part thereof pursuant to Rule 430A and 430C under the Securities Act, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading but only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information relating to such Selling Stockholder furnished in writing to the Company by or with the approval of such Selling Stockholder expressly for use in the Registration Statement or any amendments or supplements thereto; or (ii) upon any untrue statement or alleged untrue statement of a material fact contained in any Issuer Free Writing Prospectus, any Preliminary Prospectus, the Prospectus (or any amendment or supplement thereto) or any Non-IFWP Road Show, or the omission or alleged omission therefrom of a material fact, in each case, necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading but only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with information relating to such Selling Stockholder furnished in writing to the Company by or with the approval of such Selling Stockholder expressly for use in the Registration Statement, any Issuer Free Writing Prospectus, any Preliminary Prospectus, the Prospectus (or any amendments or supplements thereto) or any Non-IFWP Road Show; and to reimburse each Underwriter, its directors, officers, employees, agents and each such controlling person for any and all expenses (including the fees and disbursements of one counsel chosen by BAS, Piper and JPMorgan) as such expenses are reasonably incurred by such Underwriter, its directors, officers, employees, agents or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the foregoing indemnity agreement shall not apply to any loss, claim, damage, liability or expense to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to such Selling Stockholders by the Representatives expressly for use in the Registration Statement, any Issuer Free Writing Prospectus, any Preliminary Prospectus, the Prospectus (or any

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amendment or supplement thereto) or any Non-IFWP Road Show. Each Underwriter hereby acknowledges that the only information that such Selling Stockholder furnished to the Company expressly for use in the Registration Statement, any Issuer Free Writing Prospectus, any Preliminary Prospectus, the Prospectus (or any amendment or supplement thereto) or any Non-IFWP Road Show are its legal name, address and the number of shares of Common Stock owned by such Selling Stockholder before and after the offering as set forth in the table in the Disclosure Package and the Prospectus under the caption “Selling Stockholders”. The liability of each Selling Stockholder under the indemnity agreement contained in this paragraph 8(b) shall be limited to an amount equal to the net proceeds received by such Selling Stockholder from the offering of the Common Shares sold by such Selling Stockholder pursuant to this Agreement.

     (c) Indemnification of the Company, its Directors and Officers and the Selling Stockholders. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement, the Selling Stockholders and each person, if any, who controls the Company or the Selling Stockholders within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any loss, claim, damage, liability or expense, as incurred, to which the Company, or any such director, officer, Selling Stockholder or controlling person may become subject, under the Securities Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Underwriter), insofar as such loss, claim, damage, liability or expense (or actions in respect thereof as contemplated below) arises out of or is based upon any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Issuer Free Writing Prospectus, any Preliminary Prospectus, the Prospectus (or any amendment or supplement thereto), or any Non-IFWP Road Show or arises out of or is based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, and only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Issuer Free Writing Prospectus, any Preliminary Prospectus, the Prospectus (or any amendment or supplement thereto) or any Non-IFWP Road Show, in reliance upon and in conformity with written information furnished to the Company and the Selling Stockholders by the Representatives expressly for use therein; and to reimburse the Company, or any such director, officer, Selling Stockholder or controlling person for any legal and other expense reasonably incurred by the Company, or any such director, officer, Selling Stockholder or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. The Company and each Selling Stockholder hereby acknowledge that the only information that the Underwriters have furnished to the Company and the Selling Stockholders expressly for use in the Registration Statement, any Issuer Free Writing Prospectus, any Preliminary Prospectus, the

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Prospectus (or any amendment or supplement thereto) or any Non-IFWP Road Show are the statements set forth in the table in the first paragraph and in the third, seventh, ninth, tenth, and twenty-sixth paragraphs under the caption “Underwriting” in the Disclosure Package and the Prospectus; and the Underwriters confirm that such statements are correct. The indemnity agreement set forth in this Section 8(c) shall be in addition to any liabilities that each Underwriter may otherwise have.

     (d) Notifications and Other Indemnification Procedures. Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof, but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section 8 or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it shall elect, jointly with all other indemnifying parties similarly notified, by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that a conflict may arise between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of such indemnifying party’s election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel (together with local counsel), approved by the indemnifying party (or by BAS, Piper and JPMorgan in the case of Section 8(c) and Section 9), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time

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after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party.

     (e) Settlements. The indemnifying party under this Section 8 shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there is a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party against any loss, claim, damage, liability or expense by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(d) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, such consent not to be unreasonably withheld, effect any settlement, compromise or consent to the entry of judgment in any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity was or could have been sought hereunder by such indemnified party, unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding.

          Section 9. Contribution. If the indemnification provided for in Section 8 is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount paid or payable by such indemnified party, as incurred, as a result of any losses, claims, damages, liabilities or expenses referred to therein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Stockholders, on the one hand, and the Underwriters, on the other hand, from the offering of the Common Shares pursuant to this Agreement or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Selling Stockholders, on the one hand, and the Underwriters, on the other hand, in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Stockholders, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Common Shares pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Common Shares pursuant to this Agreement (before deducting expenses) received by the Company and the Selling Stockholders, and the total underwriting discount and commissions received by the Underwriters, in each case as set forth on the front cover page of the Prospectus bear to the aggregate public offering price of the Common Shares

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as set forth on such cover. The relative fault of the Company and the Selling Stockholders, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact or any such inaccurate or alleged inaccurate representation or warranty relates to information supplied by the Company or the Selling Stockholders, on the one hand, or the Underwriters, on the other hand, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

          The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8(d), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 8(d) with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this Section 9; provided however, that no additional notice shall be required with respect to any action for which notice has been given under Section 8(d) for purposes of indemnification.

          The Company, the Selling Stockholders and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 9.

          Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the underwriting discount and commissions received by such Underwriter in connection with the Common Shares underwritten by it and distributed to the public. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute pursuant to this Section 9 are several, and not joint, in proportion to their respective underwriting commitments as set forth opposite their names in Schedule A. For purposes of this Section 9, each director, officer, employee and agent of an Underwriter and each person, if any, who controls an Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company with the meaning of the Securities Act and the Exchange Act shall have the same rights to contribution as the Company.

          Notwithstanding any other provision of this Agreement, the liability of each Selling Stockholder to contribute pursuant to Section 9 shall be limited to the net proceeds received by such Selling Stockholder from the offering of the Common Shares sold by such Selling Stockholder pursuant to this Agreement. For purposes of this Section 9, each person, if any, who controls a Selling Stockholder within the meaning of Section 15 of the Securities Act of Section 20 of the Exchange Act shall have the same rights to contribution as such Selling Stockholder.

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          Section 10. Default of One or More of the Several Underwriters. If, on the Closing Date or the Subsequent Closing Date, as the case may be, any one or more of the several Underwriters shall fail or refuse to purchase Common Shares that it or they have agreed to purchase hereunder on such date, and the aggregate number of Common Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase does not exceed 10% of the aggregate number of the Common Shares to be purchased on such date, the other Underwriters shall be obligated, severally, in the proportions that the number of Firm Common Shares set forth opposite their respective names on Schedule A bears to the aggregate number of Firm Common Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as may be specified by the Representatives with the consent of the non-defaulting Underwriters, to purchase the Common Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date. If, on the Closing Date or the Subsequent Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Common Shares and the aggregate number of Common Shares with respect to which such default occurs exceeds 10% of the aggregate number of Common Shares to be purchased on such date, and arrangements satisfactory to the Representatives and the Company for the purchase of such Common Shares are not made within 48 hours after such default, this Agreement shall terminate without liability of any party to any other party except that the provisions of Section 4, Section 6 (to the extent the termination pursuant to Section 10 is not as a result of (a) a default by a Defaulting Representative or (b) a default by a Defaulting Representative and one or more other defaulting Underwriters that is not a Defaulting Representative), Section 8 and Section 9 shall at all times be effective and shall survive such termination. In any such case either the Representatives or the Company shall have the right to postpone the Closing Date or the Subsequent Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Registration Statement and the Prospectus or any other documents or arrangements may be effected.

          As used in this Agreement, the term “Underwriter” shall be deemed to include any person substituted for a defaulting Underwriter under this Section 10. Any action taken under this Section 10 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.

          Section 11. Termination of this Agreement. Prior to the Closing Date this Agreement may be terminated by the Representatives by notice given to the Company if at any time (i) trading or quotation in any of the Company’s securities shall have been suspended or limited by the Commission or by the NASDAQ Stock Market, or trading in securities generally on either the NASDAQ Stock Market or the New York Stock Exchange shall have been suspended or limited, or minimum or maximum prices shall have been generally established on any of such stock exchanges by the Commission or the NASD; (ii) a general banking moratorium shall have been declared by any of federal or New York, Delaware or California authorities; (iii) there shall have occurred any outbreak or escalation of national or international hostilities or any crisis or calamity, or any change in the United States or international financial markets, or any substantial change or development” involving a prospective substantial change in United States’ or international political, financial or economic conditions, as in the judgment of the Representatives is material and adverse and makes it impracticable to market the Common Shares in the manner and on the terms described in the Prospectus or to enforce contracts for the sale of securities; (iv) in the commercially reasonable judgment of the Representatives there shall

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have occurred any Material Adverse Change; or (v) the Company shall have sustained a loss by strike, fire, flood, earthquake, accident or other calamity of such character as in the reasonable judgment of the Representatives may interfere materially with the conduct of the business and operations of the Company regardless of whether or not such loss shall have been insured. Any termination pursuant to this Section 11 shall be without liability on the part of (a) the Company or the Selling Stockholders to any Underwriter, except that the Company and the Selling Stockholders shall be obligated to reimburse the expenses of the Representatives and the Underwriters pursuant to Sections 4 and 6 hereof, (b) any Underwriter to the Company or the Selling Stockholders or (c) of any party hereto to any other party except that the provisions of Section 8 and Section 9 shall at all times be effective and shall survive such termination.

          Section 12. No Advisory or Fiduciary Responsibility. Each of the Company and the Selling Stockholders acknowledges and agrees that: (i) the purchase and sale of the securities pursuant to this Agreement, including the determination of the public offering price of the Common Stock and any related discounts and commissions, is an arm’s-length commercial transaction between the Company and the Selling Stockholders, on the one hand, and the several Underwriters, on the other hand, and the Company and the Selling Stockholders are capable of evaluating and understanding and understand and accept the terms, risks and conditions of the transactions contemplated by this Agreement; (ii) in connection with each transaction contemplated hereby and the process leading to such transaction each Underwriter is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary of the Company, the Selling Stockholders or their respective affiliates, stockholders, creditors or employees or any other party; (iii) no Underwriter has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Company or the Selling Stockholders with respect to any of the transactions contemplated hereby or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company or the Selling Stockholders on other matters) and no Underwriter has any obligation to the Company or the Selling Stockholders with respect to the offering contemplated hereby except the obligations expressly set forth in this Agreement; (iv) the several Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and the Selling Stockholders and that the several Underwriters have no obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering contemplated hereby and the Company and the Selling Stockholders have consulted their own legal, accounting, regulatory and tax advisors to the extent they deemed appropriate.

          Except as set forth in Section 19, this Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company, the Selling Stockholders and the several Underwriters, or any of them, with respect to the subject matter hereof (except for agreements relating to expenses paid by the Company on behalf of the Selling Stockholders). The Company and the Selling Stockholders hereby waive and release, to the fullest extent permitted by law, any claims that the Company and the Selling Stockholders may have against the several Underwriters with respect to any breach or alleged breach of agency or fiduciary duty.

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          Section 13. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company, their respective officers, the Selling Stockholders and the several Underwriters set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the officers or employees of any Underwriter or any person controlling any Underwriter, the Company, the officers, directors or employees of the Company or any person controlling the Company, or the Selling Stockholder, (ii) acceptance of the Common Shares and payment for them hereunder and (iii) termination of this Agreement.

          Section 14. Notices. All communications hereunder shall be in writing and shall be mailed, hand delivered or telecopied and confirmed to the parties hereto as follows:

If to the Representatives:

Banc of America Securities LLC
9 West 57th Street
New York, NY 10019
Facsimile: (212) 933-2217
Attention: Thomas M. Morrison

and

Piper Jaffray & Co.
800 Nicollet Mall
Suite 800
Minneapolis, MN 55402
Facsimile: (415) 277-1551
Attention: Jeffrey A. Hoffman

and

J.P. Morgan Securities Inc.
277 Park Avenue
9th Floor
New York, New York 10172
Facsimile: (212) 622-8358
Attention: Equity Syndicate Desk

with a copy (which shall not constitute notice) to:

Banc of America Securities LLC
9 West 57th Street
New York, New York 10019
Facsimile: (212) 583-8567
Attention: Legal Department

with a copy to:

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Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Facsimile: (212) 728-9222
Attention: Steven J. Gartner, Esq.

If to the Company:

ev3 Inc.
9600 54^th Avenue North
Plymouth, MN 55442
Facsimile: (763) 398-7191
Attention: Kevin M. Klemz, Esq.

with a copy (which shall not constitute notice) to:

Oppenheimer Wolff & Donnelly LLP
Plaza VII Building, Suite 3300
45 South Seventh Street
Minneapolis, MN 55402
Facsimile: (612) 607-7100
Attention: Bruce A. Machmeier, Esq.

If to Warburg Pincus:

Warburg, Pincus Equity Partners, L.P.
c/o Warburg Pincus & Co.
466 Lexington Avenue
New York, NY 10017
Facsimile: (212) 716-5068
Attention: Scott A. Arenare, Esq.

with a copy (which shall not constitute notice) to:

Oppenheimer Wolff & Donnelly LLP
Plaza VII Building, Suite 3300
45 South Seventh Street
Minneapolis, MN 55402
Facsimile: (612) 607-7100
Attention: Thomas A. Letscher, Esq.

If to Vertical Fund I, L.P. or Vertical Fund II, L.P.:

Vertical Fund I, L.P.
c/o Vertical Group, L.P.
25 Deforest Avenue
Summit, New Jersey 07901

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Facsimile: (908) 273-9434
Attention: John A. Slattery

Vertical Fund II, L.P.
c/o Vertical Group, L.P.
25 Deforest Avenue
Summit, New Jersey 07901
Facsimile: (908) 273-9434
Attention: John A. Slattery

with a copy (which shall not constitute notice) to:

Wilentz Goldman & Spitzer, P.A.
90 Woodbridge Center Drive
Suite 900 Box 10
Woodbridge, NJ 07095-0958
Facsimile: (732) 855-6117
Attention: Kenneth Shank

Any party hereto may change the address for receipt of communications by giving written notice to the others.

          Section 15. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Underwriters pursuant to Section 10 hereof, and to the benefit of (i) the Company, its directors, any person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and any officer of the Company who signs the Registration Statement, (ii) the Selling Stockholder and each person, if any, who controls a Selling Stockholder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, (iii) the Underwriters, the officers and employees of the Underwriters, and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and (iv) the respective successors and assigns of any of the above, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The term “successors” shall not include any purchaser of the Common Shares as such from any of the Underwriters merely by reason of such purchase.

          Section 16. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

          Section 17. Governing Law Provisions.

     (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE

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INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.

     (b) Consent to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States of America located in the City of Minneapolis and County of Hennepin or the courts of the State of Minnesota in each case located in the City of Minneapolis and County of Hennepin (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court, as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.

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          Section 18. Failure of One or More of the Selling Stockholders to Sell and Deliver Optional Common Shares. If one or more of the Selling Stockholders shall fail to sell and deliver to the Underwriters the Common Shares to be sold and delivered by such Selling Stockholder pursuant to this Agreement at the Closing Date or the Subsequent Closing Date, then the Underwriters may at their option, by written notice from the Representatives to the Company and the Selling Stockholders, either (i) terminate this Agreement without any liability on the part of any Underwriter or, except as provided in Sections 4, 6, 8 and 9 hereof, the Company or the Selling Stockholders, or (ii) purchase the shares which the Company and other Selling Stockholders have agreed to sell and deliver in accordance with the terms hereof. If one or more of the Selling Stockholders shall fail to sell and deliver to the Underwriters the Common Shares to be sold and delivered by such Selling Stockholders pursuant to this Agreement at the Closing Date or any Subsequent Closing Date, then the Underwriters shall have the right, by written notice from the Representatives to the Company and the Selling Stockholders, to postpone the Closing Date or the Subsequent Closing Date, as the case may be, but in no event for longer than seven days in order that the required changes, if any, to the Registration Statement and the Prospectus or any other documents or arrangements may be effected.

          Section 19. General Provisions. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in two or more counterparts, each one of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit. The Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.

          The Underwriters will (i) not make any offer relating to the Common Shares that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a Free Writing Prospectus required to be filed by any of the Underwriters with the Commission under Rule 433 under the Securities Act other than (a) a free writing prospectus that contains no “issuer information” (as defined in Rule 433(h)(2) under the Securities Act) that was not included (including through incorporation by reference) in the Preliminary Prospectus or a previously filed Issuer Free Writing Prospectus, (b) any Permitted Free Writing Prospectus, or (c) any free writing prospectus prepared by such underwriter and approved by the Company in writing prior to its first use (each such free writing prospectus referred to in clauses (i) or (iii), an “Underwriter Permitted Free Writing Prospectus”); and (ii) comply with the requirements of Rules 164 and 433 under the Act applicable to any Underwriter Permitted Free Writing Prospectus, including the requirements relating to timely filing with the Commission, legending and record keeping.

          The Company and the Selling Stockholders (and certain other parties) are parties to a registration rights agreement, dated as of June 21, 2005 (the “Registration Rights Agreement”) which, among other things, provides for certain indemnification rights. The Company and such Selling Stockholders agree that, as between the Company and such Selling Stockholders, in the event of any conflict between such indemnification provisions and the indemnification provisions of this Agreement, the indemnification provisions of the Registration Rights Agreement will prevail.

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          Each of the parties hereto acknowledges that it is a sophisticated business person who was adequately represented by counsel during negotiations regarding the provisions hereof, including, without limitation, the indemnification provisions of Section 8 and the contribution provisions of Section 9, and is fully informed regarding said provisions. Each of the parties hereto further acknowledges that the provisions of Sections 8 and 9 hereto fairly allocate the risks in light of the ability of the parties to investigate the Company, its affairs and its business in order to assure that adequate disclosure has been made in the Registration Statement, any Preliminary Prospectus and the Prospectus (and any amendments and supplements thereto), as required by the Securities Act and the Exchange Act.

[SIGNATURE PAGE FOLLOWS]

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     If the foregoing is in accordance with your understanding of our agreement,- kindly sign and return to the Company the enclosed copies hereof, whereupon this instrument, along with all counterparts hereof, shall become a binding agreement in accordance with its terms.

Very truly yours,
EV3 INC.
By:
By:	/s/ Patrick D. Spangler Name: Patrick D. Spangler
	Title: CFO
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By:	Warburg, Pincus Partners LLC, its General Partner
By:	Warburg Pincus & Co., its Managing Member
By:	/s/ Sean Carney
	Name: Sean Carney
	Title: Managing Director
WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.
By:	Warburg, Pincus Partners LLC, its General Partner
By:	Warburg, Pincus & Co., its Managing Member
By:	/s/ Sean Carney
	Name: Sean Carney
	Title: Managing Director

WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.
By:	Warburg, Pincus Partners LLC, its General Partner
By:	Warburg, Pincus & Co., its Managing Member
By:	/s/ Sean Carney Name: Sean Carney
	Title: Managing Director
VERTICAL FUND I, L.P.
By:	Vertical Group, L.P.,
	General Partner
By:	/s/ Stephen D. Baksa
	Name: Stephen D. Baksa
	Title: General Partner
VERTICAL FUND II, L.P.
By:	Vertical Group, L.P.,
	General Partner
By:	/s/ Stephen D. Baksa
	Name: Stephen D. Baksa
	Title: General Partner

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

          The foregoing Underwriting Agreement is hereby confirmed and accepted by the Representatives as of the date first above written.

BANC OF AMERICA SECURITIES LLC
PIPER JAFFRAY & CO.
J.P. MORGAN SECURITIES INC.

Acting as Representatives of the
several Underwriters named in
the attached Schedule A.

BANC OF AMERICA SECURITIES LLC
By:	/s/ Thomas M. Morrison Managing Director
PIPER JAFFRAY & CO.
By:	/s/ Chad Abraham
	Managing Director
J.P. MORGAN SECURITIES INC.
By:	/s/ Rakesh Mehta
	Managing Director

SCHEDULE A

	NUMBER OF FIRM
	COMMON SHARES
UNDERWRITERS	TO BE PURCHASED
Banc of America Securities LLC		2,625,000
Piper Jaffray & Co.		2,625,000
J.P. Morgan Securities Inc.		1,750,000
Bear, Stearns & Co. Inc.		1,093,750
Thomas Weisel Partners LLC		656,250
Total		8,750,000

SCHEDULE B

			Maximum
	Maximum		Number of
	Number of Firm		Optional
	Common Shares		Common Shares
Selling Stockholder	to be Sold		to be Sold
Warburg, Pincus Equity Partners, L.P.		5,670,000		1,240,312
Warburg, Pincus Netherlands Equity Partners I, C.V.		300,000		65,625
Warburg, Pincus Netherlands Equity Partners III, C.V.		30,000		6,563
Vertical Fund I, L.P.		250,000		0
Vertical Fund II, L.P.		0		0

EX-31.1

Exhibit 31.1

Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 and SEC Rule 13a-14(a)

I, James M. Corbett, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ev3 Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2007	/s/ James M. Corbett
	James M. Corbett
	President and Chief Executive Officer (principal executive officer)

EX-31.2

Exhibit 31.2

Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 and SEC Rule 13a-14(a)

I, Patrick D. Spangler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ev3 Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2007	/s/ Patrick D. Spangler
	Patrick D. Spangler
	Chief Financial Officer and Treasurer (principal financial officer)

EX-32.1

Exhibit 32.1

Certification of CEO Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of ev3 Inc. (the “Company”) on Form 10-Q for the quarterly period ended July 1, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James M. Corbett, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 8, 2007	/s/ James M. Corbett
	James M. Corbett
	President and Chief Executive Officer (principal executive officer)

EX-32.2

Exhibit 32.2

Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of ev3 Inc. (the “Company”) on Form 10-Q for the quarterly period ended July 1, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick D. Spangler, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 8, 2007	/s/ Patrick D. Spangler
	Patrick D. Spangler
	Chief Financial Officer and Treasurer (principal financial officer)