EX-10.2






Exhibit 10.2




      




$28,000,000

LOAN AGREEMENT




dated as of February 12, 2009




among




HEARTWARE INTERNATIONAL, INC.

as Borrower




and




ALL OF THE SUBSIDIARIES OF

HEARTWARE INTERNATIONAL, INC.

as Guarantors




and




THORATEC CORPORATION

as Lender




      





 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	ARTICLE I. Definitions
	 	 	4	 
	SECTION 1.01. Defined Terms
	 	 	4	 
	SECTION 1.02. Terms Generally
	 	 	12	 
	ARTICLE II. The Credits
	 	 	13	 
	SECTION 2.01. Commitments
	 	 	13	 
	SECTION 2.02. Borrowing Request; Loans
	 	 	13	 
	SECTION 2.03. Repayment of Loans; Evidence of Debt
	 	 	13	 
	SECTION 2.04. Interest on Loans
	 	 	14	 
	SECTION 2.05. Default Interest
	 	 	14	 
	SECTION 2.06. Repayment of Loans
	 	 	14	 
	SECTION 2.07. Voluntary Prepayments
	 	 	14	 
	SECTION 2.08. Mandatory Prepayments
	 	 	15	 
	SECTION 2.09. Payments
	 	 	15	 
	SECTION 2.10. Conversion of Loans
	 	 	15	 
	SECTION 2.11. Conversion of Escrow Funds
	 	 	16	 
	SECTION 2.12. Maximum Amount of Converted Common Stock
	 	 	17	 
	SECTION 2.13. Adjustment of Conversion Rate
	 	 	17	 
	ARTICLE III. Representations and Warranties of the Loan Parties
	 	 	18	 
	SECTION 3.01. Organization; Powers
	 	 	18	 
	SECTION 3.02. Authorization; No Conflicts
	 	 	18	 
	SECTION 3.03. Enforceability
	 	 	18	 
	SECTION 3.04. Governmental Approvals
	 	 	18	 
	SECTION 3.05. Senior Ranking
	 	 	19	 
	SECTION 3.06. Federal Reserve Regulations
	 	 	19	 
	SECTION 3.07. Investment Company Act
	 	 	19	 
	SECTION 3.08. Solvency
	 	 	19	 
	ARTICLE IV. Representations and Warranties of the Lender
	 	 	19	 
	SECTION 4.01. Organization; Powers
	 	 	19	 
	SECTION 4.02. Authorization; No Conflicts
	 	 	20	 
	SECTION 4.03. Enforceability
	 	 	20	 
	SECTION 4.04. Governmental Approvals
	 	 	20	 
	SECTION 4.05. Capital Resources
	 	 	20	 
	ARTICLE V. Conditions of Lending
	 	 	20	 
	SECTION 5.01. All Credit Events
	 	 	20	 
	SECTION 5.02. Delayed Draw Loans
	 	 	21	 
	ARTICLE VI. Covenants
	 	 	22	 
	SECTION 6.01. Notices
	 	 	22	 
	SECTION 6.02. Use of Proceeds
	 	 	22	 
	SECTION 6.03. Further Assurances
	 	 	22	 
	SECTION 6.04. Taxes
	 	 	23	 
	SECTION 6.05. Compliance with Laws
	 	 	23	 
	SECTION 6.06. Common Stock
	 	 	23	 
	ARTICLE VII. Guaranty
	 	 	24	 
	SECTION 7.01. Guaranty of the Obligations
	 	 	24	 






2









 






	 	 	 	 	 
	 	 	Page
	SECTION 7.02. Payment by Guarantors
	 	 	24	 
	SECTION 7.03. Liability of Guarantors Absolute
	 	 	24	 
	SECTION 7.04. Waivers by Guarantors
	 	 	26	 
	SECTION 7.05. Guarantors’ Rights of Subrogation, Contribution, Etc.
	 	 	26	 
	SECTION 7.06. Subordination of Other Obligations
	 	 	27	 
	SECTION 7.07. Continuing Guaranty
	 	 	27	 
	SECTION 7.08. Authority of Guarantors or Borrower
	 	 	27	 
	SECTION 7.09. Financial Condition of Borrower
	 	 	27	 
	SECTION 7.10. Bankruptcy, Etc.
	 	 	28	 
	ARTICLE VIII. Events of Default
	 	 	28	 
	ARTICLE IX. Miscellaneous
	 	 	30	 
	SECTION 9.01. Notices
	 	 	30	 
	SECTION 9.02. Survival of Agreement
	 	 	32	 
	SECTION 9.03. Binding Effect
	 	 	32	 
	SECTION 9.04. Successors and Assigns
	 	 	32	 
	SECTION 9.05. Right of Setoff
	 	 	33	 
	SECTION 9.06. Applicable Law
	 	 	33	 
	SECTION 9.07. Waivers; Amendment
	 	 	33	 
	SECTION 9.08. Interest Rate Limitation
	 	 	33	 
	SECTION 9.09. Entire Agreement
	 	 	34	 
	SECTION 9.10. WAIVER OF JURY TRIAL
	 	 	34	 
	SECTION 9.11. Severability
	 	 	34	 
	SECTION 9.12. Counterparts
	 	 	34	 
	SECTION 9.13. Headings
	 	 	35	 
	SECTION 9.14. Jurisdiction; Consent to Service of Process
	 	 	35	 
	SECTION 9.15. No Fiduciary Duty
	 	 	35	 
	SECTION 9.16. Payments Set Aside
	 	 	36	 






EXHIBITS




	 	 	 	 	 
	Exhibit A

	 	—
	 	Form of Borrowing Request
	Exhibit B

	 	—
	 	Form of Conversion Notice






3









 






     This LOAN AGREEMENT is dated as of February 12, 2009 (this “Agreement”), among
HEARTWARE INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), the GUARANTORS (as
defined herein) from time to time party hereto and THORATEC CORPORATION, a California corporation
(the “Lender”).



     The parties hereto agree as follows:



ARTICLE I.




Definitions




     SECTION 1.01. Defined Terms. As used in this Agreement, the following terms shall
have the meanings specified below:



     “Acquisition” shall mean, collectively, (i) the merger of Thomas Merger Sub I, Inc.
with and into the Borrower, whereupon the separate existence of Thomas Merger Sub I, Inc. shall
cease, and the Borrower shall continue as the surviving corporation and (ii) immediately following
the consummation of the merger in clause (i) of this definition, the merger of Borrower with and
into Thomas Merger Sub II, Inc., whereupon the corporate existence of Borrower shall cease and
Thomas Merger Sub II, Inc. shall continue as the surviving corporation, in each case, pursuant to
the terms of the Definitive Agreement.



     “Affiliate” means, when used with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is controlled by, or is under
common control with such Person.



     “Agreement” shall have the meaning assigned to such term in the preamble.



     “Applicable Law” means, with respect to any Person, any federal (including United
States or Australian), state, local or foreign law (statutory, common or otherwise), constitution,
treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling
or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority
that is binding upon or applicable to such Person.



     “Applicable Rate” shall mean, for any day with respect to any Loan, a rate equal to
10% per annum.



     “ASTC” means ASX Settlement and Transfer Corporation Pty Ltd ACN 008 504 532.



     “ASX” means ASX Limited ACN 008 624 691 or the Australian Securities Exchange.



     “AU$” shall mean lawful money of Australia.



     “Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. §§ 101 et seq.),
as amended from time to time, and any successor statute.



     “Board” shall mean the Board of Governors of the Federal Reserve System of the United
States of America.



4









 





     “Borrower” shall have the meaning assigned to such term in the preamble.



     “Borrowing” shall mean Loans made pursuant to Section 2.01.



     “Borrowing Request” means a notice substantially in the form set forth as Exhibit
A hereto.



     “Business Day” means a day, other than Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by Applicable Law to close.



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



     “CDIs” means CHESS Depositary Interests representing shares of Common Stock (in the
ratio of one (1) share of Common Stock to thirty five (35) CDIs).



     “Change of Control” shall mean, other than the transactions contemplated by the
Definitive Agreement, (A) any acquisition or purchase, direct or indirect, of fifty percent (50%)
or more of the assets (based on fair market value) of the Borrower and its Subsidiaries, taken as a
whole, or over fifty percent (50%) of any class of equity or voting securities of the Borrower or
of any of its Subsidiaries, (B) the consummation of any tender offer (including a self-tender
offer) or exchange offer that results in a Third Party beneficially owning fifty percent (50%) or
more of any class of equity or voting securities of the Borrower or of any of its Subsidiaries or
(C) a merger, consolidation, share exchange, business combination, sale of substantially all the
assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction
involving the Borrower or any of its Subsidiaries whose assets, individually or in the aggregate,
constitute more than fifty percent (50%) of the assets (based on fair market value) of the Borrower
and its Subsidiaries, taken as a whole.



     “Charges” shall have the meaning assigned to such term in Section 9.08.



     “CHESS” means the clearing house electronic sub-register system of share transfers
operated by ASTC.



     “Closing Date” shall mean February 12, 2009.



     “Commitment” shall mean, with respect to the Lender, the commitment of the Lender to
make Loans hereunder. The amount of the Lender’s Commitment is set forth on Appendix A, subject to
any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of
the Commitments on the Closing Date is $20,000,000, subject to the terms and conditions set forth
herein.



5









 





     “Common Stock” shall mean the common stock, par value $0.001 per share, of the
Borrower.



     “Company Material Adverse Effect” shall mean any event, change or occurrence which,
individually or together with any one or more other events, changes or occurrences (A) has had, or
is reasonably likely to have, a material adverse effect upon the business, assets, liabilities,
condition (financial or otherwise) or operating results of the Borrower and its Subsidiaries taken
as a whole; provided, that in no event shall any of the following events, changes, or occurrences
constitute a “Company Material Adverse Effect” or be considered in determining whether a “Company
Material Adverse Effect” has occurred or is reasonably likely to occur: (i) changes in general
economic, securities market or business conditions except to the extent that such changes have a
materially disproportionate effect (relative to other industry participants) on the Borrower and
its Subsidiaries, taken as a whole, (ii) changes in conditions generally affecting the industry in
which the Borrower and its Subsidiaries operate, except to the extent that such changes have a
materially disproportionate effect (relative to other industry participants that are development
stage companies at a similar stage of development as the Borrower and its Subsidiaries) on the
Borrower and its Subsidiaries, taken as a whole, (iii) any change in the trading price or trading
volume of the Borrower’s common stock or CDIs in and of itself or any failure to meet internal or
published projections or forecasts for any period in and of itself (in each case, as distinguished
from any change, event or occurrence giving rise or contributing to such change or failure),
(iv) changes in GAAP or Applicable Laws or (v) changes resulting from the announcement or the
existence of, or that result from the compliance by the Borrower with its obligations under, the
Definitive Agreement, or (B) would prevent the Borrower from consummating, or materially delay, the
Merger.



     “Control” shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through the ownership of
voting securities, by contract or otherwise, and the terms “Controls”,
“Controlling” and “Controlled” shall have the meanings correlative thereto.



     “Conversion Notice” shall have the meaning assigned to such term in Section
2.10.



     “Conversion Rate” shall mean (i) if the Acquisition is not consummated because of a
Superior Proposal Termination, $21.5355 per share of Common Stock and (ii) if the Acquisition is
not consummated for any reason other than a Superior Proposal Termination, AU$35.00 per share of
Common Stock, in each case, as such rate may be adjusted pursuant to Section 2.13.



     “Convertible Portion” shall mean, as at any date of determination, the outstanding
principal amount of the Loans as of such date plus the amount of any accrued and unpaid interest
thereon.



     “Credit Event” shall have the meaning assigned to such term in Section 5.01.



     “Default” shall mean any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would constitute an Event of Default.



6









 





     “Definitive Agreement” shall mean that certain Agreement and Plan of Merger by and
among Lender, Thomas Merger Sub I, Inc., Thomas Merger Sub II, Inc. and Borrower dated as of
February 12, 2009.



     “Definitive Agreement Termination Date” shall mean the date, if any, upon which the
Definitive Agreement is terminated in accordance with its terms.



     “Delayed Draw Loan” shall have the meaning assigned to such term in Section
2.01.



     “Disposition” with respect to any property, shall mean any sale, lease, sale and
leaseback, assignment, conveyance, transfer or other disposition thereof. The terms
“Dispose” and “Disposed of” shall have correlative meanings



     “Dollars” or “$” shall mean lawful money of the United States of America.



     “Domestic Subsidiary” shall mean any Subsidiary organized under the laws of the United
States of America, any state thereof or the District of Columbia.



     “Equity Interests” shall mean shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a trust or other
equity interests in any Person, or any obligations convertible into or exchangeable for, or giving
any Person a right, option or warrant to acquire, such equity interests or such convertible or
exchangeable obligations.



     “Escrow Account” shall have the meaning assigned to such term in the Escrow Agreement.



     “Escrow Agent” shall mean U.S. Bank, National Association, or any Person selected or
appointed as a successor thereto, as escrow agent under the Escrow Agreement.



     “Escrow Agreement” shall mean the Escrow Agreement dated as of February 12, 2009,
between the Lender, the Borrower and the Escrow Agent.



     “Escrow Amount Conversion Date” shall have the meaning assigned to such term in
Section 2.10.



     “Escrow Funds” shall have the meaning assigned to such term in the Escrow Agreement.



     “Event of Default” shall have the meaning assigned to such term in Article
VII.



     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.



     “Federal Funds Effective Rate” shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve
Bank of New York, or, if such day is not a Business Day, for the Business Day preceding such day,
provided that if such rate is not so published for any day that is a Business Day, the
Federal Funds Effective Rate for such day shall be the average of the quotations for the



7









 







day for such transactions received by the Lender from three Federal funds brokers of
recognized standing selected by it.



     “Final Outside Date Extension Option” shall mean Lender’s option to extend the Outside
Date (as such term is defined in the Definitive Agreement) to January 31, 2010 in accordance with
Section 8.01(b)(i) of the Definitive Agreement.



     “Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.



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



     “Governmental Authority” means any transnational, domestic or foreign, federal, state
or local governmental authority, department, court, agency or official, including any political
subdivision thereof.



     “Guarantee” of or by any Person (the “guarantor”) shall mean any obligation,
contingent or otherwise, of (a) the guarantor or (b) another Person (including any bank under a
letter of credit) pursuant to which the guarantor has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the “primary obligor”) in any manner, whether directly or
indirectly, and including any obligation, contingent or otherwise, of the guarantor, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (ii) to purchase or lease property, securities or services for
the purpose of assuring the owner of such Indebtedness of the payment of such Indebtedness,
(iii) to maintain working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness, (iv)
as an account party in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or (v) to otherwise assure or hold harmless the owner of such Indebtedness against
loss in respect thereof; provided, however, that the term “Guarantee” shall not
include endorsements for collection or deposit in the ordinary course of business.



     “Guaranteed Obligations” shall have the meaning assigned to such term in Section
7.01.



     “Guarantor” shall mean each Subsidiary of the Borrower.



     “Guaranty” shall mean the guarantees issued pursuant to Article VII by each of
the Guarantors.



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



     “Indebtedness” of any Person shall mean, 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 under conditional sale or other title retention agreements relating to
property or assets acquired by such Person, (d) all obligations of such Person in respect of the
deferred purchase price of property or services (other than current trade accounts payable



8









 







incurred in the ordinary course of business), (e) all obligations of such Person, contingent
or otherwise, to purchase, redeem, retire or otherwise acquire for value any Equity Interests in
such Person, (f) all Indebtedness secured by (or for which the holder of such Indebtedness 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 Indebtedness secured thereby has been assumed, (g) all
Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such
Person, (i) all obligations, contingent or otherwise, of such Person as an account party 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 and bank guaranties. The Indebtedness of any Person
shall include the Indebtedness of any other Person (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 other Person, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.



     “Initial Borrowing” shall mean the initial Borrowing of Loans in accordance with this
Agreement.



     “Interest Payment Date” shall mean, as to any Loan, (a) each March 31, June 30,
September 30 and December 31 of each year, commencing on the first such date to occur after the
Closing Date, (b) the Maturity Date, (c) the date of repayment or prepayment made in respect
thereof and (d) the date of conversion of such Loan pursuant to Section 2.10.



     “Investor’s Rights Agreement” shall mean the Investor’s Rights Agreement dated as of
February 12, 2009 by and among the Borrower and the Lender.



     “Lender” shall have the meaning assigned to such term in the preamble.



     “Lender Termination” shall mean a termination by the Lender of the Definitive
Agreement in accordance with (i) Section 8.01(c)(i)(A) of the Definitive Agreement, solely to the
extent that the underlying breach by the Borrower was intentional or (ii) Section 8.01(c)(i)(B) of
the Definitive Agreement.



     “Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien
(statutory or otherwise), pledge, hypothecation, encumbrance, collateral assignment, charge or
security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a third party with
respect to such securities.



     “Loan Conversion Date” shall have the meaning assigned to such term in Section
2.10.



     “Loan Documents” shall mean this Agreement, any promissory note executed and delivered
in connection herewith, the Investor’s Rights Agreement and the Escrow Agreement.



     “Loan Parties” shall mean, collectively, Borrower and the Guarantors.



9









 





     “Loans” shall mean the Term Loans and Delayed Draw Loans made by the Lender to the
Borrower pursuant to Article II.



     “Margin Stock” shall have the meaning assigned to such term in Regulation U.



     “Maturity Date” shall mean the earlier of (i) November 1, 2011, (ii) the Termination
Date and (iii) the date on which all Loans shall become due and payable in full hereunder, whether
by acceleration or otherwise.



     “Maximum Delayed Draw Loan Amount” shall mean (a) from and after the Closing Date but
prior to the Option Date, $0 and (b) after the Option Date but prior to the Maturity Date,
$8,000,000, which amount may be reduced on a dollar for dollar basis by Escrow Funds that are
converted into Common Stock in accordance with Section 2.11.



     “Maximum Rate” shall have the meaning assigned to such term in Section 9.08.



     “Maximum Term Loan Amount” shall mean (i) from and after the Closing Date but prior to
May 1, 2009, $0, (ii) from and after May 1, 2009 but prior to July 31, 2009, $12,000,000 and (iii)
from and after July 31, 2009 but prior to the Maturity Date, $20,000,000, in the case of clauses
(ii) and (iii), as such amounts may be reduced by Escrow Funds that are converted into Common Stock
in accordance with Section 2.11.



     “Merger” shall mean the merger, in accordance with the General Corporation Law of the
State of Delaware, of Thomas Merger Sub I, Inc. with and into the Borrower, with the Borrower
continuing as the corporation surviving the Merger.



     “Obligations” shall mean the Loans and all advances, debts, liabilities, obligations,
covenants and duties owing by any Loan Party to the Lender or any Affiliate of the Lender, of any
kind or nature, present or future, whether or not evidenced by any note, guaranty or other
instrument, whether or not for the payment of money, whether arising by reason of an extension of
credit, loan, guaranty, indemnification, foreign exchange contract or in any other manner, whether
direct or indirect (including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired arising under or in connection
with the transactions contemplated hereby. The term includes, without limitation, all interest
(including any interest that, but for the provisions of the Bankruptcy Code, would have accrued),
charges, expenses, fees, attorneys’ fees and disbursements and any other sum chargeable to any Loan
Party under this Agreement or any other Loan Document.



     “Obligee Guarantor” shall have the meaning assigned to such term in Section
7.06.



     “Option Date” shall mean the date, if any, on which the Lender exercises the Final
Outside Date Extension Option.



     “Other Taxes” shall mean any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies (including interest, fines, penalties
and additions to tax) arising from any payment made under any Loan Document or from the execution,
delivery, registration or enforcement of, or otherwise with respect to, any Loan Document.



10









 





     “Parent Material Adverse Effect” shall mean any event, change or occurrence which,
individually or together with any one or more other events, changes or occurrences (A) has had, or
is reasonably likely to have, a material adverse effect upon the business, assets, liabilities,
condition (financial or otherwise) or operating results of the Lender and its Subsidiaries taken as
a whole; provided, that in no event shall any of the following events, changes, or occurrences
constitute a “Parent Material Adverse Effect” or be considered in determining whether a “Parent
Material Adverse Effect” has occurred or is reasonably likely to occur: (i) changes in general
economic, securities market or business conditions except to the extent that such changes have a
materially disproportionate effect (relative to other industry participants) on the Lender and its
Subsidiaries, taken as a whole, (ii) changes in conditions generally affecting the industry in
which the Lender and its Subsidiaries operate, except to the extent that such changes have a
materially disproportionate effect (relative to other industry participants that are at a similar
stage of development as the Lender and its Subsidiaries) on the Lender and its Subsidiaries, taken
as a whole, (iii) any change in the trading price or trading volume of the Lender’s common stock in
and of itself or any failure to meet internal or published projections or forecasts for any period
in and of itself (in each case, as distinguished from any change, event or occurrence giving rise
or contributing to such change or failure), (iv) changes in GAAP or Applicable Laws or (v) changes
resulting from the announcement or the existence of, or that result from the compliance by the
Lender with its obligations under, the Definitive Agreement or (B) would prevent the Lender, Thomas
Merger Sub I, Inc. or Thomas Merger Sub II, Inc. from consummating, or materially delay, the
Merger.



     “Permit” shall mean any franchise, license, lease, permit, notification,
certification, registration, authorization, exemption, qualification, or approval granted by or
filed with a Governmental Authority.



     “Person” shall have the meaning assigned to such term in the Definitive Agreement.



     “Regulation T” shall mean Regulation T of the Board as from time to time in effect and
all official rulings and interpretations thereunder or thereof.



     “Regulation U” shall mean Regulation U of the Board as from time to time in effect and
all official rulings and interpretations thereunder or thereof.



     “Regulation X” shall mean Regulation X of the Board as from time to time in effect and
all official rulings and interpretations thereunder or thereof.



     “Related Parties” shall mean, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, trustees, employees, agents and advisors of such
Person and such Person’s Affiliates.



     “Securities Act” shall mean the Securities Act of 1933, as amended from time to time.



     “Subsidiary” means, with respect to any Person, any corporation, limited liability
company, partnership or other entity or organization of which such Person (either alone or through
or together with any other Subsidiary of such Person), owns, directly or indirectly, a majority of
the stock or other Equity Interests having ordinary voting power to elect a majority of



11









 







the board of directors or other persons performing similar functions of such entity or
organization.



     “Superior Proposal Termination” shall mean a termination of the Definitive Agreement
(a) by the Borrower in accordance with Section 8.01(d)(ii) of the Definitive Agreement or (b) by
the Lender in accordance with Section 8.01(c)(ii) of the Definitive Agreement.



     “Taxes” shall mean any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.



     “Term Loans” shall have the meaning assigned to such term in Section 2.01.



     “Termination Date” shall mean the date on which all Loans and Escrow Funds shall have
been converted into Common Stock in accordance with Section 2.10 or Section 2.11,
as applicable, upon which date all commitments to make any Loans pursuant to this Agreement shall
terminate.



     “Third Party” shall mean any Person or “group” (within the meaning of Section 13(d)(3)
of the Exchange Act), other than the Borrower or any of its Subsidiaries or Lender or any of its
Subsidiaries.



     “Total Commitment” shall mean the sum of (i) all unfunded Commitments, (ii) all
outstanding and unpaid Loans and (iii) all Escrow Funds.



     “Transactions” shall mean, collectively, (a) the execution, delivery and performance
by each of the Loan Parties of the Loan Documents to which it is a party, (b) the Borrowings
hereunder and the use of proceeds thereof and (c) the deposit by the Lender of up to $28,000,000 in
the aggregate into the Escrow Account.



     SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The
words “include”, “includes” and “including”, and words of similar import, shall not be limiting and
shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be
construed to have the same meaning and effect as the word “shall.” The words “asset” and
“property” shall be construed as having the same meaning and effect and to refer to any and all
rights and interests in tangible and intangible assets and properties of any kind whatsoever,
whether real, personal or mixed, including cash, securities, Equity Interests, accounts and
contract rights. The words “herein,” “hereof” and “hereunder,” and words of similar import, shall
be construed to refer to this Agreement in its entirety and not to any particular provision of this
Agreement unless the context shall otherwise require. All references herein to Articles, Sections,
Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any definition of, or reference to, any Loan Document or any other
agreement, instrument or document in this Agreement shall mean such Loan Document or other
agreement, instrument or document as amended, restated, supplemented or otherwise modified from
time to time (subject to any restrictions on such amendments, restatements, supplements or
modifications set forth herein) and (b) all terms of an accounting or



12









 







financial nature shall be construed in accordance with GAAP, as in effect from time to time;
provided, however, that if the Borrower notifies the Lender that the Borrower
wishes to amend any provision hereof to eliminate the effect of any change in GAAP occurring after
the date of this Agreement on the operation of such provision (or if the Lender notifies the
Borrower that it wishes to amend any provision hereof for such purpose), then the Borrower’s
compliance with such provision shall be determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until either such notice is withdrawn or such
provision is amended in a manner satisfactory to the Borrower and the Lender.



ARTICLE II.




The Credits




     SECTION 2.01. Commitments. Subject to the terms and conditions hereof (including,
without limitation, Article IV) and relying upon the representations and warranties set
forth herein, (i) the Lender agrees to make one or more term loans (collectively, the “Term
Loans” and each, individually, a “Term Loan”) to the Borrower from and after the
Closing Date but no later than the Maturity Date in an aggregate principal amount up to the Maximum
Term Loan Amount and (ii) if the Lender exercises the Final Outside Date Extension Option, the
Lender agrees to make one or more delayed draw loans (collectively, the “Delayed Draw
Loans” and each, individually, a “Delayed Draw Loan”) to the Borrower up to an
aggregate principal amount not to exceed the Maximum Delayed Draw Loan Amount on or after the
Option Date but no later than the Maturity Date. Amounts paid or prepaid in respect of any Loans
may not be reborrowed.



     SECTION 2.02. Borrowing Request; Loans. (a) The Borrower may borrow a Loan in
accordance with this Agreement by delivery to the Lender of a duly completed Borrowing Request not
later than 10:00 a.m. New York time on the date three (3) Business Days prior to the proposed date
of the Borrowing. Each Borrowing Request is irrevocable and will not be regarded as having been
duly completed unless: (i) it identifies the Loan or Loans to be borrowed and (ii) the proposed
date of Borrowing is a Business Day prior to the Maturity Date.



     (b) No later than one (1) Business Day following the Closing Date, the Lender shall fund
$20,000,000 into the Escrow Account and, if the Lender exercises the Final Outside Date Extension
Option, then on the Option Date, the Lender shall fund an additional $8,000,000 into the Escrow
Account. The Lender shall direct the Escrow Agent to fund the Loans to be made hereunder from the
Escrow Account pursuant to and in accordance with the terms of Section 3 of the Escrow Agreement.



     SECTION 2.03. Repayment of Loans; Evidence of Debt.



     (a) The Borrower hereby unconditionally promises to pay to the Lender the principal amount of
each Loan made to the Borrower by the Lender as provided in Section 2.06.



     (b) The Lender may maintain an accounting evidencing the indebtedness of the Borrower to the
Lender resulting from the Loans made by the Lender to the Borrower under this



13









 







Agreement from time to time, including the amounts of principal and interest payable and paid
to the Lender from time to time under this Agreement.



     (c) The entries made in the accounting maintained pursuant to paragraph (b) of this Section
shall be prima facie evidence of the existence and amounts of the obligations therein recorded;
provided, however, that the failure of the Lender to maintain such accounts or any error therein
shall not in any manner affect the obligations of the Borrower to repay the Loans made to the
Borrower in accordance with the terms of this Agreement.



     (d) The Lender may request that the Loans made by it hereunder be evidenced by one or more
promissory notes. In such event, the Borrower shall execute and deliver to the Lender one or more
promissory notes payable to the Lender in a form and substance reasonably acceptable to the Lender.
Notwithstanding any other provision of this Agreement, in the event the Lender shall request and
receive such a promissory note, the interests represented by such note shall at all times
(including after any assignment of all or part of such interests pursuant to Section 9.04)
be represented by one or more promissory notes payable to the payee named therein.



     SECTION 2.04. Interest on Loans. (a) Subject to the provisions of Section
2.05, the Loans shall bear interest (computed on the basis of a year of 365 days (or 366 days
in a leap year)) at a rate per annum equal to the Applicable Rate.



     (b) Interest on each Loan shall be payable in arrears on the Interest Payment Dates, except as
otherwise provided in this Agreement, in an amount equal to the interest accrued and unpaid since
the previous Interest Payment Date.



     SECTION 2.05. Default Interest. Upon the occurrence and during the continuance of an
Event of Default, the Borrower shall on demand from time to time pay interest in cash, to the
extent permitted by law, on such defaulted amount to but excluding the date of actual payment
(after as well as before judgment) at the rate otherwise applicable to Loans hereunder pursuant to
Section 2.04 plus 2.00% per annum.



     SECTION 2.06. Repayment of Loans. All Loans then outstanding shall be due and payable
in full in cash on the Maturity Date (solely for purposes of this Section, excluding the
Termination Date), together with accrued and unpaid interest on the principal amount to be paid to
but excluding the date of payment. All repayments pursuant to this Section 2.06 shall be
without premium or penalty.



     SECTION 2.07. Voluntary Prepayments. Subject to the last sentence of this Section
2.07, the Borrower may, at any time and from time to time, prepay the Loans in whole or in part
upon at least five (5) Business Days’ prior written notice to the Lender; provided,
however, that any partial prepayment shall be in the minimum amount of $500,000 and
integral multiples of $250,000 in excess thereof. Any notice of prepayment given to the Lender
under this Section 2.07 shall specify (i) the date (which shall be a Business Day) of
prepayment and (ii) the aggregate principal amount of the prepayment. When notice of prepayment is
delivered as provided herein, the principal amount of the Loans specified in such notice, and all
accrued and unpaid interest with respect to such principal amount, shall become due and payable on
the



14









 







prepayment date specified in such notice and such notice shall be irrevocable.
Notwithstanding anything in this Section 2.07 to the contrary, the Borrower may not
voluntarily prepay the Loans (i) prior to the Definitive Agreement Termination Date or (ii) at any
time prior to the consummation of a Change of Control, if a Superior Proposal Termination shall
have occurred.



     SECTION 2.08. Mandatory Prepayments. (a) Upon a Change of Control, the Borrower shall
repay all or any part of the Loans at 100% of the outstanding principal amount of the Loans plus
accrued and unpaid interest, if any, to the date of repayment.



     (b) On a repayment date under paragraph (a), the Borrower shall repay the Loans to be repaid
to the Lender, and, in the case of Loans evidenced by promissory notes, the Lender shall surrender
all such promissory notes.



     SECTION 2.09. Payments. (a) The Borrower shall make each payment (including principal
of or interest on the Loans or other amounts) hereunder and under any other Loan Document not later
than 12:00 p.m. New York time, on the date when due in immediately available funds, without setoff,
defense or counterclaim. For purposes of computing interest, funds received by the Lender after
that time on such due date shall be deemed to have been paid by the Borrower on the next succeeding
Business Day, in the Lender’s sole discretion. Each such payment shall be made to the Lender at
its address specified in Section 9.01. All payments hereunder and under each other Loan
Document shall be made in Dollars.



     (b) Except as otherwise expressly provided herein, whenever any payment (including principal
of or interest on any Loan or other amounts) hereunder or under any other Loan Document shall
become due, or otherwise would occur, on a day that is not a Business Day, such payment may be made
on the next succeeding Business Day, and such extension of time shall in such case be included in
the computation of interest, if applicable.



     SECTION 2.10. Conversion of Loans. (a) From and after the Definitive Agreement Termination
Date, the Lender may convert the Convertible Portion of its Loans in whole or in part into Common
Stock at any time prior to 5:00 p.m. New York time on the Business Day immediately preceding the
Maturity Date into a number of whole shares of Common Stock equal to the Convertible Portion of the
Loans divided by the applicable Conversion Rate in effect on the date the Conversion Notice is
delivered; provided that with respect to any conversion of the Convertible Portion of the Loans
into Common Stock that would be subject to a waiting period provided by the HSR Act, no such
conversion shall be considered effective until the expiration or termination of such waiting
period; provided further that the Borrower agrees to use its commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties hereto in doing, all things necessary to consummate and make
effective the conversion contemplated by this Section 2.10.



     (b) The Convertible Portion of the Loans delivered for conversion will be deemed to have been
converted immediately prior to 5:00 p.m. New York time on the Loan Conversion Date. The Lender
shall be entitled to rights with regard to the Common Stock only to the extent such Convertible
Portion of Loans has been converted (or deemed to have converted) into Common Stock pursuant
hereto.



15









 





     (c) The right of conversion attaching to the Convertible Portion of any Loan may be exercised
(i) if such Loan is not represented by a promissory note, by book-entry transfer by the Lender, or
(ii) if such Loan is represented by a promissory note, by delivery of such promissory note to the
Borrower, accompanied, in either case, by: (1) a duly signed and completed Conversion Notice, in
the form as set forth as Exhibit B (a “Conversion Notice”), which Conversion Notice
shall specify the Convertible Portion of such Loan to be converted; (2) if any promissory note has
been lost, stolen, destroyed or mutilated, a notice to the Borrower regarding the loss, theft,
destruction or mutilation of the promissory note together with reasonable indemnity for the
Borrower; (3) appropriate endorsements and transfer documents if reasonably required by the
Borrower; and (4) payment of any transfer tax due that is payable solely as a result of the issue,
delivery or registration of the Common Stock in the name of a Person other than the Lender. The
date on which the Lender satisfies all of the requirements in the immediately preceding sentence is
the “Loan Conversion Date.” Notwithstanding any other provision of this Agreement, the
Borrower may not, and shall not, redeem or prepay any Loans (or any portion thereof) with respect
to which a Conversion Notice has been delivered to the Borrower. The Borrower shall deliver to the
Lender the number of whole shares of Common Stock issuable upon the conversion of the Convertible
Portion of the Loans in accordance with Section 2.10(a) (and cash in lieu of any fractional
shares) no later than five (5) Business Days following the relevant Loan Conversion Date. All such
shares shall be fully paid, duly authorized and issued and nonassesable.



     (d) Upon conversion of a Loan and receipt of Common Stock issued upon conversion of the
Convertible Portion of the Loans, the recipient of such Common Stock shall no longer be the Lender
to the extent of such converted Loan. No adjustment will be made to the Conversion Rate for
accrued and unpaid interest on a converted Loan except as provided herein.



     (e) Upon surrender of a Loan evidenced by a promissory note that is converted in part, the
Borrower shall execute and deliver to the Lender a new note evidencing the Loan equal in principal
amount to the unconverted portion of the Loan promissory note surrendered.



     SECTION 2.11. Conversion of Escrow Funds . (a) From and after the Definitive Agreement
Termination Date, the Lender may convert any Escrow Funds in whole or in part into Common Stock at
any time prior to 5:00 p.m. New York time on the Business Day immediately preceding the Maturity
Date into a number of whole shares of Common Stock equal to the Escrow Funds delivered for
conversion divided by the applicable Conversion Rate; provided that with respect to any conversion
of any Escrow Funds into Common Stock that would be subject to a waiting period provided by the HSR
Act, no such conversion shall be considered effective until the expiration or termination of such
waiting period; provided further that the Borrower agrees to use its commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties hereto in doing, all things necessary to consummate and make
effective the conversion contemplated by this Section 2.11.



     (b) Any Escrow Funds delivered for conversion will be deemed to have been converted
immediately prior to 5:00 p.m. New York time on Escrow Amount Conversion Date. The Lender shall be
entitled to rights with regard to the Common Stock only to the extent such



16









 







Escrow Funds have been converted (or deemed to have converted) into Common Stock pursuant hereto.



     (c) The right of conversion attaching to any Escrow Funds may be exercised if the Lender shall
have delivered (i) a Conversion Notice, which Conversion Notice shall specify the Escrow Funds to
be converted and (ii) payment of any transfer tax due that is payable solely as a result of the
issue, delivery or registration of the Common Stock in the name of a Person other than the Lender.
The date on which the Lender satisfies all of the requirements in the immediately preceding
sentence is the “Escrow Amount Conversion Date.” Upon receipt by the Borrower of the
Escrow Funds delivered for conversion in accordance with Section 2.11(a), the Borrower
shall deliver to the Lender the number of whole shares of Common Stock issuable upon the conversion
thereof (and cash in lieu of any fractional shares) no later than five (5) Business Days following
the relevant Escrow Amount Conversion Date. All such shares shall be fully paid, duly authorized
and issued and nonassesable.



     (d) Upon delivery of the Escrow Funds to Borrower and receipt of Common Stock by the Lender,
(i) the Commitment of the Lender shall be reduced by the amounts so converted and (ii) such amounts
shall no longer be available to the Borrower for Borrowings hereunder.



     SECTION 2.12. Maximum Amount of Converted Common Stock . Notwithstanding anything in
Section 2.10, Section 2.11 or in any other Loan Document, for so long as the
Borrower’s CHESS Depositary Receipts are listed on the ASX, no more than 14.99% in the aggregate of
the then authorized and outstanding shares of Common Stock as of the date of any conversion in
accordance with Section 2.10 or Section 2.11 (without giving effect to such
conversion) shall be issued to the Lender hereunder.



     SECTION 2.13. Adjustment of Conversion Rate . If at any time between (i) the execution of
this Agreement and (ii) the date on which all amounts outstanding under this Agreement are paid by
Borrower and/or all of the Loans and any Escrow Funds have been converted into Common Stock as
provided herein, the number of outstanding shares of Common Stock shall (A) increase by virtue of
or in connection with any dividend or distribution on the Common Stock or any stock split or other
subdivision of the outstanding shares of Common Stock or a reclassification, then the Conversion
Rate in effect immediately prior to such dividend, distribution, stock split or other subdivision
shall, concurrently with the effectiveness of such increase, be adjusted to a Conversion Rate that
would entitle the holder of any Loans and any Escrow Funds delivered for conversion to receive,
from time to time upon conversion thereof, the same percentage of the outstanding shares of Common
Stock that such holder would have received on conversion thereof had such Loan or Escrow Funds been
outstanding and converted immediately prior to such increase and (B) decrease by virtue of or in
connection with any combination or consolidation, by reclassification or otherwise, into a lesser
number of shares of Common Stock (including, without limitation, pursuant to a reverse stock
split), then the Conversion Rate in effect immediately prior to such combination, consolidation,
reclassification, stock split or other process shall, concurrently with the effectiveness of such
decrease, be adjusted to a Conversion Rate that would entitle the holder of any Loans and any
Escrow Funds delivered for conversion to receive, from time to time upon conversion, the same
percentage of the outstanding shares of Common Stock that such holder would have received on
conversion



17









 







thereof had such Loan or Escrow Funds been outstanding and converted immediately prior to such
decrease.



ARTICLE III.




Representations and Warranties of the Loan Parties




     Each Loan Party represents and warrants to the Lender that:



     SECTION 3.01. Organization; Powers. Such Loan Party (a) is duly organized or formed,
validly existing and in good standing under the laws of the jurisdiction of its organization or
formation, (b) has all corporate power and authority, and the legal right, to own and operate its
property and assets, to lease the property it operates as lessee and to carry on its business as
now conducted and as proposed to be conducted, except where any failure of a Loan Party to have
such power, authority and legal right would not have a Company Material Adverse Effect, (c) is
qualified to do business in, and is in good standing in, every jurisdiction where such
qualification is required, except where any failure to have such qualification would not have a
Company Material Adverse Effect and (d) has the corporate power and authority, and the legal right,
to execute, deliver and perform its obligations under this Agreement and each of the other Loan
Documents.



     SECTION 3.02. Authorization; No Conflicts. The Transactions: (a) have been duly
authorized by all requisite corporate action of such Loan Party and (b) will not (i) violate
(A) any provision of law, statute, rule or regulation, or of the certificate or articles of
incorporation or other constitutive documents or by-laws of such Loan Party, (B) any order of any
Governmental Authority or (C) any provision of any indenture, agreement or other instrument to
which such Loan Party is a party or by which it or any of its property is or may be bound, (ii) be
in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or
both) a default under, or give rise to any right to accelerate or to require the prepayment,
repurchase or redemption of any obligation under any such indenture, agreement or other instrument
or (iii) result in the creation or imposition of any Lien upon or with respect to any property or
assets of such Loan Party, except in the case of any of clauses (b)(i)(C), (b)(ii) and (b)(iii) for
matters that would not have a Company Material Adverse Effect.



     SECTION 3.03. Enforceability. This Agreement has been duly executed and delivered by
such Loan Party, and assuming this Agreement is a valid and binding obligation of the Lender,
constitutes, and each other Loan Document when executed and delivered by such Loan Party, and
assuming each other Loan Document is a valid and binding obligation of the Lender, will constitute,
a legal, valid and binding obligation of such Loan Party enforceable against such Loan Party 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 3.04. Governmental Approvals. No action, consent or approval of, registration
or filing with, Permit from, notice to, or any other action by, any Governmental Authority is or
will be required in connection with the Transactions as they relate to such Loan Party, except for
(a) filings required by applicable federal and state securities laws, (b) such as have been made or



18









 







obtained and are in full force and effect and (c) for such other actions, consents, approvals,
registrations, filings, and notifications, which if not obtained or made would not cause a Company
Material Adverse Effect.



     SECTION 3.05. Senior Ranking. The obligations of such Loan Party under the Loan
Documents are its direct, general and unconditional obligations and, as of the date of this
Agreement, rank senior and prior to all its other secured and unsecured obligations and
liabilities, whether actual or contingent.



     SECTION 3.06. Federal Reserve Regulations. (a) Such Loan Party is not engaged
principally, or as one of its important activities, in the business of purchasing or carrying
Margin Stock or extending credit for the purpose of buying or carrying Margin Stock.



     (b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately, by such Loan Party for the purpose of purchasing,
carrying or trading in any securities under such circumstances as to involve any of the Loan
Parties in a violation of Regulation X or to involve any broker or dealer in a violation of
Regulation T. None of the transactions contemplated by this Agreement will violate or result in
the violation of any of the provisions of the Regulations of the Board, including Regulation T, U
or X.



     SECTION 3.07. Investment Company Act. Such Loan Party is not an “investment company”
as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.



     SECTION 3.08. Solvency. Immediately after the consummation of the Transactions to
occur on the Closing Date and immediately following the making of the Loans and after giving effect
to the application of the proceeds of the Loans: (a) the value of the assets of each of the Loan
Parties at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or
otherwise; (b) the present fair saleable value of the property of each of the Loan Parties will be
greater than the amount that will be required to pay the probable liability of its debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become
absolute and matured; (c) each of the Loan Parties expects to be able to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute
and matured; and (d) no Loan Party will have unreasonably small capital resources with which to
conduct the business in which it is engaged as such business is now conducted and is proposed to be
conducted following the Closing Date.



ARTICLE IV.




Representations and Warranties of the Lender




     The Lender represents and warrants to each Loan Party that:



     SECTION 4.01. Organization; Powers. The Lender (a) is duly organized or formed,
validly existing and in good standing under the laws of the jurisdiction of its organization or
formation and (b) has the corporate power and authority to execute, deliver and perform its
obligations under this Agreement.



19









 





     SECTION 4.02. Authorization; No Conflicts. The Transactions: (a) have been duly
authorized by all necessary corporate action of the Lender and (b) will not (i) violate (A) any
provision of law, statute, rule or regulation, or of the certificate or articles of incorporation
or other constitutive documents or by-laws of the Lender, (B) any order of any Governmental
Authority, or (C) any provision of any indenture, agreement or other instrument to which the Lender
is a party or by which it or any of its property is or may be bound, (ii) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of time or both) a default
under, or give rise to any right to accelerate or to require the prepayment, repurchase or
redemption of any obligation under any such indenture, agreement or other instrument or
(iii) result in the creation or imposition of any Lien upon or with respect to any property or
assets of the Lender, except with respect to clauses (b)(i)(C), (b)(ii) and (b)(iii) of this
Section 4.02 for matters that would not have a Parent Material Adverse Effect.



     SECTION 4.03. Enforceability. This Agreement has been duly executed and delivered by
the Lender, and assuming this Agreement is a valid and binding obligation of each of the Loan
Parties, constitutes, and each other Loan Document when executed and delivered by the Lender, and
assuming each other Loan Document is a valid and binding obligation of each of the Loan Parties,
will constitute, a legal, valid and binding obligation of the Lender enforceable against such the
Lender 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 4.04. Governmental Approvals. No action, consent or approval of, registration
or filing with, Permit from, notice to, or any other action by, any Governmental Authority is or
will be required in connection with the Transactions as they relate to the Lender, except for (a)
filings required by applicable federal and state securities laws, (b) such as have been made or
obtained and are in full force and effect and (c) for such other actions, consents, approvals,
registrations, filings, and notifications, which if not obtained or made would not cause a Parent
Material Adverse Effect.



     SECTION 4.05. Capital Resources. The Lender has, or will have prior to the Closing
Date, sufficient cash or other sources of immediately available funds to enable it to fund
$20,000,000 into the Escrow Account and, if the Lender exercises the Final Outside Date Extension
Option, on or prior to the Option Date, the Lender will have sufficient cash or other sources of
immediately available funds to enable it to fund and additional $8,000,000 into the Escrow Account.



ARTICLE V.




Conditions of Lending




     The obligations of the Lender to make the Loans hereunder are subject to the satisfaction (or
waiver in accordance with Section 9.07) of the following conditions:



     SECTION 5.01. All Credit Events. In respect of any Borrowing, the Lender will only be
obliged to comply with Article II if, on or as of the date of such Borrowing (each such
event being a “Credit Event”):



20









 





     (a) The representations and warranties set forth in each Loan Document (disregarding any
exception in such representations and warranties relating to materiality or a Company Material
Adverse Effect) shall be true and correct in all material respects on and as of the date of such
Credit Event with the same effect as though made on and as of such date (except for any such
representations and warranties which address matters only as of an earlier date, which shall be
true and correct in all material respects as of such earlier date), except for such failures to be
true and correct which do not have a Company Material Adverse Effect.



     (b) At the time of and immediately after such Borrowing, no Event of Default or Default shall
have occurred and be continuing.



     (c) A Superior Proposal Termination shall not have occurred.



     (d) A Lender Termination shall not have occurred.



     (e) Prior to the Initial Borrowing, the Lender shall have received (i) a copy of the
certificate or articles of incorporation or other formation documents, including all amendments
thereto, of each Loan Party, certified as of a recent date by the Secretary of State of the state
of its organization, and a certificate as to the good standing of such Loan Party as of a recent
date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of
each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and
complete copy of the by-laws, limited partnership agreement, operating agreement or other governing
document of such Loan Party as in effect on the Closing Date and at all times since a date prior to
the date of the resolutions described in clause (B) below (such by-laws, limited partnership
agreement, operating agreement or other governing document to be in form and substance reasonably
satisfactory to the Lender), (B) that attached thereto is a true and complete copy of resolutions
duly adopted by the board of directors of the Borrower authorizing the execution, delivery and
performance of the Loan Documents to which such Person is a party and, in the case of the Borrower,
the Borrowings hereunder, and that such resolutions have not been modified, rescinded or amended
and are in full force and effect, (C) that the certificate or articles of incorporation or other
formation documents of such Loan Party have not been amended since the date of the last amendment
thereto shown on the certificate of good standing furnished pursuant to clause (i) above and (D) as
to the incumbency and specimen signature of each officer executing any Loan Document or any other
document delivered in connection herewith on behalf of the such Loan Party; and (iii) a certificate
of another officer as to the incumbency and specimen signature of the Secretary or Assistant
Secretary executing the certificate pursuant to (ii) above.



     (f) Prior to the Initial Borrowing, the Lender shall have received (i) this Agreement and each
of the other Loan Documents, each executed and delivered by a duly authorized officer of each Loan
Party thereto, and (ii) if requested by the Lender pursuant to Section 2.03, a promissory
note or notes conforming to the requirements of such Section and executed and delivered by a duly
authorized officer of the Borrower.



     SECTION 5.02. Delayed Draw Loans. In addition to the satisfaction (or waiver in
accordance with Section 9.07) of the conditions set forth in Section 5.01 hereof,
the Lender shall



21









 







not be obligated to fund any Delayed Draw Loans unless the Lender shall have first exercised
the Final Outside Date Extension Option.



ARTICLE VI.




Covenants




     Each Loan Party covenants and agrees with the Lender that so long as this Agreement shall
remain in effect and until the principal of and interest on each Loan and all other expenses or
amounts payable under any Loan Document shall have been satisfied in full, that:



     SECTION 6.01. Notices. (a) Such Loan Party will furnish to the Lender promptly, and
in any event no later than five (5) Business Days after such Loan Party has knowledge of an Event
of Default or Default, written notice of any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) taken or proposed to be taken with respect
thereto.



     (b) Such Loan Party shall give the Lender written notice, at least ten (10) Business Days
prior to the consummation of any Change of Control, of the anticipated date of consummation of such
Change of Control and the material terms and conditions thereof.



     (c) Whenever the Conversion Rate is adjusted pursuant to Section 2.13, the Borrower
shall promptly notify, and in no event later than five (5) Business Days after such an adjustment,
the Lender in writing of the adjustment, which notice shall briefly state the facts requiring the
adjustment, the manner of computing such adjustment and the adjusted Conversion Rate.



     SECTION 6.02. Use of Proceeds. At all times prior to the termination of the
Definitive Agreement in accordance with its terms, the Borrower shall use the proceeds of the Loans
only (i) in the ordinary course of its business consistent with past practice, and to pay NASDAQ
related expenses and any expenses incurred in connection with the transactions contemplated by the
Definitive Agreement and (ii) to lend money directly to any Subsidiary for use by such Subsidiary
only in the ordinary course of business in accordance with the Capital Expenditure and Loan
Proceeds Budget (as such term is defined in the Definitive Agreement) and shall not authorize any
expenditures of the proceeds of the Loans that, in the aggregate, exceed any specific line item set
forth in the Capital Expenditure and Loan Proceeds Budget (as such term is defined in the
Definitive Agreement).



     SECTION 6.03. Further Assurances. Each Loan Party shall, from time to time, duly
authorize, execute and deliver, or cause to be duly authorized, executed and delivered, such
additional instruments, certificates, agreements or documents, and take all such actions, as the
Lender may reasonably request or as may be necessary, for the purposes of implementing or
effectuating the provisions of this Agreement and the other Loan Documents. Upon the exercise by
the Lender of any power, right, privilege or remedy pursuant to this Agreement or the other Loan
Documents which requires any consent, approval, recording, qualification or authorization of any
Governmental Authority, each Loan Party will execute and deliver, or will cause the execution and
delivery of, all applications, certifications, instruments and other documents and



22









 







papers that the Lender may be required to obtain from it for such governmental consent,
approval, recording, qualification or authorization.



     SECTION 6.04. Taxes. (a) All sums payable by or on behalf of any Loan Party hereunder and
under the other Loan Documents shall (except to the extent required by law) be paid free and clear
of, and without any deduction or withholding on account of, any Tax (excluding any income or
franchise Tax imposed on the net income of the Lender by the United States of America or any
political subdivision thereof). So long as Thoratec Corporation is the Lender and the Lender has
complied with Section 6.04(b), if the Borrower shall be required to deduct any such
non-excluded Taxes from such payments, then (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to additional sums
payable under this Section) the Lender receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.



     (b) On or prior to the Closing Date, the Lender shall deliver to the Borrower a properly
completed and duly executed Internal Revenue Service Form W-9 (or any subsequent versions thereof
or successors thereto). Any permitted assignee pursuant to Section 9.04(b) shall, on or
prior to such assignment, deliver to the Borrower a properly completed and duly executed Internal
Revenue Service Form W-9 (or any subsequent versions thereof or successors thereto) or applicable
Internal Revenue Service Form W-8 (or any subsequent versions thereof or successors thereto).



     (c) The Borrower shall pay any Other Taxes.



     SECTION 6.05. Compliance with Laws. Each Loan Party will comply in all material respects
with the requirements of all applicable laws, rules, regulations and orders of any Governmental
Authority in performing its obligations under this Agreement and the other Loan Documents.



     SECTION 6.06. Common Stock. (a) The Borrower shall, at all times prior to the Maturity
Date, and from time to time thereafter as may be necessary, reserve at all times and keep
available, free from preemptive rights, out of its authorized but unissued Common Stock, a
sufficient number of shares of Common Stock such that the Borrower shall be able to deliver at any
time and from time to time following the date hereof all of the shares of Common Stock that would
be deliverable upon conversion of all of the Convertible Portion of the Loans and Escrow Funds
pursuant to Section 2.10 and Section 2.11.



     (b) The Borrower shall take all actions necessary to ensure that all shares of Common Stock
that may be issued upon conversion of any Loans and/or Escrow Funds shall be (i) newly issued
shares or shares held in the treasury of the Borrower, (ii) duly authorized, validly issued, fully
paid and nonassessable and (iii) free of any preemptive rights, lien or adverse claim.



23









 





ARTICLE VII.




Guaranty




     SECTION 7.01. Guaranty of the Obligations. (a) Guarantors jointly and severally hereby
irrevocably and unconditionally guaranty to the Lender the due and punctual payment in full of all
Obligations when the same shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code) (collectively, the
“Guaranteed Obligations”).



     (b) Each Guarantor and the Lender hereby confirms that it is the intention of all such Persons
that this Guaranty and the Obligations of each Guarantor hereunder not constitute a fraudulent
transfer or conveyance for purposes of any law related to fraudulent transfer or conveyance to the
extent applicable to this Guaranty and the Obligations of the Guarantor hereunder. To effectuate
the foregoing intention, the Lender and the Guarantors hereby irrevocably agree that the
Obligations of each Guarantor under this Guaranty at any time shall be limited to the maximum
amount as will result in the Obligations of such Guarantor under this Guaranty not constituting a
fraudulent transfer or conveyance.



     SECTION 7.02. Payment by Guarantors. Guarantors hereby jointly and severally agree, in
furtherance of the foregoing and not in limitation of any other right which the Lender may have at
law or in equity against any Guarantor by virtue hereof, that upon the failure of Borrower to pay
any of the Guaranteed Obligations when and as the same shall become due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts
that would become due but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code), Guarantors will upon demand pay, or cause to be paid, in cash, to the Lender, an
amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as
aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which,
but for Borrower’s becoming the subject of a case under the Bankruptcy Code, would have accrued on
such Guaranteed Obligations, whether or not a claim is allowed against Borrower for such interest
in the related bankruptcy case) and all other Guaranteed Obligations then owed to the Lenders as
aforesaid.



     SECTION 7.03. Liability of Guarantors Absolute. Each Guarantor agrees that its obligations
hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than
payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without
limiting the generality thereof, each Guarantor agrees as follows:



          (a) this Guaranty is a guaranty of payment when due and not of collectability. This Guaranty
is a primary obligation of each Guarantor and not merely a contract of surety;




          (b) the Lender may enforce this Guaranty upon the occurrence of an Event of Default
notwithstanding the existence of any dispute between Borrower and the Lender with respect to the
existence of such Event of Default;




24









 








          (c) the obligations of each Guarantor hereunder are independent of the obligations of
Borrower and the obligations of any other guarantor (including any other Guarantor) of the
obligations of Borrower, and a separate action or actions may be brought and prosecuted against
such Guarantor whether or not any action is brought against Borrower or any of such other
guarantors and whether or not Borrower is joined in any such action or actions;




          (d) payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall
in no way limit, affect, modify or abridge any Guarantor’s liability for any portion of the
Guaranteed Obligations which has not been paid. Without limiting the generality of the foregoing,
if the Lender is awarded a judgment in any suit brought to enforce any Guarantor’s covenant to pay
a portion of the Guaranteed Obligations, such judgment shall not be deemed to release such
Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the
subject of such suit, and such judgment shall not, except to the extent satisfied by such
Guarantor, limit, affect, modify or abridge any other Guarantor’s liability hereunder in respect of
the Guaranteed Obligations;




          (e) the Lender, upon such terms as it deems appropriate, without notice or demand and without
affecting the validity or enforceability hereof or giving rise to any reduction, limitation,
impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time may
(i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time,
place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release
or discharge, or accept or refuse any offer of performance with respect to, or substitutions for,
the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the
same to the payment of any other obligations; (iii) request and accept other guaranties of the
Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed
Obligations; and (iv) exercise any other rights available to it under the Loan Documents; and




          (f) this Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable
and shall not be subject to any reduction, limitation, impairment, discharge or termination for any
reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any
of the following, whether or not any Guarantor shall have had notice or knowledge of any of them:
(i) any failure or omission to assert or enforce or agreement or election not to assert or enforce,
or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or
enforcement of, any claim or demand or any right, power or remedy (whether arising under the Loan
Documents, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any
agreement relating thereto, or with respect to any other guaranty of the payment of the Guaranteed
Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure
from, any of the terms or provisions (including provisions relating to Events of Default) hereof,
any of the other Loan Documents or any agreement or instrument executed pursuant thereto, or of any
other guaranty for the Guaranteed Obligations, in each case whether or not in accordance with the
terms hereof or such Loan Document or any agreement relating to such other guaranty; (iii) the
Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal,
invalid or unenforceable in any respect; (iv) the application of payments received from any source
(other than payments received pursuant to the other Loan Documents) to the payment of indebtedness
other than the Guaranteed Obligations, even though the Lender might have elected to apply such
payment to




25









 





any part or all of the Guaranteed Obligations; (v) the Lender’s consent to the change,
reorganization or termination of the corporate structure or existence of Borrower or any of its
Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (vi) any
defenses, set offs or counterclaims which Borrower may allege or assert against the Lender in
respect of the Guaranteed Obligations, including failure of consideration, breach of warranty,
payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (vii)
any other act or thing or omission, or delay to do any other act or thing, which may or might in
any manner or to any extent vary the risk of any Guarantor as an obligor in respect of the
Guaranteed Obligations.




     SECTION 7.04. Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of the
Lender: (a) any right to require the Lender, as a condition of payment or performance by such
Guarantor, to (i) proceed against Borrower, any other guarantor (including any other Guarantor) of
the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held
from Borrower, any such other guarantor or any other Person, (iii) proceed against or have resort
to any balance of any deposit account or credit on the books of the Lender in favor of Borrower or
any other Person, or (iv) pursue any other remedy in the power of the Lender whatsoever; (b) any
defense arising by reason of the incapacity, lack of authority or any disability or other defense
of Borrower or any other Guarantor including any defense based on or arising out of the lack of
validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument
relating thereto or by reason of the cessation of the liability of Borrower or any other Guarantor
from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon
any statute or rule of law which provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than that of the principal; (d) any defense based upon
the Lender’s errors or omissions in the administration of the Guaranteed Obligations, except
behavior which amounts to bad faith; (e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms hereof and any legal or equitable
discharge of such Guarantor’s obligations hereunder, (ii) the benefit of any statute of limitations
affecting such Guarantor’s liability hereunder or the enforcement hereof, and (iii) any rights to
set offs, recoupments and counterclaims; (f) notices, demands, presentments, protests, notices of
protest, notices of dishonor and notices of any action or inaction, including acceptance hereof,
notices of default hereunder, notices of any renewal, extension or modification of the Guaranteed
Obligations or any agreement related thereto, notices of any extension of credit to Borrower and
notices of any of the matters referred to in Section 7.03 and any right to consent to any
thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit
the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.



     SECTION 7.05. Guarantors’ Rights of Subrogation, Contribution, Etc. Until the Guaranteed
Obligations shall have been indefeasibly paid in full and the Commitments shall have terminated,
each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor
now has or may hereafter have against Borrower or any other Guarantor or any of its assets in
connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in
each case whether such claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise and including (a) any right of subrogation, reimbursement or
indemnification that such Guarantor now has or may hereafter have against Borrower with respect to
the Guaranteed Obligations, and (b) any right to enforce, or to



26









 







participate in, any claim, right or remedy that the Lender now has or may hereafter have against
Borrower. In addition, until the Guaranteed Obligations shall have been indefeasibly paid in full
and the Commitments shall have terminated, each Guarantor shall withhold exercise of any right of
contribution such Guarantor may have against any other guarantor (including any other Guarantor) of
the Guaranteed Obligations. Each Guarantor further agrees that, to the extent the waiver or
agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and
contribution as set forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor
may have against Borrower, and any rights of contribution such Guarantor may have against any such
other guarantor, shall be junior and subordinate to any rights the Lender may have against Borrower
to any right the Lender may have against such other guarantor. If any amount shall be paid to any
Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights
at any time when all Guaranteed Obligations shall not have been finally and indefeasibly paid in
full, such amount shall be held in trust for the Lender and shall forthwith be paid over to the
Lender to be credited and applied against the Guaranteed Obligations, whether matured or unmatured,
in accordance with the terms hereof.



     SECTION 7.06. Subordination of Other Obligations. Any Indebtedness of Borrower or any
Guarantor now or hereafter held by any Guarantor (the “Obligee Guarantor”) is hereby
subordinated in right of payment to the Guaranteed Obligations, and any such Indebtedness collected
or received by the Obligee Guarantor after an Event of Default has occurred and is continuing shall
be held in trust for the Lender and shall forthwith be paid over to the Lender to be credited and
applied against the Guaranteed Obligations but without affecting, impairing or limiting in any
manner the liability of the Obligee Guarantor under any other provision hereof.



     SECTION 7.07. Continuing Guaranty. This Guaranty is a continuing guaranty and shall remain
in effect until all of the Guaranteed Obligations shall have been paid in full and the Commitments
shall have terminated. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty
as to future transactions giving rise to any Guaranteed Obligations.



     SECTION 7.08. Authority of Guarantors or Borrower. It is not necessary for the Lender to
inquire into the capacity or powers of any Guarantor or Borrower or the officers, directors or any
agents acting or purporting to act on behalf of any of them.



     SECTION 7.09. Financial Condition of Borrower. Any Loan may be made to Borrower or
continued from time to time without notice to or authorization from any Guarantor regardless of the
financial or other condition of Borrower at the time of any such grant or continuation. The Lender
shall have no obligation to disclose or discuss with any Guarantor its assessment, or any
Guarantor’s assessment, of the financial condition of Borrower. Each Guarantor has adequate means
to obtain information from Borrower on a continuing basis concerning the financial condition of
Borrower and its ability to perform its obligations under the Loan Documents and each Guarantor
assumes the responsibility for being and keeping informed of the financial condition of Borrower
and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each
Guarantor hereby waives and relinquishes any duty on the part of the Lender to disclose any matter,
fact or thing relating to the business, operations or conditions of Borrower now known or hereafter
known by the Lender.



27









 





     SECTION 7.10. Bankruptcy, Etc. (a) So long as any Guaranteed Obligations remain
outstanding, no Guarantor shall, without the prior written consent of the Lender, commence or join
with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding
of or against Borrower or any other Guarantor. The obligations of Guarantors hereunder shall not
be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or
proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of Borrower or any other Guarantor or by any defense
which Borrower or any other Guarantor may have by reason of the order, decree or decision of any
court or administrative body resulting from any such proceeding.



          (b) Each Guarantor acknowledges and agrees that any interest on any portion of the
Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to
in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue
by operation of law by reason of the commencement of such case or proceeding, such interest as
would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not
been commenced) shall be included in the Guaranteed Obligations because it is the intention of
Guarantors and the Lender that the Guaranteed Obligations which are guaranteed by Guarantors
pursuant hereto should be determined without regard to any rule of law or order which may relieve
Borrower of any portion of such Guaranteed Obligations. Guarantors will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar Person
to pay the Lender, or allow the claim of the Lender in respect of, any such interest accruing after
the date on which such case or proceeding is commenced.




          (c) In the event that all or any portion of the Guaranteed Obligations are paid by Borrower,
the obligations of Guarantors hereunder shall continue and remain in full force and effect or be
reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded
or recovered directly or indirectly from the Lender as a preference, fraudulent transfer or
otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed
Obligations for all purposes hereunder.




ARTICLE VIII.




Events of Default




     In case of the happening of any of the following events (“Events of Default”):



     (a) any representation or warranty made in any Loan Document, shall prove to have been false
or misleading in any material respect when so made, deemed made or furnished;



     (b) default shall be made in the payment of any principal of any Loan when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed for prepayment
thereof or by acceleration thereof or otherwise;



     (c) default shall be made in the payment of any interest on any Loan or any other amount
(other than an amount referred to in (b) above) due under any Loan Document, when and



28









 







as the same shall become due and payable, and such default shall continue unremedied for a
period of three (3) Business Days;



     (d) default shall be made in the due observance or performance by the Borrower of any
covenant, condition or agreement contained in Section 2.10 or Section 2.11, and
such default shall continue unremedied for a period of three (3) Business Days;



     (e) the Borrower shall fail to comply in all material respects with any covenant, condition or
agreement contained in any Loan Document (other than those specified in clauses (b), (c) or (d)
above) and such default shall continue unremedied for a period of 30 days;



     (f) the Borrower shall default in the observance or performance of any agreement or condition
relating to any Indebtedness (including any Guarantee of Indebtedness) exceeding $5,000,000 in
aggregate principal and accrued interest, or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist (other than (x) any
disposition of assets giving rise to a repayment or prepayment obligation on Indebtedness secured
by such assets and (y) the issuance of Equity Interests or Indebtedness giving rise to a repayment
obligation with respect to the proceeds of such issuance, provided in each case such payment is
timely made), the effect of which default or other event or condition is to cause such Indebtedness
to become due prior to its stated maturity or (in the case of any Guarantee of Indebtedness) to
become due or payable in respect of any such accelerated Indebtedness;



     (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in
a court of competent jurisdiction seeking (i) relief in respect of the Borrower , or of a
substantial part of the property or assets of the Borrower under the Bankruptcy Code, as now
constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or for a substantial part of the property or
assets of the Borrower or (iii) the winding-up or liquidation of the Borrower; and such proceeding
or petition shall continue undismissed for 60 days or an order or decree approving or ordering any
of the foregoing shall be entered;



     (h) the Borrower shall (i) voluntarily commence any proceeding or file any petition seeking
relief under the Bankruptcy Code, as now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing
of any petition described in (g) above, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or for
a substantial part of the property or assets of the Borrower, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) admit in writing its inability or fail generally to
pay its debts as they become due or (vii) take any action for the purpose of effecting any of the
foregoing;



     (i) one or more judgments for the payment of money that, individually or in the aggregate,
would reasonably be expected to result in a Company Material Adverse Effect shall



29









 







be rendered against the Borrower or any combination thereof and the same shall remain
undischarged for a period of thirty (30) consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets
or properties of the Borrower to enforce any such judgment; or



     (j) the Borrower shall fail to repay on the date required pursuant to Section 2.06 the
entire principal amount of and accrued interest on the Loans,



then, and in every such event (other than an event with respect to the Borrower described in
paragraph (g) or (h) above), and at any time thereafter during the continuance of such event either
or both of the following actions may be taken: the Lender by notice to the Borrower may declare
the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the
principal of the Loans so declared to be due and payable, together with accrued interest thereon
and all other liabilities of the Borrower accrued hereunder and under any other Loan Document,
shall become forthwith due and payable, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in
any other Loan Document to the contrary notwithstanding, and the Lender shall have the right to
take all or any actions and exercise any remedies available to them under this Agreement,
applicable law or in equity; and in any event with respect to the Borrower described in
paragraph (g) or (h) above, the principal of the Loans then outstanding, together with accrued
interest thereon and all other liabilities of the Borrower accrued hereunder and under any other
Loan Document, 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 Borrower, anything
contained herein or in any other Loan Document to the contrary notwithstanding, and the Lender
shall have the right to take all or any actions and exercise any remedies available to them under
this Agreement, applicable law or in equity.



ARTICLE IX.




Miscellaneous




     SECTION 9.01. Notices. (a) Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to paragraph (b) of this Section
9.01), notices and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or registered mail or sent by
fax, as follows:




	 	(i)	 	if to the Borrower to:




HeartWare International, Inc.

14000-14050 NW 57th Court

Miami Lakes, FL 33014

Attention: David McIntyre

Fax: (305) 818-4123

Email: dmcintyre@heartwareinc.com




30









 









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




Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022

Attention: Clare O’Brien



Robert M. Katz



Fax: (212) 848-7179





	 	(ii)	 	if to the Lender to:




Thoratec Corporation

6035 Stoneridge Drive

Pleasanton, CA 94588

Attention: Gary Burbach

Fax: (925) 264-4341

Email: gary.burbach@thortec.com





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




Latham & Watkins LLP

650 Town Center Drive, 20th Floor

Costa Mesa, CA 92626

Attn: Charles K. Ruck



Tad J. Freese



Fax: (714) 755-8290



provided that, upon receipt of prior consent from the Lender, any notice delivered by the
Borrower pursuant to Article II may be delivered via email (to be promptly confirmed by
written or fax notice).



All such notices and other communications (i) sent by hand or overnight courier service, or mailed
by certified or registered mail, shall be deemed to have been given when received or (ii) sent by
fax shall be deemed to have been given when sent and when receipt has been confirmed by telephone;
provided that if not given during normal business hours for the recipient, shall be deemed
to have been given at the opening of business on the next Business Day for the recipient. Notices
delivered through electronic communications to the extent provided in paragraph (b) below, shall be
effective as provided in such paragraph (b).




     (b) Notices and other communications to the Lender hereunder may be delivered or furnished by
electronic communications (including e-mail) pursuant to procedures approved by the Lender;
provided that the foregoing shall not apply to notices to the Lender pursuant to
Article II. The Lender or the Borrower may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to procedures approved
by it; provided that approval of such procedures may be limited to particular notices or



31









 







communications. All such notices and other communications (i) sent to an e-mail address shall
be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient
(such as by the “return receipt requested” function, return e-mail or other written
acknowledgment); provided that if not given during the normal business hours of the
recipient, such notice or communication shall be deemed to have been given at the opening of
business on the next Business Day for the recipient, and (ii) posted to an internet or intranet
website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (b)(i) of notification that such notice or
communication is available and identifying the website address therefor.



     (c) Any party hereto may change its address or fax number for notices and other communications
hereunder by notice to the other parties hereto in accordance with the provisions hereof.



     SECTION 9.02. Survival of Agreement. All rights, covenants, agreements,
representations and warranties made by the Borrower in this Agreement shall be considered to have
been relied upon by the other parties hereto and shall survive the execution and delivery of this
Agreement and the making of any Loans, regardless of any investigation made by any such other party
or on its behalf and notwithstanding that any such other party may have had notice or knowledge of
any Default or incorrect representation or warranty at the time any credit is extended hereunder,
and shall continue in full force and effect as long as (i) the principal of or any accrued interest
on any Loan or any other amount payable under this Agreement is outstanding and unpaid, (ii) any
Convertible Portion of the Loans has not been converted into Common Stock and (iii) any amount
remains in the Escrow Account that has not been converted into Common Stock.



     SECTION 9.03. Binding Effect. This Agreement shall become effective when it shall
have been executed by each of the parties hereto and thereto and when the Lender shall have
received counterparts hereof and thereof which, when taken together, bear the signatures of each of
the other parties hereto and thereto.



     SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the permitted successors
and assigns of such party; and all covenants, promises and agreements by or on behalf of the
Borrower or the Lender that are contained in this Agreement shall bind and inure to the benefit of
their respective successors and assigns.



     (b) Neither the Lender nor the Borrower shall assign or delegate any of its rights or duties
hereunder to any Person (other than with respect to the Borrower by operation of law to Thomas
Merger Sub I, Inc. and Thomas Merger Sub II, Inc., or their respective successors and assigns, in
the Acquisition) without the prior written consent of the Lender or the Borrower, as applicable,
and any attempted assignment without such prior written consent shall be null and void.



     (c) The Borrower and the Lender intend that the Loans (including any promissory notes
evidencing such Loans) shall be obligations in “registered form” within the meaning of section
163(f) of the Internal Revenue Code of 1986, as amended, and section 5f.103-1(c) of the



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Treasury Regulations (and any successor provisions) at all times during which the Loans remain
in effect. Neither the Borrower nor the Lender shall take any action or otherwise permit such
obligation to become an obligation that is not in “registered form.” The Borrower shall maintain a
register for the recordation of the name and address of the Lender (and any permitted assignees
pursuant to Section 9.04(b)) and principal and interest shall only be paid to such persons
recorded in the register. The register is intended to function as a “book entry” system within the
meaning of sections 5f.103-1(c)(1)(ii) and 5f.103–1(c)(2) of the Treasury Regulations (and any
successor provisions).



     SECTION 9.05. Right of Setoff. If an Event of Default shall have occurred and be
continuing, the Lender is hereby authorized at any time and from time to time, except to the extent
prohibited by law, to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing by the Lender to or
for the credit or the account of the Borrower against any of and all the obligations of the
Borrower now or hereafter existing under this Agreement and other Loan Documents held by the
Lender, irrespective of whether or not the Lender shall have made any demand under this Agreement
or such other Loan Document and although such obligations may be unmatured. The rights of the
Lender under this Section 9.05 are in addition to other rights and remedies (including
other rights of setoff) which the Lender may have.



     SECTION 9.06. Applicable Law. THIS AGREEMENT AND THE NOTES SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES THEREOF.



     SECTION 9.07. Waivers; Amendment. (a) No failure or delay of the Lender in exercising
any power or right hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of the Lender
hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or
remedies that it would otherwise have. No waiver of any provision of this Agreement or any other
Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No notice or demand
on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.



     (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower and the Lender.



     SECTION 9.08. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges
and other amounts which are treated as interest on such Loan under applicable law (collectively the
“Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be
contracted for, charged, taken, received or reserved by the Lender holding such Loan or



33









 







participation in accordance with applicable law, the rate of interest payable in respect of
such Loan or participation hereunder, together with all Charges payable in respect thereof, shall
be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan or participation but were not payable as a result of the
operation of this Section 9.08 shall be cumulated and the interest and Charges payable to
the Lender in respect of other Loans or participations or periods shall be increased (but not above
the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been received by the Lender.



     SECTION 9.09. Entire Agreement. This Agreement, the other Loan Documents, the
Definitive Agreement and the other documents contemplated hereby and thereby constitute the entire
contract between the parties relative to the subject matter hereof. Any other previous agreement
among the parties with respect to the subject matter hereof is superseded by this Agreement, the
other Loan Documents, the Definitive Agreement and the other documents contemplated hereby and
thereby. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is
intended to confer upon any person (other than the parties hereto and thereto, their respective
successors and assigns permitted hereunder and, to the extent expressly contemplated hereby, the
Related Parties of the Lender) any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.



     SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 9.10.



     SECTION 9.11. Severability. In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and therein shall not in
any way be affected or impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect
of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.



     SECTION 9.12. Counterparts. This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall constitute an original but
all of which when taken together shall constitute a single contract, and shall become effective as
provided in Section 9.03. Delivery of an executed signature page to this Agreement by
facsimile



34









 







or other electronic transmission shall be as effective as delivery of a manually signed
counterpart of this Agreement.



     SECTION 9.13. Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and are not to affect
the construction of, or to be taken into consideration in interpreting, this Agreement.



     SECTION 9.14. Jurisdiction; Consent to Service of Process. (a) The Borrower and the
Lender each irrevocably and unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any New York State court or Federal court of the United States of America sitting
in the Borough of Manhattan, New York, New York and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard and determined in
such New York State or, to the extent permitted by law, in such Federal court sitting in the
Borough of Manhattan, New York, New York. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.



     (a) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to this Agreement in any New
York State or Federal court sitting in the Borough of Manhattan, New York, New York. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such court.



     (b) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 9.01. Nothing in this Agreement will affect the right of
any party to this Agreement to serve process in any other manner permitted by law.



     SECTION 9.15. No Fiduciary Duty. The Lender and its Affiliates (collectively, solely
for purposes of this paragraph, the “Lender”), may have economic interests that conflict
with those of the Borrower. The Borrower agrees that nothing in the Loan Documents or otherwise
will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other
implied duty between the Lender and the Borrower, its stockholders or its affiliates. The Borrower
acknowledge and agree that (i) the transactions contemplated by the Loan Documents are arm’s-length
commercial transactions between the Lender, on the one hand, and the Borrower, on the other, (ii)
in connection therewith and with the process leading to such transaction the Lender is acting
solely as a principal and not the agent or fiduciary of the Borrower, its management, stockholders,
creditors or any other Person, (iii) the Lender has not assumed an advisory or fiduciary
responsibility in favor of the Borrower with respect to the transactions contemplated hereby or the
process leading thereto (irrespective of whether the Lender or any of its affiliates has advised or
is currently advising the Borrower on other matters) or any other obligation to the Borrower except
the obligations expressly set forth in the Loan Documents and (iv) the Borrower has consulted its
own legal and financial advisors to the extent they deemed appropriate. The Borrower further
acknowledges and agrees that it is responsible for making its own independent



35









 







judgment with respect to such transactions and the process leading thereto. The Borrower
agrees that it will not claim that the Lender has rendered advisory services of any nature or
respect, or owes a fiduciary or similar duty to the Borrower, in connection with such transaction
or the process leading thereto.



     SECTION 9.16. Payments Set Aside. To the extent that any payment by or on behalf of
the Borrower is made to the Lender, or the Lender exercises its right of setoff, and such payment
or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any settlement entered
into by the Lender in its discretion) to be repaid to a trustee, receiver or any other party, in
connection with any proceeding under any bankruptcy or insolvency law or otherwise, then to the
extent of such recovery, the obligation or part thereof originally intended to be satisfied shall
be revived and continued in full force and effect as if such payment had not been made or such
setoff had not occurred.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.



	 	 	 	 	 	 	 
	 	 	HEARTWARE INTERNATIONAL, INC., as Borrower	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Douglas Godshall
 

Douglas Godshall
	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	HEARTWARE LIMITED, as a Guarantor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Douglas Godshall
 

Douglas Godshall
	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	HEARTWARE, INC., as a Guarantor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Douglas Godshall
 

Douglas Godshall
	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	THORATEC CORPORATION, as Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Gerhard F. Burbach
 

Gerhard F. Burbach
	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 









 









 





APPENDIX A




Commitments




	 	 	 	 	 	 	 	 	 
	Lender	 	Commitment	 	Pro Rata Share
	Thoratec Corporation
	 	$	28,000,000.00	 	 	 	100	%
	 	 	 	 	 	 	 	 	 
	Total
	 	$	28,000,000.00	 	 	 	100	%