Document:

exv10w14

 

Exhibit 10.14

EMPLOYMENT AGREEMENT

     This Employment Agreement (this “Agreement”), dated as of August 8, 2007, is made by and
between WELLMAN, INC. (the “Company”), and David R. Styka (the “Executive”).

WITNESSETH

     WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the
best interests of the Company and its shareholders to assure that the Company will have the
continued service and dedication of the Executive.

     WHEREAS, the Board believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending or threatened
Change of Control and to encourage the Executive’s full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control;

     WHEREAS, the Company has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company’s executive management,
including the Executive, to their assigned duties with the Company, without distraction in the face
of potentially disruptive circumstances arising from the possibility of a Change of Control;

     WHEREAS,
the Company has determined that the payments and benefits
contemplated by this Agreement are to be paid for services currently
performed by the Executive;

     NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and
for other good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Company and the Executive hereby agree as follows:

     1. Definitions.

          “Affiliate” means, with respect to any Person, any other Person controlling, controlled by, or
under direct or indirect common control with such Person. For the purposes of this definition
“control”, when used with respect to any specified Person, shall mean the power to direct the
management and policies of such Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms “controlling” and “controlled by” shall have
the meanings correlative to the foregoing.

          “Cause” means, when used with respect to the termination of the employment of the Executive by
the Company, termination due to (a) an act or acts of personal dishonesty taken by the Executive
and intended to result in substantial personal enrichment of the Executive at the expense of the
Company; (b) the Executive’s continued failure to substantially perform the Executive’s employment
duties (other than any such failure resulting from the Executive’s incapacity due to physical or
mental illness) which are demonstrably willful and deliberate on the Executive’s part and which are
not remedied in a reasonable period of time after receipt of written notice from the Company; or
(c) conviction of, or a plea of guilty or no contest by, the Executive to a crime that constitutes
a felony involving moral turpitude. No act or failure to act on the part

 

 

of the Executive shall be considered “willful” unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief that the Executive’s action or omission was
in the best interests of the Company.

     “Change of Control” means:

     (i) The acquisition (whether by tender offer, exchange offer or other business
combination or by the purchase of shares or other securities (including from the
Company), and whether in a single transaction or multiple transactions), by any
Person or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50% or more of either the then outstanding shares of common stock
of the Company (the “Outstanding Company Common Stock”) or the combined voting power
of the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the “Company Voting Securities”), provided, however,
that any acquisition by the Company or its subsidiaries, or any employee benefit
plan (or related trust) of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than 50% of, respectively, the
then outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the Persons who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Company Voting
Securities immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Company Voting Securities, as the case may be,
shall not constitute a Change of Control and provided further, however, that for the
purposes of this Agreement the Convertible Preferred Stock shall be considered
Company Voting Securities based on the equivalent number of shares of common stock
of the Company that could be voted at that time; or

     (ii) Individuals who, as of January 1, 2007, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board, provided that any individual becoming a director subsequent to January 1,
2007 who is elected by the Company’s shareholders or was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of office
is in connection with an actual or threatened election contest relating to the
election of the directors of the Board (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or

     (iii) The Company entering into (x) a reorganization, merger, consolidation or
other business combination, in each case, with respect to which all or substantially
all of the Persons who were the respective beneficial owners of the Outstanding
Company Common Stock and Company Voting Securities immediately prior to such
reorganization, merger, business combination or

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consolidation do not, following such reorganization, merger, business
combination or consolidation, beneficially own, directly or indirectly, more than
50% of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such reorganization, merger, business combination or consolidation, or (y) a
complete liquidation or dissolution of the Company, or (z) the sale or other
disposition of all or substantially all of the assets of the Company in one
transaction or series of related transactions.

     (iv) Anything in this Agreement to the contrary notwithstanding, if an event
that would, but for this paragraph, constitute a Change of Control results from or
arises out of a purchase or other acquisition of the Company, directly or
indirectly, by a Person in which the Executive has a direct or indirect equity
interest, such event shall not constitute a Change of Control; provided, however,
that the limitation contained in this sentence shall not apply to any direct or
indirect equity interest in a Person (1) which equity interest is part of a class of
equity interests which are publicly traded on any national securities exchange or
other market system, (2) received by the Executive, without the Executive’s
concurrence or consent, as a result of a purchase or other acquisition of the
Company by such corporation or other entity, or (3) received by the Executive,
without the Executive’s explicit concurrence or consent, in connection with a
purchase or other acquisition of the Company by such Person in respect of any stock
options or performance awards granted to the Executive by the Company.

          “Change of Control Period” means the 24-month period following a Change of Control; provided,
that for purposes of this Agreement there can be no more than one Change of Control Period.

          “Code” means the Internal Revenue Code of 1986, as amended.

          “Convertible Preferred Stock” means the Company’s Series A Preferred Stock and Series B
Preferred Stock with a par value of $0.001 per share issued and outstanding from time to time.

          “Cumulative Annual Bonus” is the most recent two Annual Bonuses paid or payable to the
Executive within 24 months preceding a Change of Control.

          “Date of Termination” means the date of the Executive’s death, the Disability Effective Date,
or the date on which the termination of the Executive’s employment by the Company for Cause or
without Cause or by the Executive for Good Reason or without Good Reason is effective, as the case
may be.

          “Disability” means that the Executive has been unable, for the period specified in the
Company’s disability plan for senior executives, but not less than a period of 180 consecutive
days, to perform the Executive’s duties under this Agreement, as a result of physical or mental
illness or injury.

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          “Disability Effective Date” has the meaning given such term in Section 5.1.

          “Employment Period” means the period commencing on the date hereof and ending one and one half
years after the anniversary of such date; provided, however, that commencing on the date that is
one year after the date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof is hereinafter referred to as the “Renewal Date”), the Employment Period
shall be automatically extended without any action required of either party to this Agreement so as
to terminate one and one half years from such Renewal Date, unless at least 180 days prior to the
applicable Renewal Date, either party gives written notice to the other that it wishes not to
extend the Employment Period (the “Non-Renewal Notice”) in which event the Employment Period will
expire one and one half years from the date of the Non-Renewal Notice. The expiration of the
Employment Period resulting from the delivery of a Non-Renewal Notice will not be deemed a
termination of the Executive’s employment without Cause. Notwithstanding the foregoing, unless the
Employment Period has already terminated, the Employment Period shall be automatically extended
upon a Change of Control so as to terminate two years from the date of the Change of Control.

          “Fiscal Period” shall mean a full calendar year.

          “Good Reason” means the Executive’s termination of the Executive’s employment during
the Change of Control Period for any one or more of the following reasons: (a) the
assignment to the Executive of any duties inconsistent with the Executive’s position,
authority, duties or responsibilities as contemplated by Section 3 of this Agreement, or
any other action by the Company which results in a diminution in such position, authority,
comparable duties or responsibilities, excluding for these purposes an isolated,
insubstantial or inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive; (b) any failure by
the Company to comply with any of the provisions of Section 4 of this Agreement (including
(i) adopting a bonus plan that does not have substantially similar terms and payments for
comparable performance, and (ii) providing Welfare Benefit Plans, Vacation and Fringe
Benefits and Perquisites that are in the aggregate less favorable to the Executive than
those in effect 90 days before the Change of Control) other than an isolated, insubstantial
or inadvertent failure not occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive; (c) the Company’s
requiring the Executive to be based at any office or location other than the location where
the Executive was employed immediately preceding the date of the Change of Control or any
office or location more than 50 miles from such location and in no event shall the
Executive be required to travel outside such location more often than 45 days in any
calendar year; (d) any purported termination by the Company of the Executive’s employment
otherwise than as expressly permitted by this Agreement; or (e) any failure by the Company
to comply with and satisfy Section 9.3 of this Agreement.
“Good Reason” shall also mean the Executive’s
termination of the Executive’s employment at any time if the
Company terminates the Executive’s employment other than as
expressly permitted by this Agreement.

          “Notice of Termination” shall mean either a Notice of Termination for Cause under
Section 5.2, Notice of Termination without Good Reason under Section 5.3, or a Notice of
Termination for Good Reason under Section 5.4.

          “Person” means an individual, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association or joint venture.

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     2. Term of Employment. Subject to the terms and provisions set forth in this
Agreement, the Company shall continue to employ the Executive, and the Executive agrees to remain
in the employ of the Company, for the Employment Period, unless either party terminates the
Executive’s employment pursuant to the terms of this Agreement.

     3. Position and Duties.

          3.1 Positions and Duties. During the Employment Period, the Executive shall be
employed and shall serve as a senior corporate officer with such duties and responsibilities as are
customarily assigned to a Vice President.

          3.2 Best Efforts. During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive shall devote substantially all
their attention and time during normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities assigned to the Executive under this
Agreement, use the Executive’s reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the foregoing for the
Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage
personal investments, so long as such activities do not significantly interfere with the
performance of the Executive’s responsibilities as an employee of the Company in accordance with
this Agreement.

     4. Compensation and Other Benefits. The Executive’s compensation during the
Employment Period shall be determined by the Board upon recommendation of the committee of the
Board having responsibility for approving the compensation of senior executives, subject to the
provisions below:

          4.1 Base Salary. During the Employment Period, the Executive shall receive an annual
base salary (“Base Salary”) at a rate of not less than 15% lower than $162,000. The Base Salary
shall be payable in accordance with the Company’s regular payroll practices for its senior
executives, as in effect from time to time. During the Employment Period, the Executive’s Base
Salary will be reviewed at least annually by the Board, and the Board may, in its sole discretion,
increase the Base Salary. Any increase in the Base Salary shall not limit or reduce any other
obligation of the Company under this Agreement. The term “Base Salary” shall thereafter refer to
the Base Salary as so increased.

          4.2 Annual Bonus. With respect to each year during the Employment Period, the
Executive shall be designated as a participant in the Company’s Management Incentive Bonus Plan or
any similar bonus plan for senior executives (the “Bonus Plan”), which provides for bonus payments
to the Executive, and subject to meeting the criteria of the Bonus Plan established by the Board in
its discretion, shall receive the bonus award provided for therein (the “Annual Bonus”). Each such
Annual Bonus shall be paid not later than the 15th day of the third month of the Fiscal
Period for which the Annual Bonus is awarded, unless the Executive elects to defer the receipt of
such Annual Bonus pursuant to a Company deferred compensation plan, if any.

          4.3 Incentive, Retirement, and Savings Plans. During the Employment Period, the
Executive shall participate in all incentive, pension, retirement, supplemental retirement,
savings, stock option, restricted stock and other stock grant and equity compensation plans, as
well

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as all other employee benefit plans and programs, which are made available from time to time
by the Company for the benefit of similarly situated senior executives of the Company.

          4.4 Welfare Benefit Plans. During the Employment Period, the Executive and their
spouse and other eligible dependents shall participate in, and be covered by, all of the health and
other welfare benefit plans, practices, policies and programs that are made available from time to
time by the Company for the benefit of senior executives and/or other employees of the Company,
collectively the “Welfare Benefit Plans”.

          4.5 Expense Reimbursement. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses, including reasonable business
travel expenses, incurred by the Executive in performing the Executive’s duties and
responsibilities under this Agreement in accordance with the policies, programs, procedures and
practices of the Company as in effect at the time the expense was incurred, as the same may be
changed from time to time.

          4.6 Vacation and Fringe Benefits. During the Employment Period, the Executive shall
be entitled to vacation days each Fiscal Period at such times which do not materially interfere
with the performance of the Executive’s duties and responsibilities under this Agreement in
accordance with the vacation policy of the Company. In addition, during the Employment Period, the
Executive shall be eligible to benefit from such fringe benefits, in accordance with the policies,
programs, procedures and practices of the Company, as may be in effect and provided from time to
time to senior executives and/or other employees of the Company, collectively the foregoing are
referred to as “Vacation and Fringe Benefits”

          4.7 Perquisites. During the Employment Period the Company will also pay for $1
million of term life insurance assuming the Executive is insurable at standard rates and pay for
the Executive to have an annual physical examination, both in accordance with the Company’s current
policy, collectively the foregoing are referred to as “Perquisites”.

     5. Termination of Employment.

          5.1 Death or Disability. The Executive’s employment, and the Employment Period, shall
terminate automatically upon the Executive’s death. The Company shall be entitled to terminate the
Executive’s employment because of the Executive’s Disability during the Employment Period. A
termination of the Executive’s employment by the Company for Disability shall be communicated to
the Executive by written notice, and shall be effective on the 30th day after receipt of
such notice by the Executive (“Disability Effective Date”) at which time the Employment Period
shall end, unless the Executive returns to full-time performance of the Executive’s duties before
the Disability Effective Date.

          5.2 Termination by the Company. The Company may terminate the Executive’s employment
hereunder for Cause or without Cause at any time during the Employment Period at which time the
Employment Period shall end. The Company shall give the Executive written notice of its intention
to terminate the Executive’s employment and the effective date of Executive’s termination of
employment, and for terminations for Cause the notice shall set forth in

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reasonable detail the specific conduct of the Executive that it considers to constitute Cause
and the specific provisions of this Agreement on which it relies (the “Notice of Termination for
Cause”).

          5.3 Termination by Executive. The Executive may terminate their employment hereunder
without the Company’s approval at any time during the Employment Period without Good Reason upon
not less than 60 nor more than 90 days advance written notice to the Company stating the date on
which the Employment Period shall end (the “Notice of Termination without Good Reason”). A
termination of the Executive’s employment by the Executive without Good Reason shall be effected by
giving the Company written notice of the termination and setting forth the date of such
termination. Notwithstanding the foregoing, the Company may elect to have any such termination
become effective immediately or at such other date, not later than the date specified in the Notice
of Termination without Good Reason, as the Company may determine, however it will continue the
Executive’s Base Salary, Welfare Benefit Plans, Vacation and Fringe Benefits, and Perquisites
through the date specified by the Executive for their termination in such Notice unless the Company
terminates the Executive’s employment pursuant to another section of this Agreement prior to such
date.

          5.4 Termination by Executive for Good Reason. During the Change of Control Period,
the Executive may terminate their employment hereunder for Good Reason by giving the Company
written notice (“Notice of Termination for Good Reason”) of the termination, setting forth in
reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific
provision(s) of this Agreement on which the Executive relies. The failure by the Executive to set
forth in the Notice of Termination for Good Reason any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing the Executive’s rights hereunder.

     6. Obligations of the Company upon Termination of Employment.

          6.1 Termination upon Death or Disability. If an Executive’s employment is terminated
by death or the Company terminates the Executive’s employment for Disability the Company shall:

          (a) pay to the Executive (or in the event of termination of employment by reason of the
Executive’s death, the Executive’s legal representative or the Executive’s estate if no
representative has been appointed) in a lump sum in cash, within 30 days after the Date of
Termination, or as otherwise provided in this Section 6.1, any portion of the Executive’s Base
Salary through the Date of Termination that has not been paid plus any unpaid Annual Bonus,
deferred compensation, if any, or other payments due the Executive,

          (b) pay to the Executive a prorata portion of any bonus the Executive would have earned in
that year (based on the days covered by the Agreement in that year divided by the number of days in
the year) as if he had been employed for the full year, payable at time specified in Section 4.2,
and

          (c) make available to the Executive (or the Executive’s eligible dependents) any rights to
continued health and welfare benefits provided by law (i.e., COBRA) or payable to the

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Executive under the terms of such plans and programs in effect immediately prior to the
Executive’s death or Disability.

          Anything in this Agreement to the contrary notwithstanding, if the Executive’s death or
Disability occurs during the Change of Control Period, the Executive or Executive’s family shall be
entitled to receive benefits at least equal to the most favorable benefits provided by the Company
and any of its Affiliates to disabled executives or the surviving families of peer executives of
the Company and such Affiliates under such plans, programs, practices and policies relating to
family disability or death benefits, if any, as in effect with respect to other peer executives and
their families at any time during the 90-day period immediately preceding the Change of Control or,
if more favorable to the Executive and/or the Executive’s family, as in effect on the date of the
Executive’s death or disability with respect to other peer executives of the Company and its
Affiliates and their families.

          6.2 Termination by the Executive other than for Good Reason. If the Executive
voluntarily terminates employment during the Employment Period, other than during the Change of
Control Period for Good Reason, the Company shall pay to the Executive any portion of the
Executive’s Base Salary through the Date of Termination that has not been paid, plus any other
amounts due the Executive under this Agreement within 30 days and the Executive shall have any
rights to continued health and welfare benefits provided by law (i.e., COBRA) or payable to the
Executive under the terms of such plans and programs in effect immediately prior to the Date of
Termination. If the Executive voluntarily terminates employment during the Employment Period, other
than during the Change of Control Period for Good Reason, then the Executive shall not be entitled
to any Annual Bonus for the Fiscal Period that includes the Executive’s Date of Termination.

          6.3 Termination by the Company for Cause. If the Executive’s employment is terminated
by the Company for Cause during the Employment Period, the Company shall pay to the Executive any
portion of the Executive’s Base Salary through the Date of Termination that has not been paid, plus
any other amounts due the Executive under this Agreement within 30 days and the Executive shall
have any rights to continued health and welfare benefits to the extent provided by law (i.e.,
COBRA) or payable to the Executive under the terms of such plans and programs as in effect
immediately prior to the Notice of Termination. If the Executive is terminated for Cause during
the Employment Period, then the Executive shall not be entitled to any Annual Bonus for the Fiscal
Period that includes the date of the Notice of Termination for Cause.

          6.4 Termination by the Company other than for Cause. If the Executive’s employment is
terminated by the Company other than for Cause or due to death or Disability during the Employment
Period and not during a Change of Control Period, the Company shall:

          (a) pay to the Executive, in a lump sum within thirty days after the Date of Termination, an
amount equal to 1.5 times the Executive’s Base Salary for the Fiscal Period in which the Date of
Termination occurs in lieu of any severance under the Company’s Severance Plan,

          (b) pay to the Executive a prorata portion of any bonus the Executive would have earned in
that Fiscal Period (based on the days covered by the Agreement divided by the number

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of days in that Fiscal Period) as if he had been employed for the full Fiscal Period payable
at the time specified in Section 4.2,

          (c) pay 18 months of health and welfare (COBRA) benefits that provide the Executive with
coverage comparable to other executives that are employed by the Company during that time, and

          (d) reimburse the executive for outplacement services incurred within one year of the Date of
Termination no later than 30 days after receipt of appropriate documentation, for an amount not
greater than the lesser of (i) 7.5% of the Executive’s Base Salary or (ii) $25,000.

          6.5 Termination following a Change of Control. If (a) contemporaneously with or
during the Change of Control Period, the Executive’s employment is terminated (i) by the Company or
a successor entity other than for Cause or (ii) by the Executive for Good Reason or (b) if the
Executive’s employment with the Company is terminated or the Executive ceases to be an officer of
the Company prior to the date on which a Change of Control occurs and it is reasonably demonstrated
that such termination of employment (i) was at the request of a third party who has taken steps
reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or
in anticipation of the Change of Control, the Company shall:

          (a) pay to the Executive, in a lump sum within thirty days after the Date of
Termination, an amount equal to (i) two (2) times the Base Salary and (ii) the Cumulative
Annual Bonus;

          (b) continue benefits described in Sections 4.4, 4.6 and 4.7 of this Agreement to the
Executive or the Executive’s family from the Date of Termination through the end of the
Change of Control Period, or such longer period as any plan, program, practice or policy may
provide, at least equal to those which would have been provided to them in accordance with
the plans, programs, practices and policies described in Sections 4.4, 4.6 and 4.7 of this
Agreement if the Executive’s employment had not been terminated, in accordance with the most
favorable plans, practices, programs or policies of the Company and its Affiliates
applicable to other peer executives and their families during the 90-day period immediately
preceding the Date of Termination, or, if more favorable to the Executive, as in effect at
any time thereafter with respect to other peer executives of the Company and its Affiliates
and their families. For purposes of determining the amount an Executive is going to
receive, the Executive shall be considered as eligible for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be considered to have remained
employed until the end of the Change of Control Period and to have retired on the last day
of such period; and

          (c) reimburse the executive for outplacement services incurred within one year of the Date of
Termination no later than 30 days after receipt of appropriate documentation, for an amount not
greater than the lesser of (i) 7.5% of the Executive’s Base Salary or (ii) $25,000.

          6.6 Non Disparagement. The Company agrees that the Company will not make any
negative of disparaging comments about the Executive unless required by legal process to do so.

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     7. Effect of Termination. The provisions of this Section 7 shall apply in the event
of termination of the Executive’s employment, pursuant to Section 5 or otherwise.

          7.1 Payment in Full. Payment by the Company to Executive of any Base Salary and other
specified amounts or benefits which are due the Executive (or, as the case may be, the Executive’s
designated beneficiary, estate, surviving spouse or dependents) under the applicable termination
provision of Sections 6.1, 6.2, 6.3, 6.4 or 6.5 shall constitute the entire obligation of the
Company to the Executive under this Agreement, except that nothing in this Section 7.1 is intended
or shall be construed to affect the rights and obligations of the Company (or its Affiliates), on
the one hand, and the Executive, on the other, with respect to any option plans, option agreements,
restricted stock grants, awards or agreements, subscription agreements, stockholders agreements,
employee benefit plans or other equity arrangements or agreements to the extent said rights or
obligations survive termination of employment under the provisions of documents relating thereto.
The Executive shall only be eligible to receive the benefits of Sections 6.1, 6.2, 6.3, 6.4 or 6.5
of this Agreement and shall not be entitled to receive benefits under more than one such section.
The Company’s obligation to provide payment and/or benefits set forth herein shall be conditioned
upon the Executive’s (or the Executive’s executor or legal representative) execution of a
Separation and Release Agreement consistent with the terms of this Agreement in a form agreeable to
the Company.

          7.2 Termination of Benefits. Except as set forth above and for any right of
continuation of health coverage at the Executive’s cost to the extent provided by Sections 601
through 608 of ERISA, all of the Executive’s rights to any benefits under the Welfare Benefit Plans
shall terminate pursuant to the terms of the applicable benefit plans based on the Date of
Termination.

          7.3 Return of Property. Within a reasonable time after the Date of Termination of
employment, the Executive shall return to the Company all of the Company’s property of which he is
in possession, including, without limitation, any material and documentation that constitutes
Confidential Information, credit cards, computers, and keys.

     8. Executives Commitment to the Company.

          8.1 Confidentiality. The Executive shall not, during the Employment Period or for two
years after the Employment Period (and for an indefinite period for Confidential Information
composed of trade secrets of the Company), disclose any Confidential Information (as such term is
defined herein) to any Person for any reason or purpose whatsoever, other than in connection with
the performance of the Executive’s duties under this Agreement. The term “Confidential
Information” shall mean all confidential information of or relating to the Company and any of its
Affiliates, including without limitation, financial information and data, business plans and
information regarding prospects and opportunities (such as, by way of example only, client and
customer lists and acquisition, disposition, expansion, product development and other strategic
plans), but does not include any information that is or becomes public knowledge by means other
than the Executive’s breach or nonobservance of the Executive’s obligations described in this
Section 8.1. Notwithstanding the foregoing, the Executive may disclose such Confidential
Information as he may be legally required to do so on the advice of counsel in connection with any
legal or regulatory proceeding; provided, however, that the Executive shall provide the Company
with prior written notice of any such required or potentially required

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disclosure and shall cooperate with the Company and use their best efforts under such
circumstances to obtain appropriate confidential treatment of any such Confidential Information
that may be so required to be disclosed in connection with any such legal or regulatory proceeding.
In no event shall an asserted violation of the provisions of this Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under this Agreement during
or with respect to the Change of Control Period.

          8.2 Litigation. The Executive agrees to cooperate fully with the Company, or its
assignee, and counsel for the Company, or its assignee, in any and all matters involving
litigation, administrative proceedings, arbitration or governmental investigations. The Executive’s
cooperation shall include being reasonably available for, without limitation, interviews,
depositions, and trial testimony. To the extent that the Executive’s cooperation involves travel,
the Company or its assignee will reimburse the Executive for their reasonable travel expenses. To
the extent that the Executive’s cooperation requires him to incur out-of-pocket expenses, including
without limitation reasonable attorney’s fees, the Company or its assignee will reimburse such
expenses, provided they are reasonable and supported by reasonable documentation. The Executive
will make available, at the expense of the Company or its assignee, copies of all documents and
files requested by the Company in connection with this duty of cooperation, excluding only those
documents and files which are subject to any attorney-client privilege, work product doctrine, or
other legal protection from disclosure that is held solely by the Executive in their individual
capacity, as opposed to any privilege or legal protection from disclosure held by the Company.

          8.3 Compliance with Securities Laws. The Executive agrees not to directly or
indirectly buy or sell the Company stock or other securities as long as he possesses “material
non-public information” as that term is defined by interpretations of the Securities Exchange Act
of 1934 and the rules and regulations there under. Without limiting the generality of the
foregoing, the Executive further agrees to abide by the Company’s Insider Trading policy as in
effect during the Employment Period until three (3) business days after the public release of the
financial results for the fiscal quarter ending after the Executive’s Date of Termination.

          8.4 Position as Officer and Director. Upon the Executive’s termination of employment
the Executive shall resign as an Officer/Director from the Company and all Affiliates and any
administrative roles in any plans sponsored by the Company and its Affiliates and will execute all
instruments and documents requested by the Company to effectuate this.

          8.5 Non Compete. The Executive agrees not to directly or indirectly compete with the
business of the Company and its successors and assigns during the Employment Period and for a
period of one year following the Executive’s termination of employment. The term “not compete” as
used herein shall mean that the Executive shall not own, manage, operate, consult or be an employee
in a business that has operations in the United States that are substantially similar to or
competitive with the business activity of the Company or any of its Affiliates at the Executive
Termination Date. Notwithstanding the foregoing the Executive may own up to 5% of any stock or
security that is publicly traded on any national securities exchange or other market system.

-11-

 

          8.6 Non-Solicitation. The Executive agrees for a period of one year from the
Executive’s Termination Date that the Executive will not without the prior written approval of the
Company directly or indirectly: (i) solicit for hire any employees of the Company or any Affiliate,
or (ii) induce any employee of the Company or any Affiliate to terminate their relationship with
the Company or Affiliate. The foregoing will not apply to individuals hired as a result of the use
of an independent employment agency (so long as the agency was not directed to solicit a particular
individual) or as a result of the use of a general solicitation not specifically directed to
Company or its Affiliate’s employees.

          8.7 Non Disparagement. The Executive agrees that the Executive will not make any
negative of disparaging comments about the Company unless required by legal process to do so.

          8.8 Injunctive Relief. The Executive acknowledges and agrees that the Company will
have no adequate remedy at law, and would be irreparably harmed, if the Executive breaches or
threatens to breach any of the provisions of this Section 8. The Executive agrees that the Company
shall be entitled to equitable and/or injunctive relief to prevent any breach or threatened breach
of this Section 8, and to specific performance of each of the terms of this Section 8 in addition
to any other legal or equitable remedies that the Company may have. The Executive further agrees
that he shall not, in any equity proceeding relating to the enforcement of the terms of this
Section 8, raise the defense that the Company has an adequate remedy at law.

          8.9 Special Severability. The terms and provisions of this Section 8 are intended to
be separate and divisible provisions and if, for any reason, any one or more of them is held to be
invalid or unenforceable, and neither the validity nor the enforceability of any other provision of
this Agreement shall thereby be affected.

     9. Successors.

          9.1 The Executive. This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive, other than by will or the
laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive’s heirs, beneficiaries and/or legal representatives.

          9.2 The Company. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.

          9.3 Successors. The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no such succession had
taken place and the Executive will consent to such successor’s assumption. As used in this
Agreement, “Company” shall mean the Company as previously defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law
or otherwise.

     10. Full Settlement; Mitigation. The Company’s obligation to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement shall not be

-12-

 

affected by any set-off, counterclaim, recoupment, defense or other claim, right or action
that the Company may have against the Executive or others other than a claim, right or action for
fraud after the individual is judicially determined to have committed such action. In no event
shall the Executive be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced, regardless of whether the Executive obtains other
employment.

     11. Indemnification. The Company shall pay or indemnify the Executive to the full
extent permitted by law and the by-laws of the Company for all expenses, costs, liabilities and
legal fees which the Executive may incur in the discharge of the Executive’s duties hereunder.

     12. Miscellaneous.

          12.1 Applicable Law. This Agreement shall, to the extent not superseded by federal
law, be governed by and construed in accordance with the laws of the State of Delaware, without
regard to principles of conflict of laws.

          12.2 Amendments/Waiver. This Agreement may not be amended, waived, or modified
otherwise than by a written agreement executed by the parties to this Agreement or their respective
successors and legal representatives. No waiver by any party to this Agreement of any breach of
any term, provision or condition of this Agreement by the other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same time, or any prior or subsequent time.

          12.3 Notices. All notices and other communications hereunder shall be in writing and
shall be deemed given when received by hand-delivery to the other party, by overnight courier, or
by registered or certified mail, return receipt requested, postage prepaid, addressed, addressed as
follows:

If to the Executive:

David R. Styka

205 Rosedale Lane

Matthews, N.C. 28105

If to the Company:

The Compensation Committee

of the Board of Directors of Wellman, Inc.

c/o Wellman, Inc.

1041 521 Corporate Center Drive

Fort Mill, South Carolina 29707-7151

With a copy to:

Douglas Gray, Esq.

Edwards Angell Palmer & Dodge, LLP

-13-

 

2800 Financial Plaza

Providence, RI 02903

or to such other addresses as either party furnishes to the other in writing in accordance with
this Section 12.3. Notices and communications shall be effective when actually received by the
addressee.

          12.4 Withholding. The Company may withhold from any amounts payable under this
Agreement such taxes as shall be required to be withheld pursuant to any applicable law or
regulation.

          12.5 Strict Compliance. The Executive’s or Company’s failure to insist upon strict
compliance with any provisions of, or to assert, any right under, this Agreement shall not be
deemed to be a waiver of such provision or right or of any other provision of or right under this
Agreement.

          12.6 Enforceability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
If any portion or provision of this Agreement shall to any extent be declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by law.

          12.7 Captions; Counterparts. The captions of this Agreement are for convenience of
reference only, are not part of the terms of this Agreement and shall have no force or effect in
the application or interpretation thereof. This Agreement may be executed in several counterparts,
each of which shall be deemed an original and said counterparts shall constitute but one and the
same instrument.

          12.8 Entire Agreement. This Agreement contains the entire agreement between the
parties to this Agreement concerning the subject matter hereof and supersedes all prior agreements,
understandings, discussions, negotiations and undertakings, whether written or oral, between the
parties with respect thereto. Specifically this Agreement replaces and supersedes in its entirety
any prior the Employment Agreement between the Company and the Executive.

          12.9 Survivorship. The obligations of the Company and the Executive under Sections 6,
7, 8, 9, 10, 11, and 12 shall survive the expiration or termination for any reason of this
Agreement.

          12.10 Assignment. The rights and benefits of the Executive under this Agreement may
not be anticipated, assigned, alienated or subject to the attachment, garnishment, levy, execution
or other legal or equitable process except as required by law. Any attempt by the Executive to
anticipate, alienate, assign, sell, transfer, pledge, encumber or charge the same shall be void.

          12.11 Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any benefit, bonus, incentive or other plans,

-14-

 

programs, policies or practices provided by the Company or any of its Affiliates and for which
the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the Company or any of its Affiliates. Amounts
which are vested benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of the Company or any of its Affiliates at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or program except as
explicitly modified by this Agreement.

          12.12 Arbitration. The Executive and the Company both agree to submit any disputes
under this Agreement to binding arbitration with a mutually agreeable arbitrator and to make their
best efforts to settle any disputes within 90 days. In the event this does not occur and the
Executive has cooperated in the arbitration process the Company agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result
of any contest (regardless of the outcome thereof) by the Company or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any guarantee of
performance thereof, plus in each case interest at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code.

-15-

 

          IN WITNESS WHEREOF, the Executive has hereunto set their hand and, pursuant to the
authorization of its Board, the Company has caused this Agreement to be executed in its name and on
its behalf by a duly authorized officer, as of the date set forth above.

	 	 	 	 	 
	 	WELLMAN, INC.

 	 
	 	By:  	/s/ Keith R. Phillips
 	 
	 	 	Name:  	Keith R. Phillips 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	EXECUTIVE

 	 
	 	/s/ David R. Styka
 	 
	 	David R. Styka 	 
	 	 	 
	 

-16-exv10w1

 

    Exhibit 10.1

 

 

    STOCK
    PURCHASE AGREEMENT

    BETWEEN

    DAVID S. UTTERBERG

    AND

    NXSTAGE MEDICAL, INC.

    June 4, 2007

 

 

    TABLE OF
    CONTENTS

 

	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	 

	
    ARTICLE I PURCHASE AND SALE
    OF THE SHARES
    
	
 
	
	
    1
    
	

	
	

    1.1
    

	
	
 
	
    Purchase of the Shares from the
    Stockholder
    
	
 
	
	
    1
    
	

	
	

    1.2
    

	
	
 
	
    Further Assurances
    
	
 
	
	
    1
    
	

	
	

    1.3
    

	
	
 
	
    Purchase Price
    
	
 
	
	
    1
    
	

	
	

    1.4
    

	
	
 
	
    Payment of Base Purchase Price
    
	
 
	
	
    2
    
	

	
	

    1.5
    

	
	
 
	
    Post-Closing Adjustments
    
	
 
	
	
    2
    
	

	
	

    1.6
    

	
	
 
	
    Escrow Account
    
	
 
	
	
    4
    
	

	
	

    1.7
    

	
	
 
	
    The Closing
    
	
 
	
	
    4
    
	

	
	

    1.8
    

	
	
 
	
    Stock Transfer Documents
    
	
 
	
	
    4
    
	

	
	

    1.9
    

	
	
 
	
    Allocation
    
	
 
	
	
    4
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE II REPRESENTATIONS OF
    THE STOCKHOLDER REGARDING THE SHARES
    

	
 
	
	
    5
    
	

	
	

    2.1
    

	
	
 
	
    Title
    
	
 
	
	
    5
    
	

	
	

    2.2
    

	
	
 
	
    Authority
    
	
 
	
	
    5
    
	

	
	

    2.3
    

	
	
 
	
    Noncontravention
    
	
 
	
	
    5
    
	

	
	

    2.4
    

	
	
 
	
    Approvals
    
	
 
	
	
    5
    
	

	
	

    2.5
    

	
	
 
	
    Brokers
    
	
 
	
	
    5
    
	

	
	

    2.6
    

	
	
 
	
    Residency
    
	
 
	
	
    5
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE III REPRESENTATIONS
    AND WARRANTIES OF THE STOCKHOLDER REGARDING THE COMPANIES
    

	
 
	
	
    6
    
	

	
	

    3.1
    

	
	
 
	
    Organization, Qualification and
    Corporate Power
    
	
 
	
	
    6
    
	

	
	

    3.2
    

	
	
 
	
    Capitalization
    
	
 
	
	
    6
    
	

	
	

    3.3
    

	
	
 
	
    Authorization of Transaction
    
	
 
	
	
    7
    
	

	
	

    3.4
    

	
	
 
	
    [Intentionally Deleted]
    
	
 
	
	
    7
    
	

	
	

    3.5
    

	
	
 
	
    Subsidiaries
    
	
 
	
	
    7
    
	

	
	

    3.6
    

	
	
 
	
    Financial Statements
    
	
 
	
	
    7
    
	

	
	

    3.7
    

	
	
 
	
    Absence of Certain Changes
    
	
 
	
	
    7
    
	

	
	

    3.8
    

	
	
 
	
    Undisclosed Liabilities
    
	
 
	
	
    7
    
	

	
	

    3.9
    

	
	
 
	
    Tax Matters
    
	
 
	
	
    8
    
	

	
	

    3.10
    

	
	
 
	
    Assets
    
	
 
	
	
    10
    
	

	
	

    3.11
    

	
	
 
	
    Owned Real Property
    
	
 
	
	
    10
    
	

	
	

    3.12
    

	
	
 
	
    Real Property Leases
    
	
 
	
	
    10
    
	

	
	

    3.13
    

	
	
 
	
    Intellectual Property
    
	
 
	
	
    10
    
	

	
	

    3.14
    

	
	
 
	
    Inventory
    
	
 
	
	
    12
    
	

	
	

    3.15
    

	
	
 
	
    Contracts
    
	
 
	
	
    13
    
	

	
	

    3.16
    

	
	
 
	
    Accounts Receivable
    
	
 
	
	
    14
    
	

	
	

    3.17
    

	
	
 
	
    Powers of Attorney
    
	
 
	
	
    14
    
	

	
	

    3.18
    

	
	
 
	
    Insurance
    
	
 
	
	
    14
    
	

	
	

    3.19
    

	
	
 
	
    Litigation
    
	
 
	
	
    14
    
	

	
	

    3.20
    

	
	
 
	
    Warranties
    
	
 
	
	
    15
    
	

	
	

    3.21
    

	
	
 
	
    Employees
    
	
 
	
	
    15
    
	

	
	

    3.22
    

	
	
 
	
    Employee Benefits
    
	
 
	
	
    16
    
	

	
	

    3.23
    

	
	
 
	
    Environmental Matters
    
	
 
	
	
    17
    
	

	
	

    3.24
    

	
	
 
	
    Legal Compliance
    
	
 
	
	
    18
    
	

	
	

    3.25
    

	
	
 
	
    Customers and Suppliers
    
	
 
	
	
    19
    
	

	
	

    3.26
    

	
	
 
	
    Permits
    
	
 
	
	
    20
    
	

    

    i

 

	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	 

	
	

    3.27
    

	
	
 
	
    Certain Business Relationships
    With Affiliates
    
	
 
	
	
    20
    
	

	
	

    3.28
    

	
	
 
	
    Brokers’ Fees
    
	
 
	
	
    20
    
	

	
	

    3.29
    

	
	
 
	
    Books and Records
    
	
 
	
	
    20
    
	

	
	

    3.30
    

	
	
 
	
    Disclosure
    
	
 
	
	
    20
    
	

	
	

    3.31
    

	
	
 
	
    Controls and Procedures
    
	
 
	
	
    20
    
	

	
	

    3.32
    

	
	
 
	
    [Intentionally Deleted]
    
	
 
	
	
    21
    
	

	
	

    3.33
    

	
	
 
	
    Government Contracts
    
	
 
	
	
    21
    
	

	
	

    3.34
    

	
	
 
	
    Questionable Payments
    
	
 
	
	
    21
    
	

	
	

    3.35
    

	
	
 
	
    Personally Identifiable
    Information and Privacy
    
	
 
	
	
    21
    
	

	
	

    3.36
    

	
	
 
	
    Customs Matters
    
	
 
	
	
    21
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE IV REPRESENTATIONS
    AND WARRANTIES OF THE BUYER
    

	
 
	
	
    22
    
	

	
	

    4.1
    

	
	
 
	
    Organization, Standing and Power
    
	
 
	
	
    22
    
	

	
	

    4.2
    

	
	
 
	
    Capitalization
    
	
 
	
	
    22
    
	

	
	

    4.3
    

	
	
 
	
    Authority; No Conflict; Required
    Filings and Consents
    
	
 
	
	
    23
    
	

	
	

    4.4
    

	
	
 
	
    Reports and Financial Statements
    
	
 
	
	
    24
    
	

	
	

    4.5
    

	
	
 
	
    Absence of Certain Changes
    
	
 
	
	
    24
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE V COVENANTS
    

	
 
	
	
    24
    
	

	
	

    5.1
    

	
	
 
	
    Closing Efforts
    
	
 
	
	
    24
    
	

	
	

    5.2
    

	
	
 
	
    Governmental and Third-Party
    Notices and Consents
    
	
 
	
	
    24
    
	

	
	

    5.3
    

	
	
 
	
    Special Meeting,
    S-4
    Registration Statement and Proxy Statement Prospectus
    
	
 
	
	
    25
    
	

	
	

    5.4
    

	
	
 
	
    Operation of Business
    
	
 
	
	
    25
    
	

	
	

    5.5
    

	
	
 
	
    Access to Information
    
	
 
	
	
    26
    
	

	
	

    5.6
    

	
	
 
	
    Notice of Stockholder Changes
    
	
 
	
	
    27
    
	

	
	

    5.7
    

	
	
 
	
    Exclusivity
    
	
 
	
	
    27
    
	

	
	

    5.8
    

	
	
 
	
    Expenses
    
	
 
	
	
    27
    
	

	
	

    5.9
    

	
	
 
	
    Listing of Buyer Shares
    
	
 
	
	
    27
    
	

	
	

    5.10
    

	
	
 
	
    S-X Financial Statements
    
	
 
	
	
    27
    
	

	
	

    5.11
    

	
	
 
	
    FIRPTA Tax Certificates
    
	
 
	
	
    28
    
	

	
	

    5.12
    

	
	
 
	
    [Assignment and] License of IP
    
	
 
	
	
    28
    
	

	
	

    5.13
    

	
	
 
	
    Notice of Buyer Changes
    
	
 
	
	
    28
    
	

	
	

    5.14
    

	
	
 
	
    Elimination of Certain Items
    
	
 
	
	
    28
    
	

	
	

    5.15
    

	
	
 
	
    Releases
    
	
 
	
	
    29
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE VI CONDITIONS TO
    CONSUMMATION OF THE TRANSACTIONS
    

	
 
	
	
    29
    
	

	
	

    6.1
    

	
	
 
	
    Conditions to Obligation of the
    Buyer
    
	
 
	
	
    29
    
	

	
	

    6.2
    

	
	
 
	
    Conditions to Obligation of the
    Stockholder
    
	
 
	
	
    30
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE VII INDEMNIFICATION
    

	
 
	
	
    31
    
	

	
	

    7.1
    

	
	
 
	
    Indemnification by the Stockholder
    
	
 
	
	
    31
    
	

	
	

    7.2
    

	
	
 
	
    Indemnification by the Buyer
    
	
 
	
	
    31
    
	

	
	

    7.3
    

	
	
 
	
    Indemnification Claims
    
	
 
	
	
    31
    
	

	
	

    7.4
    

	
	
 
	
    Survival of Representations and
    Warranties
    
	
 
	
	
    33
    
	

	
	

    7.5
    

	
	
 
	
    Limitations
    
	
 
	
	
    34
    
	

	
	

    7.6
    

	
	
 
	
    Purchase Price Adjustment
    
	
 
	
	
    35
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE VIII OTHER AGREEMENTS
    

	
 
	
	
    35
    
	

	
	

    8.1
    

	
	
 
	
    Proprietary Information
    
	
 
	
	
    35
    
	

	
	

    8.2
    

	
	
 
	
    No Solicitation or Hiring of
    Former Employees
    
	
 
	
	
    35
    
	

    

    ii

 

	 	 	 	 	 	 	 	 	 
	
 
	
 
	
 
	
 
	
    Page

	 

	
	

    8.3
    

	
	
 
	
    Payment of Outstanding Amounts
    
	
 
	
	
    35
    
	

	
	

    8.4
    

	
	
 
	
    Resale Limitations
    
	
 
	
	
    35
    
	

	
	

    8.5
    

	
	
 
	
    Standstill Agreement
    
	
 
	
	
    36
    
	

	
	

    8.6
    

	
	
 
	
    Nomination of Director
    
	
 
	
	
    36
    
	

	
	

    8.7
    

	
	
 
	
    Further Assurances
    
	
 
	
	
    37
    
	

	
	

    8.8
    

	
	
 
	
    Employee Matters and Transition
    Services
    
	
 
	
	
    37
    
	

	
	

    8.9
    

	
	
 
	
    Insurance
    
	
 
	
	
    38
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE IX TAX MATTERS
    

	
 
	
	
    38
    
	

	
	

    9.1
    

	
	
 
	
    Preparation and Filing of Tax
    Returns; Payment of Taxes
    
	
 
	
	
    38
    
	

	
	

    9.2
    

	
	
 
	
    Tax Contests; Withholding Taxes;
    Clearance Certificates and Other Matters
    
	
 
	
	
    39
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE X REGISTRATION RIGHTS
    

	
 
	
	
    40
    
	

	
	

    10.1
    

	
	
 
	
    Piggyback Registrations
    
	
 
	
	
    40
    
	

	
	

    10.2
    

	
	
 
	
    Assignment of Rights
    
	
 
	
	
    40
    
	

	
	

    10.3
    

	
	
 
	
    Legends
    
	
 
	
	
    40
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE XI TERMINATION
    

	
 
	
	
    41
    
	

	
	

    11.1
    

	
	
 
	
    Termination of Agreement
    
	
 
	
	
    41
    
	

	
	

    11.2
    

	
	
 
	
    Effect of Termination
    
	
 
	
	
    41
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE XII DEFINITIONS
    

	
 
	
	
    41
    
	

	
 
	
 
	
	
 
	 
	

    ARTICLE XIII MISCELLANEOUS
    

	
 
	
	
    49
    
	

	
	

    13.1
    

	
	
 
	
    Press Releases and Announcements
    
	
 
	
	
    49
    
	

	
	

    13.2
    

	
	
 
	
    No Third Party Beneficiaries
    
	
 
	
	
    49
    
	

	
	

    13.3
    

	
	
 
	
    Entire Agreement; Attachments
    
	
 
	
	
    49
    
	

	
	

    13.4
    

	
	
 
	
    Successors and Assigns
    
	
 
	
	
    50
    
	

	
	

    13.5
    

	
	
 
	
    Notices
    
	
 
	
	
    50
    
	

	
	

    13.6
    

	
	
 
	
    Governing Law
    
	
 
	
	
    50
    
	

	
	

    13.7
    

	
	
 
	
    Amendments and Waivers
    
	
 
	
	
    50
    
	

	
	

    13.8
    

	
	
 
	
    Severability
    
	
 
	
	
    51
    
	

	
	

    13.9
    

	
	
 
	
    Submission to Jurisdiction
    
	
 
	
	
    51
    
	

	
	

    13.10
    

	
	
 
	
    Specific Performance
    
	
 
	
	
    51
    
	

	
	

    13.11
    

	
	
 
	
    Section Headings
    
	
 
	
	
    51
    
	

	
	

    13.12
    

	
	
 
	
    Governing Document
    
	
 
	
	
    51
    
	

	
	

    13.13
    

	
	
 
	
    Exchange Rates
    
	
 
	
	
    51
    
	

	
	

    13.14
    

	
	
 
	
    Counterparts and Facsimile
    Signature
    
	
 
	
	
    51
    
	

    

    iii

 

    STOCK
    PURCHASE AGREEMENT

 

    Agreement (the “Agreement”) entered into as of
    June 4, 2007 between NxStage Medical, Inc., a Delaware
    corporation (the “Buyer”), and David S. Utterberg (the
    “Stockholder”).

 

    Preliminary
    Statement

 

    1. The Stockholder owns (a) all of the issued and
    outstanding shares of each of Medisystems Services Corporation,
    a Nevada corporation (“MDS Services”), and Medisystems
    Corporation, a Washington corporation (“MDS”),
    (b) 90% of the issued and outstanding shares of Medisystems
    Europe S.p.A., a company organized under the laws of Italy
    (“MDS Italy”), and (c) 0.273% of the value of the
    issued and outstanding equity participation of Medimexico s. de
    R.L. de C.V., a company organized under the laws of Mexico
    (“MDS Mexico”).

 

    2. MDS owns 10% of the issued and outstanding shares of MDS
    Italy and 99.727% of the value of the issued and outstanding
    equity participation of MDS Mexico.

 

    3. The Buyer desires to purchase, and the Stockholder
    desires to sell, (a) all of the issued and outstanding
    shares of each of MDS Services and MDS, (b) all of the
    issued and outstanding shares of MDS Italy held by the
    Stockholder, and (c) the issued and outstanding equity
    participation of MDS Mexico held by the Stockholder (the shares
    and equity participation specified in clauses (a), (b) and
    (c) of this sentence, the “Shares”) for the
    consideration set forth below, subject to the terms and
    conditions of this Agreement (the “Transaction”).

 

    4. For federal income tax purposes, it is intended that the
    Transaction qualify as a reorganization within the meaning of
    Section 368(a)(1)(B) of the Code.

 

    NOW, THEREFORE, in consideration of the representations,
    warranties and covenants herein contained, the Parties agree as
    follows:

 

    ARTICLE I

    

 

    PURCHASE AND
    SALE OF THE SHARES
    

 

    1.1  Purchase of the Shares from the
    Stockholder.  Subject to and upon the terms
    and conditions of this Agreement, at the Closing the Stockholder
    shall sell, transfer, convey, assign and deliver to the Buyer,
    and the Buyer shall purchase, acquire and accept from the
    Stockholder, all of the Shares. At the Closing, the Stockholder
    shall deliver to the Buyer certificates evidencing the Shares
    duly endorsed in blank or with stock powers duly executed by the
    Stockholder, or such other documentation as may be required
    under relevant local laws to transfer title to Shares to the
    Buyer.

 

    1.2  Further Assurances.  At
    any time and from time to time after the Closing, at the
    Buyer’s request and without further consideration, the
    Stockholder shall promptly execute and deliver such instruments
    of sale, transfer, conveyance, assignment and confirmation, and
    take all such other action as the Buyer may reasonably request,
    to transfer, convey and assign to the Buyer, and to confirm the
    Buyer’s title to, all of the Shares, to put the Buyer in
    actual possession of the assets, properties and businesses of
    the Companies to assist the Buyer in exercising all rights with
    respect thereto and to carry out the purpose and intent of this
    Agreement.

 

    1.3  Purchase Price.  The base
    purchase price to be paid by the Buyer to the Stockholder for
    the Shares (the “Base Purchase Price”) shall consist
    of the Buyer Shares. If, prior to the Closing, there is any
    stock dividend, stock split or other change in the character or
    amount of the outstanding Buyer Common Stock, then in such event
    any and all new, substituted or additional shares of voting
    stock of the Buyer to which the Stockholder would have been
    entitled by reason of his ownership of the Buyer Shares had the
    Closing occurred prior to such event shall be considered Buyer
    Shares for purposes of this Agreement and the consideration to
    be received by the Stockholder shall be adjusted accordingly.
    The Base Purchase Price shall be payable in the manner described
    in Section 1.4. No fraction of a share of Buyer Common
    Stock shall be

    

    1

 

    issued, and any fractional share thereof shall be rounded to the
    nearest whole number. The Base Purchase Price shall be subject
    to adjustment after the Closing Date pursuant to the provisions
    of Section 1.5.

 

    1.4  Payment of Base Purchase
    Price.  

 

    (a) At the Closing, the Buyer shall deliver:

 

    (i) to the Stockholder, certificate(s) for the number of
    Buyer Shares minus the Escrow Shares; and

 

    (ii) to the Escrow Agent, a certificate representing the
    Escrow Shares, to be held pursuant to the terms of the Escrow
    Agreement, as a reserve for all or part of any adjustments
    pursuant to Section 1.5 and to satisfy all or part of any
    claims for indemnity pursuant to Article VII hereof.

 

    1.5  Post-Closing
    Adjustments.  The Base Purchase Price shall be
    subject to adjustment after the Closing Date as follows:

 

    (a) Within 60 days after the Closing Date, the Buyer
    shall prepare and deliver to the Stockholder the Draft Closing
    Balance Sheet and a certificate based on such Draft Closing
    Balance Sheet setting forth Buyer’s calculation of the
    Closing Working Capital (the “Working Capital
    Certificate”). The Buyer shall prepare the Draft Closing
    Balance Sheet and Working Capital Certificate in accordance with
    GAAP applied on a basis consistent with the application of GAAP
    to the preparation of the Financial Statements.

 

    (b) At all reasonable times during the 90 days
    immediately following Stockholder’s receipt of the Draft
    Closing Balance Sheet and the Working Capital Certificate,
    Stockholder and his representatives shall be permitted to review
    the records of the Companies relating to the Draft Closing
    Balance Sheet and the Working Capital Certificate, and the Buyer
    shall direct any accountants engaged to prepare the Draft
    Closing Balance Sheet and the Working Capital Certificate, upon
    receipt of customary waivers, to permit Stockholder and his
    representatives to review such accountant’s work papers, if
    any, relating to the Draft Closing Balance Sheet and the Working
    Capital Certificate, in each case reasonably requested by
    Stockholder, and the Buyer shall make reasonably available to
    the Stockholder and his representatives the individuals employed
    by the Buyer and responsible for the preparation of the Draft
    Closing Balance Sheet and the Working Capital Certificate, in
    order to respond to the inquiries of the Stockholder relating
    thereto. The Stockholder shall deliver to the Buyer, by the
    Objection Deadline Date, either a notice indicating that the
    Stockholder accepts the Draft Closing Balance Sheet and the
    Buyer’s calculation of the Closing Working Capital
    delivered pursuant to Section 1.5(a) or a detailed
    statement describing its objections (if any) to the Draft
    Closing Balance Sheet
    and/or the
    calculation of the Closing Working Capital. If the Stockholder
    delivers to the Buyer a notice accepting the Draft Closing
    Balance Sheet and the Buyer’s calculation of the Closing
    Working Capital, or the Stockholder does not deliver a written
    objection to the Draft Closing Balance Sheet or the calculation
    of the Closing Working Capital by the Objection Deadline Date,
    then, effective as of either the date of delivery of such notice
    of acceptance or as of the close of business on the Objection
    Deadline Date, the Draft Closing Balance Sheet shall be deemed
    to be the Final Closing Balance Sheet and the amount of Closing
    Working Capital as shown on the Working Capital Certificate
    shall be deemed to be the Final Closing Working Capital. If the
    Stockholder timely objects to the Draft Closing Balance Sheet or
    the Buyer’s calculation of the Closing Working Capital,
    such objections shall be resolved as follows:

 

    (i) The Buyer and the Stockholder shall first use
    reasonable efforts to resolve such objections.

 

    (ii) If the Buyer and the Stockholder do not reach a
    resolution of all objections set forth on the Stockholder’s
    statement of objections within 30 days after delivery of
    such statement of objections, the Buyer and the Stockholder
    shall, within 30 days following the expiration of such
    30-day
    period, engage the Accountant, pursuant to an engagement
    agreement executed by the Buyer, the Stockholder and the
    Accountant, to resolve the Unresolved Objections.

 

    (iii) The Buyer and the Stockholder shall jointly submit to
    the Accountant, within 10 days after the date of the
    engagement of the Accountant (as evidenced by the date of the
    engagement agreement), a copy of the Draft Closing Balance Sheet
    and the Working Capital Certificate, a copy

    

    2

 

    of the statement of objections delivered by the Stockholder to
    the Buyer, and a statement setting forth the resolution of any
    objections agreed to by the Buyer and the Stockholder. Each of
    the Buyer and the Stockholder shall submit to the Accountant
    (with a copy delivered to the other Party on the same day),
    within 45 days after the date of the engagement of the
    Accountant, a memorandum (which may include supporting exhibits)
    setting forth their respective positions on the Unresolved
    Objections. Each of the Buyer and the Stockholder may (but shall
    not be required to) submit to the Accountant (with a copy
    delivered to the other Party on the same day), within
    75 days after the date of the engagement of the Accountant,
    a memorandum responding to the initial memorandum submitted to
    the Accountant by the other Party. Unless requested by the
    Accountant in writing, neither Party may present any additional
    information or arguments to the Accountant, either orally or in
    writing.

 

    (iv) Within 100 days after the date of its engagement
    hereunder, the Accountant shall determine whether or to what
    degree the objections raised by the Stockholder are correct and
    shall issue a ruling which shall include (A) a balance
    sheet, consisting of the Draft Closing Balance Sheet as adjusted
    pursuant to any resolutions to objections agreed upon by the
    Buyer and the Stockholder and pursuant to the Accountant’s
    resolution of the Unresolved Objections and (B) a
    calculation of the Closing Working Capital based on the balance
    sheet described in clause (A) of this sentence. Such
    balance sheet shall be deemed to be the “Final Closing
    Balance Sheet” and the amount of Closing Working Capital
    calculated based on such balance sheet shall be deemed to be the
    “Final Closing Working Capital.”

 

    (v) The resolution by the Accountant of the Unresolved
    Objections shall be conclusive and binding upon the Buyer and
    the Stockholder. The Buyer and the Stockholder agree that the
    procedure set forth in this Section 1.5(b) for resolving
    disputes with respect to the Draft Closing Balance Sheet
    and/or the
    Working Capital Certificate shall be the sole and exclusive
    method for resolving any such disputes; provided that this
    provision shall not prohibit either Party from instituting
    litigation to enforce the ruling of the Accountant.

 

    (vi) MDS or the Stockholder shall pay the fees and expenses
    of the Accountant based upon the difference between the Draft
    Closing Balance Sheet and the Final Closing Balance Sheet or
    between the Working Capital Certificate and the Closing Working
    Capital, as follows: (1) if either of such difference is
    less than $50,000, the fees and expenses of the Accountant shall
    be solely borne by the Stockholder; and (2) if either of
    such difference exceeds $50,000, the fees and expenses of the
    Accountant shall be solely borne by MDS.

 

    (c) Immediately upon the expiration of the Objection
    Deadline Date, if no objection to the Draft Closing Balance
    Sheet or the calculation of the Closing Working Capital is made,
    or upon notification by the Stockholder to the Buyer that no
    objection to the Draft Closing Balance Sheet or the calculation
    of the Closing Working Capital will be made, or immediately upon
    final resolution of any dispute in connection with the
    determination of the Closing Working Capital pursuant to this
    Section 1.5, the Base Purchase Price shall be adjusted as
    follows:

 

    (i) If the Final Closing Working Capital is less than the
    Target Amount by $250,000 or more, such deficiency shall be
    deducted from the Base Purchase Price (at which point such
    deduction shall equal the entire amount of the deficiency, and
    not just amounts in excess of $250,000).

 

    (ii) If the Final Closing Working Capital is greater than
    the Target Amount by $250,000 or more, such excess shall be
    added to the Base Purchase Price (at which point such addition
    shall equal the entire amount of the excess, and not just
    amounts in excess of $250,000).

 

    (d) The amount, if any, to be paid pursuant to
    Section 1.5(c)(i) shall be paid by the Stockholder to the
    Buyer not later than two business days following the
    Determination Date, first by delivery to Buyer of a number of
    Escrow Shares determined by dividing the amount of such
    deficiency by the Closing Price, to the extent a sufficient
    number of Escrow Shares are available, and the balance, if any,
    shall then be payable to the Buyer directly by the Stockholder
    in shares of Buyer Common Stock (at an assumed

    

    3

 

    value per share equal to the Closing Price with any fractional
    share rounded to the nearest whole share)
    and/or in
    cash, by cashier’s or certified check or by wire transfer
    of immediately available funds to an account designated by the
    Buyer.

 

    (e) The amount, if any, to be paid pursuant to
    Section 1.5(c)(ii) shall be paid by the Buyer to the
    Stockholder not later than two business days following the
    Determination Date in shares of Buyer Common Stock (at an
    assumed value per share equal to the Closing Price with any
    fractional share rounded to the nearest whole share).

 

    1.6  Escrow Account.  The
    Escrow Shares shall be held by the Escrow Agent under the terms
    of the Escrow Agreement for the purpose of securing the
    indemnification obligations of the Stockholder pursuant to
    Article VII and any adjustments to the Base Purchase Price
    pursuant to Section 1.5. The Escrow Shares shall be held as
    a trust fund and shall not be subject to any lien, attachment,
    trustee process or any other judicial process of any creditor of
    any party, and shall be held and disbursed solely for the
    purposes and in accordance with the terms of the Escrow
    Agreement.

 

    1.7  The Closing.  The Closing
    shall take place at the offices of WilmerHale, 60 State Street,
    Boston, Massachusetts commencing at 9:00 a.m., local time,
    on the Closing Date. The transfer of the Shares by the
    Stockholder to the Buyer and the payment of the Base Purchase
    Price by the Buyer to the Stockholder shall be deemed to occur
    at 9:00 a.m., local time, on the Closing Date.

 

    1.8  Stock Transfer
    Documents.  At or before the Closing, the
    Stockholder shall, and shall cause the relevant Companies to,
    enter into and deliver separate stock purchase agreements, share
    transfer forms, powers of attorney, stock powers, deeds and any
    other documents as may be required under relevant local law to
    transfer title to the Shares to the Buyer under this Agreement
    (“Stock Transfer Documents”), with only such
    modifications as are necessary in order to maintain
    substantially the same legal meaning and effect under local law
    as provided in this Agreement, including but not limited to the
    following:

 

    (a) Italy.

 

    (i) the share certificates of MDS Italy representing the
    entire authorized and issued corporate capital of MDS Italy duly
    endorsed to the Buyer before a notary;

 

    (b) Mexico.  

 

    (i) a short-form equity participation purchase and sale
    agreement between the Stockholder and the Buyer;

 

    (ii) the certificate of contribution representing the
    Shares of MDS Mexico owned by the Stockholder; and

 

    (iii) evidence of the entry of the Buyer into MDS
    Mexico’s partners registry as the new owner of the MDS
    Mexico Shares.

 

    1.9  Allocation.  The Base
    Purchase Price shall be allocated among the Shares of each
    Company in a manner that will be mutually agreed by the parties,
    in good faith, as soon as practicable following the execution of
    this Agreement but in no event later than five (5) business
    days prior to Closing. In an event that an adjustment to the
    Base Purchase Price is made pursuant to Section 1.5 of this
    Agreement, the allocation of the Base Purchase Price shall be
    amended to allocate such adjustment to the Shares of such
    Company to which such adjustment is attributable. The parties
    shall report the Tax consequences of the transactions
    contemplated by this Agreement in a manner consistent with the
    allocation agreed under this Section 1.9.

    

    4

 

    ARTICLE II

    

 

    REPRESENTATIONS
    OF THE STOCKHOLDER REGARDING THE SHARES
    

 

    The Stockholder represents and warrants to the Buyer that the
    statements contained in this Article II are true and
    correct as of the date of this Agreement and will be true and
    correct as of the Closing as though made as of the Closing.

 

    2.1  Title.  The Stockholder
    has good and marketable title to the Shares which are to be
    transferred to the Buyer by the Stockholder pursuant hereto,
    free and clear of any and all covenants, conditions,
    restrictions, voting trust arrangements, liens, charges,
    encumbrances, options and adverse claims or rights whatsoever.
    Schedule I sets forth a true and correct description
    of all Shares owned by the Stockholder.

 

    2.2  Authority.  The
    Stockholder has the full capacity, right, power and authority to
    enter into this Agreement, to consummate the transactions
    contemplated hereby and to transfer, convey and sell to the
    Buyer, at the Closing, the Shares. Upon consummation of the
    purchase contemplated hereby, the Buyer will acquire from the
    Stockholder good and marketable title to the Shares, free and
    clear of all covenants, conditions, restrictions, voting trust
    arrangements, liens, charges, encumbrances, options and adverse
    claims or rights whatsoever. This Agreement has been duly and
    validly executed and delivered by the Stockholder and
    constitutes a valid and binding obligation of the Stockholder,
    enforceable against the Stockholder in accordance with its
    terms, subject to the Bankruptcy Exception. Each of the Related
    Agreements to be entered into by the Stockholder, upon execution
    thereof by the Stockholder, will constitute a valid and binding
    obligation of the Stockholder enforceable against the
    Stockholder in accordance with its terms, subject to the
    Bankruptcy Exception.

 

    2.3  Noncontravention.  Subject
    to compliance with the applicable requirements of the Hart-Scott
    Rodino Act, neither the execution and delivery by the
    Stockholder of this Agreement or any of the Related Agreements
    to be entered into by the Stockholder, nor the consummation by
    the Stockholder of the transactions contemplated hereby or
    thereby, will (a) conflict with or violate any provision of
    the Certificate of Incorporation, by-laws or other
    organizational document of any of the Companies,
    (b) require on behalf of any of the Companies any notice to
    or filing with, or any permit, authorization, consent or
    approval of, any Governmental Entity, (c) except as set
    forth in Section 2.3 of the Company Disclosure Schedule,
    conflict with, result in a breach of, constitute (with or
    without due notice or lapse of time or both) a default under,
    result in the acceleration of obligations under, create in any
    party the right to terminate, modify or cancel, or require any
    notice, consent or waiver under, any contract or instrument to
    which any of the Companies is a party or by which any of the
    Companies is bound or to which any of their respective assets is
    subject, (d) result in the imposition of any Security
    Interest upon any assets of any of the Companies or
    (e) violate any order, writ, injunction, decree, statute,
    rule or regulation applicable to any of the Companies or any of
    their respective properties or assets, except in the case of
    clauses (c), (d) and (e) of this Section 2.3 for
    any such conflicts, violations, breaches, defaults,
    terminations, cancellations, accelerations or losses that,
    individually or in the aggregate, are not reasonably likely to
    have a Company Material Adverse Effect.

 

    2.4  Approvals.  The
    Stockholder is not a party to, subject to or bound by any
    agreement or any judgment, order, writ, prohibition, injunction
    or decree of any court or other governmental body which would
    prevent the execution or delivery of this Agreement by the
    Stockholder or the transfer, conveyance and sale of the Shares
    to the Buyer pursuant to the terms hereof.

 

    2.5  Brokers.  The Stockholder
    has no liability or obligation to pay any fees or commissions to
    any broker, finder or agent with respect to the transactions
    contemplated by this Agreement.

 

    2.6  Residency.  The
    Stockholder is not a resident of Italy or Mexico.

    

    5

 

    ARTICLE III

    

 

    REPRESENTATIONS
    AND WARRANTIES OF THE STOCKHOLDER REGARDING THE COMPANIES
    

 

    The Stockholder represents and warrants to the Buyer that,
    except as expressly set forth in the Company Disclosure
    Schedule, the statements contained in this Article III are
    true and correct as of the date of this Agreement and will be
    true and correct as of the Closing as though made as of the
    Closing, except to the extent such representations and
    warranties are specifically made as of a particular date (in
    which case such representations and warranties will be true and
    correct as of such date). The Company Disclosure Schedule shall
    be arranged in sections and subsections corresponding to the
    numbered and lettered sections and subsections contained in this
    Article III. An item of disclosure in any section or
    subsection of the Company Disclosure Schedule shall be deemed to
    be a disclosure in any other individual schedule of the Company
    Disclosure Schedule as to which the applicability of such item
    is readily apparent in light of the disclosure made. For
    purposes of this Article III, the phrase “to the
    knowledge of the Companies” or any phrase of similar import
    shall be deemed to refer to the actual knowledge of the
    Stockholder and each of the following individuals: Gus Azel,
    Jorge Celiceo, Melanie Imperial and Luigi Tagliavini (after
    reasonable inquiry and investigation).

 

    3.1  Organization, Qualification and Corporate
    Power.  Each of MDS, MDS Services and MDS
    Italy is a corporation duly organized, validly existing and in
    corporate and tax good standing, or local equivalent, under the
    laws of the jurisdiction of its incorporation. MDS Mexico is a
    limited liability company duly organized, validly existing and
    in corporate and tax good standing, or local equivalent, under
    the laws of Mexico. Each of the Companies is duly qualified to
    conduct business and is in corporate and tax good standing, or
    local equivalent, under the laws of each jurisdiction listed in
    Section 3.1 of the Company Disclosure Schedule, which
    jurisdictions constitute the only jurisdictions in which the
    nature of the Companies’ businesses or the ownership or
    leasing of their properties requires such qualification, except
    for such failures to be so organized, qualified or in good
    standing, individually or in the aggregate, that have not had,
    and are not reasonably likely to have, a Company Material
    Adverse Effect. Each of the Companies has all requisite
    corporate power and authority to carry on the businesses in
    which it is engaged and to own and use the properties owned and
    used by it. Each of the Companies has furnished to the Buyer
    complete and accurate copies of its Certificate of Incorporation
    and by-laws or other organizational documents, each as amended,
    in accordance with applicable local law. None of the Companies
    is in default under or in violation of any provision of its
    Certificate of Incorporation, by-laws or other organizational
    documents.

 

    3.2  Capitalization.  

 

    (a) The authorized, issued and paid-in share or equity
    participation capital of each of the Companies is as set forth
    in Section 3.2(a) of the Company Disclosure Schedule.

 

    (b) Section 3.2(b) of the Company Disclosure Schedule
    sets forth a complete and accurate list, as of the date of the
    Agreement, of the holders of capital stock or equity
    participation in each Company showing the number of shares of
    capital stock or equity participation, and the class or series
    of such shares or equity participation, held by each stockholder
    and (for shares other than common stock) the number of common
    shares (if any) into which such shares are convertible.
    Section 3.2(b) of the Company Disclosure Schedule also
    indicates all outstanding common shares that constitute
    restricted stock or that are otherwise subject to a repurchase
    or redemption right, indicating the name of the applicable
    stockholder, the vesting schedule (including any acceleration
    provisions with respect thereto), and the repurchase price
    payable by the applicable Company. All of the issued and
    outstanding shares or equity participation of capital stock of
    each Company have been duly authorized and validly issued and
    are fully paid and nonassessable, or local equivalent. All of
    the issued and outstanding shares or equity participation of
    capital stock of each Company have been offered, issued and sold
    by such Company in compliance with all applicable federal and
    state securities laws in the relevant jurisdiction.

 

    (c) There are no Company Stock Plans. None of the Companies
    has any outstanding Options or Warrants.

    

    6

 

    (d) No subscription, warrant, option, convertible security
    or other right (contingent or otherwise) to purchase or acquire
    any shares or equity participation of capital stock any Company
    is authorized or outstanding. No Company has any obligation
    (contingent or otherwise) to issue any subscription, warrant,
    option, convertible security or other such right, or to issue or
    distribute to holders of any shares or equity participation of
    its capital stock any evidences of indebtedness or assets of
    such Company. No Company has any obligation (contingent or
    otherwise) to purchase, redeem or otherwise acquire any shares
    or equity participation of its capital stock or any interest
    therein or to pay any dividend or to make any other distribution
    in respect thereof. There are no outstanding or authorized stock
    appreciation, phantom stock or similar rights with respect to
    any Company.

 

    (e) There is no agreement, written or oral, between any of
    the Companies and any holder of their securities, or, to the
    best of the Companies’ knowledge, among any holders of
    their securities, relating to the sale or transfer (including
    agreements relating to rights of first refusal, co-sale rights
    or “drag-along” rights), registration under the
    Securities Act, or voting, of the capital stock of any of the
    Companies.

 

    3.3  Authorization of
    Transaction.  Each of the Companies has all
    requisite power and authority to execute and deliver each of the
    Related Agreements to which such Company is a party and to
    perform its obligations thereunder. The execution and delivery
    by each Company of each of the Related Agreements to be entered
    into by such Company and the consummation by each Company of the
    transactions contemplated hereby and thereby have been duly and
    validly authorized by all necessary corporate action on the part
    of each such Company. Each of the Related Agreements to be
    entered into by a Company will, upon execution thereof by such
    Company, constitute a valid and binding obligation of such
    Company, enforceable against such Company in accordance with its
    terms, subject to the Bankruptcy Exception.

 

    3.4  [Intentionally Deleted]

 

    3.5  Subsidiaries.  Except as
    set forth in Section 3.5 of the Company Disclosure
    Schedule, none of the Companies has any Subsidiaries nor
    controls directly or indirectly or has any direct or indirect
    equity participation or similar interest in any corporation,
    partnership, limited liability company, joint venture, trust or
    other business association or entity.

 

    3.6  Financial
    Statements.  The Companies have provided to
    the Buyer the Financial Statements. The Financial Statements
    (i) comply as to form in all respects with applicable
    accounting requirements, (ii) were prepared in accordance
    with GAAP applied on a consistent basis throughout the periods
    covered thereby (except as may be indicated in the notes to such
    financial statements) and (iii) fairly present the
    consolidated financial position of the Companies as of the dates
    thereof and the consolidated results of their operations and
    cash flows for the periods indicated, consistent with the books
    and records of the Medisystems Operating Companies, except that
    the unaudited interim financial statements are subject to normal
    and recurring year-end adjustments which will not be material in
    amount or effect and do not include footnotes.

 

    3.7  Absence of Certain
    Changes.  Since the Most Recent Balance Sheet
    (a) there has occurred no event or development which,
    individually or in the aggregate, has had, or could reasonably
    be expected to have in the future, a Company Material Adverse
    Effect, and (b) except as set forth in Section 3.7 of
    the Company Disclosure Schedule, none of the Companies has taken
    any of the actions set forth in paragraphs (a) through
    (n) of Section 5.4.

 

    3.8  Undisclosed
    Liabilities.  None of the Companies has any
    liability (whether known or unknown, whether absolute or
    contingent, whether liquidated or unliquidated and whether due
    or to become due), except for (a) liabilities shown on the
    Most Recent Balance Sheet, (b) liabilities which have
    arisen since the Most Recent Balance Sheet Date in the Ordinary
    Course of Business (including in connection with agreements
    entered into in the Ordinary Course of Business) or otherwise in
    accordance with the terms and conditions of this Agreement,
    (c) liabilities under agreements listed in
    Section 3.15(a) of the Company Disclosure Schedule, and
    (d) liabilities under agreements which are not required to
    be disclosed in the Company Disclosure Schedule and which
    liabilities, in the aggregate, are not material.

    

    7

 

    3.9  Tax Matters.  

 

    (a) Each of the Companies has properly filed on a timely
    basis (taking account of extensions) all Tax Returns that it was
    required to file, and all such Tax Returns were true, correct
    and complete in all material respects. No Company is or has ever
    been a member of a group of corporations with which it has filed
    (or been required to file) consolidated, combined or unitary Tax
    Returns, other than a group of which the common parent is a
    Company. Each of the Companies has paid on a timely basis all
    Taxes that were due and payable. Except as set forth in
    Section 3.9(a) of the Company Disclosure Schedule, the
    unpaid Taxes of the Companies for Tax periods through the Most
    Recent Balance Sheet Date do not exceed the accruals and
    reserves for Taxes (excluding accruals and reserves for deferred
    Taxes established to reflect timing differences between book and
    Tax income) set forth on the Most Recent Balance Sheet and all
    unpaid Taxes of the Companies for all Tax periods commencing
    after the date of the Most Recent Balance Sheet Date arose in
    the Ordinary Course of Business and are of a type consistent
    with, and in an amount commensurate with, Taxes attributable to
    prior similar periods (with due regard to intervening changes in
    applicable law or administrative practice). None of the
    Companies (i) has any actual or potential liability as a
    transferee or successor, pursuant to any contractual obligation,
    or otherwise for any Taxes of any person other than a Company or
    (ii) is a party to or bound by any Tax indemnity, Tax
    sharing, Tax allocation or similar agreement. All Taxes that any
    of the Companies was required by law to withhold or collect have
    been duly withheld or collected and, to the extent required,
    have been properly paid to the appropriate Governmental Entity.

 

    (b) The Companies have delivered or made available to the
    Buyer (i) complete and correct copies of all Tax Returns of
    the Companies relating to Taxes for all taxable periods for
    which the applicable statute of limitations has not yet expired
    and (ii) complete and correct copies of all private letter
    rulings, revenue agent reports to any Company, information
    document requests, notices of proposed deficiencies, deficiency
    notices, protests, petitions, closing agreements, settlement
    agreements, pending ruling requests and any similar documents
    submitted by, received by, or agreed to by or on behalf of the
    Companies or any of them relating to Taxes for all taxable
    periods for which the statute of limitations has not yet
    expired. The federal income Tax Returns of the Companies have
    been audited by the Internal Revenue Service, or equivalent
    Governmental Entity in the relevant
    non-U.S. jurisdiction,
    or are closed by the applicable statute of limitations for all
    taxable years through the taxable year specified in
    Section 3.9(b)(i) of the Company Disclosure Schedule.
    Except as set forth in Section 3.9(b)(ii) of the Company
    Disclosure Schedule, no examination or audit of any Tax Return
    of any Company by any Governmental Entity is currently in
    progress or, to the knowledge of the Companies, threatened or
    contemplated. None of the Companies has been informed by any
    jurisdiction that the jurisdiction believes that such Company
    was required to file any Tax Return that was not filed. Except
    as set forth in Section 3.9(b)(ii) of the Company
    Disclosure Schedule, none of the Companies has (x) waived
    any statute of limitations with respect to Taxes or agreed to
    extend the period for assessment or collection of any Taxes,
    (y) requested any extension of time within which to file
    any Tax Return, which Tax Return has not yet been filed, or
    (z) executed or filed any power of attorney with any taxing
    authority.

 

    (c) None of the assets of the Companies (i) is
    property that is required to be treated as being owned by any
    other person pursuant to the provisions of former Section
    168(f)(8) of the Internal Revenue Code of 1954, (ii) is
    “tax-exempt use property” within the meaning of
    Section 168(h) of the Code, (iii) directly or
    indirectly secures any debt the interest on which is tax exempt
    under Section 103(a) of the Code or (iv) is subject to
    a lease under Section 7701(h) of the Code or under any
    predecessor section.

 

    (d) There are no adjustments under Section 481 of the
    Code (or any similar adjustments under any corresponding
    foreign, state or local Tax laws) that are required to be taken
    into account by the Companies in any period ending after the
    Closing Date by reason of a change in method of accounting in
    any taxable period ending on or before the Closing Date or as a
    result of the consummation of the transactions contemplated by
    this Agreement.

 

    (e) None of the Companies (i) is a “consenting
    corporation” within the meaning of former
    Section 341(f) of the Code, and none of the assets of the
    Companies is subject to an election under former
    Section 341(f) of the Code or (ii) has been a United
    States real property holding corporation within the meaning of
    Section 897(c)(2) of the Code during the applicable period
    specified in Section 897(c)(l)(A)(ii) of the Code.

    

    8

 

    (f) None of the Companies has ever participated in an
    international boycott as defined in Section 999 of the Code.

 

    (g) None of the Companies is a party to a lease that is
    treated as a “Section 467 rental agreement”
    within the meaning of Section 467(d) of the Code.

 

    (h) None of the Companies has distributed to its
    shareholders or security holders stock or securities of a
    controlled corporation, nor has stock or securities of any
    Company been distributed, in a transaction to which
    Section 355 of the Code applies (i) in the two
    (2) years prior to the date of this Agreement or
    (ii) in a distribution that could otherwise constitute part
    of a “plan” or “series of related
    transactions” (within the meaning of Section 355(e) of
    the Code) that includes the transactions contemplated by this
    Agreement.

 

    (i) No Company owns any interest in an entity that is
    characterized as a partnership for federal income Tax purposes.

 

    (j) Section 3.9(j) of the Company Disclosure Schedule
    sets forth each jurisdiction (other than United States federal)
    in which any Company files or filed a Tax Return and each
    jurisdiction that has sent notices or communications of any kind
    requesting information relating to any Company’s nexus with
    such jurisdiction.

 

    (k) None of the Companies is or has been a passive foreign
    investment company within the meaning of Section 1297 of
    the Code.

 

    (l) None of the Companies has incurred (or been allocated)
    an “overall foreign loss” as defined in
    Section 904(f)(2) of the Code which has not been previously
    recaptured in full as provided in Sections 904(f)(1)
    and/or
    904(f)(3) of the Code.

 

    (m) None of the Companies is a party to a gain recognition
    agreement under Section 367 of the Code.

 

    (n) None of the Companies will be required to include any
    item of income in, or exclude any item of deduction from,
    taxable income for any period (or any portion thereof) ending
    after the Closing Date as a result of any (i) closing
    agreement as described in Section 7121 of the Code (or any
    corresponding or similar provision of state, local or foreign
    Tax law) executed on or prior to the Closing Date,
    (ii) installment sale or other open transaction disposition
    made on or prior to the Closing Date or (iii) prepaid
    amount received on or prior to the Closing Date.

 

    (o) There are no liens or other encumbrances with respect
    to Taxes upon any of the assets or properties of the Companies,
    other than with respect to Taxes not yet due and payable.

 

    (p) None of the Shares held by the Stockholder that are
    shares of common stock of a Company are non-transferable and
    subject to a substantial risk of forfeiture within the meaning
    of Section 83 of the Code with respect to which a valid
    election under Section 83(b) of the Code has not been made.

 

    (q) None of the Companies is or ever has been a party to a
    transaction or agreement that is in conflict with the Tax rules
    on transfer pricing then in effect in any relevant jurisdiction
    and MDS Mexico has complied with all applicable Mexican transfer
    pricing rules and other Mexican tax obligations that are
    specifically applicable to Mexican corporations doing business
    under a maquila program authorization issued by the
    Ministry of Economy in Mexico.

 

    (r) None of the Companies has engaged in any
    “reportable transaction” for purposes of Treasury
    Regulation
    sections 1.6011-4(b)
    or Code Section 6111 or any analogous provision of state or
    local law.

 

    (s) At all times since its formation, each of MDS Services
    and MDS has validly been treated for federal income tax purposes
    as an “S corporation” within the meaning of
    Section 1361(a) of the Code and has validly been treated in
    a similar manner for purposes of the income tax laws of all
    states in which it has been subject to taxation.

 

    (t) None of the Companies has a permanent establishment in
    any country (determined under the laws of such country) other
    than its country of incorporation or formation.

    

    9

 

    3.10  Assets.

 

    (a) Each Company is the true and lawful owner, and has good
    title to, all of the material tangible assets owned by such
    Company, free and clear of all Security Interests. Except for
    the assets described in Section 3.10(a) of the Company
    Disclosure Schedule, the Companies own, lease or possess under a
    bailment or other agreement all material tangible assets
    currently used in all businesses of the Companies, and such
    material tangible assets are sufficient for the conduct of the
    Companies’ businesses. Each such material tangible asset is
    free from material defects, has been maintained in accordance
    with normal industry practice, is in good operating condition
    and repair (subject to normal wear and tear) and is suitable for
    the purposes for which it presently is used.

 

    (b) Section 3.10(b) of the Company Disclosure Schedule
    lists individually (i) all fixed assets (within the meaning
    of GAAP) of the Companies having a book value greater than
    $5,000, indicating the cost, accumulated book depreciation (if
    any) and the net book value of each such fixed asset as of the
    Most Recent Balance Sheet Date, and (ii) all other assets
    of a tangible nature (other than inventories) of the Companies
    whose book value exceeds $5,000.

 

    3.11  Owned Real
    Property.  None of the Companies owns or has
    ever owned any Real Property.

 

    3.12  Real Property
    Leases.  Section 3.12 of the Company
    Disclosure Schedule lists all Leases and lists the term of each
    such Lease, any extension and expansion options, and the rent
    payable thereunder. The Companies have delivered to the Buyer
    complete and accurate copies of the Leases. With respect to each
    Lease:

 

    (a) such Lease is legal, valid, binding, enforceable and in
    full force and effect;

 

    (b) such Lease will continue to be legal, valid, binding,
    enforceable and in full force and effect immediately following
    the Closing in accordance with the terms thereof as in effect
    immediately prior to the Closing;

 

    (c) neither the applicable Company nor, to the knowledge of
    the Companies, any other party, is in breach or violation of, or
    default under, any such Lease, and no event has occurred, is
    pending or, to the knowledge of the Companies, is threatened,
    which, after the giving of notice, with lapse of time, or
    otherwise, would constitute a breach or default by the
    applicable Company or, to the knowledge of the Companies, any
    other party under such Lease;

 

    (d) there are no disputes, oral agreements or forbearance
    programs in effect as to such Lease;

 

    (e) the applicable Company has not assigned, transferred,
    conveyed, mortgaged, deeded in trust or encumbered any interest
    in the leasehold or subleasehold;

 

    (f) to the knowledge of the Companies, all facilities
    leased or subleased thereunder are supplied with utilities and
    other services adequate for the operation of said facilities and
    the businesses of the Companies;

 

    (g) the Companies are not aware of any Security Interest,
    easement, covenant or other restriction applicable to the real
    property subject to such lease which would reasonably be
    expected to materially impair the current uses or the occupancy
    by the applicable Company of the property subject thereto;

 

    (h) the Companies are not in discussions with any landlords
    or lessors regarding potential changes to rental payments,
    duration of term or other material terms of the Leases; and

 

    (i) this Transaction will not trigger any consent
    and/or
    notice requirements under any of the Leases.

 

    3.13  Intellectual Property

 

    (a) Company
    Registrations.  Section 3.13(a) of the
    Company Disclosure Schedule lists all Registered Company
    Intellectual Property, in each case enumerating specifically the
    applicable filing or registration number, title, jurisdiction in
    which filing was made or from which registration issued and date
    of filing or issuance. To the knowledge of the Companies and
    except as otherwise indicated in Section 3.13(a) of the

    

    10

 

    Company Disclosure Schedule, all registered copyrights and
    trademarks included in the Registered Company Intellectual
    Property are valid and enforceable and the Companies have not
    received any written notice that any issued Patent included
    therein is invalid or unenforceable. To the knowledge of the
    Companies and except as otherwise indicated in
    Section 3.13(a) of the Company Disclosure Schedule, all
    issuance, renewal, maintenance and other payments that are or
    have become due with respect to the Registered Company
    Intellectual Property have been timely paid.

 

    (b) Prosecution Matters.  None of the
    Companies nor DSU has received any written notice of, and, to
    the knowledge of the Companies, there are no inventorship
    challenges, opposition or nullity proceedings, reexaminations,
    reissues or interferences that have been declared or instituted
    by the patent or trademark office of any jurisdiction, and none
    of the Companies or DSU has received any written notice
    threatening any such action, in each case, with respect to any
    Patent included in the Registered Company Intellectual Property.
    The Companies and DSU have complied with their duty of candor
    and good faith to the United States Patent and Trademark Office
    and any relevant foreign patent office with respect to all
    patent and trademark applications included in the Registered
    Company Intellectual Property and have not intentionally made
    any material misrepresentation in such applications.

 

    (c) Ownership and Right to Use.  Each item
    of Company Intellectual Property will be available for use by
    the Buyer and the Companies immediately following the Closing on
    substantially identical terms and conditions as it was available
    for use immediately prior to the Closing. As of the Closing
    Date, the Companies will exclusively own or otherwise have the
    right to use all Intellectual Property used in connection with
    the conduct of the businesses as conducted by the Companies
    immediately prior to the Closing Date. The Companies are the
    sole and exclusive owner of all Intellectual Property included
    within the Company Owned Intellectual Property, free and clear
    of any Security Interests. The Company Intellectual Property
    that is licensed to or exclusively owned by the Companies as of
    the Closing Date, or which the Companies otherwise have the
    right to use as of the Closing Date, constitutes all
    Intellectual Property (other than the Excluded Intellectual
    Property) used by the Companies in connection with the conduct
    of the Companies’ business, in all material respects, in
    the manner done so by the Companies immediately prior to the
    Closing Date.

 

    (d) Reasonable Protection Measures.  The
    applicable Company has taken commercially reasonable measures to
    maintain the confidentiality of the trade secrets and other
    material non-public information owned by the Company, or
    received from third parties which the Company is obligated to
    treat as confidential. To the knowledge of the Companies, there
    has been no: (i) material unauthorized disclosure of any
    third party proprietary or confidential information in the
    possession, custody or control of any Company, or
    (ii) material breach of any Company’s security
    procedures wherein confidential information has been disclosed
    to a third person.

 

    (e) Infringement by Companies.  To the
    knowledge of the Companies, neither the manufacture, use, sale,
    offering for sale or importation of the Products by the
    Companies, nor any other activity of the Companies in connection
    with the operation of their businesses, infringes, violates, or
    constitutes a misappropriation of, any Intellectual Property
    rights of any third party. To the knowledge of the Companies,
    there are no pending claims (and the Companies and DSU have not
    received written notice of any threatened claims) by any person
    alleging infringement by the Companies of any third party
    Intellectual Property. Section 3.13(e) of the Company
    Disclosure Schedule lists, and each Company has provided to the
    Buyer copies of, any complaint, claim or written notice, or
    written threat of any of the foregoing (including any written
    notification that a license under any patent is offered or
    available, or is or may be required). The representations set
    forth in Section 3.13(a), (e) and (f) which are
    made to the Companies’
    and/or
    DSU’s knowledge are made only to the actual knowledge of
    the Companies
    and/or DSU
    without any requirement of inquiry into the actions or
    intellectual property rights of third parties.

 

    (f) Infringement of Company Rights.  To
    the knowledge of the Companies and except as otherwise indicated
    in Section 3.13(f) of the Company Disclosure Schedule, no
    person (including, without limitation, any current or former
    employee, contractor or consultant of any Company) is infringing
    or misappropriating any of the Company Owned Intellectual
    Property or any Company Licensed Intellectual Property which is
    exclusively licensed to any Company. Each Company has provided
    to the Buyer copies of all written notices

    

    11

 

    provided by the Company or DSU to third parties and claims filed
    by the Company or DSU against third parties alleging
    infringement of the Company Owned Intellectual Property or any
    Company Licensed Intellectual Property exclusively licensed to
    any Company.

 

    (g) Outbound IP
    Agreements.  Section 3.13(g) of the Company
    Disclosure Schedule identifies each agreement pursuant to which
    any Company has assigned, transferred, licensed, or otherwise
    granted any right to any person, or covenanted not to assert any
    right, with respect to any Registered Company Intellectual
    Property.

 

    (h) Inbound IP
    Agreements.  Section 3.13(h) of the Company
    Disclosure Schedule identifies each agreement pursuant to which
    any Company has been granted or has otherwise acquired any
    rights with respect to any Registered Company Intellectual
    Property (excluding commercially available software programs).

 

    (i) Products.  Except as set forth in
    Schedule 3.13(i) of the Company Disclosure Schedule, the
    manufacture, use, sale, offering for sale and importation of the
    Products by the Companies as conducted immediately prior to the
    Closing Date is not covered by any claims of any Excluded
    Intellectual Property and does not constitute the practice
    outside of the Field of inventions, methods or processes claimed
    or disclosed in the Licensed Class B Patents. In the event
    that this Section 3.13(i) is inaccurate, the sole and
    exclusive remedy therefor, shall be that (i) such claims of
    Excluded Intellectual Property shall automatically be licensed
    under the License Agreement as if such claims were included in
    the Licensed Class B Patents thereunder and (ii) MDS
    shall have the worldwide, perpetual, irrevocable, fully paid up,
    sublicensable right and license under such Excluded Intellectual
    Property or Licensed Class B Patents to continue to make,
    have made, sell, offer for sale and import such Products in the
    manner conducted by the Companies immediately prior to the
    Closing Date.

 

    (j) Limitations.  The representations and
    warranties set forth in this Sections 3.13(c) and
    (e) above do not extend to any activities, Products or
    portion of the business relating to the Excluded Intellectual
    Property or to the practice outside of the Field of the
    inventions, methods and processes claimed or disclosed in the
    Licensed Class B Patents.

 

    (k) [Intentionally Deleted]  

 

    (l) Assignment of Patent Rights.  Except
    as otherwise indicated in Section 3.13(l) of the Company
    Disclosure Schedule, each employee of the Companies has executed
    a valid and binding written agreement expressly assigning to
    such Company, to the extent legally permissible, all right,
    title and interest in any inventions, trade secrets and works of
    authorship, whether or not patentable, invented, created,
    developed, conceived
    and/or
    reduced to practice during the term and in the course of such
    employee’s employment for such Company, and all
    Intellectual Property rights therein.

 

    (m) Government Support and
    Funding.  Except as set forth in
    Section 3.13(m) of the Company Disclosure Schedule, the
    Companies have not created or reduced to practice any inventions
    claimed in the Patents included within the Company Licensed
    Intellectual Property using any federal funding, or facilities
    of any university, college, or other educational institution or
    research center.

 

    3.14  Inventory.  All
    inventory of the Companies consists of a quality and quantity
    usable and saleable in the Ordinary Course of Business, except
    for obsolete items and items of below-standard quality, all of
    which, to the extent reflected on the Most Recent Balance Sheet,
    have been written-off or written-down to net realizable value.
    All such inventories of the Companies that have not been
    written-off have been priced at the lower of cost or net
    realizable value on a
    first-in,
    first-out basis. The quantities of each type of inventory of the
    Companies, whether raw materials,
    work-in-process
    or finished goods, are not excessive in the present
    circumstances of the Companies.

    

    12

 

    3.15  Contracts.  

 

    (a) Section 3.15(a) of the Company Disclosure Schedule
    lists the following agreements (written or oral) to which any
    Company is a party as of the date of this Agreement under which
    any of the Companies has any ongoing or surviving obligations or
    rights:

 

    (i) any agreement (or group of related agreements) for the
    lease of personal property from or to third parties providing
    for lease payments in excess of $10,000 per annum or having a
    remaining term longer than six months;

 

    (ii) any agreement (or group of related agreements) for the
    purchase or sale of products (including yet to be developed
    products) or for the furnishing or receipt of services
    (A) which calls for performance over a period of more than
    six months, (B) which involves more than the sum of
    $50,000, or (C) in which any Company has granted
    manufacturing rights, “most favored nation” pricing
    provisions or marketing or distribution rights relating to any
    products or territory or has agreed to purchase a minimum
    quantity of goods or services or has agreed to purchase goods or
    services exclusively from a certain party;

 

    (iii) any agreement concerning the establishment or
    operation of a partnership, joint venture or limited liability
    company;

 

    (iv) any agreement (or group of related agreements) under
    which it has created, incurred, assumed or guaranteed (or may
    create, incur, assume or guarantee) indebtedness (including
    capitalized lease obligations) or under which it has imposed (or
    may impose) a Security Interest on any of its assets, tangible
    or intangible, and the amount of indebtedness outstanding as of
    the date of this Agreement under each such agreement;

 

    (v) any agreement for the disposition of any significant
    portion of the assets or business of any Company (other than
    sales of products in the Ordinary Course of Business) or any
    agreement for the acquisition of the assets or business of any
    other entity (other than purchases of inventory or components in
    the Ordinary Course of Business);

 

    (vi) any agreement concerning confidentiality;

 

    (vii) any employment or consulting agreement;

 

    (viii) any agreement involving any current or former
    officer, director or stockholder of any Company or an Affiliate
    of any Company (other than any agreements with former officers
    or former employees in the standard form of the Medisystems
    Employment Agreement or the MDS Mexico Employment Agreement,
    copies of which are included in Section 3.15(a) of the
    Company Disclosure Schedule);

 

    (ix) any agreement under which the consequences of a
    default or termination would reasonably be expected to have a
    Company Material Adverse Effect;

 

    (x) any agreement which contains any provisions requiring
    any Company to indemnify any other party;

 

    (xi) any agreement that could reasonably be expected to
    have the effect of prohibiting or impairing the conduct of the
    businesses of any Company or the Buyer or any of its
    subsidiaries as currently conducted and as currently proposed to
    be conducted by the Stockholder;

 

    (xii) any agreement under which any Company is restricted
    from selling, licensing or otherwise distributing any of its
    technology or products, or providing services to, customers or
    potential customers or any class of customers, in any geographic
    area, during any period of time or any segment of the market or
    line of business;

 

    (xiii) any agreement which would entitle any third party to
    receive a license or any other right to intellectual property of
    the Buyer or any of the Buyer’s Affiliates (other than any
    Company) following the Closing;

    

    13

 

    (xiv) any business associate agreements, under HIPAA;

 

    (xv) any maquila, bailment or other inter-company
    agreements; and

 

    (xvi) any other agreement (or group of related agreements)
    either involving more than $50,000 or not entered into in the
    Ordinary Course of Business.

 

    (b) The Companies have delivered to the Buyer a complete
    and accurate copy of each agreement listed in Section 3.13
    or Section 3.15(a) of the Company Disclosure Schedule. With
    respect to each agreement so listed: (i) the agreement is
    legal, valid, binding and enforceable and in full force and
    effect, subject to the Bankruptcy Exception; (ii) the
    agreement will continue to be legal, valid, binding and
    enforceable and in full force and effect immediately following
    the Closing in accordance with the terms thereof as in effect
    immediately prior to the Closing, subject to the Bankruptcy
    Exception; and (iii) none of the Companies nor, to the
    knowledge of the Companies, any other party, is in breach or
    violation of, or default under, any such agreement, and no event
    has occurred, is pending or, to the knowledge of the Companies,
    is threatened, which, after the giving of notice, with lapse of
    time, or otherwise, would constitute a breach or default by any
    Company or, to the knowledge of the Companies, any other party
    under such agreement.

 

    3.16  Accounts
    Receivable.  All accounts receivable of the
    Companies reflected on the Most Recent Balance Sheet (other than
    those paid since such date) are valid receivables subject to no
    setoffs or counterclaims and are current and collectible, net of
    the applicable reserve for bad debts on the Most Recent Balance
    Sheet. A complete and accurate list of the accounts receivable
    reflected on the Most Recent Balance Sheet, showing the aging
    thereof, is included in Section 3.16 of the Company
    Disclosure Schedule. All accounts receivable of the Companies
    that have arisen since the Most Recent Balance Sheet Date are
    valid receivables subject to no setoffs or counterclaims and are
    collectible, net of a reserve for bad debts in an amount
    proportionate to the reserve shown on the Most Recent Balance
    Sheet. None of the Companies has received any written notice
    from an account debtor stating that any account receivable in an
    amount in excess of $10,000 is subject to any contest, claim or
    setoff by such account debtor.

 

    3.17  Powers of
    Attorney.  There are no outstanding powers of
    attorney executed on behalf of any Company or the Stockholder
    relating to any Company other than those listed in
    Section 3.17 of the Company Disclosure Schedule.

 

    3.18  Insurance.  Section 3.18
    of the Company Disclosure Schedule lists each insurance policy
    (including fire, theft, casualty, comprehensive general
    liability, workers compensation, business interruption,
    environmental, product liability and automobile insurance
    policies and bond and surety arrangements) to which any Company
    is a party, all of which are in full force and effect. All
    applications for insurance of the Companies were truthful,
    accurate and complete as of the date of each such application.
    Such insurance policies are of the type and in amounts
    customarily carried by organizations conducting businesses or
    owning assets similar to those of the Companies. There is no
    material claim pending under any such policy as to which
    coverage has been questioned, denied or disputed by the
    underwriter of such policy. All premiums due and payable under
    all such policies have been paid, none of the Companies may be
    liable for retroactive premiums or similar payments, and the
    Companies are otherwise in compliance in all material respects
    with the terms of such policies. The Companies have no knowledge
    of any threatened termination of, or premium increase with
    respect to, any such policy, other than any termination due to a
    change of control provision in any such policy. Subject to
    Section 8.9 herein, each such policy will continue to be
    enforceable and in full force and effect immediately following
    the Closing in accordance with the terms thereof as in effect
    immediately prior to the Closing. Section 3.18 of the
    Company Disclosure Schedule lists all customs bonds currently in
    effect for each Company in the amount as determined by the
    U.S. Customs and Border Protection Agency (“CBP”)
    to be necessary and proper for the purpose of making customs
    entries by the relevant Company.

 

    3.19  Litigation.  There is no
    Legal Proceeding which is pending or has been threatened in
    writing against any Company which (a) seeks either damages
    in excess of $25,000 or equitable relief or (b) in any
    manner challenges or seeks to prevent, enjoin, alter or delay
    the transactions contemplated by this Agreement. There are no
    judgments, orders or decrees outstanding against any Company.

    

    14

 

    3.20  Warranties.  No
    agreement of the Companies provides that any product or service
    manufactured, sold, leased, licensed or delivered by any Company
    is subject to any guaranty, warranty, right of return, right of
    credit or other indemnity other than (i) the applicable
    terms and conditions of sale or lease of the applicable Company,
    which are set forth in the agreements described in
    Section 3.15(a) of the Company Disclosure Schedule,
    (ii) the applicable labeling, including “Instructions
    for Use” of the Products of the applicable Company, which
    have heretofore been provided to the Buyer and
    (iii) manufacturers’ warranties for which none of the
    Companies has any liability.

 

    3.21  Employees.  

 

    (a) Section 3.21(a) of the Company Disclosure Schedule
    contains a list of all employees of each Company employed as of
    May 14, 2007 whose annual rate of compensation exceeds
    $50,000 per year, along with the position, date of hire, and the
    base annual rate of compensation of each such person. Except as
    set forth in Section 3.21(a) of the Company Disclosure
    Schedule, each current employee of MDS and MDS Services and each
    former employee of MDS and MDS Services within the last three
    (3) years has entered into a Medisystems Employment
    Agreement with the applicable Company, a copy or form of which
    has previously been made available to the Buyer. Except as set
    forth in Section 3.21(a) of the Company Disclosure
    Schedule, each current employee of MDS Mexico whose annual base
    rate of compensation exceeds $50,000 per year has entered into
    an MDS Mexico Employment Agreement, a copy or form of which has
    previously been made available to the Buyer. Each of the current
    employees of MDS Italy has entered into an MDS Italy Employment
    Agreement, a copy or form of which has previously been made
    available to the Buyer. Section 3.21(a) of the Company
    Disclosure Schedule contains a list of all employees of each
    Company who are a party to a non-competition agreement with such
    Company; copies of such agreements have previously been made
    available to the Buyer. All of the agreements referenced above
    in this Section 3.21(a) will continue to be legal, valid,
    binding and enforceable and in full force and effect immediately
    following the Closing in accordance with the terms thereof as in
    effect immediately prior to the Closing. To the knowledge of the
    Companies, as of the date of this Agreement, none of the
    employees who are party to such non-competition agreements have
    engaged in any activities prohibited by such agreements.
    Section 3.21(a) of the Company Disclosure Schedule contains
    a list of all employees of each Company as of May 14, 2007
    whose home office or employment location is in the United States
    who are not citizens of the United States. To the knowledge of
    the Companies, no key employee or group of employees has any
    plans to terminate employment with any Company. The Companies
    have been and are in compliance with all applicable laws and
    with all applicable provisions of collective and individual
    agreements relating to the hiring and employment of all current
    and past employees relating to all aspects of employment,
    including, but not limited to, their search, hiring, employment
    relationship, and termination.

 

    (b) MDS Italy has been, and is currently in, compliance
    with all applicable laws and with all applicable provisions of
    collective and individual agreements related to activities that
    are performed for MDS Italy by individuals who are not employees
    of MDS Italy, including, but not limited to, the past or current
    performance by or in favor of MDS Italy, of “contratti
    d’appalto” under article 1655 of the Italian
    Civil Code and article 29 of Italian Legislative Decree No
    276 of September 10, 2003, all past and current performance
    of activities under “contratti di somministrazione di
    manodopera” (lending of workmanship), all past and
    current performance of activities by “lavoratori a
    progetto” (workers by project) and generally all types
    of non-employed providers of services. As of Closing, there are
    no pending claims, or grounds for the initiation of claims,
    against MDS Italy under article 29 of Italian Legislative
    Decree No 276 of September 10, 2003, related to any
    “contratto d’appalto”.

 

    (c) Except as set forth in Section 3.21(c) of the
    Company Disclosure Schedule, none of the Companies is party to
    or bound by any labor or collective bargaining agreement, nor
    has any of them experienced, within the last two (2) years,
    any strikes, work stoppages, work slowdowns or lockouts,
    grievances, complaints, claims of unfair labor practices or
    other collective bargaining disputes, and with respect to MDS
    Italy, any anti-union behavior (“comportamento
    antisindacale”). The Companies have no knowledge of any
    union organization campaigns with regard to any employees of the
    Companies and no organizational effort has been made or
    threatened, either currently or within the past two years, by or
    on behalf of any labor union with respect to any employee or
    group of employees of any Company. The Companies have no
    obligation either by

    

    15

 

    contract or under applicable Laws and Regulations, to inform
    and/or
    consult with the employees
    and/or their
    representatives, or to issue any related notices or obtain any
    related consents before Closing, regarding the transaction
    contemplated by this Agreement.

 

    3.22  Employee Benefits.  

 

    (a) Section 3.22(a) of the Company Disclosure Schedule
    contains a complete and accurate list of all material Company
    Plans other than Company Plans that are government mandated or
    disclosed in, or provided pursuant to,
    non-U.S. collective
    bargaining agreements (made available to the Buyer). Complete
    and accurate copies of (i) all Company Plans which have
    been reduced to writing, (ii) written summaries of all
    unwritten material Company Plans, (iii) all related trust
    agreements, insurance contracts and summary plan descriptions,
    all as currently in effect, and (iv) all annual reports
    filed on IRS Form 5500, 5500C or 5500R and (for all funded
    plans) all plan financial statements for the last three plan
    years for each Company Plan, have been made available to the
    Buyer.

 

    (b) Each Company Plan has been administered in all material
    respects in accordance with its terms, and each of the Companies
    and the ERISA Affiliates has in all material respects met its
    obligations with respect to each Company Plan and has made all
    required contributions thereto. Each Company, each ERISA
    Affiliate (with respect to each Company Plan) and each Company
    Plan is in compliance in all material respects with the
    currently applicable provisions of ERISA and the Code and the
    regulations thereunder (including Section 4980B of the
    Code, Subtitle K, Chapter 100 of the Code and
    Sections 601 through 608 and Section 701 et seq. of
    ERISA). No Company Plan that is subject to ERISA has assets that
    include securities issued by any Company or any ERISA Affiliate.

 

    (c) There are no Legal Proceedings (except claims for
    benefits payable in the normal operation of the Company Plans
    and proceedings with respect to qualified domestic relations
    orders) against or involving any Company Plan or asserting any
    rights or claims to benefits under any Company Plan that could
    reasonably be expected to give rise to any material liability to
    the Companies.

 

    (d) Each Company Plan that is intended to be qualified
    under Section 401(a) of the Code has received a
    determination letter from the Internal Revenue Service to the
    effect that such Company Plan is qualified and the plan and the
    trust related thereto are exempt from federal income taxes under
    Sections 401(a) and 501(a), respectively, of the Code, no
    such determination letter has been revoked and revocation has
    not been threatened.

 

    (e) No Company Plan is subject to Section 412 of the
    Code or Title IV of ERISA. No liability under Title IV
    of ERISA has been incurred by the Company or any ERISA Affiliate
    that has not been satisfied in full, and no condition exists
    that presents a material risk to the Company or any ERISA
    Affiliate of incurring a liability under such Title.

 

    (f) No Company Plan is a “multiemployer plan” (as
    defined in Section 4001(a)(3) of ERISA).

 

    (g) Except as reflected in the Financial Statements, there
    are no unfunded obligations of the Companies under any Company
    Plan providing benefits after termination of employment to any
    employee of the Companies (or to any beneficiary of any such
    employee), including but not limited to retiree health coverage
    and deferred compensation, but excluding continuation of health
    coverage required to be continued under Section 4980B of
    the Code or other applicable law and insurance conversion
    privileges under state law.

 

    (h) No act or omission has occurred and no condition exists
    with respect to any Company Plan that would reasonably be
    expected to subject any of the Companies to (i) any
    material fine, penalty, tax or liability of any kind imposed
    under ERISA or the Code or (ii) any obligations to pay a
    material amount pursuant to any contractual indemnification or
    contribution obligation protecting any fiduciary, insurer or
    service provider with respect to any Company Plan.

 

    (i) No Company Plan is funded by or related to a
    “voluntary employee’s beneficiary association”
    within the meaning of Section 501(c)(9) of the Code.

    

    16

 

    (j) Section 3.22(j) of the Company Disclosure Schedule
    discloses each: (i) agreement between any Company and any
    stockholder, director, executive officer or other key employee
    of any Company (A) the benefits of which are contingent, or
    the terms of which are altered, upon the occurrence of the
    transactions contemplated by this Agreement, (B) providing
    any term of employment or compensation guarantee or
    (C) providing severance benefits or other benefits after
    the termination of employment of such director, executive
    officer or key employee and (ii) Company Plan, any of the
    benefits of which provided thereunder will be increased, or the
    vesting of the benefits of which will be accelerated, by the
    occurrence of any of the transactions contemplated by this
    Agreement or the value of any of the benefits of which provided
    thereunder will be calculated on the basis of any of the
    transactions contemplated by this Agreement.

 

    (k) Section 3.22(k) of the Company Disclosure Schedule
    sets forth the policy of each Company with respect to accrued
    vacation, accrued sick time and earned time off and the amount
    of such liabilities as of March 31, 2007. With respect to
    all employees of MDS Italy, Section 3.22(k) of the Company
    Disclosure Schedule also sets forth details of accrued and
    unused annual vacation, public holidays, any other paid leaves,
    T.F.R. — Trattamento di Fine Rapporto, monthly
    wages in addition to the twelve calendar monthly wages,
    seniority increases, contributions to Employee Benefit Plans and
    all allowances and indemnities to which employees are entitled
    to under applicable laws, collective agreements and company
    policies or practices.

 

    (l) Each Company Plan that is a “nonqualified deferred
    compensation plan” (as defined in Code
    Section 409A(d)(1)) has been operated since January 1,
    2005 in good faith compliance with Code Section 409A, to
    the extent applicable.

 

    3.23  Environmental Matters.

 

    The representations and warranties set forth in this
    Section 3.23 shall be the sole representations and
    warranties by the Stockholder with respect to matters arising
    under or governed by Environmental Laws or relating to Materials
    of Environmental Concern, and no other representations and
    warranties shall be deemed to apply to such matters.

 

    (a) Each Company is and, has been in compliance in all
    material respects with all applicable Environmental Laws. There
    is no pending or, to the knowledge of the Companies, written or
    oral threat of civil or criminal litigation, written notice of
    violation, formal administrative proceeding, formal
    investigation or written information request by any Governmental
    Entity, relating to the violation of or liability under any
    Environmental Law involving any Company.

 

    (b) None of the Companies has any liabilities or
    obligations arising from the release by the Companies or any
    third party of any Materials of Environmental Concern into the
    environment.

 

    (c) None of the Companies is a party to or bound by any
    court order, administrative order, consent order or other
    written agreement (excluding, however, Permits required under
    Environmental Laws, which are addressed in Section 3.23(f)
    hereof) between any such Company and any Governmental Entity
    whose primary purpose is to impose or confirm legal obligations
    or liabilities arising under any Environmental Law.

 

    (d) Set forth in Section 3.23(d) of the Company
    Disclosure Schedule is a list of all documents (whether in hard
    copy or electronic form) whose primary purpose is to provide
    information on the presence of Materials of Environmental
    Concern in the soil
    and/or
    groundwater at premises currently or previously owned or
    operated by a Company (whether conducted by or on behalf of such
    Company or a third party, and whether done at the initiative of
    such Company or directed by a Governmental Entity or other third
    party) which such Company has possession of. A complete and
    accurate copy of each such document has been provided to the
    Buyer.

 

    (e) There is no material environmental liability of any
    solid or hazardous waste transporter or treatment, storage or
    disposal facility that has been used by any Company and for
    which such Company is legally responsible.

 

    (f) Section 3.23(f) of the Company Disclosure Schedule
    sets forth a list of all material Permits required by
    Environmental Laws issued to or held by any Company. Such listed
    Permits are the only material Permits required by Environmental
    Laws that are required for the Companies to conduct their
    respective businesses.

    

    17

 

    Each such Permit is in full force and effect; the applicable
    Company is, and at all times has been, in compliance with the
    terms of each such Permit; and, to the knowledge of the
    Companies, no suspension or cancellation of such Permit is being
    threatened in writing or orally. Each such Permit will continue
    in full force and effect immediately following the Closing.

 

    3.24  Legal Compliance.

 

    (a) Each Company is conducting and has conducted its
    business and operations in compliance in all material respects
    with all applicable U.S. and
    non-U.S. regional,
    federal, state and local laws, regulations, rules, decrees,
    writs and orders (“Laws and Regulations”), including
    without limitation the rules and regulations of the United
    States Food and Drug Administration (“FDA”). None of
    the Companies has, within the last three (3) years,
    received any notice or communication from any Governmental
    Entity alleging noncompliance with any applicable Laws and
    Regulations. No civil, criminal or administrative action, suit,
    demand, claim, complaint, hearing, investigation, notice, demand
    letter, warning letter, inquiry, proceeding or request for
    information is pending or to the knowledge of the Companies,
    threatened against any Company and none of the Companies
    currently has any liability (whether actual or contingent) for
    failure to comply with any Laws and Regulations. There is no
    act, omission, event, or circumstance of which the Companies
    have knowledge that would reasonably be expected to give rise to
    any such action, suit, demand, claim, complaint, hearing,
    investigation, notice, demand letter, warning letter, inquiry,
    proceeding or request for information or any such liability. To
    the knowledge of the Companies, there has not been any violation
    of any Laws and Regulations by any Company in its product
    development efforts, submissions or reports to any Governmental
    Entity that could reasonably be expected to require
    investigation, corrective action or enforcement action. None of
    the Companies has ever been or is now subject to FDA’s
    Applications Integrity Policy (“AIP”). To the
    Companies’ knowledge, the Companies have not made any false
    statements on, or material omissions from, any applications,
    approvals, reports, or other submissions to any Governmental
    Entity, or made any false statements on, or material omissions
    from, any other records and documentation prepared or maintained
    to comply with the requirements of any Governmental Entity.

 

    (b) Except for MDS Italy, the Companies’ facilities
    are registered, as required, and each product manufactured by or
    on behalf of any Company for commercial distribution in the
    United States that is required to be listed (the
    “Products”) with the FDA under Section 510 of the
    Federal Food, Drug, and Cosmetic Act, 21 U.S.C.
    § 301 et seq. (the “FD&C Act”), and the
    applicable rules and regulations thereunder, is so listed. Each
    Product in current commercial distribution is either a
    Class I or Class II medical device as defined under
    21 U.S.C. § 360c(a)(1)(A) and (B), and applicable
    rules and regulations thereunder and was first marketed under,
    and is covered by, an FDA order of substantial equivalence in
    response to a premarket notification submitted in compliance
    with 21 U.S.C. § 360(k) and the applicable rules
    and regulations thereunder, or is exempt from such premarket
    notification in accordance with 21 U.S.C.
    § 360(l) or (m) and applicable rules and
    regulations thereunder. Each Company is, and at all times has
    been, in compliance with, and each Product in current commercial
    distribution is designed, manufactured, prepared, assembled,
    packaged, labeled, stored and processed in compliance with the
    applicable requirements of the Quality System Regulation set
    forth in 21 C.F.R. Part 820. Each Company is, and at
    all times has been, in compliance with the written procedures,
    record-keeping and FDA reporting requirements for Medical Device
    Reporting set forth in 21 C.F.R. Part 803. None of the
    Companies is subject to any enforcement proceedings by the FDA
    and, to the Companies’ knowledge, no such proceedings have
    been threatened. None of the Companies has introduced in
    commercial distribution during the period of three calendar
    years immediately preceding the date hereof any Products which
    were upon their shipment by any Company adulterated or
    misbranded in violation of 21 U.S.C. §331.

 

    (c) None of the Companies has received or possesses any of
    the following documents: (i) 510(k) rescission letters,
    (ii) notice of FDA regulatory actions against any Company
    including notice of adverse findings, regulatory, untitled or
    warning letters or mandatory recalls, (iii) documentation
    related to voluntary or mandatory recalls of any products of the
    Companies, (iv) reports of removals or corrections or
    correspondence to and from the FDA concerning such reports and
    all related investigations or (v) safety alerts.

    

    18

 

    (d) Each Company has provided the Buyer a true and correct
    copy of each of the following with respect to the last three
    calendar years and year-to-date 2007: (i) a list of all
    products marketed by such Company or any predecessor thereto,
    and for each such product, the legal basis for distributing the
    product in interstate commerce, (ii) all justifications by
    such Company or any predecessor thereto for not filing a 510(k)
    for a change or modification to a marketed device,
    (iii) all substantially equivalent or not substantially
    equivalent letters received by such Company or any predecessor
    to such Company, (iv) all correspondence, meeting notes or
    minutes, or related documents concerning material communications
    between the FDA and such Company or any predecessor thereto as
    they relate to 510(k) submissions, including requests for
    additional information and responses thereto, and compliance
    matters (v) all management review reports of such Company,
    (vi) all documents in response to actual or proposed FDA
    regulatory action(s), including all documents showing corrective
    actions undertaken by such Company or any predecessor thereto in
    response to FDA regulatory action(s), (vii) all FDA reports
    of inspection (Establishment Inspection Reports and
    Form FDA 483s) and FDA inspection reports of such Company
    evaluating compliance with Good Manufacturing Practices
    (“GMP”) or analogous procedures from other
    Governmental Entities, including foreign regulatory authorities,
    (viii) all Medical Device Reports (“MDRs”) filed
    by such Company or any predecessor to such Company,
    (ix) all MedWatch forms received by such Company or any
    predecessor thereto, and (x) all written reports of GMP
    audits of such Company or any predecessor thereto and their
    suppliers in the Company’s possession or control. Each
    Company has provided the Buyer a true and correct copy of all
    product labeling and advertising currently in use, including
    that posted on such Company’s website and in such
    Company’s user’s manuals.

 

    (e) None of the Companies nor, to the knowledge of the
    Companies, any other person (i) who has a direct or
    indirect ownership interest (as those terms are defined in
    42 C.F.R. Section 1001.1001(a)(2)) in any of the
    Companies, or (ii) who has an ownership or control interest
    (as defined in 42 C.F.R. Section 420.201) in any of
    the Companies, or (iii) who is an officer, director, agent
    (as defined in 42 C.F.R. Section 1001.1001(a)(2)) or
    managing employee (as defined in 42 C.F.R.
    Section 420.201) of any of the Companies, has engaged in
    any activities which are prohibited, or are cause for civil
    penalties or mandatory or permissive exclusion from Medicare,
    Medicaid, or any other State Health Care Program or Federal
    Health Care Program (as those terms are defined in
    42 C.F.R. Section 1001.2) under 42 U.S.C.
    Sections 1320a-7,
    1320a-7a,
    1320a-7b, or
    1395nn, or the Federal False Claim Act, 31. U.S.C.
    Section 3729, or the regulations promulgated pursuant to
    such statutes.

 

    (f) MDS Mexico’s maquila program and activities
    are in compliance with all applicable Laws and Regulations in
    all material respects, and MDS Mexico has obtained all
    extensions required for MDS Mexico to carry out its activities
    as historically and currently conducted.

 

    (g) MDS Mexico submitted its Sectoral Promotion Programs
    (PROSEC) applications to Mexico’s Ministry of Economy. The
    Ministry of Economy has approved the PROSEC and a true, correct
    and complete copy of the application and approval has been
    delivered to the Buyer.

 

    (h) All temporarily imported goods that are used by or
    located at MDS Mexico’s facility are included in MDS
    Mexico’s maquila program and have been and remain
    legally imported in Mexico, and no goods have remained in Mexico
    longer than the relevant authorized period.

 

    3.25  Customers and
    Suppliers.  Section 3.25 of the Company
    Disclosure Schedule sets forth a list of (a) each customer
    that accounted for more than 1% of the consolidated revenues of
    the Companies during the last full fiscal year or the interim
    period through the Most Recent Balance Sheet Date and the amount
    of revenues accounted for by such customer during each such
    period and (b) each supplier that is the sole supplier of
    any significant product or service to any Company. No such
    customer or supplier has indicated within the past year that it
    will stop, or decrease the rate of, buying products or supplying
    products, as applicable, to any Company and the Companies have
    no reason to believe that any of the foregoing is likely to
    occur as a result of the transactions contemplated by this
    Agreement or for any other reason within the next
    12 months. No unfilled customer order or commitment
    obligating any Company to process, manufacture or deliver
    products or perform services will result in a loss to such
    Company upon completion of performance. No purchase order or
    commitment of any Company is in excess of normal requirements,
    nor are prices provided therein in excess of current market
    prices for the products or services to be provided thereunder.

    

    19

 

    3.26  Permits.  Section 3.26
    of the Company Disclosure Schedule sets forth a list of all
    material Permits issued to or held by any Company. Such listed
    Permits are the only material Permits that are required for the
    Companies to conduct their respective businesses (in the case of
    MDS Italy, as required within the last three (3) years).
    Each such Permit is in full force and effect; the applicable
    Company is, and with respect to each Company other than MDS
    Italy, at all times has been and, with respect to MDS Italy,
    within the last three (3) years has been, in compliance
    with the terms of each such Permit; and, to the knowledge of the
    Companies, no suspension or cancellation of such Permit is
    threatened and there is no basis for believing that such Permit
    will not be renewable upon expiration. Each such Permit will
    continue in full force and effect immediately following the
    Closing.

 

    3.27  Certain Business Relationships With
    Affiliates.  Except for (i) the business
    relationships between MDS Mexico and certain of its Affiliates
    with respect to MDS Mexico’s maquila program and
    activities as set forth in Section 3.27 of the Company
    Disclosure Schedule, (ii) rights pursuant to the License
    Agreement and the Consulting Agreement and (iii) payments
    and expenses set forth in Section 3.27 of the Company
    Disclosure Schedule, no Affiliate of any Company (other than an
    Affiliate that is one of the Companies) (a) owns any
    property or right, tangible or intangible, which is used in the
    business of any Company and which will survive the Closing,
    (b) has any claim or cause of action against any Company,
    or (c) owes any money to, or is owed any money by, any
    Company, which right or obligation will survive the Closing.
    Section 3.27 of the Company Disclosure Schedule describes
    any transactions or relationships between any Company, on the
    one hand, and any Affiliate of such Company (other than any
    Affiliate that is one of the Companies), which occurred or have
    existed since the beginning of the time period covered by the
    Financial Statements and which would have the effect of either
    (i) overstating operating income of the Companies if the
    parties had not been Affiliates or (ii) understating
    operating expense of the Companies if the parties had not been
    Affiliates.

 

    3.28  Brokers’
    Fees.  None of the Companies has any liability
    or obligation to pay any fees or commissions to any broker,
    finder or agent with respect to the transactions contemplated by
    this Agreement.

 

    3.29  Books and Records.  The
    minute books and other similar records of each Company contain
    complete and accurate records of all actions taken at any
    meetings of such Company’s stockholders, Board of Directors
    or any committee thereof, and of all written consents executed
    in lieu of the holding of any such meeting. The books and
    records of each Company accurately reflect in all material
    respects the assets, liabilities, business, financial condition
    and results of operations of such Company and have been
    maintained in accordance with good business and bookkeeping
    practices. Section 3.29 of the Company Disclosure Schedule
    contains a list of all bank accounts and safe deposit boxes of
    the Companies and the names of persons having signature
    authority with respect thereto or access thereto.

 

    3.30  Disclosure.  No
    representation or warranty by any Company contained in this
    Agreement (including the Company Disclosure Schedule) omits to
    state any material fact necessary, in light of the circumstances
    under which it was made, in order to make the statements herein
    or therein not misleading. No statement contained in any other
    document, certificate or other instrument delivered by or on
    behalf of any Company pursuant to this Agreement, contains any
    untrue statement of a material fact or omits to state any
    material fact necessary, in light of the circumstances under
    which it was made, in order to make the statements herein or
    therein not misleading.

 

    3.31  Controls and
    Procedures.  

 

    (a) Each Company maintains accurate books and records
    reflecting its assets and liabilities and maintains proper and
    adequate internal control over financial reporting which provide
    assurance that (i) transactions are executed with
    management’s authorization, (ii) transactions are
    recorded as necessary to permit preparation of the consolidated
    financial statements of the Companies and to maintain
    accountability for the consolidated assets of the Companies,
    (iii) access to assets of such Company is permitted only in
    accordance with management’s authorization, (iv) the
    reporting of assets of such Company is compared with existing
    assets at regular intervals and (v) accounts, notes and
    other receivables and inventory were recorded accurately, and
    proper and adequate procedures are implemented to effect the
    collection thereof on a current and timely basis.

    

    20

 

    (b) The Companies have not, since July 30, 2002,
    extended or maintained credit, arranged for the extension of
    credit, modified or renewed an extension of credit, in the form
    of a personal loan or otherwise, to or for any director or
    executive officer of any of the Companies. Section 3.31(b)
    of the Company Disclosure Schedule identifies any loan or
    extension of credit maintained by any Company to which the
    second sentence of Section 13(k)(1) of the Exchange Act
    would apply.

 

    3.32  [Intentionally
    Deleted].  

 

    3.33  Government
    Contracts.  None of the Companies is or has
    been party to any contract, subcontract, agreement or commitment
    with any Governmental Entity.

 

    3.34  Questionable
    Payments.  None of the Companies (nor, to the
    Companies’ knowledge, any of their respective officers,
    directors, executives, representatives, agents or employees)
    (a) has used or is using any corporate funds for any
    illegal contributions, gifts, entertainment or other unlawful
    expenses relating to political activity, (b) has used or is
    using any corporate funds for any direct or indirect unlawful
    payments to any foreign or domestic government officials or
    employees, (c) has violated or is violating any provision
    of the Foreign Corrupt Practices Act of 1977, (d) has
    established or maintained, or is maintaining, any unlawful fund
    of corporate monies or other properties or (e) has made any
    bribe, unlawful rebate, payoff, influence payment, kickback or
    other unlawful payment of any nature.

 

    3.35  Personally Identifiable Information and
    Privacy.  Except as set forth in
    Section 3.35 of the Company Disclosure Schedule, none of
    the Companies is currently or has ever been a “business
    associate” as such term is defined under HIPAA.

 

    3.36  Customs Matters.

 

    (a) Each of the Companies has filed all necessary documents
    with CBP and other customs authorities in each of the countries
    in which the Companies have imported merchandise, and none of
    the Companies has received any notices from CBP or other customs
    authorities with regard to the correctness of any such filings.

 

    (b) None of the Companies is the subject of any ongoing
    audits, Focused Assessments, investigations or other reviews by
    CBP or other customs authorities in any of the countries in
    which any Company operates or imports merchandise.

 

    (c) None of the Companies has made any prior disclosures or
    other types of voluntary disclosures relating to its import or
    export activities in any country during the last three
    (3) years.

 

    (d) Within the last three (3) years, none of the
    Companies have been asked to provide, nor have they provided, a
    statute of limitations waiver in response to any requests from
    customs authorities in any country in which any Company imports
    or operates.

 

    (e) All powers of attorney currently in existence that have
    been granted by each of the Companies to customs brokers are
    listed in Section 3.36(e) of the Company Disclosure
    Schedule.

 

    (f) Each Company has the appropriate customs bond or other
    necessary security in place in each of the countries in which it
    operates in order to import merchandise.

 

    (g) During the last three (3) years, none of the
    Companies has received any notice of any kind from CBP, or any
    other customs authority in any country in which any Company
    imports or operates, that any additional duties are, or may be,
    due; that a seizure of merchandise has occurred; that liquidated
    damages or penalties of any kind are, or may be, due.

 

    (h) None of the products exported by the Companies is the
    subject of any controls in place by any countries from which any
    Company exports product. To the extent that any of the
    merchandise exported by any of the Companies is subject to
    specific export regulations or export controls of any kind, each
    of the Companies is in full compliance with all applicable laws
    and regulations. Any necessary permits, licenses or similar
    governmental approvals for the exportation of its products have
    been obtained.

 

    (i) Within the last three (3) years, none of the
    Companies has been denied a license, permit or other
    authorization to export products from any of the countries in
    which it operates.

    

    21

 

    (j) To the extent that each of the Companies utilizes free
    trade agreements, including the North American Free Trade
    Agreement, in its export and import activities, each of the
    Companies is in full compliance with, and have issued
    and/or
    received necessary certificates of origin in order to claim
    preferential duty treatment for the importations.

 

    (k) Within the last three (3) years, none of the
    Companies has received any rulings of any kind from any customs
    authorities in any countries in which it imports or exports
    merchandise.

 

    ARTICLE IV

    

 

    REPRESENTATIONS
    AND WARRANTIES OF THE BUYER
    

 

    The Buyer represents and warrants to the Stockholder that,
    except as expressly set forth in the Buyer Disclosure Schedule,
    the statements contained in this Article IV are true and
    correct as of the date of this Agreement and will be true and
    correct as of the Closing as though made as of the Closing,
    except to the extent such representations and warranties are
    specifically made as of a particular date (in which case such
    representations and warranties will be true and correct as of
    such date). The Buyer Disclosure Schedule shall be arranged in
    sections and subsections corresponding to the numbered and
    lettered sections and subsections contained in this
    Article IV. Any item of disclosure in any section or
    subsection of the Buyer Disclosure Schedule shall be deemed to
    be a disclosure in any other individual schedule of the Buyer
    Disclosure Schedule as to which the applicability of such item
    is readily apparent in light of the disclosure made.

 

    4.1  Organization, Standing and
    Power.  The Buyer is a corporation duly
    organized, validly existing and in good standing under the laws
    of the jurisdiction of its incorporation, has all requisite
    corporate power and authority to own, lease and operate its
    properties and assets and to carry on its business as now being
    conducted and as proposed to be conducted, and is duly qualified
    to do business and is in good standing as a foreign corporation
    in each jurisdiction in which the character of the properties it
    owns, operates or leases or the nature of its activities makes
    such qualification necessary, except for such failures to be so
    organized, qualified or in good standing, individually or in the
    aggregate, that have not had, and are not reasonably likely to
    have, a Buyer Material Adverse Effect.

 

    4.2  Capitalization.  

 

    (a) The authorized capital stock of the Buyer consists of
    100,000,000 shares of Buyer Common Stock and
    5,000,000 shares of preferred stock, $.001 par value
    per share (the “Buyer Preferred Stock”), which shares
    may be issued in one or more series from time to time by the
    Buyer’s Board of Directors. The rights and privileges of
    each class of the Buyer’s capital stock are set forth in
    the Buyer’s Certificate of Incorporation. As of the close
    of business on May 30, 2007, 29,925,152 shares of
    Buyer Common Stock were issued and outstanding and no shares of
    Buyer Preferred Stock were issued and outstanding. No material
    change in such capitalization has occurred between May 30,
    2007 and the date of this Agreement.

 

    (b) Section 4.2(b) of the Buyer Disclosure Schedule
    lists the number of shares of Buyer Common Stock reserved for
    future issuance as of May 30, 2007 pursuant to equity plans
    of the Buyer (collectively, “Buyer Stock Plans”), and
    the total number of outstanding options to purchase shares of
    the Buyer Common Stock (such outstanding options, “Buyer
    Stock Options”) under Buyer Stock Plans as of the close of
    business on May 30, 2007.

 

    (c) Section 4.2(c) of the Buyer Disclosure Schedule
    shows the number of shares of Buyer Common Stock reserved for
    future issuance pursuant to warrants or other outstanding rights
    (other than Buyer Stock Options) to purchase shares of Buyer
    Common Stock outstanding as of May 30, 2007 (such
    outstanding warrants or other rights, the “Buyer
    Warrants”).

 

    (d) All outstanding shares of Buyer Common Stock are, and
    all shares of Buyer Common Stock subject to issuance as
    specified in Sections 4.2(b) and 4.2(c) or pursuant to
    Article I, upon issuance on the terms and conditions
    specified in the instruments pursuant to which they are
    issuable, will be, duly authorized, validly issued, fully paid
    and nonassessable and not subject to or issued in violation of
    any purchase option, call option, right of first refusal,
    preemptive right, subscription right or any similar right under
    any provision of the

    

    22

 

    DGCL, the Buyer’s Certificate of Incorporation or By-laws
    or any agreement to which the Buyer is a party or is otherwise
    bound.

 

    4.3  Authority; No Conflict; Required Filings
    and Consents.  

 

    (a) The Buyer has all requisite corporate power and
    authority to enter into this Agreement and the Related
    Agreements and, subject only to the Buyer Stockholder Approval,
    to consummate the transactions contemplated by this Agreement
    and the Related Agreements. The execution and delivery of this
    Agreement and the Related Agreements and the consummation of the
    transactions contemplated by this Agreement and the Related
    Agreements by the Buyer have been duly authorized by all
    necessary corporate action on the part of the Buyer, subject
    only to the required receipt of the Buyer Stockholder Approval.
    This Agreement has been duly executed and delivered by the Buyer
    and constitutes the valid and binding obligation of the Buyer,
    enforceable against the Buyer in accordance with its terms,
    subject to the Bankruptcy Exception. Each of the Related
    Agreements to be entered into by the Buyer, upon execution
    thereof by the Buyer, will constitute the valid and binding
    obligation of the Buyer, enforceable against the Buyer in
    accordance with its terms, subject to the Bankruptcy Exception.

 

    (b) The execution and delivery of this Agreement and the
    Related Agreements by the Buyer do not and will not, and the
    consummation by the Buyer of the transactions contemplated by
    this Agreement and the Related Agreements shall not,
    (i) conflict with, or result in any violation or breach of,
    any provision of the Certificate of Incorporation or By-laws of
    the Buyer, (ii) conflict with, or result in any violation
    or breach of, or constitute (with or without notice or lapse of
    time, or both) a default (or give rise to a right of
    termination, cancellation or acceleration of any obligation or
    loss of any material benefit) under, require a consent or waiver
    under, constitute a change in control under, require the payment
    of a penalty under or result in the imposition of any Security
    Interest on the Buyer’s assets under, any of the terms,
    conditions or provisions of any note, bond, mortgage, indenture,
    lease, license, contract or other agreement, instrument or
    obligation to which the Buyer is a party or by which the Buyer
    or any of its properties or assets may be bound, or
    (iii) subject to obtaining the Buyer Stockholder Approval
    and compliance with the requirements specified in
    clauses (i) through (vi) of Section 4.3(c),
    conflict with or violate any permit, concession, franchise,
    license, judgment, injunction, order, decree, statute, law,
    ordinance, rule or regulation applicable to the Buyer or any of
    its properties or assets, except in the case of
    clauses (ii) and (iii) of this Section 4.3(b) for
    any such conflicts, violations, breaches, defaults,
    terminations, cancellations, accelerations or losses that,
    individually or in the aggregate, are not reasonably likely to
    have a Buyer Material Adverse Effect.

 

    (c) No consent, approval, license, permit, order or
    authorization of, or registration, declaration, notice or filing
    with, any Governmental Entity is required by or with respect to
    the Buyer in connection with the execution and delivery of this
    Agreement or any Related Agreement by the Buyer or the
    consummation by the Buyer of the transactions contemplated by
    this Agreement or any Related Agreement, except for (i) the
    pre-merger notification requirements under the HSR Act,
    (ii) the filing of the Registration Statement with the SEC
    in accordance with the Securities Act, (iii) the filing of
    the Proxy Statement/Prospectus with the SEC in accordance with
    the Exchange Act, (iv) the filing of such reports,
    schedules or materials under Section 13 of or
    Rule 14a-12
    under the Exchange Act and materials under Rule 165 and
    Rule 425 under the Securities Act as may be required in
    connection with this Agreement and the transactions contemplated
    hereby, (v) such consents, approvals, orders,
    authorizations, registrations, declarations and filings as may
    be required under applicable state securities laws and such
    other consents, licenses, permits, orders, authorizations,
    filings, approvals and registrations which, if not obtained or
    made, would not be reasonably likely, individually or in the
    aggregate, to have a Buyer Material Adverse Effect, and
    (vi) the filing with the NASDAQ Global Market of (A) a
    Notification Form for Listing of Additional Shares and
    (B) a Notification Form for Change in the Number of Shares
    Outstanding, with respect to the shares of Buyer Common Stock
    issuable pursuant to the terms of this Agreement.

 

    (d) The affirmative vote of the holders of a majority of
    the shares of Buyer Common Stock present or represented by proxy
    and voting at the Buyer Meeting (the “Buyer Stockholder
    Approval”) is the only vote of the holders of any class or
    series of the Buyer’s capital stock or other securities
    necessary for approval of the issuance of the Buyer Shares and
    for the consummation by the Buyer of the other transactions
    contemplated

    

    23

 

    by this Agreement. There are no bonds, debentures, notes or
    other indebtedness of the Buyer having the right to vote (or
    convertible into, or exchangeable for, securities having the
    right to vote) on any matters on which stockholders of the Buyer
    may vote.

 

    4.4  Reports and Financial
    Statements.  The Buyer has previously
    furnished or made available to the Stockholder complete and
    accurate copies, as amended or supplemented, of the Buyer
    Reports. The Buyer Reports constitute all of the documents
    required to be filed by the Buyer under Section 13 or
    subsections (a) or (c) of Section 14 of the
    Exchange Act with the SEC from January 1, 2006 through the
    date of this Agreement, except for any current reports on
    Form 8-K
    relating to events occurring during the Buyer’s current
    fiscal quarter, the failure of which to report would not result
    in the Buyer’s failure to be eligible to register its
    shares on a
    Form S-3
    Registration Statement, provided that any such missed reports
    are filed with the SEC prior to the filing of the
    Form S-3
    Registration Statement or the required disclosure is included in
    the Buyer’s
    Form 10-Q
    for the current fiscal quarter. The Buyer Reports complied in
    all material respects with the requirements of the Exchange Act
    and the rules and regulations thereunder when filed. As of their
    respective dates, the Buyer Reports did not contain any untrue
    statement of a material fact or omit to state a material fact
    required to be stated therein or necessary to make the
    statements therein, in light of the circumstances under which
    they were made, not misleading. The audited financial statements
    and unaudited interim financial statements of the Buyer included
    in the Buyer Reports (i) complied as to form in all
    material respects with applicable accounting requirements and
    the published rules and regulations of the SEC with respect
    thereto when filed, (ii) were prepared in accordance with
    GAAP applied on a consistent basis throughout the periods
    covered thereby (except as may be indicated therein or in the
    notes thereto, and in the case of quarterly financial
    statements, as permitted by
    Form 10-Q
    under the Exchange Act), and (iii) fairly present the
    consolidated financial condition, results of operations and cash
    flows of the Buyer as of the respective dates thereof and for
    the periods referred to therein.

 

    4.5  Absence of Certain
    Changes.  Since December 31, 2006, there
    has occurred no event or development which, individually or in
    the aggregate, has had, or could reasonably be expected to have
    in the future, a Buyer Material Adverse Effect.

 

    ARTICLE V

    

 

    COVENANTS
    

 

    5.1  Closing Efforts.  Each of
    the Parties shall use his or its Reasonable Best Efforts to take
    all actions and to do all things necessary, proper or advisable
    to consummate the transactions contemplated by this Agreement,
    including using its Reasonable Best Efforts to ensure that
    (i) his or its representations and warranties remain true
    and correct in all material respects through the Closing Date
    and (ii) the conditions to the obligations of the other
    Party to consummate the transactions contemplated hereby are
    satisfied.

 

    5.2  Governmental and Third-Party Notices and
    Consents.  

 

    (a) Each Party shall use its Reasonable Best Efforts to
    obtain, at its expense, all waivers, permits, consents,
    approvals or other authorizations from Governmental Entities,
    and to effect all registrations, filings and notices with or to
    Governmental Entities, as may be required for such Party to
    consummate the transactions contemplated by this Agreement and
    to otherwise comply with all applicable laws and regulations in
    connection with the consummation of the transactions
    contemplated by this Agreement. Without limiting the generality
    of the foregoing, each of the Parties shall promptly file any
    Notification and Report Forms and related material that it may
    be required to file with the Federal Trade Commission and the
    Antitrust Division of the United States Department of Justice
    under the
    Hart-Scott-Rodino
    Act, shall use its Reasonable Best Efforts to obtain an early
    termination of the applicable waiting period, and shall make any
    further filings or information submissions pursuant thereto that
    may be necessary, proper or advisable; provided, however, that
    notwithstanding anything to the contrary in this Agreement, the
    Buyer shall not be obligated (A) to respond to formal
    requests for additional information or documentary material
    pursuant to 16 C.F.R. 803.20 under the
    Hart-Scott-Rodino
    Act except to the extent it elects to do so in its sole
    discretion or (B) to sell or dispose of

    

    24

 

    or hold separately (through a trust or otherwise) any assets or
    businesses of the Buyer or its Affiliates, including the
    Companies.

 

    (b) The Stockholder shall use its Reasonable Best Efforts
    to obtain, at its expense, all such waivers, consents or
    approvals from third parties, and to give all such notices to
    third parties, as are required to be listed in the Company
    Disclosure Schedule.

 

    5.3  Special Meeting,
    S-4
    Registration Statement and Proxy
    Statement/Prospectus.  

 

    (a) The Buyer shall use its Reasonable Best Efforts to
    obtain, as promptly as practicable, the approval of the issuance
    of shares of Buyer Common Stock pursuant to the terms of this
    Agreement by the stockholders of the Buyer at a special meeting
    of the stockholders of the Buyer (the “Buyer
    Meeting”), as required by the rules of the NASDAQ Global
    Market, in accordance with the applicable requirements of the
    DGCL. In connection therewith, the Buyer shall prepare, with the
    assistance and cooperation of the Stockholder, the
    S-4
    Registration Statement and the Proxy Statement/Prospectus. The
    Buyer shall file the
    S-4
    Registration Statement with the SEC and shall, with the
    assistance of the Stockholder, promptly respond to any SEC
    comments on the
    S-4
    Registration Statement and shall otherwise use its Reasonable
    Best Efforts to have the
    S-4
    Registration Statement declared effective under the Securities
    Act as promptly as practicable. Promptly following such time as
    the S-4
    Registration Statement is declared effective, the Buyer shall
    distribute the Proxy Statement/Prospectus to its stockholders.

 

    (b) The Buyer, acting through its Board of Directors, shall
    include in the Proxy Statement/Prospectus the recommendation of
    its Board of Directors (the “Buyer Board”) that the
    stockholders of the Buyer vote in favor of the approval of the
    issuance of shares of Buyer Common Stock pursuant to the terms
    of this Agreement. Notwithstanding the foregoing, the obligation
    set forth in the foregoing sentence shall not apply (and the
    Buyer Board shall be permitted to modify or withdraw any such
    recommendation previously made) if the Buyer Board reasonably
    concludes, after consultation with its outside legal counsel,
    that the fiduciary duties of the Buyer Board under applicable
    law prohibit it from fulfilling the obligations in the foregoing
    sentence.

 

    (c) The Buyer shall ensure that the
    S-4
    Registration Statement does not contain an untrue statement of a
    material fact or omit to state a material fact required to be
    stated therein or necessary to make the statements therein not
    misleading (provided that the Buyer shall not be responsible for
    the accuracy or completeness of any information relating to the
    Stockholder or any of the Companies or furnished by the
    Stockholder or any of the Companies in writing for inclusion in
    the S-4
    Registration Statement).

 

    (d) The Stockholder shall, and shall cause the Companies
    to, ensure that any information relating to any of them or
    furnished by any of them to the Buyer in writing for inclusion
    in the S-4
    Registration Statement does not contain an untrue statement of
    material fact or omit to state a material fact required to be
    stated therein or necessary to make the statements therein not
    misleading.

 

    5.4  Operation of
    Business.  Except as contemplated by this
    Agreement during the period from the date of this Agreement to
    the Closing, the Stockholder shall cause each of the Companies
    to conduct its operations in the Ordinary Course of Business and
    in compliance with all applicable laws and regulations and, to
    the extent consistent therewith, use its Reasonable Best Efforts
    to preserve intact its current business organization, keep its
    physical assets in good working condition, keep available the
    services of its current officers and employees and preserve its
    relationships with customers, suppliers and others having
    business dealings with it to the end that its goodwill and
    ongoing business shall not be impaired in any material respect.
    Without limiting the generality of the foregoing, except as set
    forth on Schedule 5.4 attached hereto, prior to the
    Closing, the Stockholder shall cause each of the Companies not
    to without the written consent of the Buyer:

 

    (a) issue or sell any stock, or equity participation or
    other securities of any Company or any options, warrants or
    rights to acquire any such stock, or equity participation or
    other securities, or repurchase or redeem any stock, or equity
    participation or other securities of any Company;

 

    (b) split, combine or reclassify any shares of or equity
    participation in its capital stock; or declare, set aside or pay
    any dividend or other distribution (whether in cash, stock or
    property or any combination thereof) in respect of its capital
    stock;

    

    25

 

    (c) create, incur or assume any indebtedness (including
    obligations in respect of capital leases); assume, guarantee,
    endorse or otherwise become liable or responsible (whether
    directly, contingently or otherwise) for the obligations of any
    other person or entity; or make any loans, advances or capital
    contributions to, or investments in, any other person or entity;

 

    (d) enter into, adopt or amend any Employee Benefit Plan or
    any employment or severance agreement or arrangement of the type
    described in Section 3.22(j) or (except for normal
    increases in the Ordinary Course of Business for employees who
    are not Affiliates) increase in any manner the compensation or
    fringe benefits of, or materially modify the employment terms
    of, its directors, officers or employees, generally or
    individually, or pay any bonus or other benefit to its
    directors, officers or employees (except for existing payment
    obligations listed in Section 3.22 of the Company
    Disclosure Schedule) or hire any new officers or (except in the
    Ordinary Course of Business) any new employees;

 

    (e) acquire, sell, lease, license or dispose of any assets
    or property (including any shares or other equity interests in
    or securities of any Subsidiary or any corporation, partnership,
    association or other business organization or division thereof),
    other than purchases and sales of assets in the Ordinary Course
    of Business;

 

    (f) mortgage or pledge any of its property or assets or
    subject any such property or assets to any Security Interest;

 

    (g) discharge or satisfy any Security Interest or pay any
    obligation or liability other than in the Ordinary Course of
    Business;

 

    (h) amend its charter, by-laws or other organizational
    documents;

 

    (i) change its accounting methods, principles or practices,
    except insofar as may be required by a generally applicable
    change in GAAP, or make any new elections, or changes to any
    current elections, with respect to Taxes;

 

    (j) enter into, amend, terminate, take or omit to take any
    action that would constitute a violation of or default under, or
    waive any rights under, any contract or agreement of a nature
    required to be listed in Section 3.12, Section 3.13,
    Section 3.15(a) or Section 3.21 of the Company
    Disclosure Schedule;

 

    (k) make or commit to make any capital expenditure in
    excess of $10,000 per item or $50,000 in the aggregate, other
    than amounts set forth in the capital budget of the Companies
    for 2007, a copy of which is attached to
    Schedule 5.4 to this Agreement;

 

    (l) institute or settle any Legal Proceeding;

 

    (m) take any action or fail to take any action permitted by
    this Agreement with the knowledge that such action or failure to
    take action would result in (i) any of the representations
    and warranties of the Stockholder set forth in this Agreement
    becoming untrue or (ii) any of the conditions set forth in
    Section 6.1 not being satisfied; or

 

    (n) agree in writing or otherwise to take any of the
    foregoing actions.

 

    5.5  Access to Information.  

 

    (a) The Stockholder shall, and shall cause each of the
    Companies to, permit representatives of the Buyer to have full
    access (at all reasonable times, and in a manner so as not to
    interfere with the normal business operations of the Companies)
    to all premises, properties, financial, Tax and accounting
    records (including the work papers of the independent
    accountants of the Companies), contracts, other records and
    documents, and personnel, of or pertaining to any of the
    Companies.

 

    (b) Within 20 days after the end of each month ending
    prior to the Closing, beginning with June 2007, the Stockholder
    shall furnish to the Buyer an unaudited income statement of each
    Company for such month and a balance sheet of each Company as of
    the end of such month, prepared on a basis consistent with the
    Financial Statements. Such financial statements shall present
    fairly the financial condition and results of

    

    26

 

    operations of the Companies on a consolidated basis as of the
    dates thereof and for the periods covered thereby, and shall be
    consistent with the books and records of the Companies.

 

    5.6  Notice of Stockholder
    Changes.  From the date of this Agreement
    through the Closing Date, the Stockholder shall promptly advise
    the Buyer in writing of (a) any event occurring subsequent
    to the date of this Agreement that would render any
    representation or warranty of the Stockholder contained in
    Article II or III to be untrue or inaccurate such that
    the condition set forth in Section 6.1(d) would not be
    satisfied; (b) any breach of any covenant or obligation of
    the Stockholder under this Agreement such that the condition set
    forth in Section 6.1(e) would not be satisfied; and
    (c) any Company Material Adverse Effect.

 

    5.7  Exclusivity.  

 

    (a) The Stockholder shall not, and shall cause each of the
    Companies not to, and shall cause each of the Companies to
    require each of its officers, directors, employees,
    representatives and agents not to, directly or indirectly,
    (i) initiate, solicit, encourage or otherwise facilitate
    any inquiry, proposal, offer or discussion with any party (other
    than the Buyer) concerning any merger, reorganization,
    consolidation, recapitalization, business combination,
    liquidation, dissolution, share exchange, sale of stock, sale of
    material assets or similar business transaction involving any of
    the Companies or any division of any of the Companies,
    (ii) furnish any non-public information concerning the
    business, properties or assets of any of the Companies or any
    division of any of the Companies to any party (other than the
    Buyer) or (iii) engage in discussions or negotiations with
    any party (other than the Buyer) concerning any such transaction.

 

    (b) The Stockholder shall, and shall cause each of the
    Companies to, immediately notify any party with which
    discussions or negotiations of the nature described in paragraph
    (a) above were pending that the Stockholder or such
    Company, as the case may be, is terminating such discussions or
    negotiations. If the Stockholder or any of the Companies
    receives any inquiry, proposal or offer of the nature described
    in paragraph (a) above, the Stockholder shall or shall
    cause such Company, as the case may be, to, within one business
    day after such receipt, notify the Buyer of such inquiry,
    proposal or offer, including the identity of the other party and
    the terms of such inquiry, proposal or offer.

 

    5.8  Expenses.  Except as set
    forth in Article VII, Section 1.5 or Section 11.2
    hereof and in the Escrow Agreement, the Buyer shall bear its own
    costs and expenses (including legal and accounting fees and
    expenses) incurred in connection with this Agreement and the
    transactions contemplated hereby, and the Stockholder shall bear
    the costs and expenses (including legal and accounting fees and
    expenses) of the Stockholder and the Companies incurred in
    connection with this Agreement and the transactions contemplated
    hereby.

 

    5.9  Listing of Buyer
    Shares.  The Buyer shall file with the NASDAQ
    Global Market (a) a Notification Form for Listing
    Additional Shares and (b) a Notification Form for Change in
    the Number of Shares Outstanding, with respect to the shares of
    Buyer Common Stock issuable pursuant to the terms of this
    Agreement.

 

    5.10  S-X Financial
    Statements.  

 

    (a) Prior to the Closing, the Stockholder shall, and shall
    cause the Companies to, (i) provide such information,
    assistance and cooperation as the Buyer may reasonably request
    in connection with any offering or Buyer filings under the
    Exchange Act, including, without limitation, assisting with the
    preparation of the Proxy Statement/Prospectus and all other
    registration statements filed under the Securities Act and
    reports under the Securities Act (the “Public
    Filings”), (ii) cooperate with the Buyer so the Buyer
    can obtain information sufficient for the Buyer to comply with
    the requirements for the Management’s Discussion and
    Analysis portion of the Public Filings, (iii) use
    commercially reasonable efforts to cause the officers of the
    Companies to execute any reasonably necessary officers’
    certificates or management representation letters to the
    Companies’ accountants to issue unqualified reports with
    respect to the financial statements to be included in any Public
    Filings, (iv) upon reasonable prior notice, use
    commercially reasonable efforts to make senior management and
    other representatives of the Companies available to participate
    in the preparation of any Public Filings or related materials
    and (v) request from the present and former independent
    accountants of the Companies that they (A) cooperate with
    and assist the Buyer in preparing financial statements with
    respect to

    

    27

 

    the businesses of the Companies for inclusion by the Buyer in
    the Public Filings, including in compliance with the applicable
    provisions of
    Regulation S-X,
    Form 8-K,
    Form S-3
    and
    Form S-4,
    (B) participate in drafting sessions related to the
    preparation of the Public Filings, (C) make work papers
    available to the Buyer and its representatives (subject to Buyer
    entering into any agreements reasonably required or requested by
    the accountants in connection with the provision of such work
    papers), (D) deliver “comfort-letters” in
    customary form in connection with any offering, and
    (E) deliver consents to the inclusion of financial
    statements required in connection with any Public Filing.

 

    (b) Without limiting the foregoing, the Stockholder shall,
    and/or shall
    cause the Companies to, deliver to the Buyer historical
    financial statements for the businesses of the Companies for
    fiscal years 2004, 2005 and 2006 (or the applicable portions
    thereof), each of the fiscal quarters ended September 30,
    2006 and December 31, 2006, and any other financial
    information with respect to the businesses of the Companies
    required by Item 9.01 of
    Form 8-K
    and
    Regulation S-X
    of the SEC for a business acquisition required to be described
    in answer to Item 2.01 of
    Form 8-K,
    including information required in order for the Buyer to prepare
    the pro forma financial information required by Item 9.01
    of
    Form 8-K.

 

    (c) Not later than forty (40) days after the
    completion of each fiscal quarter of the Companies that occurs
    during the period from the date of this Agreement through the
    Closing Date, the Stockholder shall,
    and/or shall
    cause the Companies to, deliver to the Buyer quarterly financial
    statements for the businesses of the Medisystems Operating
    Companies (together with any required notes), which financial
    statements shall include a balance sheet, statement of
    operations and statement of cash flows prepared in a manner
    consistent with the Financial Statements.

 

    5.11  FIRPTA Tax
    Certificates.  Prior to the Closing, the
    Stockholder shall cause each Company to deliver to Buyer a
    notice that its Shares are not “U.S. real property
    interests” in accordance with Treasury Regulations under
    Sections 897 and 1445 of the Code, together with evidence
    reasonably satisfactory to Buyer that such Company has provided
    notice to the Internal Revenue Service in accordance with the
    provisions of
    Section 1.897-2(h)(2)
    of the Treasury Regulations. If Buyer does not receive the
    notice described above prior to the Closing Date, Buyer shall be
    permitted to withhold from the payments to be made pursuant to
    this Agreement any required withholding Tax under
    Section 1445 of the Code.

 

    5.12  Intentionally Omitted.

 

    5.13  Notice of Buyer
    Changes.  From the date of this Agreement
    through the Closing Date, the Buyer shall promptly advise the
    Stockholder in writing of (a) any event occurring
    subsequent to the date of this Agreement that would render any
    representation or warranty of the Buyer contained in
    Article IV to be untrue or inaccurate such that the
    condition set forth in Section 6.2(e) would not be
    satisfied; (b) any breach of any covenant or obligation of
    the Buyer under this Agreement such that the condition set forth
    in Section 6.2(f) would not be satisfied; and (c) any
    Buyer Material Adverse Effect.

 

    5.14  Elimination of Certain
    Items.  Notwithstanding the provisions of
    Section 5.4 of this Agreement, prior to the Closing, the
    Stockholder shall, subject to Section 8.3 of this
    Agreement, (a) cause the Companies to pay, to the extent
    not previously paid (i) all accrued royalties owed by the
    Companies as of December 31, 2006 under the Non-Exclusive
    License to Inventions Sub-License & Royalty Agreement,
    dated as of October 1, 1998, between MDS and DSU (as
    successor-in-interest
    to MTC), as amended, plus all royalties owed by the Companies as
    of the effective date of the License Agreement, and (ii) a
    cash dividend equal to $55,000.00 per month for each month from
    January 1, 2007 through the Closing Date plus a cash
    dividend equal to 35% of the Companies’ net income for the
    period from January 1, 2007 through the Closing Date to
    reimburse the Shareholder for his tax liability with regards to
    the Companies, less the amount of the royalty payable under the
    License Agreement as of its effective date, and (b) cause
    all other trade payables and trade receivables between any
    Company, on the one hand, and all Affiliates of such Company
    (other than an Affiliate that is one of the Companies), on the
    other hand, to be cancelled; provided, however,
    that the aggregate payments to be made under clause (a) of
    this sentence shall in no event exceed the cash on hand of the
    Companies as of immediately before the Closing Date; and
    provided, further, that any shortfall in the
    required payments hereunder resulting from the application of
    the limitation contained in the preceding proviso shall be paid
    by MDS as promptly as possible after the Closing Date out of its
    operating income earned after the Closing Date

    

    28

 

    and before any amount is paid by any Company to Buyer or any
    Affiliate of Buyer. Prior to any payment pursuant to this
    Section 5.14, the Stockholder shall provide notice to the
    Buyer of the proposed payment (including the amount and
    documentation showing the calculation of the amount in a form
    reasonably requested by the Buyer, the name of the payee and the
    proposed payment date). The Stockholder shall provide to the
    Buyer evidence of all payments made pursuant to this
    Section 5.14 promptly upon such payment.

 

    5.15  Releases.  Effective
    upon the Closing Date, to the maximum extent permitted by
    applicable law, Stockholder, on behalf of himself and each of
    the Medisystems Operating Companies and DSU, hereby irrevocably
    releases, acquits and forever discharges the Companies, and each
    of them, and their respective employees, directors, officers,
    agents, successors, assigns, heirs, executors and administrators
    from any and all claims or liability for infringement of any
    Intellectual Property or any unauthorized use or disclosure of
    trade secrets of the Medisystems Operating Companies and DSU by
    any such parties occurring prior to the Closing Date. Effective
    upon the Closing Date, to the maximum extent permitted by
    applicable law, each of the Companies, hereby irrevocably
    releases, acquits and forever discharges the Medisystems
    Operating Companies and DSU and each of their respective
    employees, directors, officers, agents, successors, assigns,
    heirs, executors and administrators from any and all claims or
    liability for infringement of any Intellectual Property or any
    unauthorized use or disclosure of trade secrets of any of the
    Companies by any such parties occurring prior to the Closing
    Date.

 

    ARTICLE VI

    

 

    CONDITIONS
    TO CONSUMMATION OF THE TRANSACTIONS
    

 

    6.1  Conditions to Obligation of the
    Buyer.  The obligation of the Buyer to
    consummate the transactions contemplated by this Agreement is
    subject to the satisfaction (or waiver by the Buyer) of the
    following conditions:

 

    (a) all applicable waiting periods (and any extensions
    thereof) under the
    Hart-Scott-Rodino
    Act shall have expired or otherwise been terminated;

 

    (b) the issuance of the Buyer Shares to the Stockholder
    pursuant to the terms of this Agreement shall have obtained the
    Buyer Stockholder Approval;

 

    (c) the Stockholder shall have obtained at his own expense
    (and shall have provided copies thereof to the Buyer) all of the
    waivers, permits, consents, approvals or other authorizations,
    and effected all of the registrations, filings and notices,
    referred to in Section 5.2 which are required on the part
    of the Stockholder and any of the Companies;

 

    (d) the representations and warranties of the Stockholder
    set forth in Article II, the first sentence of
    Section 3.1 and in Section 3.3 and any representations
    and warranties of the Stockholder set forth in this Agreement
    that are qualified as to materiality shall be true and correct
    in all respects, and all other representations and warranties of
    the Stockholder set forth in this Agreement shall be true and
    correct in all material respects, in each case as of the date of
    this Agreement and as of the Closing as though made as of the
    Closing, except to the extent such representations and
    warranties are specifically made as of a particular date (in
    which case such representations and warranties shall be true and
    correct as of such date);

 

    (e) the Stockholder shall have performed or complied with
    his agreements and covenants required to be performed or
    complied with under this Agreement as of or prior to the Closing;

 

    (f) no Legal Proceeding shall be pending or threatened in
    writing wherein an unfavorable judgment, order, decree,
    stipulation or injunction would (i) prevent consummation of
    the transactions contemplated by this Agreement, (ii) cause
    the transactions contemplated by this Agreement to be rescinded
    following consummation or (iii) have, individually or in
    the aggregate, a Company Material Adverse Effect, and no such
    judgment, order, decree, stipulation or injunction shall be in
    effect;

 

    (g) the Stockholder shall have delivered to the Buyer the
    Company Certificate;

    

    29

 

    (h) the Buyer shall have received the financial statements,
    information and other documents required to be provided under
    Section 5.10;

 

    (i) the Stockholder shall have caused each Company to hold
    a meeting of its stockholder(s) to approve the resignation of
    the outgoing directors and officers of each Company and the
    appointment of incoming directors and officers, as specified by
    Buyer, effective as of the Closing;

 

    (j) the Buyer shall have received copies of the
    resignations, effective as of the Closing, of each director and
    officer (in the case of MDS Italy, this will include the Board
    of Statutory Auditors), of each of the Companies (other than any
    such resignations which the Buyer designates, by written notice
    to the Stockholder, as unnecessary), and such other
    documentation that may be required under relevant local law or
    reasonably requested by Buyer to implement the resignation of
    the outgoing directors and officers and the appointment of the
    incoming directors and officers as specified by Buyer, including
    but not limited to full waivers from the outgoing directors
    releasing the Companies from any claims, in accordance with text
    to be provided by Buyer;

 

    (k) the Buyer shall have received (i) the Escrow
    Agreement, duly executed by the Stockholder and the Escrow
    Agent; and (ii) the Consulting Agreement, duly executed by
    DSU and the Stockholder;

 

    (l) the Buyer shall have received such other certificates
    and instruments (including certificates of good standing of each
    of the Companies in their jurisdiction of organization and the
    various foreign jurisdictions in which they are qualified,
    certified charter documents, certificates as to the incumbency
    of officers and the adoption of authorizing resolutions) as it
    shall reasonably request in connection with the Closing.

 

    6.2  Conditions to Obligation of the
    Stockholder.  The obligation of the
    Stockholder to consummate the transactions contemplated by this
    Agreement is subject to the satisfaction of the following
    conditions:

 

    (a) all applicable waiting periods (and any extensions
    thereof) under the
    Hart-Scott-Rodino
    Act shall have expired or otherwise been terminated;

 

    (b) the
    S-4
    Registration Statement shall have become effective in accordance
    with the provisions of the Securities Act, and there shall not
    be in effect any stop order suspending the effectiveness of the
    S-4
    Registration Statement or any proceedings seeking such a stop
    order;

 

    (c) the Buyer shall have filed with the NASDAQ Global
    Market (a) a Notification Form for Listing of Additional
    Shares and (b) a Notification Form for Change in the Number
    of Shares Outstanding, with respect to the shares of Buyer
    Common Stock issuable pursuant to the terms of this Agreement;

 

    (d) the Buyer shall have effected all of the registrations,
    filings and notices referred to in Section 5.2 which are
    required on the part of the Buyer;

 

    (e) The representations and warranties of the Buyer set
    forth in the first sentence of Section 4.1 and in
    Section 4.3 and any representations and warranties of the
    Buyer set forth in this Agreement that are qualified as to
    materiality shall be true and correct in all respects, and all
    other representations and warranties of the Buyer set forth in
    this Agreement shall be true and correct in all material
    respects, in each case as of the date of this Agreement and as
    of the Closing as though made as of the Closing, except to the
    extent such representations and warranties are specifically made
    as of a particular date (in which case such representations and
    warranties shall be true and correct as of such date);

 

    (f) the Buyer shall have performed or complied with its
    agreements and covenants required to be performed or complied
    with under this Agreement as of or prior to the Closing;

 

    (g) no Legal Proceeding shall be pending or threatened in
    writing wherein an unfavorable judgment, order, decree,
    stipulation or injunction would (i) prevent consummation of
    the transactions contemplated by this Agreement, (ii) cause
    the transactions contemplated by this Agreement to be rescinded
    following consummation or (iii) have, individually or in
    the aggregate, a Buyer Material Adverse Effect, and no such
    judgment, order, decree, stipulation or injunction shall be in
    effect;

    

    30

 

    (h) the Buyer shall have delivered to the Stockholder the
    Buyer Certificate;

 

    (i) the Stockholder shall have received (i) the Escrow
    Agreement, duly executed by the Buyer and the Escrow Agent; and
    (ii) the Consulting Agreement, duly executed by the Buyer
    or an Affiliate thereof; and

 

    (j) the Stockholder shall have received such other
    certificates and instruments (including certificates of good
    standing of the Buyer in its jurisdiction of organization,
    certified charter documents, certificates as to the incumbency
    of officers and the adoption of authorizing resolutions) as it
    shall reasonably request in connection with the Closing.

 

    ARTICLE VII

    

 

    INDEMNIFICATION
    

 

    7.1  Indemnification by the
    Stockholder.  The Stockholder shall indemnify
    the Buyer in respect of, and hold it harmless against, any and
    all Damages incurred or suffered by the Buyer or any Affiliate
    thereof resulting from, relating to or constituting:

 

    (a) any breach, as of the date of this Agreement or as of
    the Closing Date, of any representation or warranty of the
    Stockholder contained in this Agreement or any other agreement
    or instrument executed by the Stockholder or any of the
    Companies to the Buyer pursuant to this Agreement;

 

    (b) any failure to perform any covenant or agreement of the
    Stockholder contained in this Agreement or any agreement or
    instrument furnished by the Stockholder or any of the Companies
    to the Buyer pursuant to this Agreement; or

 

    (c) any failure of the Stockholder to have good, valid and
    marketable title to the Shares, free and clear of all Security
    Interests.

 

    7.2  Indemnification by the
    Buyer.  The Buyer shall indemnify the
    Stockholder in respect of, and hold him harmless against, any
    and all Damages incurred or suffered by the Stockholder
    resulting from, relating to or constituting:

 

    (a) any breach, as of the date of this Agreement or as of
    the Closing Date, of any representation or warranty of the Buyer
    contained in this Agreement or any other agreement or instrument
    executed by the Buyer to the Stockholder pursuant to this
    Agreement; or

 

    (b) any failure to perform any covenant or agreement of the
    Buyer contained in this Agreement or any agreement or instrument
    furnished by the Buyer to the Stockholder pursuant to this
    Agreement.

 

    7.3  Indemnification Claims.  

 

    (a) An Indemnified Party shall give written notification to
    the Indemnifying Party of the commencement of any Third Party
    Action. Such notification shall be given within 20 days
    after receipt by the Indemnified Party of notice of such Third
    Party Action, and shall describe in reasonable detail (to the
    extent known by the Indemnified Party) the facts constituting
    the basis for such Third Party Action and the amount of the
    claimed Damages; provided, however, that no delay or failure on
    the part of the Indemnified Party in so notifying the
    Indemnifying Party shall relieve the Indemnifying Party of any
    liability or obligation hereunder except to the extent of any
    Damages caused by or arising out of such failure. Within
    20 days after delivery of such notification, the
    Indemnifying Party may, upon written notice thereof to the
    Indemnified Party, assume control of the defense of such Third
    Party Action with counsel reasonably satisfactory to the
    Indemnified Party; provided that (i) the Indemnifying Party
    may only assume control of such defense if (A) it
    acknowledges in writing to the Indemnified Party that any
    damages, fines, costs or other liabilities that may be assessed
    against the Indemnified Party in connection with such Third
    Party Action constitute Damages for which the Indemnified Party
    shall be indemnified pursuant to this Article VII and
    (B) the amount claimed as Damages is less than or equal to
    the amount of Damages for which the Indemnifying Party is liable
    under this Article VII and (ii) the Indemnifying Party
    may not assume control of the defense of a Third Party Action
    involving

    

    31

 

    criminal liability or in which equitable relief (provided, that
    this clause shall not apply to equitable relief for the
    remediation of contamination of environmental media including
    soils, sediments, surface water and groundwater) is sought
    against the Indemnified Party. If the Indemnifying Party does
    not, or is not permitted under the terms hereof to, so assume
    control of the defense of a Third Party Action, the Indemnified
    Party shall control such defense. The Non-controlling Party may
    participate in such defense at its own expense. The Controlling
    Party shall keep the Non-controlling Party advised of the status
    of such Third Party Action and the defense thereof and shall
    consider in good faith recommendations made by the
    Non-controlling Party with respect thereto. The Non-controlling
    Party shall furnish the Controlling Party with such information
    as it may have with respect to such Third Party Action
    (including copies of any summons, complaint or other pleading
    which may have been served on such party and any written claim,
    demand, invoice, billing or other document evidencing or
    asserting the same) and shall otherwise cooperate with and
    assist the Controlling Party in the defense of such Third Party
    Action. The fees and expenses of counsel to the Indemnified
    Party with respect to a Third Party Action shall be considered
    Damages for purposes of this Agreement if (i) the
    Indemnified Party controls the defense of such Third Party
    Action pursuant to the terms of this Section 7.3(a) or
    (ii) the Indemnifying Party assumes control of such defense
    and the Indemnified Party reasonably concludes that the
    Indemnifying Party and the Indemnified Party have conflicting
    interests or different defenses available with respect to such
    Third Party Action. The Indemnifying Party shall not agree to
    any settlement of, or the entry of any judgment arising from,
    any Third Party Action without the prior written consent of the
    Indemnified Party, which shall not be unreasonably withheld,
    conditioned or delayed. The Indemnified Party shall not agree to
    any settlement of, or the entry of any judgment arising from,
    any such Third Party Action without the prior written consent of
    the Indemnifying Party, which shall not be unreasonably
    withheld, conditioned or delayed. In the event that the Damages
    require remediation of releases of Materials of Environmental
    Concern at properties of the Companies, the Indemnifying Party
    shall be entitled to remediate such releases pursuant to the
    least stringent standards consistent with the land use and the
    lease obligations existing at such properties as of the Closing
    Date, provided further, than any such remediation shall not
    adversely affect on-going commercial operations at the property.

 

    (b) In order to seek indemnification under this
    Article VII, an Indemnified Party shall deliver a Claim
    Notice to the Indemnifying Party. If the Indemnified Party is
    the Buyer and is seeking to enforce such claim pursuant to the
    Escrow Agreement, the Indemnifying Party shall also deliver a
    copy of the Claim Notice to the Escrow Agent.

 

    (c) Within 20 days after delivery of a Claim Notice,
    the Indemnifying Party shall deliver to the Indemnified Party a
    Response, in which the Indemnifying Party shall: (i) agree
    that the Indemnified Party is entitled to receive all of the
    Claimed Amount, (ii) agree that the Indemnified Party is
    entitled to receive the Agreed Amount; or (iii) dispute
    that the Indemnified Party is entitled to receive any of the
    Claimed Amount. In connection with any Response delivered
    pursuant to (i) or (ii) in the first sentence of this
    paragraph (c), the Indemnifying Party shall pay the Claimed
    Amount (in the case of clause (i)) or the Agreed Amount (in the
    case of clause (ii)) by delivering to the Indemnified Party such
    number of shares of Buyer Common Stock (or, in the case of a
    claim against the Stockholder, instructions to the Escrow Agent
    to release such number of Escrow Shares) as have an aggregate
    Value equal to the Claimed Amount or the Agreed Amount, as the
    case may be. In the case of such Response regarding a Claim
    Notice against the Stockholder, the Stockholder shall
    (A) deliver to the Escrow Agent a written notice executed
    by both Parties instructing the Escrow Agent to distribute to
    the Buyer the appropriate number of Escrow Shares and
    (B) to the extent there are insufficient or no remaining
    Escrow Shares, deliver to the Buyer original stock certificates
    representing the appropriate number of shares of Buyer Common
    Stock, together with duly executed and completed stock powers
    and written representations relating to ownership of and title
    to such shares as reasonably requested by the Buyer. For
    purposes of this Article VII, the “Value” of any
    Escrow Shares or other shares of Buyer Common Stock delivered in
    satisfaction of an indemnity claim shall be the average of the
    last reported sale prices per share of the Buyer Common Stock on
    the NASDAQ Global Market over the five consecutive trading days
    ending two trading days before such Escrow Shares are
    distributed by the Escrow Agent to the Buyer or such other
    shares of Buyer Common Stock are delivered to the Indemnified
    Party, as applicable, as provided above (subject to equitable
    adjustment in the event of any stock split, stock dividend,
    reverse stock split or similar event affecting the Buyer Common
    Stock since the beginning of such
    five-day
    period), multiplied by the number of

    

    32

 

    such Escrow Shares or such other shares of Buyer Common Stock
    are delivered to the Indemnified Party. In the case of any such
    shares of Buyer Common Stock that are delivered to the
    Stockholder by the Buyer, such shares of Buyer Common Stock
    shall not be registered under the Securities Act and shall bear
    the following legend:

 

    “The shares represented by this certificate have not been
    registered under the Securities Act of 1933, as amended, and may
    not be offered, sold or otherwise transferred, pledged or
    hypothecated unless and until such shares are registered under
    such Act or an opinion of counsel satisfactory to the Company is
    obtained to the effect that such registration is not
    required.”

 

    In addition, and notwithstanding any other terms hereof, in no
    event shall Buyer be obligated to issue or deliver to
    Stockholder, pursuant to this Article VII or the Consulting
    Agreement, an aggregate number of shares of Buyer Common Stock
    representing twenty percent (20%) or more of the
    then-outstanding shares of Buyer Common Stock without the prior
    approval of Buyer’s stockholders.

 

    (d) During the
    30-day
    period following the delivery of a Response that reflects a
    Dispute, the Indemnifying Party and the Indemnified Party shall
    use good faith efforts to resolve the Dispute. If the Dispute is
    not resolved within such
    30-day
    period, such Dispute shall be resolved in a state or federal
    court sitting in the State of Delaware, in accordance with
    Section 13.9. If the Indemnified Party is the Buyer and is
    seeking to enforce the claim that is the subject of the Dispute
    pursuant to the Escrow Agreement, the Indemnifying Party and the
    Indemnified Party shall deliver to the Escrow Agent, promptly
    following the resolution of the Dispute (whether by mutual
    agreement, arbitration, judicial decision or otherwise), a
    written notice executed by both Parties instructing the Escrow
    Agent as to what (if any) portion of the Escrow Shares shall be
    distributed to the Buyer
    and/or the
    Stockholder (which notice shall be consistent with the terms of
    the resolution of the Dispute).

 

    (e) Notwithstanding the other provisions of this
    Section 7.3, if a customer, distributor, supplier or vendor
    of the Companies asserts (other than by means of a lawsuit) that
    an Indemnified Party is liable to such customer, distributor,
    supplier or vendor for a monetary or other obligation which may
    constitute or result in Damages for which such Indemnified Party
    may be entitled to indemnification pursuant to this
    Article VII, and such Indemnified Party reasonably
    determines that it has a valid business reason to fulfill such
    obligation, then (i) such Indemnified Party shall be
    entitled to satisfy such obligation, without prior notice to or
    consent from the Indemnifying Party, (ii) such Indemnified
    Party may subsequently make a claim for indemnification in
    accordance with the provisions of this Article VII, and
    (iii) such Indemnified Party shall be reimbursed, in
    accordance with the provisions of this Article VII, for any
    such Damages for which it is entitled to indemnification
    pursuant to this Article VII (subject to the right of the
    Indemnifying Party to dispute both the Indemnified Party’s
    entitlement to indemnification and the amount for which it is
    entitled to indemnification, under the terms of this
    Article VII).

 

    7.4  Survival of Representations and
    Warranties.  All representations and
    warranties that are covered by the indemnification agreements in
    Section 7.1(a) and Section 7.2(a) shall
    (a) survive the Closing and (b) shall expire on the
    date 24 months following the Closing Date, except that
    (i) the representations and warranties set forth in
    Article II and Sections 3.1 (Organization,
    Qualification and Corporate Power), 3.2 (Capitalization), 3.3
    (Authorization of Transaction), 4.1 (Organization, Standing and
    Power), 4.2 (Capitalization) and 4.3 (Authority; No Conflict;
    Required Filings and Consents) shall survive the Closing without
    limitation; (ii) the representations and warranties set
    forth in Sections 3.9 (Tax Matters), 3.22 (Employee
    Benefits), and 3.36 (Customs Matters) shall survive until
    30 days following expiration of all statutes of limitation
    applicable to the matters referred to therein and (iii) the
    representations and warranties set forth in Section 3.23
    (Environmental Matters) shall expire on the date 36 months
    following the Closing Date. If an Indemnified Party delivers to
    an Indemnifying Party, before expiration of a representation or
    warranty, either a Claim Notice based upon a breach of such
    representation or warranty, or an Expected Claim Notice based
    upon a breach of such representation or warranty, then the
    applicable representation or warranty shall survive until, but
    only for purposes of, the resolution of any claims arising from
    or related to the matter covered by such notice. If the legal
    proceeding or written claim with respect to which an Expected
    Claim Notice has been given is definitively withdrawn or
    resolved in favor of the Indemnified Party, the Indemnified
    Party shall promptly so

    

    33

 

    notify the Indemnifying Party; and if the Indemnified Party has
    delivered a copy of the Expected Claim Notice to the Escrow
    Agent and Escrow Shares have been retained in escrow after the
    Termination Date (as defined in the Escrow Agreement) with
    respect to such Expected Claim Notice, the Indemnifying Party
    and the Indemnified Party shall promptly deliver to the Escrow
    Agent a written notice executed by both parties instructing the
    Escrow Agent to distribute such retained Escrow Shares to the
    Stockholder in accordance with the terms of the Escrow
    Agreement. The rights to indemnification set forth in this
    Article VII shall not be affected by (i) any
    investigation conducted by or on behalf of an Indemnified Party
    or any knowledge acquired (or capable of being acquired) by an
    Indemnified Party, whether before or after the date of this
    Agreement or the Closing Date, with respect to the inaccuracy or
    noncompliance with any representation, warranty, covenant or
    obligation which is the subject of indemnification hereunder or
    (ii) any waiver by an Indemnified Party of any closing
    condition relating to the accuracy of representations and
    warranties or the performance of or compliance with agreements
    and covenants.

 

    7.5  Limitations.  

 

    (a) Notwithstanding anything to the contrary herein,
    (i) the aggregate liability of the Stockholder for Damages
    under Section 7.1(a) shall not exceed (x) 50% of the
    Closing Value minus (y) $1,250,000 (such resulting amount,
    the “Cap Amount”) and (ii) the Stockholder shall
    not be liable under Section 7.1(a) unless and until the
    aggregate Damages for which he would otherwise be liable under
    Section 7.1(a) exceed $1,250,000 (the
    “Deductible”) (at which point the Stockholder shall
    become liable for the Damages under Section 7.1(a) that are
    in excess of the Deductible); provided, that the limitations set
    forth in this sentence shall not apply to a claim pursuant to
    Section 7.1(a) relating to a breach of the representations
    and warranties set forth in Article II or Sections 3.1
    (Organization, Qualification and Corporate Power), 3.2
    (Capitalization), 3.3 (Authorization of Transaction), 3.9 (Tax
    Matters), 3.22 (Employee Benefits) or 3.36 (Customs Matters), or
    the first or second sentence of Section 3.10(a) (Assets).
    For purposes solely of this Article VII, all
    representations and warranties of the Stockholder in
    Articles II and III (other than Sections 3.7
    (Absence of Certain Changes) and 3.30 (Disclosure)) shall be
    construed as if the term “material” and any reference
    to “Company Material Adverse Effect” (and variations
    thereof) were omitted from such representations and warranties.

 

    (b) Notwithstanding anything to the contrary herein,
    (i) the aggregate liability of the Buyer for Damages under
    Section 7.2(a) shall not exceed the Cap Amount, and
    (ii) the Buyer shall not be liable under
    Section 7.2(a) unless and until the aggregate Damages for
    which it would otherwise be liable under Section 7.2(a)
    exceed the Deductible (at which point the Buyer shall become
    liable for the Damages under Section 7.2(a) that are in
    excess of the Deductible); provided, that the limitations set
    forth in this sentence shall not apply to a claim pursuant to
    Section 7.2(a) relating to a breach of the representations
    and warranties set forth in Sections 4.1 (Organization,
    Standing and Power), 4.2 (Capitalization) or 4.3 (Authority; No
    Conflict; Required Filings and Consents). For purposes solely of
    this Article VII, all representations and warranties of the
    Buyer in Article IV shall be construed as if the term
    “material” and any reference to “Buyer Material
    Adverse Effect” (and variations thereof) were omitted from
    such representations and warranties.

 

    (c) The Escrow Agreement is intended to secure the
    indemnification obligations of the Stockholder under this
    Agreement. However, the rights of the Buyer under this
    Article VII shall not be limited to the Escrow Shares nor
    shall the Escrow Agreement be the exclusive means for the Buyer
    to enforce such rights; provided that the Buyer shall not
    attempt to collect any Damages directly from the Stockholder
    unless there are no remaining Escrow Shares held in escrow
    pursuant to the Escrow Agreement.

 

    (d) Except with respect to claims based on fraud or willful
    misrepresentation, or claims for willful breach of any covenant
    or agreement contained in any of the provisions referenced in
    Section 13.10 of this Agreement, after the Closing, the
    rights of the Indemnified Parties under this Article VII
    and the Escrow Agreement shall be the exclusive remedy of the
    Indemnified Parties with respect to claims resulting from or
    relating to any misrepresentation, breach of warranty or failure
    to perform any covenant or agreement contained in this
    Agreement, and the Indemnified Parties agree to release and
    relinquish any and all other claims that they may have with
    respect to such matters, regardless of whether such claims arise
    by statute, in equity or at law.

    

    34

 

    (e) The Stockholder shall have no right of contribution
    against the Companies with respect to any breach by any of the
    Companies of any of its representations, warranties, covenants
    or agreements.

 

    7.6  Purchase Price
    Adjustment.  The Buyer and the Stockholder
    agree to treat each indemnification payment pursuant to this
    Article VII as an adjustment to the Base Purchase Price for
    all Tax purposes and shall take no position contrary thereto
    unless required to do so by applicable Laws and Regulations.

 

    ARTICLE VIII

    

 

    OTHER
    AGREEMENTS
    

 

    8.1  Proprietary Information.  

 

    (a) Except as otherwise provided in the Consulting
    Agreement, the Stockholder and each of his Affiliates shall hold
    in confidence and shall use their best efforts to have all
    officers, directors and personnel who continue after the Closing
    to be employed by the Stockholder or any Affiliate thereof to
    hold in confidence all knowledge and information of a secret or
    confidential nature with respect to the business of any Company
    prior to Closing and not to disclose, publish or make use of the
    same without the prior written consent of the Buyer, except to
    the extent that such information shall have become public
    knowledge other than by breach of this Agreement by the
    Stockholder or any such Affiliate.

 

    (b) If (i) the employment of an officer, director or
    other employee of the Stockholder or any Affiliate thereof, to
    whom secret or confidential knowledge or information concerning
    the business of any Company prior to Closing has been disclosed,
    is terminated and (ii) such individual is subject to an
    obligation to maintain such knowledge or information in
    confidence after such termination, the Stockholder shall, upon
    request by the Buyer, take all reasonable steps at his expense
    to enforce such confidentiality obligation in the event of an
    actual or threatened breach thereof. Any legal counsel retained
    by the Stockholder in connection with any such enforcement or
    attempted enforcement shall be selected by the Stockholder, but
    shall be subject to the approval of the Buyer, which approval
    shall not be unreasonably withheld.

 

    (c) The Stockholder agrees that the remedy at law for any
    breach of this Section 8.1 would be inadequate and that the
    Buyer shall be entitled to injunctive relief in addition to any
    other remedy it may have upon breach of any provision of this
    Section 8.1.

 

    8.2  No Solicitation or Hiring of Former
    Employees.  Except as provided by law, for a
    period of two (2) years after the Closing Date, neither the
    Stockholder nor any Affiliate thereof shall (a) solicit any
    person who was an employee of any Company on the date hereof or
    the Closing Date to terminate his employment with the Buyer (or
    any Company, as the case may be) or to become an employee of the
    Stockholder or any Affiliate of the Stockholder, or
    (b) hire any person who was an employee of any Company on
    the date hereof or the Closing Date; provided, however,
    that it shall not be a violation of this Section 8.2 for
    the Stockholder or any Affiliate thereof (either directly or
    through another entity) to (y) advertise employment
    opportunities in newspapers, trade publications or other media
    not targeted specifically at any such employees of the Buyer or
    any Company or (z) solicit
    and/or hire
    any employee who has ceased to be employed by the Buyer or any
    Company for a period of at least six months.

 

    8.3  Payment of Outstanding
    Amounts.  To the extent not fully paid at or
    prior to the Closing as promptly as practicable but not less
    than 60 days following the Closing Date, the Buyer shall
    cause the Companies to pay to the Stockholder (or to an
    Affiliate of the Stockholder designated by the Stockholder) all
    amounts required to be paid pursuant to Section 5.14 hereof
    subject to the limitation set forth therein.

 

    8.4  Resale Limitations.  From
    and after the Closing Date until the second anniversary thereof,
    the Stockholder shall not sell or otherwise dispose of the Buyer
    Shares in (a) short sales or (b) without the
    Buyer’s prior written consent, which consent shall not be
    unreasonably withheld, in trades to a single party exceeding
    250,000 Buyer Shares. The provisions of this Section 8.4
    shall terminate upon the consummation of a Change in Control of
    the Buyer. For purposes of this Article VIII, “Change
    in Control” of the Buyer means any transaction or any event
    as a result of which (i) any one or more persons or
    entities, acting as a group, acquires or, for the first time,
    controls or is able to vote (directly or through nominees or
    beneficial

    

    35

 

    ownership), after the Closing Date, 50% or more of the capital
    stock of the Buyer outstanding at the time ordinarily having
    power to vote for directors (“Voting Stock”) of the
    Buyer, provided, however, any acquisition directly from the
    Buyer shall not constitute a Change in Control, or (ii) the
    consummation of a merger, consolidation, reorganization or
    recapitalization involving the Buyer or the disposition of all
    or substantially all of the assets of the Buyer (a
    “Business Combination”), unless, immediately following
    such Business Combination, each of the following two conditions
    is satisfied: (A) all or substantially all of the persons
    and entities who beneficially owned the Voting Stock of the
    Buyer outstanding immediately prior to such Business Combination
    beneficially own, directly or indirectly, 50% or more of the
    Voting Stock of the resulting or acquiring corporation
    outstanding at the time, in substantially the same proportions
    as their ownership of the Buyer’s Voting Stock outstanding
    immediately prior to such Business Combination, and (B) no
    person or entity beneficially owns, directly or indirectly, 50%
    or more of the outstanding Voting Stock of the resulting or
    acquiring corporation.

 

    8.5  Standstill Agreement.  

 

    (a) From and after the Closing Date until the second
    anniversary thereof, except with the prior consent of the Buyer
    Board, the Stockholder shall not, and shall not permit any
    entity owned or controlled directly or indirectly by him, to:
    (i) directly or indirectly acquire, announce its intention
    to acquire, make any proposal to acquire, agree or offer to
    acquire ownership of any shares of Buyer Common Stock, or any
    other securities convertible into, or any options, warrants or
    rights to acquire any shares of Buyer Common Stock or any assets
    of Buyer (other than property acquired in the ordinary course of
    business) from the Buyer or any other person or entity;
    (ii) “solicit” or propose to “solicit”
    or participate in any “solicitation” of any,
    “proxy” (as such term is defined in
    Regulation 14A under the Exchange Act) from any holder of
    shares of Buyer Common Stock, become a “participant”
    in a “solicitation” in opposition to any matter that
    has been recommended by a majority of the members of the Buyer
    Board, propose or otherwise solicit stockholders of Buyer for
    approval of any stockholder proposal, or otherwise seek to
    influence or control the management or policies of Buyer in his
    capacity as a stockholder of the Buyer; (iii) nominate for
    election as a director of the Buyer, or vote his Buyer Shares
    for election as a director of the Buyer, any person who is not
    nominated by the then incumbent directors of the Buyer;
    (iv) vote his Buyer Shares against any proposal or matter
    recommended by a majority of the members of the Buyer Board for
    approval by the stockholders of the Buyer; (v) take any
    action to form, join in or in any way participate in any
    partnership, limited partnership or other Group (as such term is
    defined under the Exchange Act) with respect to shares of Buyer
    Common Stock; or (vi) assist or announce his intention to
    assist any other person or entity in doing any of the foregoing.

 

    (b) The provisions of Section 8.5(a) shall not apply
    to any actions, determinations or decisions taken or made by the
    Stockholder, in his capacity as a director of the Buyer and
    shall terminate upon the consummation of a Change in Control of
    the Buyer. Nothing contained in this Section 8.5 shall
    restrict or impede the Stockholder’s ability in carrying
    out his duties and obligations as a director of the Buyer.

 

    8.6  Nomination of
    Director.  In the event the Stockholder ceases
    to serve as a director of the Buyer, if the Stockholder
    nominates an individual (which may include himself) for election
    as a director of the Buyer (the “Stockholder Nominee”)
    at any annual meeting of stockholders of the Buyer, the Buyer
    Board shall (a) nominate the Stockholder Nominee for
    election to the Buyer Board, and (b) recommend that the
    Stockholder Nominee be elected to the Buyer Board and such
    recommendation shall be included in any proxy statement of the
    Buyer relating to the annual meeting at which the stockholders
    of the Buyer will consider and act upon such nomination.
    Notwithstanding the foregoing, the Buyer shall have no
    obligation under this Section 8.6 unless all of the
    following conditions are met: (x) the Stockholder Nominee
    (i) is willing to serve as a Director of the Buyer;
    (ii) is and has been at all times in compliance with
    Buyer’s Code of Business Conduct and Ethics;
    (iii) satisfies the criteria/qualifications for service on
    the Buyer Board; and (iv) for any Stockholder Nominee other
    than the Stockholder, is “independent” under the
    applicable rules of the NASDAQ Global Market; (y) the
    director nomination complies with the applicable provisions of
    the Buyer’s Bylaws, as then in effect; and (z) the
    Stockholder is not in breach of any covenant or agreement of the
    Stockholder contained in this Agreement or any Related
    Agreement. The provisions of this Section 8.6 shall
    terminate upon the consummation of a Change in Control of the
    Buyer.

    

    36

 

    8.7  [Intentionally Deleted]  

 

    8.8  Employee Matters and Transition
    Services.  

 

    (a) Subject to the provisions of Section 8.8(b) below
    and without prejudice to Buyer’s right to operate the
    business of the Companies in the Buyer’s sole discretion
    after Closing, the Buyer agrees that all persons who are
    employees of the Companies immediately prior to the Closing (the
    “Company Employees”) shall (i) continue as
    employees of the Companies following the Closing on terms and
    conditions which, in the aggregate, are reasonably comparable to
    those in effect for similarly situated employees of the
    applicable Buyer Affiliate in the relevant jurisdiction, and
    (ii) receive benefits which, in the aggregate, are
    reasonably comparable to those in effect for similarly situated
    employees of the applicable Buyer Affiliate in the relevant
    jurisdiction. To the extent that there is no applicable Buyer
    Affiliate in the relevant jurisdiction, the Company Employees
    shall (x) continue as employees of the Companies following
    the Closing on terms and conditions which, in the aggregate, are
    reasonably comparable to those currently in effect for such
    Company Employees, and (y) receive benefits which, in the
    aggregate, are reasonably comparable to those currently in
    effect for such Company Employees. Each Company Employee who
    remains in the employment of any Company following the Closing
    shall be referred to as a “Continuing Employee.” To
    the extent permitted by the Buyer Benefit Plans or by amendment
    of the Buyer Benefit Plans (other than any amendment that would
    require the approval of the Buyer’s stockholders), the
    Buyer shall, or shall cause an Affiliate of the Buyer to,
    recognize and credit each Continuing Employee for the service
    with any of the Companies (and any predecessor employer to the
    extent previously credited under the Company Plans) for purposes
    of participation and vesting under the Buyer Benefit Plans and
    for purposes of benefit level under vacation and severance
    plans, but not where giving such credit would result in a
    duplication of benefits. The Buyer shall use commercially
    reasonable efforts to cause to be provided to the Continuing
    Employees credit for any co-payments, deductibles and offsets
    (or similar payments) made with respect to Company Plans
    providing medical or dental benefits during the plan year
    including the Closing Date, for the purposes of satisfying any
    applicable deductible, out-of-pocket or similar requirements
    under corresponding Buyer Benefit Plans. Any waiting periods,
    pre-existing condition exclusions and requirements to show
    evidence of good health contained in any Buyer Benefit Plans
    providing medical, dental or other welfare benefits shall be
    waived with respect to the Continuing Employees and their
    dependents. Prior to the Closing Date, the Companies shall
    cooperate with the Buyer so as to allow the Buyer or the
    applicable Buyer Affiliate to meet with the Continuing Employees
    (at such times and locations as reasonably agreed to by the
    Companies and the Buyer), to conduct an open enrollment period
    to enable the Continuing Employees to make benefit enrollment
    elections under the Buyer Benefit Plans.

 

    (b) Prior to the Closing Date, MDS and MDS Services shall
    (i) contribute to the Medisystems Corporation 401(k) Profit
    Sharing Plan (the “Company 401(k) Plan”) a profit
    sharing contribution for the 2006 plan year in an aggregate
    amount not in excess of $165,000, (ii) contribute to the
    Company 401(k) Plan a pro-rated profit sharing contribution for
    the 2007 plan year in an aggregate amount not in excess of
    $165,000, and (iii) take all such actions as may be
    necessary to cause the Continuing Employees to become fully
    vested, immediately prior to the Closing Date, in their account
    balances and accrued benefits under the Company 401(k) Plan.

 

    (c) Prior to the Closing Date, the Stockholder shall take
    or cause to be taken all necessary action to cause the Companies
    to cease to be participating employers in the Company Plans
    listed on Schedule 8.8(c) attached hereto, effective
    immediately prior to the Closing Date. It is understood that the
    Continuing Employees will continue under the other benefit plans
    listed in Section 3.22(a) of the Company Disclosure
    Schedule at the expense of MDS until December 31, 2007.

 

    (d) Nothing contained in this Agreement shall be
    interpreted to impose any limits on the authority of Buyer, in
    its sole discretion, to make any change to the terms or
    conditions of, or terminate, the employment of any employees of
    any Companies or to terminate or amend any Buyer Benefit Plan.
    Section 8.8(a) and 8.8(b) above shall not apply to MDS
    Italy employees or MDS Mexico employees to the extent such
    Section would conflict with the requirements of a national
    collective agreement, individual work contract, applicable law
    or the current practices of MDS Italy or MDS Mexico.

    

    37

 

    8.9  Insurance.  

 

    (a) At the Closing, the Buyer shall cause the Companies to
    purchase insurance that will provide for product liability
    insurance that will survive the Closing for a period of six
    (6) years after the Closing, covering all products of the
    Companies manufactured prior to the Closing Date on
    substantially the same terms and conditions as in effect
    immediately prior to the Closing.

 

    (b) For a period of six (6) years after the Closing,
    the Buyer shall cause the Companies to maintain in effect
    product liability insurance covering all products of the
    Companies manufactured after the Closing Date on a claims-made
    basis on substantially the same terms and conditions as in
    effect as of December 31, 2006.

 

    (c) Buyer agrees that all rights to indemnification now
    existing in favor of the directors, officers or employees of any
    of the Companies (including, without limitation, any person who
    was or becomes a director, officer or employee prior to the
    Closing Date) under the applicable local law or as provided in
    each Companies’ Certificate of Incorporation, by-laws or
    other organizational document with respect to matters occurring
    on or prior to the Closing shall survive the Closing and shall
    continue in full force and effect for a period of not less than
    six (6) years after the Closing (or, in the case of claims
    or other matters occurring on or prior to the expiration of such
    six (6) year period which have not been resolved prior to
    the expiration of such six (6) year period, until such
    matters are finally resolved) and Buyer shall honor, and shall
    cause each of the Companies to honor, all such rights. Prior to
    the Closing, the Stockholder shall cause the Companies to
    purchase and pay in full a policy of directors’ and
    officers’ liability insurance and errors and omissions
    insurance that will survive the Closing for a period of six
    (6) years after the Closing. Buyer shall not cancel the
    insurance policy purchased by the Companies pursuant to the
    immediately preceding sentence.

 

    ARTICLE IX

    

 

    TAX MATTERS
    

 

    9.1  Preparation and Filing of Tax Returns;
    Payment of Taxes.  

 

    (a) To the extent not previously prepared and filed, the
    Stockholder shall prepare and timely file or shall cause to be
    prepared and timely filed (i) all Tax Returns for any
    Income Taxes of MDS Services and MDS for all taxable periods
    that end on or before the Closing Date, and (ii) and cause
    to be prepared and timely filed all other Tax Returns of any
    other Company required to be filed (taking into account
    extensions) prior to the Closing Date. The Stockholder shall
    make or cause to be made all payments required with respect to
    any such Tax Returns. The Buyer shall cooperate fully with the
    Stockholder in connection with the preparation and filing of
    such Tax Returns. The Stockholder will promptly provide or make
    available to the Buyer copies of all such Tax Returns.

 

    (b) The Buyer shall prepare and timely file or shall cause
    to be prepared and timely filed all other Tax Returns for the
    Companies. The Buyer shall make all payments required with
    respect to any such Tax Returns; provided, however, that the
    Stockholder shall promptly reimburse the Buyer to the extent any
    payment the Buyer is required to make relates to the operations
    of any Company for any period ending (or deemed pursuant to
    Section 9.1(d) to end) on or before the Closing.

 

    (c) The Buyer and the Stockholder agree that if any Company
    is permitted but not required under applicable foreign, state or
    local Tax laws to treat the Closing Date as the last day of a
    taxable period, the Buyer and the Stockholder shall treat such
    day as the last day of a taxable period.

 

    (d) The portion of any Taxes for a taxable period beginning
    before and ending after the Closing allocable to the portion of
    such period ending on the Closing Date shall be deemed to equal
    (i) in the case of Taxes that (x) are based upon or
    related to income or receipts or (y) imposed in connection
    with any sale or other transfer or assignment of property, other
    than Taxes described in Section 9.1(e), the amount which
    would be payable if the taxable year ended with the Closing
    Date, and (ii) in the case of other Taxes imposed on a
    periodic basis (including property Taxes), the amount of such
    Taxes for the entire period multiplied by a fraction the
    numerator of which is the number of calendar days in the period
    ending with the Closing Date and the denominator of which is the
    number of calendar days in the entire period. For purposes of
    the

    

    38

 

    provisions of this Section 9.1(d), each portion of such
    period shall be deemed to be a taxable period (whether or not it
    is in fact a taxable period). For purposes of
    Section 9.1(d)(i)(x), any exemption, deduction, credit or
    other item that is calculated on an annual basis shall be
    allocated pro rata per day between the period ending on the
    Closing Date and the period beginning the day after the Closing
    Date.

 

    (e) The Stockholder shall be responsible for the payment of
    any transfer, sales, use, stamp, conveyance, value added,
    recording, registration, documentary, filing and other
    non-Income Taxes and administrative fees (including, without
    limitation, notary fees) arising in connection with the
    consummation of the transactions contemplated by this Agreement
    whether levied on the Buyer, the Stockholder, any Company, or
    any of their respective Affiliates (“Transfer Taxes”).
    The Base Purchase Price shall be exclusive of any Transfer Taxes.

 

    9.2  Tax Contests; Withholding Taxes; Clearance
    Certificates and Other Matters.  

 

    (a) The Stockholder shall have the right to control, at his
    own expense, any Tax audit, initiate any claim for refund,
    contest, resolve and defend against any assessment, notice of
    deficiency, or other adjustment or proposed adjustment relating
    to any and all Taxes for any taxable period or portion thereof
    ending on or prior to the Closing Date with respect to any
    Company to the extent that the Stockholder may have either
    (i) a Tax liability (whether as a shareholder of any
    Company or otherwise) by reason of such assessment, deficiency
    or adjustment or (ii) an indemnification obligation
    hereunder with respect; provided, that, the Buyer
    shall have the right to participate in any Tax proceeding
    concerning such matters at its own expense directly or through
    counsel. The Stockholder shall not agree to any settlement of,
    or entry of any judgment arising from, any such Tax proceeding
    without the prior written consent of the Buyer, which consent
    shall not be unreasonably withheld, conditioned or delayed, if
    any such settlement or entry of judgment would be reasonably
    expected to increase the Tax liability of the Buyer or of any
    Company in any taxable period beginning after or including the
    Closing Date. The Buyer and the Stockholder shall cooperate in
    the preparation of all Tax Returns and the conduct of all Tax
    Audits or other administrative or judicial proceedings relating
    to the determination of any Tax for any Tax periods for which
    one Party could reasonably require the assistance of the other
    Party in obtaining any necessary information. Such cooperation
    shall include, but not be limited to, furnishing prior
    years’ Tax Returns or return preparation packages to the
    extent related to the Companies or any Subsidiary illustrating
    previous reporting practices or containing historical
    information relevant to the preparation of such Tax Returns, and
    furnishing such other information within such Party’s
    possession requested by the Party filing such Tax Returns as is
    relevant to their preparation. Such cooperation and information
    also shall include without limitation provision of powers of
    attorney for the purpose of signing Tax Returns and defending
    audits and promptly forwarding copies of appropriate notices and
    forms or other communications received from or sent to any
    Taxing Authority which relate to the Companies or any
    Subsidiary, and providing copies of all relevant Tax Returns to
    the extent related to the Companies or any Subsidiary, together
    with accompanying schedules and related workpapers, documents
    relating to rulings or other determinations by any Taxing
    Authority and records concerning the ownership and Tax basis of
    property, which the requested Party may possess.

 

    (b) The Buyer shall have the right to control any other Tax
    audit, initiate any other claim for refund, contest, resolve and
    defend against any other assessment, notice of deficiency, or
    other adjustment or proposed adjustment relating to any and all
    Taxes for any taxable period at its own expense. The Buyer shall
    not agree to any settlement of, or entry of any judgment arising
    from, any such Tax proceeding without the prior written consent
    of the Stockholder, which consent shall not be unreasonably
    withheld, conditioned or delayed, if any such settlement or
    entry of judgment would be reasonably expected to increase
    either (i) the Tax liability of the Stockholder in any
    taxable period, or (ii) the liability of the
    Stockholder pursuant to its indemnification obligation hereunder.

 

    (c) Notwithstanding any other provision in this Agreement,
    the Buyer and each Company shall have the right, on or after the
    Closing Date, to deduct and withhold Taxes from any payments to
    be made hereunder if such withholding is required by law and to
    collect any necessary Tax forms, including
    Form W-9
    or the appropriate series of
    Form W-8,
    as applicable, or any similar information, from the Stockholder
    and any other recipients of payments hereunder. To the extent
    that amounts are so withheld, such withheld amounts shall be

    

    39

 

    treated for all purposes of this Agreement as having been
    delivered and paid to the Stockholder or other recipient of
    payments in respect of which such deduction and withholding was
    made.

 

    (d) If, prior to the Closing, the Stockholder shall cause a
    Company to deliver to Buyer a clearance certificate or similar
    document(s) which may be required or permitted by any Tax
    Authority to relieve Buyer of any obligation to withhold Taxes
    in connection with the Transactions, Buyer shall not withhold
    any such Taxes.

 

    (e) [Intentionally Deleted]

 

    (f) If required by Mexican Tax law, the Stockholder shall
    timely pay any capital gains Tax on the transfer of his MDS
    Mexico equity participation to the Buyer. The Stockholder shall
    deliver a copy of the corresponding Mexican Tax Return and
    certified public accountant’s report (dictamen), if
    any (or documentary evidence, satisfactory to the Buyer, of not
    being subject to Mexican capital gains Tax), to the Buyer,
    within the twenty (20) calendar days following the Closing
    Date, for MDS Mexico to be able to record the Buyer as the new
    owner of the Stockholder’s equity participation in the
    Partners’ Registry Book of MDS Mexico without MDS Mexico
    incurring joint liability with respect to the Stockholder’s
    Mexican Tax obligations associated with the transfer of such
    equity participation.

 

    (g) The Parties intend that the Transaction shall
    constitute a reorganization within the meaning of
    Section 368(a)(1)(B) of the Code. The Parties adopt this
    Agreement as a “plan of reorganization” within the
    meaning of
    Sections 1.368-2(g)
    and 1.368-3(a) of the U.S. Income Tax Regulations.

 

    ARTICLE X

    

 

    REGISTRATION
    RIGHTS
    

 

    10.1  Piggyback
    Registrations.  Following the Closing Date, if
    the Buyer proposes to register any Buyer Common Stock under the
    Securities Act at any time (other than a registration statement
    relating solely to employee benefit plans or a registration
    relating to a Rule 145 transaction on
    Form S-4
    or similar forms promulgated in the future) and the registration
    form to be used may be used for the registration of Buyer
    Shares, whether or not for sale for Buyer’s own account,
    the Buyer will give prompt written notice at least 30 days
    prior to the anticipated effective date of the registration
    statement relating to such registration (the “Company
    Registration”) to the Stockholder. The Stockholder may
    elect, for purposes of such Company Registration only, to have
    all the rights and obligations of a Holder under
    Section 2.3 of the Investor Rights Agreement solely with
    respect to the Buyer Shares held by him, and, to the extent
    applicable to Section 2.3 thereof only, Sections 2.5,
    2.6, 2.7, 2.8, 2.9 and 2.11 of the Investor Rights Agreement;
    provided, however, that under
    Section 2.3(a) thereof the underwriters may reduce the
    number of Buyer Shares to be included in such registration
    statement to not less than 20% of the total number of Buyer
    Shares requested to be included in such registration;
    and, provided, further, that as a condition
    to the Stockholder’s participation in such Company
    Registration, the Stockholder must also agree not to sell any
    shares of Buyer Common Stock held by the Stockholder from the
    date of the filing of such registration statement until
    30 days following the effective date of such registration
    statement, other than in connection with such Company
    Registration. For the avoidance of doubt, the Stockholder shall
    have no rights or obligations in connection with any offering by
    the Buyer nor shall he have any rights or obligations, as a
    Holder or otherwise, under the Investor Rights Agreement.

 

    10.2  Assignment of
    Rights.  The Stockholder may not assign any of
    his rights under this Article X except in connection with
    the transfer of some or all of the Buyer Shares to a child or
    spouse, or trust for their benefit, provided each such
    transferee agrees in a written instrument delivered to the Buyer
    to be bound by the provisions of this Article X.

 

    10.3  Legends.  The Buyer
    shall be entitled to place appropriate legends on the
    certificates evidencing the Buyer Shares for purposes of
    Rule 145 under the Securities Act reflecting the
    restrictions set forth in Rule 145 and the restrictions
    imposed by Section 8.4 and to issue appropriate stop
    transfer instructions to the transfer agent for Buyer Common
    Stock.

    

    40

 

    ARTICLE XI

    

 

    TERMINATION
    

 

    11.1  Termination of
    Agreement.  The Stockholder and the Buyer may
    terminate this Agreement prior to the Closing (whether before or
    after Buyer Stockholder Approval), as provided below:

 

    (a) the Stockholder and the Buyer may terminate this
    Agreement by mutual written consent;

 

    (b) the Buyer may terminate this Agreement by giving
    written notice to the Stockholder in the event the Stockholder
    is in breach of any representation, warranty or covenant
    contained in this Agreement, and such breach
    (i) individually or in combination with any other such
    breach, would cause the conditions set forth in clauses (d)
    or (e) of Section 6.1 not to be satisfied and
    (ii) is not cured within 20 days following delivery by
    the Buyer to the Stockholder of written notice of such breach;

 

    (c) the Stockholder may terminate this Agreement by giving
    written notice to the Buyer in the event the Buyer is in breach
    of any representation, warranty or covenant contained in this
    Agreement, and such breach (i) individually or in
    combination with any other such breach, would cause the
    conditions set forth in clauses (e) or (f) of
    Section 6.2 not to be satisfied and (ii) is not cured
    within 20 days following delivery by the Stockholder to the
    Buyer of written notice of such breach;

 

    (d) either the Buyer or the Stockholder may terminate this
    Agreement by giving written notice to the other Party at any
    time after the stockholders of the Buyer have voted on whether
    to approve the issuance of the Buyer Shares in the event the
    proposed issuance of the Buyer Shares failed to receive the
    Buyer Stockholder Approval;

 

    (e) the Buyer may terminate this Agreement by giving
    written notice to the Stockholder if the Closing shall not have
    occurred on or before December 31, 2007 by reason of the
    failure of any condition precedent under Section 6.1
    (unless the failure results primarily from a breach by the Buyer
    of any representation, warranty or covenant contained in this
    Agreement); or

 

    (f) the Stockholder may terminate this Agreement by giving
    written notice to the Buyer if the Closing shall not have
    occurred on or before December 31, 2007 by reason of the
    failure of any condition precedent under Section 6.2
    (unless the failure results primarily from a breach by the
    Stockholder of any representation, warranty or covenant
    contained in this Agreement).

 

    11.2  Effect of
    Termination.  If any Party terminates this
    Agreement pursuant to Section 11.1, all obligations of the
    Parties hereunder shall terminate without any liability of any
    Party to any other Party (except for any liability of any Party
    for willful breaches of this Agreement prior to such
    termination); provided, that, in the event this
    Agreement is terminated by either the Buyer or the Stockholder
    pursuant to Section 11.1(d) hereof as a result of the Buyer
    Board’s modification or withdrawal of its recommendation to
    the Buyer’s stockholders in accordance with
    Section 5.3(b) hereof, the Buyer shall reimburse the
    Stockholder for up to an aggregate of $600,000 in reasonable
    documented expenses of the Stockholder actually incurred
    relating to the transactions contemplated by this Agreement
    prior to such termination (excluding any discretionary fees paid
    to any financial advisors of the Stockholder or the Companies).
    The expenses payable pursuant to this Section 11.2 shall be
    paid by wire transfer of
    same-day
    funds within five (5) business days after demand therefor.

 

    ARTICLE XII

    

 

    DEFINITIONS
    

 

    For purposes of this Agreement, each of the following terms
    shall have the meaning set forth below.

 

    “Accountant” shall mean an independent
    accountant selected by the Stockholder and reasonably approved
    by the Buyer.

 

    “Affiliate” shall mean any affiliate, as
    defined in
    Rule 12b-2
    under the Securities Exchange Act of 1934.

    

    41

 

    “Agreed Amount” shall mean part, but not
    all, of the Claimed Amount.

 

    “Agreement” shall have the meaning set
    forth in the first paragraph of this Agreement.

 

    “AIP” shall have the meaning set forth
    in Section 3.24(a).

 

    “Bankruptcy Exception” means, in respect
    of any agreement, contract or commitment, any limitation thereon
    imposed by any bankruptcy, insolvency, fraudulent conveyance,
    reorganization, moratorium or similar law affecting
    creditor’s rights and remedies generally and, with respect
    to the enforceability thereof, by general principles of equity,
    including principles of commercial reasonableness, good faith
    and fair dealing (regardless of whether enforcement is sought in
    a proceeding at law or in equity).

 

    “Base Purchase Price” shall have the
    meaning set forth in Section 1.3.

 

    “Business Combination” shall have the
    meaning set forth in Section 8.4.

 

    “Buyer” shall have the meaning set forth
    in the first paragraph of this Agreement.

 

    “Buyer Assigned Patent” shall have the
    meaning set forth in Section 5.13.

 

    “Buyer Benefit Plans” shall mean the
    employee benefit plans, programs and policies of the Buyer and
    its Affiliates.

 

    “Buyer Board” shall have the meaning set
    forth in Section 5.3(b).

 

    “Buyer Certificate” shall mean a
    certificate to the effect that each of the conditions specified
    in clauses (a) through (g) (insofar as clause (g)
    relates to Legal Proceedings involving the Buyer) of
    Section 6.2 is satisfied in all respects.

 

    “Buyer Common Stock” shall mean the
    shares of voting common stock, $.001 par value per share,
    of the Buyer.

 

    “Buyer Disclosure Schedule” shall mean
    the disclosure schedule provided by the Buyer to the Stockholder
    on the date hereof and accepted in writing by the Stockholder.

 

    “Buyer Material Adverse Effect” shall
    mean any material adverse change, event, circumstance or
    development with respect to, or any material adverse effect on,
    (i) the business, assets, liabilities, capitalization,
    condition (financial or other), or results of operations of the
    Buyer and its Subsidiaries, taken as a whole or (ii) the
    ability of the Buyer to consummate the transactions contemplated
    by this Agreement. An adverse change in stock price of Buyer
    Common Stock shall not, in and of itself, be deemed to have a
    Buyer Material Adverse Effect.

 

    “Buyer Meeting” shall have the meaning
    set forth in Section 5.3(a).

 

    “Buyer Preferred Stock” shall have the
    meaning set forth in Section 4.2(a).

 

    “Buyer Reports” shall mean (a) the
    Buyer’s Annual Report on Form 10 K for the fiscal year
    ended December 31, 2006, as filed with the SEC, and
    (b) all other reports filed by the Buyer under
    Section 13 or subsections (a) or (c) of
    Section 14 of the Exchange Act with the SEC since
    January 1, 2006.

 

    “Buyer Shares” shall mean
    6,500,000 shares of Buyer Common Stock.

 

    “Buyer Stock Option” shall have the
    meaning set forth in Section 4.2(b).

 

    “Buyer Stock Plans” shall have the
    meaning set forth in Section 4.2(b).

 

    “Buyer Stockholder Approval” shall have
    the meaning set forth in Section 4.3(d).

 

    “Buyer Warrants” shall have the meaning
    set forth in Section 4.2(c).

 

    “Cap Amount” shall have the meaning set
    forth in Section 7.5(a).

 

    “CBP” shall have the meaning set forth
    in Section 3.18.

    

    42

 

    “CERCLA” shall mean the federal
    Comprehensive Environmental Response, Compensation and Liability
    Act of 1980, as amended.

 

    “Change in Control” shall have the
    meaning set forth in Section 8.4.

 

    “Claim Notice” shall mean written
    notification which contains (i) a description of the
    Damages incurred or reasonably expected to be incurred by the
    Indemnified Party and the Claimed Amount of such Damages, to the
    extent then known, (ii) a statement that the Indemnified
    Party is entitled to indemnification under Article VII for
    such Damages and a reasonable explanation of the basis therefor,
    and (iii) a demand for payment in the amount of such
    Damages.

 

    “Claimed Amount” shall mean the amount
    of any Damages incurred or reasonably expected to be incurred by
    the Indemnified Party.

 

    “Closing” shall mean the closing of the
    transactions contemplated by this Agreement.

 

    “Closing Date” shall mean the date two
    business days after the satisfaction or waiver of all of the
    conditions to the obligations of the Parties to consummate the
    transactions contemplated hereby (excluding the delivery at the
    Closing of any of the documents set forth in Article VI),
    or such other date as may be mutually agreeable to the Parties.

 

    “Closing Price” shall mean the average
    closing price of Buyer Common Stock for the five trading days
    ending on the second trading day immediately preceding the
    Closing, as reported by the NASDAQ Global Market.

 

    “Closing Value” shall mean the average
    of the last reported sale prices per share of the Buyer Common
    Stock on the NASDAQ Global Market over the five consecutive
    trading days ending two trading days before the Closing Date
    (subject to equitable adjustment in the event of any stock
    split, stock dividend, reverse stock split or similar event
    affecting the Buyer Common Stock since the beginning of such
    five-day
    period), multiplied by the number of Buyer Shares.

 

    “Closing Working Capital” shall mean as
    of Closing, (i) total current assets of the Companies as of
    such date, minus (ii) total current liabilities (including
    accrued royalties) of the Companies as of such date, each as
    calculated in accordance with GAAP.

 

    “Code” shall mean the Internal Revenue
    Code of 1986, as amended.

 

    “Companies” shall mean MDS Services,
    MDS, MDS Italy and MDS Mexico, collectively.

 

    “Company” shall mean any of MDS
    Services, MDS, MDS Italy and MDS Mexico.

 

    “Company Certificate” shall mean a
    certificate to the effect that each of the conditions specified
    in clauses (a) through (f) (insofar as clause (f)
    relates to Legal Proceedings involving any of the Companies) of
    Section 6.1 is satisfied in all respects.

 

    “Company Disclosure Schedule” shall mean
    the disclosure schedule provided by the Stockholder to the Buyer
    on the date hereof and accepted in writing by the Buyer.

 

    “Company Employees” shall have the
    meaning set forth in Section 8.8.

 

    “Company Intellectual Property” shall
    mean the Company Owned Intellectual Property and the Company
    Licensed Intellectual Property.

 

    “Company Licensed Intellectual Property”
    shall mean all Intellectual Property that is licensed to any
    of the Companies as of the Closing Date. For the avoidance of
    doubt, Company Licensed Intellectual Property shall not include
    any (a) Excluded Intellectual Property, and (b) any
    Intellectual Property that is no longer licensed to any of the
    Companies as of the Closing Date.

 

    “Company Material Adverse Effect” shall
    mean any material adverse change, event, circumstance or
    development with respect to, or material adverse effect on,
    (a) the business, assets, liabilities, capitalization,
    condition (financial or other), or results of operations of the
    Companies, taken as a whole, (b) the ability of

    

    43

 

    the Stockholder or the Companies to consummate the transactions
    contemplated by this Agreement, (c) the ability of the
    Buyer to operate the businesses of the Companies immediately
    after the Closing or (d) the ability of the officers of the
    Buyer, following the Closing, to certify without qualification
    to the Buyer’s financial statements or SEC reports as they
    relate to the businesses or operations previously conducted by
    the Companies; provided, that, in each case a
    “Company Material Adverse Effect” shall not be deemed
    to include effects or circumstances resulting from (i) any
    changes in general economic, business, political or financial
    conditions (except for any such change, event, circumstance,
    development or effect that disproportionately affects the
    Companies relative to other industry participants),
    (ii) any changes in the industry in which the Companies
    operate (except for any such change, event, circumstance,
    development or effect that disproportionately affects the
    Companies relative to other industry participants); or
    (iii) the announcement of this Agreement or the
    transactions contemplated hereby or the identity of the Buyer.
    For the avoidance of doubt, the Parties agree that the terms
    “material”, “materially” or
    “materiality” as used in this Agreement with an
    initial lower case “m” shall have their respective
    customary and ordinary meanings, without regard to the meaning
    ascribed to Company Material Adverse Effect.

 

    “Company Owned Intellectual Property”
    shall mean all Intellectual Property owned, in whole or in
    part, by any of the Companies as of the Closing Date. For the
    avoidance of doubt, Company Owned Intellectual Property shall
    not include any (a) Excluded Intellectual Property, and
    (b) any Intellectual Property that is no longer owned by
    any of the Companies as of the Closing Date.

 

    “Company Plan” shall mean any Employee
    Benefit Plan maintained, or contributed to, by any of the
    Companies or any ERISA Affiliate for the benefit of any current
    or former employee of any of the Companies, but excluding
    government-sponsored or government-affiliated Employee Benefit
    Plans.

 

    “Company 401(k) Plan” shall have the
    meaning set forth in Section 8.8(b).

 

    “Company Registration” shall have the
    meaning set forth in Section 10.1.

 

    “Company Stock Plan” shall mean any
    stock option plan or other stock or equity-related plan of any
    Company.

 

    “Consulting Agreement” shall mean the
    consulting agreement to be entered into by the Stockholder, DSU,
    and the Buyer or an Affiliate thereof in the form attached
    hereto as Exhibit C.

 

    “Continuing Employees” shall have the
    meaning set forth in Section 8.8.

 

    “Controlling Party” shall mean the party
    controlling the defense of any Third Party Action.

 

    “Damages” shall mean any and all debts,
    obligations and other liabilities (whether absolute, accrued,
    contingent, fixed or otherwise, or whether known or unknown, or
    due or to become due or otherwise), diminution in value,
    monetary damages, fines, fees, penalties, interest obligations,
    deficiencies, losses and expenses (including amounts paid in
    settlement, interest, court costs, costs of investigators, fees
    and expenses of attorneys, accountants, financial advisors and
    other experts, and other expenses of litigation, arbitration or
    other dispute resolution proceedings relating to a Third Party
    Action or an indemnification claim under Article VII),
    other than those fees and expenses of the Accountant set forth
    in and governed by Section 1.5(b)(vi).

 

    “Deductible” shall have the meaning set
    forth in Section 7.5(a).

 

    “Determination Date” shall mean
    (a) the Objection Deadline Date, if no objection to the
    Draft Closing Balance Sheet or the calculation of the Closing
    Working Capital is made pursuant to Section 1.5(c),
    (b) the date on which the Buyer receives notification from
    the Stockholder that no objection to the Draft Closing Balance
    Sheet and the calculation of the Closing Working Capital will be
    made, or (c) the date on which final resolution of any
    dispute in connection with the determination of the Closing
    Working Capital pursuant to Section 1.5 is achieved.

 

    “Dispute” shall mean the dispute
    resulting if the Indemnifying Party in a Response disputes its
    liability for all or part of the Claimed Amount.

    

    44

 

    “DGCL” shall mean the General
    Corporation Law of the State of Delaware.

 

    “Draft Closing Balance Sheet” shall mean
    the balance sheet of the Companies as of the Closing Date
    prepared and delivered by the Buyer pursuant to
    Section 1.5(a).

 

    “DSU” shall mean DSU Medical
    Corporation, a Nevada corporation.

 

    “Employee Benefit Plan” shall mean any
    “employee pension benefit plan” (as defined in
    Section 3(2) of ERISA), any “employee welfare benefit
    plan” (as defined in Section 3(1) of ERISA), and any
    other written or oral plan, agreement or arrangement involving
    direct or indirect compensation, including insurance coverage,
    severance benefits, disability benefits, deferred compensation,
    bonuses, stock options, stock purchase, phantom stock, stock
    appreciation or other forms of incentive compensation or
    post-retirement compensation.

 

    “Environmental Law” shall mean
    (a) any United States federal, state or local law, statute,
    rule, order, directive, judgment, Permit or regulation or the
    common law in effect up to and through the Closing Date relating
    to the environment, occupational health and safety, the
    potential toxic material content of any product or exposure of
    persons or property to Materials of Environmental Concern passed
    or issued by any Governmental Entity, including any statute,
    regulation, administrative decision or order pertaining to:
    (i) the presence of or the treatment, storage, disposal,
    generation, transportation, manufacture, processing, use,
    import, export, labeling, recycling, registration, investigation
    or remediation of Materials of Environmental Concern or
    documentation related to the foregoing; (ii) air, water and
    noise pollution; (iii) groundwater and soil contamination;
    (iv) the release, threatened release, or accidental release
    into the environment, the workplace or other areas of Materials
    of Environmental Concern, including emissions, discharges,
    injections, spills, escapes or dumping of Materials of
    Environmental Concern; (v) transfer of interests in or
    control of real property which may be contaminated;
    (vi) community or worker right-to-know disclosures with
    respect to Materials of Environmental Concern; (vii) the
    protection of wild life, marine life and wetlands, and
    endangered and threatened species; (viii) storage tanks,
    vessels, containers, abandoned or discarded barrels and other
    closed receptacles; and (ix) health and safety of employees
    and (b) any Mexican or Italian national, state, provincial
    or local law, statute, rule, order, directive, judgment, Permit
    or regulation or the common law in effect up to and through the
    Closing Date analogous or comparable to the topics or issues set
    forth in sub-section (a) of this definition. As used above,
    the term “release” shall have the meaning set forth in
    CERCLA.

 

    “ERISA” shall mean the Employee
    Retirement Income Security Act of 1974, as amended.

 

    “ERISA Affiliate” shall mean any entity
    which is, or at any applicable time was, a member of (1) a
    controlled group of corporations (as defined in
    Section 414(b) of the Code), (2) a group of trades or
    businesses under common control (as defined in
    Section 414(c) of the Code), or (3) an affiliated
    service group (as defined under Section 414(m) of the Code
    or the regulations under Section 414(o) of the Code), any
    of which includes or included any of the Companies.

 

    “Escrow Agreement” shall mean an escrow
    agreement in substantially the form attached hereto as
    Exhibit A.

 

    “Escrow Agent” shall mean Computershare
    Services, Inc.

 

    “Escrow Shares” shall mean
    1,000,000 shares of Buyer Common Stock.

 

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

 

    “Excluded Intellectual Property” shall
    mean the Intellectual Property set forth in Exhibit C of
    the License Agreement.

 

    “Expected Claim Notice” shall mean a
    notice that, as a result of a legal proceeding instituted by or
    written claim made by a third party, an Indemnified Party
    reasonably expects to incur Damages for which it is entitled to
    indemnification under Article VII.

 

    “Exploit” shall mean develop, design,
    test, modify, make, use, sell, have made, used and sold, import,
    reproduce, market, distribute, commercialize, support, maintain,
    correct and create derivative works of.

 

    “FDA” shall have the meaning set forth
    in Section 3.24(a).

    

    45

 

    “FD&C Act” shall have the meaning
    set forth in Section 3.24(b).

 

    “Field” shall have meaning set forth in
    the License Agreement.

 

    “Final Closing Balance Sheet” shall have
    the meaning set forth in Section 1.5(b).

 

    “Final Closing Working Capital” shall
    have the meaning set forth in Section 1.5(b).

 

    “Financial Statements” shall mean:

 

    (a) the unaudited consolidated balance sheets and
    statements of income, changes in stockholders’ equity and
    cash flows of each of the Medisystems Operating Companies as at
    December 31, 2006,

 

    (b) the audited consolidated balance sheets and statements
    of income, changes in stockholders’ equity and cash flows
    of each of the Medisystems Operating Companies as at
    December 31, 2005 and December 31, 2004, and

 

    (c) the Most Recent Balance Sheet and the unaudited
    consolidated statements of income, changes in stockholders’
    equity and cash flows for the three months ended as of the Most
    Recent Balance Sheet Date.

 

    “Focused Assessments” shall mean a Risk
    Based Approach to Audit’ as set forth by CBP that
    concentrates on a company’s internal compliance procedures
    while also addressing areas of risk identified by CBP.

 

    “GAAP” shall mean United States
    generally accepted accounting principles.

 

    “Governmental Entity” shall mean any
    court, arbitrational tribunal, administrative agency or
    commission or other governmental or regulatory authority or
    agency, including any central or local governmental,
    administrative or judicial entity, body, agency, inspectorate or
    office of any jurisdiction where any Company is based or
    operates, as far as applicable mutatis mutandis.

 

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

 

    “HIPAA” shall mean the Health Insurance
    Portability and Accountability Act of 1996, Public Law
    104-191.

 

    “Income Taxes” shall mean any Taxes
    imposed upon or measured by net income.

 

    “Indemnified Party” shall mean a party
    entitled, or seeking to assert rights, to indemnification under
    Article VII.

 

    “Indemnifying Party” shall mean the
    party from whom indemnification is sought by the Indemnified
    Party.

 

    “Intellectual Property” shall mean the
    following subsisting throughout the world:

 

    (a) Patents;

 

    (b) Trademarks and all goodwill in the Trademarks;

 

    (c) copyrights, designs, data and database rights and
    registrations and applications for registration thereof,
    including moral rights of authors;

 

    (d) inventions, invention disclosures, statutory invention
    registrations, trade secrets and confidential business
    information, know-how, manufacturing and product processes and
    techniques, research and development information, financial,
    marketing and business data, pricing and cost information,
    business and marketing plans and customer and supplier lists and
    information, whether patentable or nonpatentable, whether
    copyrightable or noncopyrightable and whether or not reduced to
    practice; and

 

    (e) other proprietary rights relating to any of the
    foregoing (including remedies against infringement thereof and
    rights of protection of interest therein under the laws of all
    jurisdictions).

    

    46

 

    “Investor Rights Agreement” shall mean
    the Investor Rights Agreement, dated as of June 30, 1999,
    by and between the Buyer and the investors listed therein, as
    the same may be amended from time to time (the “Investor
    Rights Agreement”)

 

    “Laws and Regulations” shall have the
    meaning set forth in Section 3.24(a).

 

    “Lease” shall mean any lease or sublease
    pursuant to which any Company leases or subleases from another
    party any real property.

 

    “Legal Proceeding” shall mean any
    action, suit, proceeding, claim, arbitration or investigation
    before any Governmental Entity or before any arbitrator.

 

    “License Agreement” shall mean the
    license agreement entered into by DSU and MDS dated as of
    June 1, 2007.

 

    “Licensed Class B Patents” shall
    have the meaning set forth in the License Agreement.

 

    “Materials of Environmental Concern”
    shall mean any: pollutants, contaminants or hazardous
    substances (as such terms are defined under CERCLA), pesticides
    (as such term is defined under the Federal Insecticide,
    Fungicide and Rodenticide Act), solid wastes and hazardous
    wastes (as such terms are defined under the Resource
    Conservation and Recovery Act), other hazardous, radioactive or
    toxic materials, oil, petroleum and petroleum products (and
    fractions thereof), or any other material or chemical (or
    article containing such material or chemical) listed or subject
    to regulation under any law, statute, rule, regulation, order,
    Permit, or directive passed or issued by any Governmental Entity
    due to its potential, directly or indirectly, to harm the
    environment, public health or worker health and safety.

 

    “Medisystems Employment Agreement” shall
    mean the Medisystems Employment Agreement between MDS or MDS
    Services, on the one hand, and any employee of MDS or MDS
    Services, on the other hand.

 

    “MDS Italy Employment Agreement” shall
    mean the MDS Italy Employment Agreement between MDS Italy,
    on the one hand, and any employee of MDS Italy, on the other
    hand.

 

    “MDS Mexico Employment Agreement” shall
    mean the MDS Mexico Employment Agreement between MDS Mexico, on
    the one hand, and any employee of MDS Mexico, on the other hand.

 

    “Medisystems Operating Companies” shall
    mean collectively, the Companies, MRC, MTC (until May 31,
    2007, the effective date of its merger into DSU), LifeStream
    Medical Corporation, a Nevada corporation and Infusion Care
    Services, Inc., a Delaware corporation.

 

    “Most Recent Balance Sheet” shall mean
    the unaudited consolidated balance sheet of the Companies as of
    the Most Recent Balance Sheet Date.

 

    “Most Recent Balance Sheet Date” shall
    mean March 31, 2007.

 

    “MRC” shall mean Medisystems Research
    Corp., an Illinois corporation.

 

    “MTC” shall mean Medisystems Technology
    Corporation, a Nevada corporation.

 

    “Non-controlling Party” shall mean the
    party not controlling the defense of any Third Party Action.

 

    “Objection Deadline Date” shall mean the
    date 30 days after delivery by the Buyer to the Stockholder
    of the Draft Closing Balance Sheet.

 

    “Option” shall mean each option to
    purchase or acquire shares of any Company, whether issued by a
    Company pursuant to a Company Stock Plan or otherwise.

 

    “Ordinary Course of Business” shall mean
    the ordinary course of business consistent with past custom and
    practice (including with respect to frequency and amount).

 

    “Parties” shall mean the Buyer and the
    Stockholder.

 

    “Patents” shall mean all patents and
    patent applications filed with the United States Patent and
    Trademark office or other Governmental Entity.

    

    47

 

    “Permits” shall mean all permits,
    licenses, registrations, certificates, orders, approvals,
    franchises, variances and similar rights issued by or obtained
    from any Governmental Entity (including those issued or required
    under Environmental Laws and those relating to the occupancy or
    use of owned or leased real property).

 

    “Products” shall have the meaning set
    forth in Section 3.24(b).

 

    “Proxy Statement/Prospectus” shall mean
    the proxy statement/prospectus included as part of the
    S-4
    Registration Statement, together with any accompanying letter to
    stockholders, notice of meeting and form of proxy or written
    consent.

 

    “Public Filings” shall have the meaning
    set forth in Section 5.10(a).

 

    “Reasonable Best Efforts” shall mean
    best efforts, to the extent commercially reasonable.

 

    “Registered Company Intellectual Property”
    shall mean Registered Intellectual Property that is owned by
    any Company as of the Closing Date or licensed to any Company
    pursuant to the License Agreement.

 

    “Registered Intellectual Property” shall
    mean all Patents, registered Trademarks, registered copyrights
    and designs, and all applications filed with the United States
    Patent and Trademark Office and all foreign equivalent offices
    for each of the foregoing.

 

    “Related Agreements” shall mean the
    Escrow Agreement, the Consulting Agreement, and the Stock
    Transfer Documents.

 

    “Response” shall mean a written response
    containing the information provided for in Section 7.3(c).

 

    “SEC” shall mean the Securities and
    Exchange Commission.

 

    “S-4 Registration Statement” shall mean
    a registration statement of the Buyer on
    Form S-4
    for the purposes of (1) registering the Buyer Shares under
    the Securities Act and (2) soliciting proxies from the
    stockholders of the Buyer for the purpose of obtaining the
    approval by the stockholders of the Buyer of the issuance of
    shares of Buyer Common Stock pursuant to the terms of this
    Agreement.

 

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

 

    “Security Interest” shall mean any
    mortgage, pledge, security interest, encumbrance, charge or
    other lien (whether arising by contract or by operation of law),
    other than (i) mechanic’s, materialmen’s, and
    similar liens, (ii) liens arising under worker’s
    compensation, unemployment insurance, social security,
    retirement, and similar legislation and (iii) liens on
    goods in transit incurred pursuant to documentary letters of
    credit, in each case arising in the Ordinary Course of Business
    of the applicable Company and not material to such Company.

 

    “Shares” shall have the meaning set
    forth in the Preliminary Statement of this Agreement.

 

    “Specified Sections” shall have the
    meaning set forth in Section 13.10.

 

    “Stock Transfer Documents” shall have
    the meaning set forth in Section 1.8.

 

    “Stockholder” shall have the meaning set
    forth in the first paragraph of this Agreement.

 

    “Stockholder Nominee” shall have the
    meaning set forth in Section 8.6.

 

    “Subsidiary” shall mean any corporation,
    partnership, trust, limited liability company, branch,
    representative office or other non-corporate business enterprise
    in which any Company holds stock or other ownership interests
    representing (a) more than 50% of the voting power of all
    outstanding stock or ownership interests of such entity or
    (b) the right to receive more than 50% of the net assets of
    such entity available for distribution to the holders of
    outstanding stock or ownership interests upon a liquidation or
    dissolution of such entity.

 

    “Target Amount” shall equal negative
    $1,850,000, which amount shall be increased by the sum of the
    amount of the Companies’ net income plus depreciation plus
    amortization for the period from January 1, 2007 through
    the Closing Date and decreased by the sum of the amounts of
    (a) the royalties payable under the

    

    48

 

    License Agreement, (b) the cash dividends payable pursuant
    to Section 5.14(a)(ii) and (c) the amount of the
    Companies’ capital expenditures permitted under the terms
    of this Agreement for the period from January 1, 2007
    through the Closing Date.

 

    “Taxes” shall mean any and all taxes,
    charges, fees, duties, contributions, levies or other similar
    assessments or liabilities in the nature of a tax, including,
    without limitation, income, gross receipts, corporation, ad
    valorem, premium, value-added, net worth, capital stock, capital
    gains, documentary, recapture, alternative or add-on minimum,
    disability, estimated, registration, recording, excise, real
    property, personal property, sales, use, license, lease,
    service, service use, transfer, withholding, employment,
    unemployment, insurance, social security, national insurance,
    business license, business organization, environmental, workers
    compensation, payroll, profits, severance, stamp, occupation,
    windfall profits, customs duties, franchise and other taxes of
    any kind whatsoever imposed by the United States of America or
    any state, local or foreign government, or any agency or
    political subdivision thereof, and any interest, fines,
    penalties, assessments or additions to tax imposed with respect
    to such items or any contest or dispute thereof.

 

    “Tax Returns” shall mean any and all
    reports, returns, declarations, extension requests or statements
    relating to Taxes, including any schedule or attachment thereto
    and any related or supporting workpapers or information with
    respect to any of the foregoing, including any amendment thereof.

 

    “Third Party Action” shall mean any suit
    or proceeding by a person or entity other than a Party for which
    indemnification may be sought by a Party under Article VII.

 

    “Trademarks” shall mean all registered
    trademarks and service marks, logos, Internet domain names,
    corporate names and doing business designations and all
    registrations and applications for registration of the
    foregoing, common law trademarks and service marks and trade
    dress.

 

    “Transaction” shall have the meaning set
    forth in the Preliminary Statement of this Agreement.

 

    “Transfer Taxes” shall have the meaning
    set forth in Section 9.1(e).

 

    “Unresolved Objections” shall mean any
    objections set forth in the Stockholder’s statement of
    objections that remain unresolved 30 days after delivery of
    such statement of objections.

 

    “Value” of Escrow Shares shall have the
    meaning set forth in Section 7.3(c).

 

    “Voting Stock” shall have the meaning
    set forth in Section 8.4.

 

    “Warrant” shall mean each warrant or
    other contractual right to purchase or acquire any shares of any
    Company, provided that Options shall not be considered Warrants.

 

    “Working Capital Certificate” shall have
    the meaning set forth in Section 1.5(a).

 

    ARTICLE XIII

    

 

    MISCELLANEOUS
    

 

    13.1  Press Releases and
    Announcements.  No Party shall issue any press
    release or public announcement relating to the subject matter of
    this Agreement without the prior written approval of the other
    Parties; provided, however, that any Party may
    make any public disclosure it believes in good faith is required
    by applicable law, regulation or stock market rule (in which
    case the disclosing Party shall use reasonable efforts to advise
    the other Parties and provide them with a copy of the proposed
    disclosure prior to making the disclosure).

 

    13.2  No Third Party
    Beneficiaries.  This Agreement shall not
    confer any rights or remedies upon any person other than the
    Parties and their respective heirs, executors, personal and
    legal representatives, successors and permitted assigns.

 

    13.3  Entire Agreement;
    Attachments.  This Agreement, all Schedules
    and Exhibits hereto, and all agreements and instruments to be
    delivered by the Parties pursuant hereto represent the entire
    understanding and agreement between the Parties hereto with
    respect to the subject matter hereof and supersede all prior
    oral

    

    49

 

    and written and all contemporaneous oral negotiations,
    commitments and understandings between such Parties. If the
    provisions of any Schedule or Exhibit to this Agreement are
    inconsistent with the provisions of this Agreement, the
    provisions of the Agreement shall prevail. The Exhibits and
    Schedules attached hereto or to be attached hereafter are hereby
    incorporated as integral parts of this Agreement.

 

    13.4  Successors and
    Assigns.  This Agreement shall be binding upon
    and inure to the benefit of the Parties hereto and their
    respective heirs, executors, personal and legal representatives,
    successors and assigns, except that the Buyer, on the one hand,
    and the Stockholder, on the other hand, may not assign their
    respective obligations hereunder without the prior written
    consent of the other Party; provided, however,
    that the Buyer may assign its rights to acquire all or any
    portion of the Shares hereunder, to a subsidiary or Affiliate of
    the Buyer. Any assignment in contravention of this provision
    shall be void. No assignment shall release the Buyer or the
    Stockholder from any obligation or liability under this
    Agreement.

 

    13.5  Notices.  All notices,
    requests, demands, claims, and other communications hereunder
    shall be in writing. Any notice, request, demand, claim or other
    communication hereunder shall be deemed duly delivered four
    business days after it is sent by registered or certified mail,
    return receipt requested, postage prepaid, or one business day
    after it is sent for next business day delivery via a reputable
    nationwide overnight courier service, in each case to the
    intended recipient as set forth below:

 

	 	 	 
	
    To the Buyer or any of the
    Companies (following the Closing Date):
    
	
 
	
    NxStage Medical, Inc.

    439 South Union Street

    5th Floor, Lawrence, MA 01843

    Attn: Chief Executive Officer
    

	
 
	
 
	
 

	

    With a copy to:
    

	
 
	
    NxStage Medical, Inc.

    439 South Union Street

    5th Floor, Lawrence, MA 01843

    Attn: General Counsel
    

	
 
	
 
	
 

	
 
	
 
	
    Wilmer Hale

    60 State Street

    Boston, MA 02109

    Attn: Susan Murley
    

	
 
	
 
	
 

	

    To the Stockholder:
    

	
 
	
    David S. Utterberg

    2033
    1st
    Avenue, #3

    Seattle, WA 98121
    

	
 
	
 
	
 

	

    With a copy to:
    

	
 
	
    John A. Willett or

    Christine D. Rogers

    Arnold & Porter LLP

    399 Park Avenue

    New York, NY 10022-4690
    

 

    Any Party may give any notice, request, demand, claim or other
    communication hereunder using any other means (including
    personal delivery, expedited courier, messenger service,
    telecopy, ordinary mail or electronic mail), but no such notice,
    request, demand, claim or other communication shall be deemed to
    have been duly given unless and until it actually is received by
    the party for whom it is intended. Any Party may change the
    address to which notices, requests, demands, claims, and other
    communications hereunder are to be delivered by giving the other
    Parties notice in the manner herein set forth.

 

    13.6  Governing Law.  All
    matters arising out of or relating to this Agreement and the
    transactions contemplated hereby (including without limitation
    its interpretation, construction, performance and enforcement)
    shall be governed by and construed in accordance with the
    internal laws of Delaware without giving effect to any choice or
    conflict of law provision or rule (whether of Delaware or any
    other jurisdiction) that would cause the application of laws of
    any jurisdictions other than those of Delaware.

 

    13.7  Amendments and
    Waivers.  The Buyer, by the consent of its
    Board of Directors or officers authorized by such Board, and the
    Stockholder may amend or modify this Agreement, in such manner
    as may be agreed upon, by a written instrument executed by the
    Buyer and the Stockholder. No waiver of any right or

    

    50

 

    remedy hereunder shall be valid unless the same shall be in
    writing and signed by the Party giving such waiver. No waiver by
    any Party with respect to any default, misrepresentation or
    breach of warranty or covenant hereunder shall be deemed to
    extend to any prior or subsequent default, misrepresentation or
    breach of warranty or covenant hereunder or affect in any way
    any rights arising by virtue of any prior or subsequent such
    occurrence.

 

    13.8  Severability.  Any term
    or provision of this Agreement that is invalid or unenforceable
    in any situation in any jurisdiction shall not affect the
    validity or enforceability of the remaining terms and provisions
    hereof or the validity or enforceability of the offending term
    or provision in any other situation or in any other
    jurisdiction. If the final judgment of a court of competent
    jurisdiction declares that any term or provision hereof is
    invalid or unenforceable, the Parties agree that the court
    making the determination of invalidity or unenforceability shall
    have the power to limit the term or provision, to delete
    specific words or phrases, or to replace any invalid or
    unenforceable term or provision with a term or provision that is
    valid and enforceable and that comes closest to expressing the
    intention of the invalid or unenforceable term or provision, and
    this Agreement shall be enforceable as so modified.

 

    13.9  Submission to
    Jurisdiction.  Each Party (a) submits to
    the jurisdiction of any state or federal court sitting in the
    State of Delaware in any action or proceeding arising out of or
    relating to this Agreement, (b) agrees that all claims in
    respect of such action or proceeding may be heard and determined
    in any such court, (c) waives any claim of inconvenient
    forum or other challenge to venue in such court, (d) agrees
    not to bring any action or proceeding arising out of or relating
    to this Agreement in any other court and (e) waives any
    right it may have to a trial by jury with respect to any action
    or proceeding arising out of or relating to this Agreement. Each
    Party agrees to accept service of any summons, complaint or
    other initial pleading made in the manner provided for the
    giving of notices in Section 13.5, provided that nothing in
    this Section 13.9 shall affect the right of any Party to
    serve such summons, complaint or other initial pleading in any
    other manner permitted by law.

 

    13.10  Specific
    Performance.  Each Party acknowledges and
    agrees that the other Party or Parties would be damaged
    irreparably in the event any of the provisions contained in
    Article I or any of Sections 5.2, 5.3, 5.7, 5.10,
    5.12, 5.13, 8.1, 8.2, 8.4, 8.5, 8.6 and 8.7 (the “Specified
    Sections) of this Agreement are not performed in accordance with
    their specific terms or otherwise are breached. Accordingly,
    each Party agrees that the other Party or Parties may be
    entitled to an injunction or injunctions to prevent breaches of
    the provisions contained in Article I and the Specified
    Sections of this Agreement and to enforce specifically the terms
    and provisions of Article I and the Specified Sections in
    any action instituted in any court of the United States or any
    state thereof having jurisdiction over the Parties and the
    matter.

 

    13.11  Section Headings.  The
    section headings are for the convenience of the Parties and in
    no way alter, modify, amend, limit, or restrict the contractual
    obligations of the Parties.

 

    13.12  Governing Document.  To
    the extent of any inconsistency between this Agreement and the
    Stock Transfer Documents, the provisions of this Agreement shall
    govern.

 

    13.13  Exchange Rates.  To the
    extent that any U.S. dollar amounts need to be converted
    into local currency as a result of the transactions contemplated
    by this Agreement, the Parties shall use the currency exchange
    “trading among banks of $1 million and more” rate
    published in The Wall Street Journal on the first
    business day prior to the Closing.

 

    13.14  Counterparts and Facsimile
    Signature.  This Agreement may be executed in
    two or more counterparts, each of which shall be deemed an
    original but all of which together shall constitute one and the
    same instrument. This Agreement may be executed by facsimile
    signature.

 

    [Signatures
    appear on following page]

    

    51

 

    IN WITNESS WHEREOF, the Parties have executed this Agreement as
    of the date first above written.

 

    BUYER:

 

    NXSTAGE MEDICAL, INC.

 

 

    By: /s/ Jeffrey H. Burbank 

    Title: President and CEO

 

    STOCKHOLDER:

 

    /s/ David S. Utterberg

    David S. Utterberg

    

    52

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