Exhibit 4.4


 


SECURITIES PURCHASE
AGREEMENT


 


THIS SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated as of July 28, 2005, is between
AGA MEDICAL CORPORATION, a Minnesota corporation (the “Company”) and
WCAS CAPITAL PARTNERS IV, L.P., a Delaware limited partnership (the “Purchaser”).
Capitalized terms used and not defined elsewhere in this Agreement are defined
in Article 1 hereof.


 


RECITALS


 


WHEREAS, Welsh, Carson,
Anderson & Stowe IX, L.P. (“WCAS IX”), Franck L. Gougeon (“Gougeon”)
and the Company entered into a Stock Purchase Agreement (the “Stock Purchase
Agreement”) pursuant to which WCAS IX and the co-investors listed on the
signature pages thereto (collectively with WCAS IX, the “Investors”)
have agreed to purchase from the Company, and the Company has agreed to issue
and sell to the Investors shares of the Company’s Series A Convertible
Preferred Stock, par value $0.001 per share (the “Series A Preferred
Stock”), which shares are convertible into shares of common stock of the
Company, par value $0.01 per share (“Common Stock”), the proceeds of
which, together with the proceeds from other Contemplated Transactions (as
defined herein), will be used to consummate the buyout of all the outstanding
shares of stock of Michael Afremov in the Company (the “Afremov Buyout”);


 


WHEREAS, in connection with the
Contemplated Transactions, the Company is entering into this Agreement,
pursuant to which the Purchaser has agreed to purchase from the Company and the
Company has agreed to issue and sell to the Purchaser, upon the terms and
conditions hereinafter set forth, (i) 10% senior subordinated notes due
2015 (the “Notes”) in an aggregate principal amount of $50,000,000 and
in the form of Exhibit A hereto and (ii) 6,524 shares of Series A
Preferred Stock (the “Shares” and together with the Notes, the “Securities”),
the purchase and sale of such Securities to be consummated on the Closing Date
(as hereinafter defined) upon the terms and subject to the conditions set forth
in this Agreement;


 


WHEREAS, also in connection
therewith, the Investors, Gougeon and the Company are amending and restating
the original Stock Purchase Agreement to provide for certain amendments (the “Restated
Stock Purchase Agreement”);


 


WHEREAS, also in connection
therewith, the Company, the Investors and Gougeon are entering into a
Stockholders Agreement (the “Stockholders Agreement”) and a Registration
Rights Agreement (the “Registration Rights Agreement”); and


 


NOW, THEREFORE, the parties
hereto agree as follows:


 


ARTICLE I


 


DEFINITIONS


 


SECTION 1.01  
Certain Definitions. The following terms have the meanings set forth below:


 


“1933 Act” means the
Securities Act of 1933.


 

















 


“Action” means any
claim, action, cause of action or suit (whether in contract or tort or
otherwise), litigation (whether at law or in equity, whether civil or
criminal), controversy, assessment, arbitration, investigation, hearing,
charge, complaint, demand, notice or proceeding to, from, by or before any
Governmental Authority.


 


“Affiliate” means, with
respect to any specified Person at any time means, (a) each Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Person at such time, (b) each Person
who is at such time an officer or director of, or direct or indirect beneficial
holder of at least 20% of any class of the Equity Interests of, such specified
Person, (c) each Person that is managed by a common group of executive
officers and/or directors as such specified Person, (d) the members of the
immediate family (i) of each officer, director or holder described in
clause (b) and (ii) if such specified Person is an individual, of
such specified Person and (e) each Person of which such specified Person
or an Affiliate (as defined in clauses (a) through (d)) thereof will,
directly or indirectly, beneficially own at least 20% of any class of Equity
Interests at such time.


 


“Business” means the
businesses conducted by the Company and its Subsidiaries and proposed to be
conducted by the Company and its Subsidiaries.


 


“Business Day” means any
weekday other than a weekday on which banks in New York, New York are
authorized or required to be closed.


 


“Capital Lease Obligations”
of any Person means the obligations of such Person to pay rent or other amounts
under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases on a balance sheet of such
Person under GAAP, and the amount of such obligations shall be the capitalized
amount thereof determined in accordance with GAAP.


 


“Change of Control”
means (a) a “Change of Control”, as defined in the certificate of
incorporation of Holdings or any certificate of designations relating to any
preferred stock of Holdings or the Company or (b) a “Change in Control”,
as defined in the Credit Agreement or under any other indebtedness of Holdings
or the Company.


 


“Closing Date” means the
date on which the Closing actually occurs.


 


“Code” means the U.S.
Internal Revenue Code of 1986.


 


“Compensation” means,
with respect to any Person, all salaries, compensation, remuneration, bonuses
or benefits of any kind or character whatever (including issuances or grants of
Equity Interests), made directly or indirectly by the Company to such Person or
Affiliates of such Person.


 


“Contemplated Transactions”
means, collectively, the transactions contemplated by the Restated Stock
Purchase Agreement, including (a) the filing of the Restated Articles with
the Secretary of State of Minnesota, (b) the issuance and sale of the
shares contemplated under the Restated Stock Purchase Agreement, (c) the
execution of the Credit Agreement and making of the loans contemplated thereby,
(d) the execution of this Agreement and the issuance of the Securities, (e) the
execution, delivery and performance of the other ancillary agreements
contemplated by the Restated Stock Purchase Agreement, (f) the payment of
the Dividend, (g) the consummation of the Afremov Buyout, and (h) the
adoption of the Restated Bylaws by the Company.


 


“Contractual Obligation”
means, with respect to any Person, any contract, agreement, deed, mortgage,
lease, license, commitment, promise, undertaking, arrangement or understanding,
whether 


 


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written or
oral and whether express or implied, or other document or instrument (including
any document or instrument evidencing or otherwise relating to any
Indebtedness) to which or by which such Person is a party or otherwise subject
or bound or to which or by which any property, business, operation or right of
such Person is subject or bound.


 


“Credit Agreement” means
the Credit Agreement, dated as of July           ,
2005 among the Company, Bank of America, N.A., Citicorp USA, Inc.,
Deutsche Bank Trust Company Americas, Wachovia Bank, National Association and
Lehman Commercial Paper Inc., as a Lender and as Administrative Agent for the
Lenders, as the same may be amended, restated, extended, amended and restated,
refinanced, replaced or otherwise modified from time to time.


 


“Default” means any
event or condition that constitutes an Event of Default or which upon notice,
lapse of time or both would, unless cured or waived, become an Event of
Default.


 


“Dividend” means the
dividend on the Company’s outstanding shares of Common Stock as of the date of
execution of this Agreement in the aggregate amount of $20,000,000.


 


“Environmental Laws”
means any Legal Requirement relating to (a) releases or threatened
releases of Hazardous Substances, (b) pollution or protection of public
health or the environment or worker safety or health or (c) the
manufacture, handling, transport, use, treatment, storage, or disposal of
Hazardous Substances.


 


“Equity Interests” means
(a) any capital stock, share, partnership or membership interest, unit of
participation or other similar interest (however designated) in any Person and (b) any
option, warrant, purchase right, conversion right, exchange rights or other
Contractual Obligation which would entitle any Person to acquire any such
interest in such Person or otherwise entitle any Person to share in the equity,
profit, earnings, losses or gains of such Person (including stock appreciation,
phantom stock, profit participation or other similar rights).


 


“ERISA” means the
federal Employee Retirement Income Security Act of 1974.


 


“ERISA Affiliate” means
any trade or business (whether or not incorporated) that, together with the
Company, is treated as a single employer under Section 414 of the Code.


 


“ERISA Event” means (a) any
“reportable event”, as defined in Section 4043 of ERISA or the regulations
issued thereunder, with respect to a Plan (other than an event for which the 30
day notice period is waived), (b) the existence with respect to any Plan of
an “accumulated funding deficiency” (as defined in Section 412 of the Code
or Section 302 of ERISA), whether or not waived, (c) the filing
pursuant to Section 412(d) of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan, (d) the incurrence by the Company or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan, (e) the receipt by the Company or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan, (f) the incurrence by the Company or any of its ERISA Affiliates
of any liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan or (g) the receipt by the Company or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from the
Company or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.


 


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“Financial Officer”
means the interim chief financial officer, chief financial officer, principal
accounting officer, treasurer or controller of the Company, in each case in his
or her capacity as such.


 


“GAAP” means generally
accepted accounting principles in the United States as in effect from time to
time.


 


“Government Order” means
any order, writ, judgment, injunction, decree, stipulation, ruling,
determination or award entered by or with any Governmental Authority.


 


“Governmental Authority”
means any United States federal, state or local or any foreign government, or
political subdivision thereof, or any multinational organization or authority
or any authority, agency or commission entitled to exercise any administrative,
executive, judicial, legislative, criminal, police, regulatory or taxing
authority or power, any court or tribunal (or any department, bureau or
division of any of the foregoing), or any arbitrator or arbitral body.


 


“Guarantor” means any
Subsidiary Loan Party (as defined in the Credit Agreement).


 


“HSR Act” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.


 


“Holder” means any
holder of Securities.


 


“Holdings” means any
entity that becomes the immediate parent of the Borrower.


 


“Indebtedness” with
respect to any Person, means, without duplication, (a) all obligations of
such Person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, (c) all obligations of such Person upon
which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in
respect of the deferred purchase price of property or services (excluding trade
accounts payable and accrued obligations incurred in the ordinary course of
business), (f) all obligations of others secured by (or for which the
holder of such obligations has an existing right, contingent or otherwise, to
be secured by) any Lien on property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, but limited, in the
event such secured obligations are nonrecourse to such Person, to the fair
value of such property, (g) all guarantees by such Person of the
obligations of any other Person, (h) all Capital Lease Obligations of such
Person, (i) all obligations, contingent or otherwise, of such Person as an
account party or applicant in respect of letters of credit and letters of guaranty
and (j) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor as a
result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor. Notwithstanding the foregoing, the term “Indebtedness”
shall not include post-closing payment adjustments, earn-outs or non-compete
payments to which the seller in any acquisition is or may become entitled or
amounts that any member of management, the employees or consultants of the
Company or its Subsidiaries may become entitled to under any cash incentive
plan in existence from time to time.


 


“Intellectual Property”
means all proprietary rights of every kind and nature, including all rights and
interests pertaining to or deriving from: (i) patents, copyrights, mask
work rights, technology, know-how, processes, trade secrets, algorithms,
inventions, works, proprietary data, databases, formulae, research and
development data and computer software or firmware; (ii) trademarks, trade
names, service marks, service names, brands, trade dress and logos, and the
goodwill and activities associated therewith; 


 


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(iii) domain
names, rights of privacy and publicity, moral rights, and proprietary rights of
any kind or nature, however denominated, throughout the world in all media now
known or hereafter created; (iv) any and all registrations, applications,
recordings, licenses, common-law rights and Contractual Obligations relating to
any of the foregoing; and (v) all Actions and rights to sue at law or in
equity for any past or future infringement or other impairment of any of the
foregoing, including the right to receive all proceeds and damages therefrom,
and all rights to obtain renewals, continuations, divisions or other extensions
of legal protections pertaining thereto.


 


“Legal Requirement”
means any United States federal, state or local or foreign law, statute,
standard, ordinance, code, rule, regulation, resolution or promulgation, or any
Governmental Order, or any license, franchise, permit or similar right granted
under any of the foregoing, or any similar provision having the force or effect
of law.


 


“Liability” means, with
respect to any Person, any liability or obligation of such Person whether known
or unknown, whether asserted or unasserted, whether determined, determinable or
otherwise, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, whether incurred or consequential, whether
due or to become due and whether or not required under GAAP to be accrued on
the financial statements of such Person.


 


“Lien” means any charge,
claim, community or other marital property interest, condition, equitable
interest, lien, license, option, pledge, security interest, mortgage, right of
way, easement, encroachment, servitude, right of first offer or first refusal,
buy/sell agreement and any other restriction or covenant with respect to, or
condition governing the use, construction, voting (in the case of any security
or equity interest), transfer, receipt of income or exercise of any other
attribute of ownership.


 


“Material Adverse Effect”
means a material adverse effect on (a) the business, operations, assets,
liabilities, financial condition or results of operations of the Company and
the Subsidiaries, taken as a whole, whether or not covered by insurance, (b) the
ability of the Company or the Subsidiaries to perform any obligation under this
Agreement or the Notes or (c) the rights of or benefits available to the
Holders under this Agreement or the Notes.


 


“Multiemployer Plan”
means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.


 


“Ordinary Course of Business”
means an action taken by any Person in the course of such Person’s business
which is consistent with the past customs and practices of such Person
(including past practice with respect to quantity, amount, magnitude and
frequency, standard employment and payroll policies and past practice with
respect to management of working capital).


 


“Organizational Documents”
means, with respect to any Person (other than an individual), (a) the
certificate or articles of incorporation or organization and any joint venture,
limited liability company, operating or partnership agreement and other similar
documents adopted or filed in connection with the creation, formation or
organization of such Person and (b) all by-laws, voting agreements and
similar documents, instruments or agreements relating to the organization or
governance of such Person, in each case, as amended or supplemented.


 


“Parent” means any
direct or indirect parent of which Holdings is a wholly owned subsidiary.


 


“PBGC” means the Pension
Benefit Guaranty Corporation referred to and defined in ERISA and any successor
entity performing similar functions.


 


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“Person” means any
individual or corporation, association, partnership, limited liability company,
joint venture, joint stock or other company, business trust, trust, organization,
Governmental Authority or other entity of any kind.


 


“Plan” means any
employee pension benefit plan subject to the provisions of Title IV or Section 302
of ERISA or Section 412 of the Code, and in respect of which the Company
or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.


 


“Required Holders” means
Holders holding not less than 51% in aggregate principal amount of the Notes at
the time outstanding.


 


“Senior Agent” means
Lehman Commercial Paper Inc., as Administrative Agent under the Credit
Agreement, or any successor in such capacity.


 


“Senior Debt” means all
principal, premium (if any), interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not a claim for post-filing interest is allowed or allowable
in any such proceedings), fees, charges, expenses, indemnification and
reimbursement obligations and all other amounts and obligations payable by the
Company under the Credit Agreement.


 


“Subsidiary” means, with
respect to any specified person, any other Person of which such specified
Person will, at the time, directly or indirectly through one or more Subsidiaries,
(a) own at least 50% of the outstanding capital stock (or other shares of
beneficial interest) entitled to vote generally, (b) hold at least 50% of
the partnership, limited liability company, joint venture or similar interests
or (c) be a general partner, managing member or joint venturer.


 


“Tax” or “Taxes”
means (a) any and all federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, accumulated earnings, environmental, customs duties,
capital stock, franchise, profits, withholding, social security (or similar,
including FICA), unemployment, disability, real property, personal property,
sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind or any charge of any kind in the nature of
(or similar to) taxes whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not and (b) any Liability for the payment of
any amounts of the type described in clause (a) of this definition as a
result of being a member of an affiliated, consolidated, combined or unitary
group for any period, as a result of any tax sharing or tax allocation
agreement, arrangement or understanding, or as a result of being liable for
another person’s taxes as a transferee or successor, by contract or otherwise.


 


“Tax Return” means any
return, declaration, report, claim for refund or information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.


 


“Treasury Regulations”
means the regulations promulgated under the Code.


 


“Withdrawal Liability”
means liability to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are defined in ERISA.


 


SECTION 1.02   Accounting
Principles.  The character or amount
of any asset, liability, capital account or reserve and of any item of income
or expense to be determined, and any consolidation or other accounting
computation to be made, and the construction of any definition containing a
financial 


 


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term, pursuant to this Agreement shall be
determined or made in accordance with GAAP, consistently applied, unless such
principles are inconsistent with the express requirements of this Agreement.


 


SECTION 1.03   Other
Definitional Provisions; Construction. 
Whenever the context so requires, neuter gender includes the masculine
and feminine, the singular number includes the plural and vice versa. The words
“hereof” “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not in any particular
provision of this agreement, and references to section, article, annex,
schedule, exhibit and like references are references to this Agreement unless
otherwise specified. A Default or Event of Default shall “continue” or be “continuing”
until such Default or Event of Default has been cured or waived by the
Purchaser. References in this Agreement to any Persons shall include such
Persons’ successors and permitted assigns. Other terms contained in this
Agreement (which are not otherwise specifically defined herein) shall have
meanings provided in Article 9 of the New York Uniform Commercial Code on
the date hereof to the extent the same are used or defined therein.


 


ARTICLE II


 


ISSUANCE AND SALE OF SECURITIES


 


SECTION 2.01   Issuance,
Sale and Delivery of the Securities. 
Upon the terms and subject to the conditions of this Agreement, on the
Closing Date, the Company shall issue, sell and deliver the Securities to the
Purchaser, and the Purchaser shall purchase from the Company the Securities,
for a purchase price of $50,000,000. The Purchaser shall pay the purchase price
to the Company by wire transfer of immediately available funds to an account
designated by the Company.


 


SECTION 2.02   The
Closing.  The purchase and sale of
the Securities (the “Closing”) will take place at the offices of Ropes &
Gray LLP, 45 Rockefeller Plaza, New York, NY 10111 on the first date the
conditions set forth in Article 6 have been satisfied or waived by the
applicable parties, or at such other place and on such other date as the
Company and the Purchaser may agree in writing, in each case, subject to the
satisfaction or waiver of the conditions set forth in Article 6. The
failure to consummate the purchase and sale provided for in this Agreement on
the date and time and at the place specified herein will not relieve any party
to this Agreement of any obligation under this Agreement.


 


SECTION 2.03   Aggregate
Value.  The Company and the Purchaser
acknowledge and agree that the aggregate value of the Notes is $43,476,000.00
and the aggregate value of the Shares is $6,524,000.00 and in each case will be
represented as such by each such party for federal, state and local tax
purposes.


 


ARTICLE III


 


REPAYMENT OF THE NOTES


 


SECTION 3.01   Interest.


 


(a)           The
Company covenants and agrees to make payments of accrued interest on the Notes,
at the rate of 10% per annum and payable semiannually in arrears, on January 1
and July 1 of each year, commencing on January 1, 2006 (each such
payment date being referred to as an “Interest Payment Date”). The
Company shall pay interest on overdue principal at the rate of 12% per annum
and shall pay interest on overdue installments of interest at the rate of 12%
per annum to the extent lawful. Interest shall be computed on the basis of a
360-day year of twelve 30-day months.


 


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(b)   If


 


(i)    the Company is prohibited
by Article XI of this Agreement from paying all or any portion of the
accrued interest that is due and payable on any Interest Payment Date, or


 


(ii)   the Required Holders agree
in writing to defer all or a portion of the accrued interest that is due and
payable on any Interest Payment Date,


 


then such amount of accrued interest shall be
multiplied by 1.2 (such product being referred to as the “PIK Interest”)
and the PIK Interest shall be added to the principal amount of the Note on such
Interest Payment Date (with the result that such interest shall have accrued at
an effective rate of 12% instead of 10% through such Interest Payment Date).


 


(c)   On any Interest Payment Date on or after July 1, 2012, the
Company shall pay an amount of accrued original issue discount on the Notes as
shall be necessary to ensure that the Notes shall not be considered an “applicable
high yield discount obligation” within the meaning of Section 163(i) of
the Internal Revenue Code of 1986, as amended, or any successor provision. The
amount of principal payable at maturity of the Notes shall be reduced by the
amount of any accrued original issue discount that is paid pursuant to this
paragraph.


 


SECTION 3.02   Repayment.
 The Company covenants and agrees to
repay the unpaid principal balance of the Notes in full, together with all
accrued and unpaid interest, fees and other amounts due hereunder in one
payment of the principal amount as is then outstanding, together with all
accrued and unpaid interest, fees and other amounts due hereunder on July 28,
2012.


 


SECTION 3.03   Optional
Prepayment.  Subject to the terms of
the Credit Agreement, the Company may prepay all or any part of the principal
amount of the Notes, at any time and from time to time, without premium or
penalty.


 


SECTION 3.04   Mandatory
Prepayment on Initial Public Offering. 
Subject to the terms of the Credit Agreement, if a Parent, Holdings, the
Company or any of its Subsidiaries consummates a public offering of equity
securities pursuant to an effective registration statement filed under the 1933
Act yielding gross proceeds of not less than $75,000,000 (an “IPO”), the
Company shall prepay the Notes, without penalty or premium, in an aggregate
amount equal to the net proceeds of such public offering, less the portion of
such net proceeds that is required to be applied to prepay the Senior Debt
pursuant to the Credit Agreement.


 


SECTION 3.05   Mandatory
Prepayment on Change of Control.  If
a Change of Control occurs, the Company shall prepay in full the outstanding
principal amount of the Notes, without penalty or premium. Prior to complying
with this Section 3.05, but in any event within 30 days following a Change
of Control, the Company will either repay all its outstanding Senior Debt or
obtain the requisite consents, if any, under the Credit Agreement to permit the
prepayment of the Notes.


 


SECTION 3.06   Notice
of Prepayment and Other Notices.  The
Company shall give written notice of any prepayment of any of the Notes or any
portion thereof pursuant to Section 3.03 not less than five Business Days
prior to the date fixed for such prepayment. The Company shall give such notice
of prepayment and all other notices to be given to the Holders at the address
designated for such Holders on the register on the date of mailing such notice
of prepayment or other notice. Upon notice of prepayment being given as
aforesaid, the Company shall be irrevocably obligated to prepay, on the date
therein fixed for prepayment, the Notes or the portion thereof, as the case may
be, so called for prepayment, at the principal amount thereof so called for
prepayment, together with interest accrued 


 


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thereon to the date fixed for such prepayment.
A prepayment of less than all of the outstanding principal amount of the Notes
shall not relieve the Company of its obligation to make scheduled payments of
interest payable in respect of the principal remaining outstanding on any
Interest Payment Date.


 


SECTION 3.07   Surrender
of Note; Notation Thereon.  Upon any
prepayment of a portion of the principal amount of the Notes, the Holder, at
its option, may require the Company to execute and deliver at the expense of
the Company (except for taxes or governmental charges imposed in connection
therewith), upon surrender of the Notes, new Notes registered in the name of
the Holder or such other persons as may be designated by the Holder for the
principal amount of the Notes then remaining unpaid, dated as of the date to
which interest has been paid on the principal amount of the Notes then
remaining unpaid, or may present the Notes to the Company for notation of the
payment of the portion of the principal amount of the Notes so prepaid.


 


SECTION 3.08   Taxes.  Any and all payments by the Company under
this Agreement and the Notes that are made to or for the benefit of the Holder
shall be made free and clear of and without deduction for any Taxes, excluding
taxes imposed on the Holder’s net income or capital and franchise taxes imposed
on the Holder by the jurisdiction under the laws of which the Holder is
organized or any political subdivision thereof (all such nonexcluded Taxes
being hereinafter referred to as “Covered Taxes”). If the Company shall
be required by law to deduct any Covered Taxes from or in respect of any sum
payable under this Agreement and the Notes to the Holder, the sum payable shall
be increased as may be necessary so that after making all required deductions
of Covered Taxes (including deductions of Covered Taxes applicable to
additional sums payable under this paragraph), the Holder receives an amount
equal to the sum it would have received had no such deductions been made. The
Company shall make such deductions and the Company shall pay the full amount so
deducted to the relevant taxation authority or other authority in accordance
with applicable law. In addition, the Company agrees to pay any present or
future stamp, documentary, excise, privilege, intangible or similar levies that
arise at any time or from time to time from any payment made under this
Agreement or the Notes or from the execution or delivery by the Company or from
the filing or recording or maintenance of, or otherwise with respect to the
exercise by the Holder of its respective rights under this Agreement or the
Notes (collectively, “Other Taxes”). The Company will indemnify the
Holder for the full amount of Covered Taxes imposed on or with respect to
amounts payable hereunder and Other Taxes, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
Payment of this indemnification shall be made within 30 days from the date the
Holder provides the Company with a certificate certifying and setting forth in
reasonable detail the calculation thereof as to the amount and type of such
Taxes. Any such certificates submitted by the Holder in good faith to the
Company shall, absent manifest error, be final, conclusive and binding on all
parties. The obligation of the Company under this Section 3.08 shall
survive the payment of the Notes and the termination of this Agreement.


 


SECTION 3.09   Maximum
Lawful Rate.  This Agreement and the
Notes are hereby limited by this Section 3.09. In no event, whether by
reason of acceleration of the maturity of the amounts due hereunder or
otherwise, shall interest and fees contracted for, charged, received, paid or
agreed to be paid to the Holder exceed the maximum amount permissible under
such applicable law. If, from any circumstance whatsoever, interest and fees
would otherwise be payable to the Holder in excess of the maximum amount
permissible under such applicable law, the interest and fees shall be reduced
to the maximum amount permitted under applicable law. If from any circumstance,
the Holder shall have received anything of value deemed interest by applicable
law in excess of the maximum lawful amount, an amount equal to any excess of
interest shall be applied to the reduction of the principal amount of the
Notes, in such manner as may be determined by the Holder, and not to the
payment of fees or interest, or if such excessive interest exceeds the unpaid
balance of the principal amount of the Notes, such excess shall be refunded to
the Company.


 


9














 


SECTION 3.10   Certain
Waivers.  The Company unconditionally
waives (a) any rights to presentment, demand, protest or (except as
expressly required hereby) notice of any kind, and (b) any rights of
rescission, setoff, counterclaim or defense to payment under the Notes or
otherwise that the Company may have or claim against the Holder.


 


ARTICLE IV


 


REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


In order to induce the
Purchaser to enter into this Agreement and purchase the Notes, the Company
hereby represents and warrants to the Purchaser as follows:


 


SECTION 4.01   Organization;
Subsidiaries.  The Company is (a) duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and (b) is duly qualified to do business and in good standing in
each jurisdiction in which it owns or leases Real Property and in each other
jurisdiction in which the failure to so qualify has not had, and is not
reasonably likely to have, a Material Adverse Effect. The Company has delivered
to the Purchaser true, accurate and complete copies of (x) the
Organizational Documents of the Company and (y) the minute books of the
Company which contain records of all meetings held of, and other corporate
actions taken by, its stockholders, Board of Directors and any committees
appointed by its Board of Directors. Except as disclosed on Schedule 4.1, the
Company has no Subsidiaries and does not own any Equity Interests of any other
Person.


 


SECTION 4.02   Power
and Authorization.  The execution,
delivery and performance by the Company of this Agreement and the Notes and the
consummation of the Contemplated Transactions are within the power and
authority of the Company and have been duly authorized by all necessary action
on the part of the Company. This Agreement (a) has been duly executed and
delivered by the Company and (b) is a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms.
The Company has the full power and authority necessary to own and use its Assets
and carry on the Business.


 


SECTION 4.03   Authorization
of Governmental Authorities.  Except
as disclosed on Schedule 4.3, no action by (including any authorization,
consent or approval), or in respect of, or filing with, any Governmental
Authority is required for, or in connection with, the valid and lawful (a) authorization,
execution, delivery and performance by the Company of this Agreement and the
Notes or (b) the consummation of the Contemplated Transactions by the
Company.


 


SECTION 4.04   Noncontravention.  Except as disclosed on Schedule 4.4,
neither the execution, delivery and performance by the Company of this
Agreement or the Notes nor the consummation of the Contemplated Transactions
will: (a) assuming the taking of any action by (including any
authorization, consent or approval), or in respect of, or any filing with, any
Governmental Authority, in each case, as disclosed on Schedule 4.3,
violate any Legal Requirement applicable to the Company; (b) result in a
breach or violation of, or default under, any Contractual Obligation of the
Company; (c) require any action by (including any authorization, consent
or approval) or in respect of (including notice to), any Person under any
Contractual Obligation of the Company; (d) result in the creation or
imposition of any Lien upon, or the forfeiture of, any Asset; or (e) result
in a breach or violation of, or default under, the Organizational Documents of
the Company.


 


SECTION 4.05   The
Securities.


 


(a)           The
Shares, when issued and delivered and paid for in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
non-assessable. The shares of 


 


10

















 


Common Stock issuable upon
conversion of the Shares (the “Conversion Shares”) have been duly and
validly reserved and, when issued in compliance with the provisions of the
Restated Articles, will be validly issued, fully paid and nonassessable; and


 


(b)           The
Notes have been duly executed and delivered by the Company and constitute a
legal, valid and binding obligation of the Company enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.


 


SECTION 4.06   Financial
Statements.


 


(a)           The
Company has heretofore furnished to the Purchase its consolidated balance sheet
and consolidated statements of operations and comprehensive income,
stockholders’ equity and cash flows (i) as of and for the fiscal years
ended December 31, 2003 and December 31, 2004, reported on by Ernst &
Young LLP, independent public accountants. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Company and its Subsidiaries as of such dates
and for such periods in accordance with GAAP consistently applied, subject to
year-end audit adjustments and the absence of footnotes in the case of the
statements referred to in clause (ii) above.


 


(b)   The Company has heretofore furnished to the Purchaser its pro
forma consolidated balance sheet as of the Closing Date, prepared giving effect
to the Contemplated Transactions as if the Contemplated Transactions had
occurred on such date. Such pro forma consolidated balance sheet (i) has
been prepared in good faith based on the same assumptions used to prepare the
pro forma financial statements provided to the Purchaser (which assumptions are
believed by the Company to be reasonable), (ii) accurately reflects all
adjustments necessary to give effect to the Contemplated Transactions and (iii) presents
fairly, in all material respects, the pro forma financial position of the Company
and the Subsidiaries as of the Effective Date as if the Contemplated
Transactions had occurred on such date.


 


(c)   Except as disclosed in the financial statements referred to above
or the notes thereto, after giving effect to the Contemplated Transactions,
none of the Company or its Subsidiaries has, as of the Closing Date, any
material direct or contingent liabilities.


 


(d)   No event, change or condition has occurred that has had, or is
reasonably likely to have, a material adverse effect on the business,
operations, assets, liabilities, financial condition or results of operations
of the Company and the Subsidiaries, taken as a whole, since December 31,
2004.


 


ARTICLE V


 


The Purchaser represents and
warrants to the Company that:


 


SECTION 5.01   Organization.  The Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.


 


SECTION 5.02   Power
and Authorization.  The execution,
delivery and performance by the Purchaser of this Agreement and the
consummation of the Contemplated Transactions are within the power and
authority of the Purchaser and have been duly authorized by all necessary
action on the part of the Purchaser. This Agreement (a) has been duly
executed and delivered by the Purchaser and (b) is a legal, valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.


 


11

















 


SECTION 5.03   Authorization
of Governmental Authorities.  Except
as disclosed on Schedule 5.3, no action by (including any authorization,
consent or approval), or in respect of, or filing with, any Governmental
Authority (including any state securities filing in New York) is required for,
or in connection with, the valid and lawful (a) authorization, execution,
delivery and performance by the Purchaser of this Agreement or (b) the
consummation of the Contemplated Transactions by the Purchaser.


 


SECTION 5.04   Noncontravention.  Neither the execution, delivery and
performance by the Purchaser of this Agreement nor the consummation of the
Contemplated Transactions will: (a) assuming the taking of any action by
(including any authorization, consent or approval) or in respect of, or any
filing with, any Governmental Authority, in each case, as disclosed on Schedule
5.3, violate any provision of any Legal Requirement applicable to the
Purchaser; (b) result in a breach or violation of, or default under, any
Contractual Obligation of the Purchaser; (c) require any action by
(including any authorization, consent or approval) or in respect of (including
notice to), any Person under any Contractual Obligation; or (d) result in
a breach or violation of, or default under, such Purchaser’s Organizational
Documents.


 


SECTION 5.05   Purchase
for Investment.  The Purchaser is
purchasing the Securities for investment for such Purchaser’s own account and
not with a view to, or for sale in connection with, any distribution thereof.


 


SECTION 5.06   Private
Placement.


 


(a)           The
Purchaser’s financial situation is such that the Purchaser can afford to bear
the economic risk of holding the Securities for an indefinite period of time,
and the Purchaser can afford to suffer the complete loss of the Purchaser’s
investment in the Securities.


 


(b)   The Purchaser’s knowledge and experience in financial and business
matters are such that the Purchaser is capable of evaluating the merits and
risks of the Purchaser’s investment in the Securities or the Purchaser has been
advised by a representative possessing such knowledge and experience.


 


(c)   The Purchaser understands that the Securities acquired hereunder
are a speculative investment which involves a high degree of risk of loss of
the entire investment therein, that there will be substantial restrictions on
the transferability of the Securities and that following the date hereof there
will be no public market for the Securities and that, accordingly, it may not
be possible for the Purchaser to sell or pledge the Securities, or any interest
in the Securities, in case of emergency or otherwise.


 


(d)   The Purchaser and the Purchaser’s representatives, including, to
the extent the Purchaser deems appropriate, the Purchaser’s legal,
professional, financial, tax and other advisors, have reviewed all documents
provided to them in connection with the Purchaser’s investment in the
Securities, and the Purchaser understands and is aware of the risks related to
such investment.


 


(e)   The Purchaser and the Purchaser’s representatives have been given
the opportunity to examine all documents and to ask questions of, and to
receive answers from, the Company and its respective representatives concerning
the Company, the terms and conditions of the Purchaser’s acquisition of the
Securities and related matters and to obtain all additional information which
the Purchaser or the Purchaser’s representatives deem necessary.


 


(f)    The Purchaser is an “accredited investor” as such term is defined
in Regulation D promulgated under the 1933 Act.


 


12

















 


(g)   The Purchaser does not have any plan or intention to sell,
exchange, transfer or otherwise dispose of (including by way of gift) any of
its Securities immediately after the purchase of the Securities.


 


SECTION 5.07   No
Brokers.  The Purchaser has no Liability
of any kind to any broker, finder or agent with respect to the Contemplated
Transactions for which the Company could be Liable.


 


ARTICLE VI


 


CONDITIONS


 


The obligation of the Purchaser
to consummate the Closing is subject to the prior fulfillment of each the
following conditions:


 


SECTION 6.01   Representations
and Warranties.  The representations
and warranties of the Company contained in this Agreement and in any document,
instrument or certificate delivered hereunder (a) that are not qualified
by materiality or Material Adverse Effect will be true and correct in all
material respects at and as of the Closing with the same force and effect as if
made as of the Closing and (b) that are qualified by materiality or
Material Adverse Effect will be true and correct in all respects at and as of
the Closing with the same force and effect as if made as of the Closing, in
each case, other than representations and warranties that expressly speak only
as of a specific date or time, which will be true and correct as of such
specified date or time.


 


SECTION 6.02   Performance.  The Company will have performed and complied
in all material respects, with all agreements, obligations and covenants
contained in this Agreement that are required to be performed or complied with
by it at or prior to the Closing.


 


SECTION 6.03   Compliance
Certificate.  The Company will have
delivered to the Purchaser a certificate certifying its compliance with the
conditions set forth in Sections 6.01, 6.02, 6.10 and 6.12.


 


SECTION 6.04   Qualifications.  Any applicable waiting periods (and any
extensions thereof) under the HSR Act will have expired or otherwise been
terminated. No provision of any applicable Legal Requirement and no Government
Order will prohibit the consummation of any of the Contemplated Transactions.


 


SECTION 6.05   Absence
of Litigation.


 


(a)           The Final Order and the Settlement
Agreement shall each continue to be in full force and effect.


 


(b)   No Action will be pending or threatened in writing which may
result in a Government Order (nor will there be any Government Order in effect)
(i) which would prevent consummation of any of the Contemplated
Transactions, (ii) which would result in any of the Contemplated
Transactions being rescinded following consummation, (iii) which would
limit or otherwise adversely affect the right of the Purchaser to own the
Securities or (iv) would compel the Purchaser or any Affiliate of the
Purchaser to dispose of all or any material portion of the business or assets
of the Purchaser or Affiliate.


 


13

















 


SECTION 6.06   Legal
Opinion.  The Purchaser will have
received from Parsinen Kaplan Rosberg & Gotlieb P.A., counsel to
Gougeon (or other counsel reasonably acceptable to the Purchaser), its opinion
with respect to the Contemplated Transactions, which opinion will be in form
and substance satisfactory to it.


 


SECTION 6.07   Consents,
etc.  All actions by (including any
authorization, consent or approval) or in respect of (including notice to), or
filings with, any Governmental Authority or other Person that are required to
consummate the Contemplated Transactions, as disclosed in Schedule 4.3 or
Schedule 4.4, or as otherwise reasonably requested by the Purchaser, will have
been obtained or made, in a manner reasonably satisfactory in form and
substance to the Purchaser, and no such authorization, consent or approval will
have been revoked.


 


SECTION 6.08   Proceedings
and Documents.  All corporate and
other proceedings in connection with the Contemplated Transactions and all
documents incident thereto will be reasonably satisfactory in form and
substance to the Purchaser and its counsel, and they will have received all
such counterpart original and certified or other copies of such documents as
they may reasonably request.


 


SECTION 6.09   Restated
Articles.  The Company will have
filed with the Secretary of State of Minnesota an Amended and Restated Articles
of Incorporation, in form and substance reasonably satisfactory to the
Purchaser (the “Restated Articles”), and such Restated Articles shall
have been accepted by such Secretary of State. This Agreement and the Notes
will have been executed and delivered to the Purchaser.


 


SECTION 6.10   Certain
Legal Matters.


 


(a)           The
delivery sheath recall initiated by the Company during the week of November 22,
2004 (the “Recall”), or the facts and circumstances arising out of or
relating to the Recall, shall not have had, and shall not reasonably be
expected to have, any adverse effect on the Business, operations, Assets,
prospects or condition (financial or otherwise) of the Company, including
without limitation (i) a deterioration in the relationship of the Company
with, or increase in the level of oversight by, the U.S. Food and Drug
Administration (“FDA”), or any Governmental Authority exercising
comparable regulatory authority in any jurisdiction, (ii) an increased
risk of Actions against the Company by or on behalf of end-users of the
Products or by any Person involved in the design, manufacture, testing, marketing
or implantation of any Product, (iii) a deterioration in the Company’s
reputation or reduction in demand for the Products, in any market in which the
Company now operates the Business or proposes to conduct the Business following
consummation of the Contemplated Transactions, (iv) an increase in the
Company’s operating expenses, or (v) an adverse effect on the Company’s
ability to supply, design, manufacture, market or implant any Product.


 


(b)   The facts and circumstances arising out of or relating to any
actual or threatened Actions by any Governmental Authority, other than pursuant
to Section 6.10(a), against the Company, Afremov, Gougeon or Amplatz shall
not have had, and shall not reasonably be expected to have, any adverse effect
on the Business, operations, Assets, prospects or condition (financial or
otherwise) of the Company (it being understood that for purposes of this Section 6.10(b) only,
the incurrence by the Company of reasonable legal fees and expenses and the
reasonable deployment of resources of the Company (including time spent by
management), in each case, in response to any such actual or threatened
Actions, will not by themselves constitute such an adverse effect).


 


SECTION 6.11   Financing.  The Company shall have entered into a Credit
Agreement in form and substance reasonably satisfactory to the Purchaser, and
received at least $107,000,000 pursuant to such Credit Agreement.


 


14

















 


SECTION 6.12   No
Material Adverse Change.  Since December 31,
2004, there shall not have occurred any event, change, condition, circumstance
or state of facts that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.


 


ARTICLE VII


 


AFFIRMATIVE COVENANTS


 


Until the principal of and
interest on the Notes and all fees, expenses and other amounts payable under
this Agreement and Notes shall have been paid in full, the Company covenants
and agrees that:


 


SECTION 7.01   Financial
Statements and Other Information. 
The Company will furnish to the Holders:


 


(a)           within 90 days (or such shorter
period as the SEC shall specify for the filing of annual reports on Form 10-K)
after the end of each fiscal year of the Company commencing with the fiscal
year ended December 31, 2005, (i) its audited consolidated balance
sheet and consolidated statements of operations and comprehensive income,
stockholders’ equity and cash flows as of the end of and for such fiscal year,
and the related notes thereto, setting forth in each case in comparative form
the figures for the previous fiscal year, all reported on by independent public
accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Company and the Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, and (ii) if at any time the
Company is not subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, a “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” that describes the financial condition and
results of operations of the Company and its consolidated Subsidiaries;


 


(b)   within 45 days (or such shorter period as the SEC shall specify
for the filing of quarterly reports on Form 10-Q) after the end of each of
the first three fiscal quarters of each fiscal year of the Company commencing
with the fiscal quarter ending June 30, 2005, its consolidated balance
sheet and consolidated statements of operations and comprehensive income,
stockholders’ equity and cash flows as of the end of and for such fiscal
quarter and the then-elapsed portion of the fiscal year, setting forth in each
case in comparative form the figures for the corresponding period or periods of
(or, in the case of the balance sheet, as of the end of) the previous fiscal
year, all certified by a Financial Officer as presenting fairly in all material
respects the financial condition and results of operations of the Company and
the Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes;


 


(c)   concurrently with any delivery of financial statements under Section 7.01(a) or
7.01(b), a certificate of a Financial Officer (i) certifying as to whether
a Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto, (ii) setting
forth reasonably detailed calculations demonstrating compliance with Sections
8.03, 8.04, 8.05 and 8.06 and (iii) stating whether any change in GAAP or
in the application thereof has occurred since the date of the Company’s audited
financial statements referred to in Section 4.06 and, if any such change
has occurred, specifying the effect of such change on the financial statements
accompanying such certificate, and (iv) certifying as to the calculation
of Consolidated EBITDA (as defined in the Credit Agreement) on a Pro Forma
Basis (as defined in the Credit Agreement) for the four fiscal quarter period
ending on the date of such financial statements and accompanied by reasonably 


 


15

















 


detailed supporting evidence, it being
understood that each of the calculations described in this paragraph (c) shall
provide a reconciliation to the financial statements delivered under paragraphs
(a) and (b) above;


 


(d)   concurrently with any delivery of financial statements under Section 7.01(a) above,
a certificate of the accounting firm that reported on such financial statements
stating whether they obtained knowledge during the course of their examination
of such financial statements of any Default and, if such knowledge has been
obtained, describing such Default (which certificate may be limited to the
extent required by accounting rules or guidelines);


 


(e)   within 30 days after the commencement of each fiscal year of the
Company, a detailed consolidated budget for such fiscal year (including a
projected consolidated balance sheet and consolidated statements of projected
operations and cash flows as of the end of and for such fiscal year) and,
promptly when available, any significant revisions of such budget;


 


(f)    promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Company or any Subsidiary with the SEC or with any national securities
exchange, as applicable; and


 


(g)   promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the Company
or any Subsidiary or any Company Plan, or compliance with the terms of this
Agreement or the Notes, as the Holders may reasonably request.


 


SECTION 7.02   Notices
of Material Events.  The Company will
furnish to the Holders, written notice of the following promptly after
obtaining knowledge thereof:


 


(a)   the occurrence of any Default;


 


(b)   the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Company or any Subsidiary that, if adversely determined, is reasonably likely
to result in a Material Adverse Effect;


 


(c)   the occurrence of any ERISA Event that alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result
in liability of the Company and the Subsidiaries in an aggregate amount
exceeding $5,000,000;


 


(d)   the receipt by the Company or any Subsidiary of (i) any
notice of any loss of (A) accreditation from the Joint Commission on
Accreditation of Healthcare Organizations or (B) any governmental right,
qualification, permit, accreditation, approval, authorization, license or
franchise or (ii) any notice, compliance order or adverse report issued by
any Governmental Authority that, if not promptly complied with or cured, could
result in the suspension or forfeiture of any material governmental right,
qualification, permit, accreditation, approval, authorization, license or
franchise necessary for the Borrower or any Subsidiary to carry on its business
as now conducted or as proposed to be conducted, including the right or
authorization to sell, distribute, market or donate any product, or any
material restriction, limitation, or prohibition on the specific use or
indication of any product;


 


(e)   (i) any claims by any third parties relating to alleged
infringement by Holdings, the Borrower or any Subsidiary of any material third
party Intellectual Property and (ii) any material developments regarding
the NMT Claims;


 


16

















 


(f)    any material developments regarding the FCPA Claims (as defined
in the Credit Agreement); and


 


(g)   any other development that results in, or is reasonably likely to
result in, a Material Adverse Effect.


 


Each notice delivered under this Section 7.02
shall be accompanied by a statement of a Financial Officer or other executive
officer of the Company setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect
thereto.


 


SECTION 7.03   Existence;
Conduct of Business.  The Company
will, and will cause each of the Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, qualifications, permits, approvals, accreditations,
authorizations, licenses, franchises, patents, copyrights, trademarks and trade
names material to the conduct of its business; provided that the foregoing
shall not prohibit any merger, consolidation, liquidation or dissolution
permitted under Section 8.01.


 


SECTION 7.04   Payment
of Taxes.  The Company will, and will
cause each of the Subsidiaries to, pay its Tax liabilities, before the same
shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b) the
Company or such Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP, (c) such contest effectively
suspends the enforcement of any Lien securing such obligation and (d) the
failure to make payment pending such contest is not reasonably likely to result
in a Material Adverse Effect.


 


SECTION 7.05   Maintenance
of Properties.  The Company will, and
will cause each of the Subsidiaries to, keep and maintain all property material
to the conduct of its business in good working order and condition, ordinary
wear and tear excepted.


 


SECTION 7.06   Insurance.  The Company will, and will cause each of the
Subsidiaries to, maintain, with financially sound and reputable insurance
companies (which may include self-insurance), insurance in such amounts (with
no greater risk retention) and against such risks as are customarily maintained
by companies of established repute engaged in the same or similar businesses
operating in the same or similar locations. The Company will furnish to the
Holders, upon written request, information in reasonable detail as to the
insurance so maintained.


 


SECTION 7.07   Books
and Records; Inspection and Audit Rights. 
The Company will, and will cause each of the Subsidiaries to, keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and
activities. The Company will, and will cause each of the Subsidiaries to,
permit any representatives designated by the Holders, upon reasonable prior
notice, to visit and inspect its properties during normal business hours, to
examine and make extracts from its books and records, including environment
assessment reports and Phase I or Phase II studies, and to discuss its affairs,
finances and condition with its officers and independent accountants (provided
that the Company shall be provided the opportunity to participate in any such
discussions with its independent accountants), all at such reasonable times and
as often as reasonably requested.


 


SECTION 7.08   Compliance
with Laws.  The Company will cause
each of the Subsidiaries to comply with all Requirements of Law, including
Environmental Laws, applicable to it or its property, except where the failure
to do so, individually or in the aggregate, is not reasonably likely to result
in a Material Adverse Effect.


 


17

















 


SECTION 7.09   Additional
Subsidiaries.  If any additional
Subsidiary is formed or acquired after the Closing Date (or any Subsidiary
becomes a Subsidiary Loan Party or guarantees Indebtedness of any Person other
than a Subsidiary Loan Party), the Company will, promptly after such Subsidiary
is formed or acquired, promptly cause such Subsidiary to execute a joinder to
this Agreement substantially in the form attached as Exhibit B hereto.


 


ARTICLE VIII


 


NEGATIVE COVENANTS


 


Until the principal of and
interest on the Notes and all fees, expenses and other amounts payable under
this Agreement and Notes shall have been paid in full, the Company covenants
and agrees that:


 


SECTION 8.01   Fundamental
Changes.


 


(a)   The Company will not, nor will it permit any Subsidiary to, merge
into or consolidate with any other Person, or permit any other Person to merge
into or consolidate with it, or liquidate or dissolve, except that, if at the
time thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing, (i) any Person may merge into the Company in a
transaction in which the surviving entity is a Person organized or existing
under the laws of the United States of America, any State thereof or the
District of Columbia and, if such surviving entity is not the Company, such
Person expressly assumes, in writing, all the obligations the Company under
this Agreement and the Notes, (ii) any Person may merge into any
Subsidiary in a transaction in which the surviving entity is a Subsidiary and (iii) any
Subsidiary may liquidate or dissolve if the Company determines in good faith
that such liquidation or dissolution is in the best interests of the Company
and is not materially disadvantageous to the Holders.


 


(b)   The Company will not, nor will it permit any Subsidiary to, engage
to any material extent in any business other than businesses of the type
conducted by the Company and the Subsidiaries on the Closing Date and
businesses reasonably related or incidental thereto.


 


SECTION 8.02   Amendment
of Material Documents.  The Company
will not, nor will it permit any Subsidiary to, (a) amend, modify or waive
any of its rights under its Organizational Documents to the extent such
amendment, modification or waiver would be materially adverse to the Holders or
(b) amend, modify or add any covenant or event of default with respect to
the Senior Debt which could reasonably be expected to restrict the Company from
making payments under this Agreement or the Notes permitted to be made under
the Credit Agreement as in effect on the date hereof.


 


SECTION 8.03   Interest
Expense Coverage Ratio.  The Company
will not permit the ratio (the “Interest Expense Coverage Ratio”) of (a) Consolidated
EBITDA (as defined in the Credit Agreement) to (b) cash interest expense
of the Company and its Subsidiaries, in each case for any period of four
consecutive fiscal quarters ending on any date set forth below, to be less than
the ratio set forth below opposite such date:


 




	
  Date

  	
   

  	
  Ratio

  	
   

  
	
  December 31, 2005

  	
   

  	
  2.50
  to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  2.50
  to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  2.50
  to 1.00

  	
   

  






 


18

















 




	
  September 30, 2006

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  December 31, 2006

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  June 30, 2007

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  September 30, 2007

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  March 31, 2008

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  June 30, 2008

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  September 30, 2008

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  December 31, 2008

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  March 31, 2009

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  June 30, 2009

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  September 30, 2009

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  December 31, 2009

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  March 31, 2010

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  June 30, 2010

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  December 31, 2010

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  March 31, 2011

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  June 30, 2011

  	
   

  	
  3.25
  to 1.00

  	
   

  






 


SECTION 8.04   Leverage
Ratio.  The Company will not permit
the Leverage Ratio (as defined in the Credit Agreement) as of any date set
forth below to exceed the ratio set forth opposite such date:


 




	
  Date

  	
   

  	
  Ratio

  	
   

  
	
  December 31, 2005

  	
   

  	
  4.50
  to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  4.50
  to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  4.50
  to 1.00

  	
   

  
	
  September 30, 2006

  	
   

  	
  4.00
  to 1.00

  	
   

  
	
  December 31, 2006

  	
   

  	
  4.00
  to 1.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  4.00
  to 1.00

  	
   

  
	
  June 30, 2007

  	
   

  	
  3.75
  to 1:00

  	
   

  
	
  September 30, 2007

  	
   

  	
  3.50
  to 1.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  3.50
  to 1.00

  	
   

  






 


19

















 




	
  March 31, 2008

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  June 30, 2008

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  September 30, 2008

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  December 31, 2008

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  March 31, 2009

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  June 30, 2009

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  September 30, 2009

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  December 31, 2009

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  March 31, 2010

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  June 30, 2010

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  December 31, 2010

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  March 31, 2011

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  June 30, 2011

  	
   

  	
  3.00
  to 1.00

  	
   

  






 


SECTION 8.05   Maximum
Senior Leverage.  The Company will
not permit the Senior Leverage Ratio (as defined in the Credit Agreement) as of
any date set forth below to exceed the ratio set forth opposite such date:


 




	
  Date

  	
   

  	
  Ratio

  	
   

  
	
  December 31, 2005

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  September 30, 2006

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  December 31, 2006

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  June 30, 2007

  	
   

  	
  2.50
  to 1.00

  	
   

  
	
  September 30, 2007

  	
   

  	
  2.25
  to 1.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  2.25
  to 1.00

  	
   

  
	
  March 31, 2008

  	
   

  	
  2.00
  to 1.00

  	
   

  
	
  June 30, 2008

  	
   

  	
  2.00
  to 1.00

  	
   

  
	
  September 30, 2008

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  December 31, 2008

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  March 31, 2009

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  June 30, 2009

  	
   

  	
  1.75
  to 1.00

  	
   

  






 


20

















 




	
  September 30, 2009

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  December 31, 2009

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  March 31, 2010

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  June 30, 2010

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  September 30, 2010

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  December 31, 2010

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  March 31, 2011

  	
   

  	
  1.75
  to 1.00

  	
   

  
	
  June 30, 2011

  	
   

  	
  1.75
  to 1.00

  	
   

  






 


SECTION 8.06   Maximum
Capital Expenditures.  The Company
will not, nor will it permit any Subsidiary to, incur or make any Capital
Expenditures (as defined in the Credit Agreement) except and as set forth
below:


 




	
  Fiscal Year

  	
   

  	
  Maximum 

  Capital Expenditures

  	
   

  
	
  2005

  	
   

  	
  $

  	
  16.5
  million

  	
   

  
	
  2006

  	
   

  	
  $

  	
  16.5
  million

  	
   

  
	
  2007

  	
   

  	
  $

  	
  11
  million

  	
   

  
	
  2008

  	
   

  	
  $

  	
  11
  million

  	
   

  
	
  2009

  	
   

  	
  $

  	
  11
  million

  	
   

  
	
  2010

  	
   

  	
  $

  	
  11
  million

  	
   

  
	
  2011

  	
   

  	
  $

  	
  11
  million

  	
   

  






 


 provided, however, that to the extent that actual
Capital Expenditures for any such fiscal year shall be less than the maximum
amount set forth above for such fiscal year (without giving effect to the
carryover permitted by this proviso), the difference between said stated
maximum amount and such actual Capital Expenditures shall, in addition, be
available for Capital Expenditures in the next succeeding fiscal year; provided further, however, that no portion of the such
amount carried over from the previous fiscal year shall be allocated to Capital
Expenditures in the next fiscal year until the amount allocated to the current
fiscal year is exhausted.


 


ARTICLE IX


 


TRANSFER OF NOTES


 


SECTION 9.01   Restricted
Securities.  The Purchaser
acknowledges that the Notes have not been registered under the 1933 Act and
maybe resold only if registered pursuant to the provisions of the 1933 Act or
if an exemption from registration is available, and that the Company is not
required to register the Notes.


 


SECTION 9.02   Legends.  The Company may place an appropriate legend
on the Securities owned by the Purchaser concerning the restrictions set forth
in this Article 9. Upon the assignment or transfer by the Purchaser or any
of its successors or assignees of all or any part of the 


 


21

















 


Notes, the term “Purchaser” as used herein
shall thereafter mean, to the extent thereof, the then Holder or Holders of
such Notes, or portion thereof.


 


SECTION 9.03   Transfer
of Notes.  Subject to Section 9.02
hereof, a Holder may transfer such Note to a new Holder, or may exchange such
Note for Notes of different denominations, by surrendering such Note to the
Company duly endorsed for transfer or accompanied by a duly executed instrument
of transfer naming the new Holder (or the current Holder if submitted for
exchange only), together with written instructions for the issuance of one or
more new Notes specifying the respective principal amounts of each new Note and
the name of each new Holder and each address therefor. The Company shall
simultaneously deliver to such Holder or its designee such new Notes and shall
mark the surrendered Notes as canceled. In lieu of the foregoing procedures, a
Holder may assign a Note (in whole but not in part) to a new Holder by sending
written notice to the Company of such assignment specifying the new Holder’s
name and address; in such case, the Company shall promptly acknowledge such
assignment in writing to both the old and new Holder. The Company shall not be
required to recognize any subsequent Holder of a Note unless and until the
Company has received reasonable assurance that all applicable transfer taxes
have been paid.


 


SECTION 9.04   Replacement
of Lost Securities.  Upon receipt of
evidence reasonably satisfactory to the Company of the mutilation, destruction,
loss or theft of any Notes and the ownership thereof, the Company shall, upon
the written request of the Holder of such Notes, execute and deliver in
replacement thereof new Notes in the same form, in the same original principal
amount and dated the same date as the Notes so mutilated, destroyed, lost or
stolen; and such Notes so mutilated, destroyed, lost or stolen shall then be
deemed no longer outstanding hereunder. If the Notes being replaced have been
mutilated, they shall be surrendered to the Company; and if such replaced Notes
have been destroyed, lost or stolen, such Holder shall furnish the Company with
an indemnity in writing to save it harmless in respect of such replaced Notes.


 


SECTION 9.05   No
Other Representations Affected. 
Nothing contained in this Article 9 shall limit the full force or
effect of any representation, agreement or warranty made herein or in
connection herewith to the Purchaser.


 


ARTICLE X


 


EVENTS OF DEFAULT


 


SECTION 10.01   Events
of Default.  If any one or more of
the following events (each, an “Event of Default”) occurs and is continuing:


 


(a)   Default in the payment of the principal of the Notes when and as
the same becomes due and payable, whether at maturity or at a date fixed for
prepayment or by acceleration or otherwise; or


 


(b)   Default in the payment of any interest or any other amount (other
than an amount referred to in 9.01(a) above) due under the Notes, when and
as the same becomes due and payable, and such default continues for a period of
three Business Days; or


 


(c)   Default in the due observance or performance by the Company of any
covenant, condition or agreement contained in Sections 7.03 or 8.01; or


 


(d)   Default in the due observance or performance by the Company of any
covenant, condition or agreement contained in this Agreement or the Notes
(other than those specified in 9.01(a), 


 


22

















 


9.01(b) or 9.01(c) above) and such
default continues unremedied for a period of 30 days after notice thereof from
the Holders to the Company; or


 


(e)   any representation or warranty made or deemed made in or in
connection with this Agreement or the issuance of the Notes, or any
representation, warranty, statement or information contained in any report,
certificate, financial statement or other instrument furnished pursuant to this
Agreement or the Note, proves to have been false in any material respect when
so made, deemed made or furnished; or


 


(f)    the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Company or its Subsidiaries in
an involuntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar laws, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the Company
or its Subsidiaries for any substantial part of any of their respective
properties, or ordering the winding-up or liquidation of any of their affairs
and the continuance of any such decree or order unstayed and in effect for a
period of 60 consecutive days; or


 


(g)   the commencement by the Company or its Subsidiaries of a voluntary
case under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other applicable federal or state bankruptcy, insolvency or
other similar laws, or the consent by any of them to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or its Subsidiaries for
any substantial part of their respective properties, or the making by any of them
of any assignment for the benefit of creditors, or the failure of the Company
or its Subsidiaries generally to pay its debts as such debts become due; or


 


(h)   Default occurs under the terms of any Indebtedness of the Company
or any Subsidiary in an aggregate principal amount exceeding $10,000,000 and
such default (i) consists of the failure to pay any amount of such
Indebtedness when due, whether by acceleration or otherwise or (ii) results
in the acceleration of the maturity of such indebtedness;


 


(i)    one or more judgments for the payment of money in an aggregate
amount (in each case to the extent not paid or covered by insurance provided by
a carrier who has acknowledged coverage in writing and has the ability to
perform) in excess of $10,000,000 is rendered against the Company, any
Subsidiary, or any combination thereof and the same remains undischarged for a
period of 30 consecutive days during which execution is not effectively stayed,
or any action is legally taken by a judgment creditor to levy upon assets or
properties of the Company or any Subsidiary to enforce any such judgment;


 


(j)    the Guarantees pursuant to this Agreement shall cease to be in
full force and effect (other than in accordance with the terms of this
Agreement) or shall be asserted by the Company or any Subsidiary not to be in
effect or not to be legal, valid and binding obligations;


 


then, the Required Holders may, at their
option, by notice to the Company, declare all the Notes to be forthwith due and
payable, whereupon the principal of the Notes, together with accrued interest
thereon, shall become forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by the
Company; provided, however, that in any event described in Sections 10.01(f) or
10.01(g), all the Notes, together with interest accrued thereon, shall
automatically become due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Company.


 


23














 


At any time after any declaration of
acceleration as to the Notes has been made as provided in this Section 10.01,
the Required Holders may, by notice to the Company, rescind such declaration
and its consequences, if (a) the Company has paid all overdue installments
of interest on the Notes and all principal that has become due otherwise than
by such declaration of acceleration and (b) all other Defaults and Events
of Default under this Agreement and the Notes (other than nonpayments of
principal and interest that have become due solely by reason of acceleration)
have been remedied or cured or have been waived pursuant to this paragraph;
provided, however, that no such rescission will extend to or affect any
subsequent Default or Event of Default or impair any right consequent thereon.


 


SECTION 10.02   Suits
for Enforcement.  If an Event of
Default specified in Section 10.01(a) or 10.01(b) occurs and is
continuing or the Notes become immediately due and payable in accordance with
this Section, the Holders may proceed to protect and enforce their rights by
suit in equity, action at law and/or by other appropriate proceeding, whether
for the specific performance of any covenant or agreement contained in this
Agreement or in aid of the exercise of any power granted in this Agreement, or
may proceed to enforce the payment of the Notes or to enforce any other legal
or equitable right of the Holders. In case of any Default under this Agreement,
the Company will pay to the Holders such amounts as shall be sufficient to
cover the costs and expenses of the Holders due to said Default, including,
without limitation, collection costs and reasonable attorneys’ fees.


 


ARTICLE XI


 


SUBORDINATION OF NOTES


 


This Note is subordinated in
right of payment to all Senior Debt to the extent and in the manner provided in
this Article XI.


 


SECTION 11.01   Liquidation,
Dissolution, or Bankruptcy.  Upon any
payment or distribution to creditors of the Company in a liquidation or
dissolution of the Company, in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of the Company’s creditors, or in any marshaling
of the Company’s assets and liabilities:


 


(a)   holders of Senior Debt will be entitled to receive payment in full
in cash or cash equivalents of all Senior Debt before the Holders of the Notes
are entitled directly or indirectly to receive any payment of principal of or
interest on the Notes, except the Holders of the Notes may receive and retain (i) debt
securities that are subordinated to the Senior Debt to at least the same extent
as the Notes or (ii) equity interests; and


 


(b)   until payment in full in cash or cash equivalents of all Senior
Debt, any payment to which the Holders of the Notes would be entitled but for
the foregoing clause (a) will be made to holders of Senior Debt as their
interests may appear.


 


SECTION 11.02   Senior
Debt Default.  The Company shall not
pay principal of, or interest on, the Notes, and shall not repurchase, redeem
or otherwise retire any Notes (collectively, “pay the Notes”) if (a) any
principal, premium or interest in respect of any Senior Debt is not paid when
due after any applicable grace period or (b) any other default on Senior
Debt occurs and the maturity of such Senior Debt is accelerated in accordance
with its terms unless, in either case, (i) the default has been cured or
waived and any such acceleration has been rescinded or (ii) such Senior
Debt has been paid in full; provided, however, that the Company may pay the
Notes without regard to the foregoing if the Company receives written notice
approving such payment from the Senior Agent. During the continuation of any
default (other than a default described in clause (a) or (b) of the
preceding sentence) with respect to 


 


24

















 


any Senior Debt pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
any notice required to effect the acceleration) or the expiration of any
applicable grace period, the Company shall not pay the Notes for a period (a “Payment
Blockage Period”) commencing upon the receipt by the Company of written
notice of such default from the Senior Agent specifying an election to effect a
Payment Blockage Period (a “Payment Blockage Notice”) and ending 179
days thereafter. The Payment Blockage Period will end earlier if the Payment
Blockage Period is terminated (A) by written notice to the Company from
the Senior Agent, (B) because such default is no longer continuing, or (C) because
such Senior Debt has been repaid in full. Unless the holders of such Senior
Debt or the Senior Agent have accelerated the maturity of such Senior Debt and
not rescinded such acceleration, the Company may (unless otherwise prohibited
as described in the first sentence of this paragraph) resume payments on the
Notes after the end of such Payment Blockage Period. Not more than one Payment
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to the Senior Debt that have occurred
during such period.


 


SECTION 11.03   When
Distribution Must Be Paid Over.  If a
distribution or payment is made to the Holders of the Notes that is prohibited
by Section 11.01 or 11.02, the Holders of the Notes who receive such
distribution or payment shall hold it in trust for holders of the Senior Debt
and pay it over to them as their interests may appear.


 


SECTION 11.04   Subrogation.  After all Senior Debt is paid in full in cash
and cash equivalents and until the Notes are paid in full, the Holders of the
Notes shall be subrogated to the rights of the holders of Senior Debt to
receive distributions applicable to Senior Debt. A distribution made under this
Article XI to holders of Senior Debt that otherwise would have been made
to the Holders of the Notes is not, as between the Company and the Holders of
the Notes, a payment by the Company on such Senior Debt.


 


SECTION 11.05   Subordination
May Not Be Impaired.  The
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Holders of the Notes, without incurring
responsibility to the Holders of the Notes and without impairing or releasing
the subordination provided in this Article XI or the obligations hereunder
of the Holders of the Notes to the holders of such Senior Debt, do any one or
more of the following: (a) change the manner, place, terms or time of
payment or extend the time of payment of, or renew or alter, such Senior Debt
or any instrument evidencing the same or any agreement under which such Senior
Debt is outstanding; (b) sell, exchange, impair, release or otherwise deal
with any property pledged, mortgaged or otherwise securing such Senior Debt; (c) release
any person liable in any manner for the collection or payment of such Senior
Debt; and (d) exercise or refrain from exercising any rights against the
Company or any other person.


 


SECTION 11.06   Distribution
or Notice to Senior Agent.  Whenever
a distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to the Senior Agent.


 


SECTION 11.07   Relative
Rights; Right To Accelerate.  Article XI
defines the relative rights of the Holders of the Notes and holders of Senior
Debt. Nothing in this Note shall (a) impair, as between the Company and
the Holders of the Notes, the obligation of the Company, which is absolute and
unconditional, to pay principal of and interest on the Notes in accordance with
their terms; or (b) prevent any Holder of the Notes from exercising its
available remedies upon an Event of Default, subject to the rights of holders
of Senior Debt to receive distributions or payments otherwise payable to the
Holders of the Notes. The failure to make a payment pursuant to the Notes by
reason of any provision in this Article XI shall not be construed as
preventing the occurrence of an Event of Default. If payment of the Notes is
accelerated when any Senior Debt is outstanding, the Company may not pay the
Notes until five Business 


 


25

















 


Days after the Senior Agent receives notice
of such acceleration and, thereafter, may pay the Notes only if the Notes
otherwise permits payment at that time.


 


SECTION 11.08   Reliance
by Holders of Senior Debt.  The
Purchaser acknowledges and agrees that the foregoing subordination provisions
are, and are intended to be, an inducement and a consideration to each holder
of any Senior Debt, whether such Senior Debt was created or acquired before or
after the issuance of the Notes, to acquire and continue to hold, or to
continue to hold, such Senior Debt and such holder of such Senior Debt shall be
deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior Debt.


 


ARTICLE XII


 


GUARANTEE


 


SECTION 12.01   Guarantee.


 


(a)   Subject to this Article 12, each Guarantor hereby, jointly
and severally, unconditionally guarantees to each Holder of a Note,
irrespective of the validity and enforceability of this Agreement, the Notes or
the obligations of the Company hereunder or thereunder, that:


 


(i)    the principal of, premium
and additional interest, if any, and interest on the Notes shall be promptly
paid in full when due, whether at maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal of and interest on the Notes,
if any, if lawful, and all other obligations of the Company to the Holders
hereunder or thereunder shall be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and


 


(ii)   in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
same shall be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.


 


Failing
payment when due of any amount so guaranteed or any performance so guaranteed
for whatever reason, the Guarantors shall be jointly and severally obligated to
pay the same immediately. Each Guarantor agrees that this is a guarantee of
payment and not a guarantee of collection.


 


(b)   The Guarantors hereby agree that their obligations hereunder are
unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Agreement, the absence of any action to enforce the same, any
waiver or consent by the Required Holders with respect to any provisions hereof
or thereof, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenant that this Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and this
Agreement or by release in accordance with the provisions of this Agreement.


 


(c)   If the Holders are required by any court or otherwise to return to
the Company, the Guarantors or any custodian, trustee, liquidator or other similar
official acting in relation to either the Company or the Guarantors, any amount
paid by the Company or the Guarantors to the Holders, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.


 


26

















 


(d)   Each Guarantor agrees that it shall not be entitled to any right
of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders, on the other hand, the maturity of the obligations guaranteed
hereby may be accelerated for the purposes of this Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the obligations guaranteed hereby, and in the event of any
declaration of acceleration of such obligations, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Guarantee. The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.


 


SECTION 12.02   Subordination
of Guarantee.  The obligations of
each Guarantor under its Guarantee pursuant to this Article 12 shall be
junior and subordinated to the Senior Debt of such Guarantor on the same basis
as the Notes are junior and subordinated to Senior Debt of the Company as set
forth in Article XI. For the purposes of the foregoing sentence, the
Holders shall have the right to receive and/or retain payments by any of the
Guarantors only at such times as they may receive and/or retain payments in respect
of the Notes pursuant to this Agreement.


 


SECTION 12.03   Limitation
on Guarantor Liability.  Each
Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it
is the intention of all such parties that the Guarantee of such Guarantor not
constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law,
the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or
any similar federal or state law to the extent applicable to any Guarantee. To
effectuate the foregoing intention, the Holders and the Guarantors hereby
irrevocably agree that the obligations of such Guarantor shall be limited to
the maximum amount that shall, after giving effect to such maximum amount and
all other contingent and fixed liabilities of such Guarantor that are relevant
under such laws, and after giving effect to any collections from, rights to
receive contribution from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under this Article 12,
result in the obligations of such Guarantor under its Guarantee not
constituting a fraudulent transfer or conveyance.


 


SECTION 12.04   Guarantor
May Consolidate, etc., on Certain Terms.


 


(a)   Except as otherwise provided in this Article 12, no Guarantor
may sell or otherwise dispose of all or substantially all of its assets to, or
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person, other than either of the Company or another
Guarantor, unless immediately after giving effect to such transaction, no
Default or Event of Default exists and either:


 


(i)    the Person (if other than
either of the Company or a Guarantor) acquiring the property in any such sale
or disposition or the Person (if other than either of the Company or a
Guarantor) formed by or surviving any such consolidation or merger
unconditionally assumes all the obligations of the Guarantor, pursuant to a
joinder in form and substance reasonably satisfactory to the joinder attached
hereto as Exhibit B; or


 


(ii)   the net proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of this Agreement.


 


(b)   In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by joinder, executed and delivered
to the Holders and satisfactory in form to the Holders, of the due and punctual
performance of all of the covenants and conditions of this 


 


27

















 


Agreement to be performed by the Guarantor,
such successor Person shall succeed to and be substituted for the Guarantor
with the same effect as if it had been named herein as a Guarantor. All the
Guarantees shall in all respects have the same legal rank and benefit under
this Agreement as the Guarantees theretofore and thereafter issued in
accordance with the terms of this Agreement as though all of such Guarantees
had been issued at the date of the execution hereof.


 


(c)   Except as set forth in Sections 7.03 or 8.01 and 12.04, nothing
contained in this Agreement or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into either of the Company or
another Guarantor, or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.


 


SECTION 12.05   Releases.


 


(a)   The Guarantee of a Guarantor will be released:


 


(i)    in connection with any sale
or other disposition of all or substantially all of the assets of that
Guarantor (including by way of merger or consolidation) to a Person that is not
(either before or after giving effect to such transaction) the Company or a
Subsidiary;


 


(ii)   in connection with any sale
or other disposition of all of the Equity Interests of that Guarantor to a
Person that is not (either before or after giving effect to such transaction)
the Company or a Subsidiary;


 


(iii)  if that Guarantor is
released from its guarantee under the Credit Agreement; or


 


(iv)  upon termination of this
Agreement.


 


(b)   If any Guarantor is released from its Guarantee, any of its
Subsidiaries that are Guarantors will be released from their Guarantees, if
any.


 


(c)   Any Guarantor not released from its obligations under its
Guarantee as provided in this Article 12 shall remain liable for the full
amount of principal of and interest on the Notes and for the other obligations
of any Guarantor under this Agreement as provided in this Article 12.


 


ARTICLE XIII


 


MISCELLANEOUS


 


SECTION 13.01   Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that (a) the Company may not
assign or transfer its rights hereunder or any interest herein or delegate its
duties hereunder and (b) the Purchaser shall have the right to assign its
rights hereunder and under the Securities in accordance with Article 9.


 


SECTION 13.02   Amendments,
Waivers and Consent  This Agreement
may be amended, and the observance of any term hereof may be waived (either
retroactively or prospectively) with (and only with) the written consent of the
Company and the Required Holders; provided, however, that no such amendment or
waiver may, without the prior written consent of the Holder of each Note then
outstanding and affected thereby, (a) subject any Holder to any additional
obligation, (b) reduce the principal of (or premium, if any) or rate of
interest on, any Note, (c) postpone the date fixed for any payment of
principal of (or premium, if any) or interest on any Note (other than a
deferral of interest 


 


28

















 


pursuant to Section 3.01(b) or a
waiver of any increase in the interest rate on the Notes upon the occurrence of
an Event of Default pursuant to Article 10), (d) change the ranking
or priority of the Notes or the percentage of the aggregate principal amount of
the Notes the Holders of which shall be required to consent or take any other
action under this Section 13.02 or any other provision of this Agreement, (e) modify
or change any provision of this Agreement or the related definitions affecting
the subordination or ranking of the Notes or any Guarantee in a manner which
adversely affects the Holders or (f) release any Guarantor from any of its
obligations under its Guarantee or this Agreement otherwise than in accordance
with the terms of this Agreement. No amendment or waiver of this Agreement will
extend to or affect any obligation, covenant, agreement, Default or Event of
Default not expressly amended or waived or thereby impair any right consequent
thereon. As used herein, the term this “Agreement” and references thereto shall
mean this Agreement as it may from time to time be amended, supplemented or
modified.


 


SECTION 13.03   No
Implied Waivers; Cumulative Remedies; Writing Required.  No delay or failure in exercising any right,
power or remedy hereunder shall affect or operate as a waiver thereof; nor
shall any single or partial exercise thereof or any abandonment or
discontinuance of steps to enforce such a right, power or remedy preclude any
further exercise thereof or of any other right, power or remedy. The rights and
remedies hereunder are cumulative and not exclusive of any rights or remedies
that the Purchaser or any Holders would otherwise have. Any waiver, permit,
consent or approval of any kind or character of any breach or default under
this Agreement or any such waiver of any provision or condition of this
Agreement must be in writing and shall be effective only to the extent specifically
set forth in such writing.


 


SECTION 13.04   Transfer
Taxes.  All transfer taxes, fees and
duties under applicable law incurred in connection with the sale and transfer
of the Securities under this Agreement will be borne and paid by the Company
and it shall promptly reimburse the Purchaser for any such tax, fee or duty
which any of them is required to pay under applicable law.


 


SECTION 13.05   Reimbursement
of Expenses.  The Company upon demand
shall pay or reimburse the Purchaser for all fees and expenses incurred or
payable by the Purchaser (including, without limitation, reasonable fees and
expenses of special counsel for the Purchaser), from time to time (a) arising
in connection with the negotiation, preparation and execution of this Agreement
or the Notes and all other instruments and documents to be delivered hereunder
or thereunder or arising in connection with the Contemplated Transactions
hereunder or thereunder, (b) relating to any amendments, waivers or
consents pursuant to the provisions hereof or thereof, and (c) arising in
connection with the enforcement of this Agreement or collection of the Notes.
At the time of, and subject to, the consummation of the Afremov Buyout, the
Company shall pay to the Purchaser, or another designee of the Purchaser, a
financing fee equal to $500,000 payable in immediately available funds at the
Closing.


 


SECTION 13.06   Holidays.  Whenever any payment or action to be made or
taken hereunder or under the Notes shall be stated to be due on a day which is
not a Business Day, such payment or action shall be made or taken on the next
following Business Day, and such extension of time shall be included in
computing interest or fees, if any, in connection with such payment or action.


 


SECTION 13.07   Notices.  All notices and other communications given to
or made upon any party hereto in connection with this Agreement shall, except
as otherwise expressly herein provided, be in writing (including telecopy, but
in such case, a confirming copy will be sent by another permitted means) and
mailed via certified mail, telecopied or delivered by guaranteed overnight
parcel express service or courier to the respective parties, as follows:


 


29

















 


If to the
Company, to it at:


 


AGA Medical
Corporation


682
Mendelssohn Avenue


Golden Valley,
Minnesota 55427 


Telephone
number: (763) 513-9227


Facsimile
number: (763) 513-9226


Attention:
Chief Executive Officer


 


with a copy
to:


 


Parsinen
Kaplan Rosberg & Gotlieb P.A.


100 South
Fifth Street, Suite 110


Minneapolis,
Minnesota 55402


Facsimile
number: (612) 333-6798


Attention:
Jude Anne Carluccio, Esq.


 


If WCAS CP IV,
to it at:


 


c/o Welsh,
Carson, Anderson & Stowe


320 Park
Avenue, Suite 2500


New York, New
York 10022


Telephone
number: (212) 893-9500


Facsimile
number: (212) 893-9583


Attention:
Paul B. Queally and Sean M. Traynor


 


with a copy
to:


 


Ropes &
Gray LLP


45 Rockefeller
Plaza


New York, New
York 10111


Telephone
number: (212) 841-5785


Facsimile
number: (212) 841-5725


Attention:
Othon A. Prounis, Esq.


 


or in accordance with any subsequent written
direction from the recipient party to the sending party. All such notices and
other communications shall, except as otherwise expressly herein provided, be
effective upon delivery if delivered by courier or overnight parcel express
service; in the case of certified mail, three Business Days after the date
sent; or in the case of telecopy, when received.


 


SECTION 13.08   Survival.  All representations, warranties, covenants
and agreements of the Company contained herein or made in writing in connection
herewith shall survive the execution and delivery of this Agreement and the
purchase of the Securities and shall continue in full force and effect so long
as any Securities are outstanding and until payment in full of all of the
Company’s obligations hereunder or thereunder. All obligations relating to
indemnification hereunder shall survive any termination of this Agreement and
shall continue for the length of any applicable statute of limitations.


 


SECTION 13.09   Governing
Law.  This Agreement will be governed
by and construed and interpreted in accordance with the laws of the State of
New York.


 


30

















 


SECTION 13.10   Jurisdiction,
Venue; Service of Process.


 


(a)   Jurisdiction.  Each
party to this Agreement, by its execution hereof, (i) hereby irrevocably
submits to the exclusive jurisdiction of the state courts of the State of New
York or the United States District Court located in New York County in the
State of New York for the purpose of any Action between the parties arising in
whole or in part under or in connection with this Agreement, the Notes or the
Contemplated Transactions, (ii) hereby waives to the extent not prohibited
by applicable law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such Action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such Action brought in one of the
above-named courts should be dismissed on grounds of forum non conveniens,
should be transferred or removed to any court other than one of the above-named
courts, or should be stayed by reason of the pendency of some other proceeding in
any other court other than one of the above-named courts, or that this
Agreement or the subject matter hereof may not be enforced in or by such court
and (iii) hereby agrees not to commence any such Action other than before
one of the above-named courts. Notwithstanding the previous sentence a party
may commence any Action in a court other than the above-named courts solely for
the purpose of enforcing an order or judgment issued by one of the above-named
courts.


 


(b)   Venue.  Each party
agrees that for any Action between the parties arising in whole or in part
under or in connection with this Agreement, such party bring Actions only in
courts located in New York County in the State of New York. Each party further
waives any claim and will not assert that venue should properly lie in any
other location within the selected jurisdiction.


 


(c)   Service of Process. 
Each party hereby (i) consents to service of process in any Action
between the parties arising in whole or in part under or in connection with
this Agreement in any manner permitted by New York law, (ii) agrees that
service of process made in accordance with clause (i) or made by
registered or certified mail, return receipt requested, at its address
specified pursuant to Section 13.07, will constitute good and valid
service of process in any such Action and (iii) waives and agrees not to
assert (by way of motion, as a defense, or otherwise) in any such Action any
claim that service of process made in accordance with clause (i) or (ii) does
not constitute good and valid service of process.


 


SECTION 13.11   Jury
Trial Waiver. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE
WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT
(WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN
ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES
AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS
WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG
THE PARTIES IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY IN ANY PROCEEDING
WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT, THE ANCILLARY AGREEMENTS OR
ANY OF THE CONTEMPLATED TRANSACTIONS WILL INSTEAD BE TRIED IN A COURT OF
COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.


 


SECTION 13.12   Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to he
prohibited by or invalid under applicable law in any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating any other provision of this Agreement.


 


31

















 


SECTION 13.13   Headings.  Article, section and subsection headings in
this Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.


 


SECTION 13.14   Indemnity.  The Company hereby agrees to indemnify,
defend and hold harmless the Purchasers and their officers, directors,
employees, agents and representatives, and their respective successors and
assigns in connection with any losses, claims, damages, liabilities and
expenses, including reasonable attorneys’ fees, to which any Purchaser may
become subject (other than as a result of the gross negligence or willful
misconduct of any such Person), insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or by reason of any
investigation, litigation or other proceedings related to or resulting from any
act of, or omission by, the Company or its Affiliates or any officer, director,
employee, agent or representative of the Company or its Affiliates with respect
to the Contemplated Transactions, the Notes, the Organizational Documents or
any agreements entered into in connection with any such agreements, instruments
or documents and to reimburse the Purchasers and each such Person and
Affiliate, upon demand, for any legal or other expenses incurred in connection
with investigating or defending any such loss, claim, damage, liability,
expense or action. To the extent that the foregoing undertakings may be
unenforceable for any reason, the Company agrees to make the maximum
contribution to the payment and satisfaction of indemnified liabilities set
forth in this Section 13.14 which is permissible under applicable law.


 


32

















 


IN WITNESS WHEREOF, the parties
hereto have executed this Agreement as of the day and year first above written.


 


	
  THE COMPANY:

  	
  AGA MEDICAL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
  /s/ Franck Gougeon

  
	
   

  	
   

  	
  Name:  Franck Gougeon

  
	
   

  	
   

  	
  Title:   President &
  CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE PURCHASER:

  	
  WCAS CAPITAL PARTNERS IV, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  WCAS CP IV Associates LLC

  
	
   

  	
   

  	
  Its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jonathan Rather

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: Managing Member

  
					



 


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