Document:

Exhibit
10.1

 

 

ev3 Inc.

11,765,000 Shares

 

Common Stock

 

UNDERWRITING
AGREEMENT

 

dated June 16,
2005

 

Piper Jaffray &
Co.

Banc of
America Securities LLC

 

 

 

UNDERWRITING
AGREEMENT

 

June 16, 2005

 

PIPER JAFFRAY & CO.

 

BANC OF AMERICA SECURITIES
LLC 

As
Representatives of the several Underwriters

c/o PIPER JAFFRAY &
CO.

800 Nicollet Mall

Minneapolis, MN 55402

 

Ladies and Gentlemen:

 

Introductory.  ev3 Inc., a Delaware corporation (the “Company”),
proposes to issue and sell to the several underwriters named in Schedule A
(the “Underwriters”) an aggregate of 11,765,000 shares (the “Firm Common Shares”)
of its Common Stock, par value $0.01 per share (the “Common Stock”).  In addition, the Company has granted to the
Underwriters an option to purchase up to an additional 1,728,850 shares of
Common Stock and the stockholder of the Company named in Schedule B (in
his individual capacity and not in his capacity as a director of the Company)
(the “Selling Stockholder”) has granted to the Underwriters an option to purchase
up to an additional 35,900 shares of Common Stock, all as provided in Section 2.  The additional 1,728,850 shares that may be
sold by the Company and the additional 35,900 shares that may be sold by the
Selling Stockholder pursuant to such option are collectively called the “Optional
Common Shares”.  The Firm Common Shares
and, if and to the extent such option is exercised, the Optional Common Shares
are collectively called the “Common Shares”. 
Piper Jaffray & Co. (“Piper”) and Banc of America Securities
LLC (“BAS”) have agreed to act as representatives of the several Underwriters
(in such capacity, the “Representatives”) in connection with the offering and
sale of the Common Shares.

 

The Company and the Underwriters agree that
up to 588,250 of the Firm Common Shares to be purchased by the Underwriters
(the “Directed Shares”) shall be reserved for sale by the Underwriters to
certain eligible directors, officers and employees of the Company and persons
having business relationships with the Company (collectively, the “Participants”),
as part of the distribution of the Common Shares by the Underwriters (the “Directed
Share Program”) subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the NASD, Inc. (the “NASD”) and all
other applicable laws, rules and regulations.  One of the Underwriters (the “Designated
Underwriter”) shall be selected to process the sales to the Participants under
the Directed Share Program.  To the
extent that such Directed Shares are not orally confirmed for purchase by the
Participants by the end of the first business day after the date of this
Agreement, such Directed Shares may be offered to the public as part of the
public offering contemplated hereby.

 

The Company has prepared and filed with the
Securities and Exchange Commission (the “Commission”) a registration statement
on Form S-1 (File No. 333-123851), which contains a

 

 

form of prospectus to be used in connection
with the public offering and sale of the Common Shares.  Such registration statement, as amended,
including the financial statements, exhibits and schedules thereto, in the form
in which it was declared effective by the Commission under the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder
(collectively, the “Securities Act”), including any information deemed to be a
part thereof at the time of effectiveness pursuant to Rule 430A under the
Securities Act, is called the “Registration Statement.”  Any registration statement filed by the Company
pursuant to Rule 462(b) under the Securities Act is called the “Rule 462(b) Registration
Statement”, and from and after the date and time of filing of the Rule 462(b) Registration
Statement the term “Registration Statement” shall include the Rule 462(b) Registration
Statement.  Such prospectus, in the form
first used by the Underwriters to confirm sales of the Common Shares, is called
the “Prospectus”.  The preliminary
prospectus, dated as of May 27, 2005, included in the Registration
Statement before it became effective under the Securities Act and any
prospectus filed with the Commission by the Company with the consent of the
Underwriters pursuant to Rule 424(a) under the Securities Act is
hereinafter called the “Preliminary Prospectus.”  All references in this Agreement to the
Registration Statement, the Rule 462(b) Registration Statement, the
Preliminary Prospectus or the Prospectus, or any amendments or supplements to
any of the foregoing, shall include any copy thereof filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

 

The Company, ev3 LLC, a Delaware limited
liability company (“ev3 LLC”), and the Selling Stockholder hereby confirm their
respective agreements with the Underwriters as follows:

 

Section 1.  Representations
and Warranties.

 

A.  Representations and Warranties of the Company and ev3
LLC.  The Company and ev3 LLC
hereby jointly and severally represent, warrant and covenant to each
Underwriter as follows:

 

(a)  Compliance
with Registration Requirements. 
The Registration Statement has been declared effective by the Commission
under the Securities Act and any Rule 462(b) Registration Statement
is effective.  The Company has complied
with all requests of the Commission for additional or supplemental
information.  No stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.  The
Preliminary Prospectus when filed with the Commission complied, and the
Prospectus when filed with the Commission will comply, in all material respects
with the Securities Act and, if filed by electronic transmission pursuant to
EDGAR (except as may be permitted by Regulation S-T under the Securities Act),
was or will be, as the case may be, identical to the copy thereof delivered to
the Underwriters for use in connection with the offer and sale of the Common
Shares.  The Registration Statement
complies, and any Rule 462(b)

 

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Registration Statement and any post-effective
amendments or supplements to the Registration Statement, when they become
effective and at all times during the Prospectus Delivery Period, will comply,
in all material respects with the requirements of the Securities Act.  The Registration Statement did not contain,
and any Rule 462(b) Registration Statement or any post-effective
amendments thereto will not contain, as of their respective effective dates and
at all times during the Prospectus Delivery Period, 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, except in each case if
the Company notifies the Representatives in writing of an event or condition as
a result of which it is necessary to amend or supplement the Registration
Statement in order to make the statements therein not misleading and the
Company so amends or supplements the Registration Statement in compliance with
the terms of this Agreement.  The
Prospectus (including any Prospectus wrapper), as amended or supplemented, as
of its date and at all times during the Prospectus Delivery Period (as defined
below), did not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except in each case if the Company notifies the Representatives in
writing of an event or condition as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading and the
Company so amends or supplements the Prospectus in compliance with the terms of
this Agreement.  The representations and
warranties set forth in the three immediately preceding sentences do not apply
to statements in or omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus
(including any Prospectus wrapper), or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by the Representatives
expressly for use therein.  There are no
contracts or other documents of ev3 LLC, the Company or their respective
subsidiaries required to be described in the Prospectus or to be filed as
exhibits to the Registration Statement which have not been described or filed
as required.

 

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

 

(c)  Distribution
of Offering Material By the Company. 
The Company has not distributed and will not distribute, prior to the
later of the Second Closing Date

 

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(as defined below) and the completion of the
Prospectus Delivery Period (as defined below), any offering material in
connection with the offering and sale of the Common Shares other than the
Preliminary Prospectus, the Prospectus or the Registration Statement.

 

(d)  The
Underwriting Agreement.  This
Agreement has been duly authorized, executed and delivered by, and is a valid
and binding agreement of, ev3 LLC and the Company, enforceable against each of
ev3 LLC and the Company in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the rights and remedies of creditors generally and by the effect of general
principles of equity and except that any rights to indemnity and contribution
pursuant to Sections 8 and 9 hereof may be limited by federal and state
securities laws and public policy considerations.

 

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

 

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

 

(g)  No
Material Adverse Change. 
Except as otherwise disclosed in the Prospectus, subsequent to the
respective dates as of which information is given in the Prospectus: (i) there
has been no material adverse change, or any development that could reasonably
be expected to result in a material adverse change, in the condition, financial
or otherwise, or in the earnings, business, operations or prospects, whether or
not arising from transactions in the ordinary course of business, of ev3 LLC,
the Company and their respective subsidiaries, considered as one entity (any
such change is called a “Material Adverse Change”); (ii) ev3 LLC, the
Company and their respective subsidiaries, considered as one entity, have not
incurred any material liability or obligation, indirect, direct or contingent,
not in the ordinary course of business nor entered into any material
transaction or agreement not in the ordinary course of business; and (iii) there
has been no dividend or distribution of any kind declared, paid or made by ev3
LLC or the Company or, except for dividends paid to ev3 LLC, the Company or any
of their respective 

 

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subsidiaries, any of their respective
subsidiaries on any class of their respective capital stock or repurchase or
redemption by the Company or any of its subsidiaries of any class of their
respective capital stock.

 

(h)  Independent
Accountants. 
PricewaterhouseCoopers LLP and Ernst & Young LLP, which have
expressed their respective opinions with respect to certain portions (as
indicated therein) of the combined consolidated financial statements (which
term as used in this Agreement includes the related notes thereto) filed with
the Commission as a part of the Registration Statement and included in the
Prospectus, are each an independent registered public accounting firm as
required by the Securities Act.

 

(i)  Preparation
of the Financial Statements. 
The combined consolidated financial statements filed with the Commission
as a part of the Registration Statement and included in the Prospectus present
fairly the consolidated financial position of ev3 LLC and its subsidiaries as
of and at the dates indicated and the results of their operations and cash
flows for the periods specified.  The
financial statement schedule included in the Registration Statement
presents fairly the information required to be stated therein.  Such combined consolidated financial
statements and financial statement schedule have been prepared in
conformity with generally accepted accounting principles as applied in the
United States applied on a consistent basis throughout the periods involved,
except as may be expressly stated in the related notes thereto.  No other financial statements or supporting
schedules are required to be included in the Registration Statement.  The combined consolidated financial data set
forth in the Prospectus under the captions “Prospectus Summary - Summary
Combined Consolidated Financial Data,” “Selected Combined Consolidated
Financial Data” and “Capitalization” fairly present the information set forth
therein on a basis consistent with that of the combined consolidated financial
statements contained in the Registration Statement.

 

(j)  Incorporation and Good Standing of ev3 LLC, the
Company and their Subsidiaries. 
Each of ev3 LLC, the Company and each of their respective subsidiaries
has been duly formed, incorporated or organized and is validly existing as a
limited liability company, corporation or other entity in good standing under
the laws of the jurisdiction of its formation, incorporation or organization
and has limited liability company, corporate or other power and authority to
own, lease and operate its properties and to conduct its business as it is
currently conducted and as described in the Prospectus and, in the case of ev3
LLC and the Company, to enter into and perform their obligations under this
Agreement.  Each of ev3 LLC, the Company
and each of their respective subsidiaries is duly qualified as a foreign
limited liability company or corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of business,
except for such jurisdictions where the failure to

 

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so qualify or to be in good standing would
not, individually or in the aggregate, result in a Material Adverse
Change.  All of the issued and
outstanding capital stock of each subsidiary of ev3 LLC and the Company has
been duly authorized and validly issued, is fully paid and nonassessable and is
owned by ev3 LLC or the Company, directly or through their respective
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance or claim, except for such security interests, mortgages, pledges,
liens, encumbrances or claims (1) which would not individually or in the
aggregate result in a Material Adverse Change or (2) pursuant to that
certain Loan and Security Agreement, dated as of May 6, 2005, between
Silicon Valley Bank and Micro Therapeutics, Inc., a Delaware corporation (“MTI”);
provided, however, with respect to MTI, either ev3 LLC or the
Company (i) directly owns 9,704,819 shares of the common stock of MTI and (ii) indirectly
owns 24,336,759 shares of the common stock of MTI.  Neither ev3 LLC nor the Company owns or
controls, directly or indirectly, any corporation, association or other entity
other than the subsidiaries listed in Exhibit 21.1 to the Registration
Statement, except for any such corporation, association or other entity which
is not a “significant subsidiary” as defined by Rule 1-02 of Regulation
S-X under the Securities Act.

 

(k)  Capitalization and Other Capital Stock Matters.  (i) The authorized, issued and
outstanding membership units of ev3 LLC is as set forth in the Prospectus under
the column “Actual ev3 LLC” under the caption “Capitalization”; (ii) the
authorized, issued and outstanding Common Stock of the Company after giving
effect to the merger of ev3 LLC with and into the Company (the “Merger”) is as
set forth in the Prospectus under the column “Pro Forma for MTI Share
Contribution and Merger ev3 Inc.” under the caption “Capitalization”; (iii) the
authorized, issued and outstanding Common Stock of the Company after giving
effect to the “reorganization transactions” (as defined in the Prospectus) and
the reverse stock split (as set forth in the Prospectus) is as set forth in the
Prospectus under the column “Pro Forma for Reorganization Transactions and
Reverse Stock Split ev3 Inc.” under the caption “Capitalization”; and (iv) the
authorized, issued and outstanding Common Stock of the Company after giving
effect to the “reorganization transactions” (as defined in the Prospectus), the
reverse stock split (as set forth in the Prospectus) and the sale of the Firm
Common Shares is as set forth in the Prospectus under the column “Pro Forma As
Adjusted ev3 Inc.” under the caption “Capitalization”, in each case, other than
for subsequent issuances, if any, pursuant to employee benefit plans described
in the Prospectus or upon exercise of outstanding convertible securities,
options or warrants described in the Prospectus.  The Common Stock (including the Common
Shares) conforms in all material respects to the description thereof contained
in the Prospectus.  All of the issued and
outstanding shares of Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance
with federal and state securities laws as of the First Closing Date and as of
the

 

7

 

Second Closing Date, if applicable.  As of the First Closing Date and as of the
Second Closing Date, if applicable, all of the issued and outstanding shares of
Common Stock owned by the Selling Stockholder will have been duly authorized
and validly issued, and will be fully paid and nonassessable and have been
issued in compliance with federal and state securities laws.  None of the outstanding membership units of
ev3 LLC or shares of Common Stock were issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of ev3 LLC or the Company which were not properly
waived.  Except as set forth in that
certain Option, Contribution and Exchange Agreement, dated as of August 29,
2003, by and among ev3 LLC and certain of its members party thereto and in the
Holders Agreement, dated as of August 29, 2003, among the investors named
therein and the Company, there are no authorized or outstanding options,
warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable or exercisable
for, any capital stock of the Company or any of its subsidiaries other than
those described in the Prospectus or issued or granted after the date
thereof.  The description of ev3 LLC’s
and the Company’s stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth in
the Prospectus accurately and fairly presents in all material respects the
information required to be shown with respect to such plans, arrangements,
options and rights.

 

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

 

(m)  Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required.  Neither ev3 LLC, the Company nor any of their
respective subsidiaries is in violation of its charter, by-laws or other
organizational documents or is in default (or, with the giving of notice or
lapse of time, would be in default) (“Default”) under any indenture, mortgage,
loan or credit agreement, note, contract, lease or other instrument to which
ev3 LLC, the Company or any of their respective subsidiaries is a party or by
which any of them may be bound, or to which any of the property or assets of
ev3 LLC, the Company or any of their respective subsidiaries is subject (each,
an “Existing Instrument”), except for such Defaults as would not, individually
or in the aggregate, result in a Material Adverse Change.  Each of ev3 LLC’s and the Company’s
execution, delivery and performance of this Agreement and consummation of the
transactions contemplated hereby and by the Prospectus (i) have been duly
authorized by all necessary corporate action and will not result in any
violation of the provisions of, with respect to ev3 LLC, its operating
agreement or other organizational documents, and with respect to the Company,
its charter or by-laws, or the organizational documents of any of their
subsidiaries, (ii) will not conflict with or constitute a breach of, or
Default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of ev3 LLC, the Company or any of their
respective subsidiaries pursuant to, or require

 

8

 

the consent of any other party to, any
Existing Instrument, except for such consents which have been obtained and for
such conflicts, breaches, Defaults, liens, charges or encumbrances as would
not, individually or in the aggregate, result in a Material Adverse Change and (iii) will
not result in any violation of any law, administrative regulation or
administrative or court decree applicable to ev3 LLC, the Company or any of
their respective subsidiaries except for such violations as would not,
individually or in the aggregate, result in a Material Adverse Change.  No consent, approval, authorization or other
order of, or registration or filing with, any court or other governmental or
regulatory authority or agency, is required for ev3 LLC’s or the Company’s
execution, delivery and performance of this Agreement and consummation of the
transactions contemplated hereby and by the Prospectus, except (i) such as
have been obtained or made by ev3 LLC and the Company and are in full force and
effect under the Securities Act and applicable state securities or blue sky
laws and (ii) for the filing of the Certificate of Merger contemplated by
the Agreement and Plan of Merger, dated as of April 4, 2005 (filed as Exhibit 2.1
to the Registration Statement), which Certificate of Merger will be filed on or
before the First Closing Date.

 

(n)  No Material Actions or Proceedings.  Except as otherwise disclosed in the
Prospectus, there are no legal or governmental actions, suits or proceedings
(including, without limitation, any actions, suits or proceedings by the Food
and Drug Administration (the “FDA”)) pending or, to the best of ev3 LLC’s and
the Company’s knowledge, threatened (i) against ev3 LLC, the Company or
any of their respective subsidiaries, (ii) which has as the subject thereof
any officer or director of, or property owned or leased by, ev3 LLC or the
Company or any of their respective subsidiaries or (iii) relating to
environmental or discrimination matters, where in any such case (A) there
is a reasonable possibility that such action, suit or proceeding would be
determined adversely to ev3 LLC, the Company or such subsidiary and (B) any
such action, suit or proceeding, if so determined adversely, would reasonably
be expected to result in a Material Adverse Change or materially and adversely
affect the Company’s ability to consummate the transactions contemplated by
this Agreement.  No labor dispute with
the employees of ev3 LLC, the Company or any of any of their respective
subsidiaries exists or, to the best of ev3 LLC’s and the Company’s knowledge,
is threatened or imminent which would, individually or in the aggregate, be
reasonably expected to result in a Material Adverse Change.

 

(o)  Intellectual Property Rights.  Each of ev3 LLC, the Company and their
respective subsidiaries own or possess sufficient trademarks, trade names,
patent rights, copyrights, domain names, licenses, approvals, trade secrets and
other similar rights (collectively, “Intellectual Property Rights”) reasonably
necessary to conduct their businesses as now conducted, except as such failure
to own, possess or acquire such rights would not have a Material Adverse Change
and the expected expiration of any of such Intellectual Property Rights would
not result in a Material Adverse

 

9

 

Change. 
Except as disclosed in the Prospectus, none of ev3 LLC, the Company or
any of their respective subsidiaries has received any notice of infringement or
conflict with asserted Intellectual Property Rights of others, which infringement
or conflict, if the subject of an unfavorable decision, would result in a
Material Adverse Change.  None of ev3
LLC, the Company or any of their respective subsidiaries is a party to or bound
by any options, licenses or agreements with respect to the Intellectual
Property Rights of any other person or entity that are required to be described
in the Prospectus and are not described in all material respects.  None of the Intellectual Property Rights
owned by ev3 LLC, the Company or any of their respective subsidiaries have been
obtained or are being used by ev3 LLC, the Company or any of their respective
subsidiaries in violation of any contractual obligation binding on ev3 LLC, the
Company, any of their respective subsidiaries or, to ev3 LLC’s or the Company’s
knowledge, any of their respective officers, directors or employees or
otherwise in violation of the rights of any persons, except where such
violations would not, individually or in the aggregate, result in a Material
Adverse Change.

 

(p)  All Necessary Permits, etc.  Each of ev3 LLC, the Company and each of
their respective subsidiaries possess such valid and current certificates,
authorizations or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct their respective businesses,
except where the failure to so possess would not, individually or in the
aggregate, result in a Material Adverse Change and none of ev3 LLC, the Company
or any of their respective subsidiaries has received any notice of proceedings
relating to the revocation or modification of, or non-compliance with, any such
certificate, authorization or permit which, individually or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would result in a
Material Adverse Change.

 

(q)  Title to Properties.  ev3 LLC, the Company and each of their
respective subsidiaries has good and marketable title to all the properties
(whether real or personal) and assets reflected as owned in the financial
statements referred to in Section 1(A)(i) above, in each case free
and clear of any security interests, mortgages, liens, encumbrances, equities,
claims and other defects to title, except such as are described in the
Prospectus or would not, individually or in the aggregate, be reasonably
expected to result in a Material Adverse Change.  The real property, improvements, equipment
and personal property held under lease by ev3 LLC, the Company or any
subsidiary are held under valid and enforceable leases, with such exceptions as
would not, individually or in the aggregate, be reasonably expected to result
in a Material Adverse Change.

 

(r)  Tax Law Compliance.  Each of ev3 LLC, the Company and their
respective subsidiaries have filed all necessary federal, state and foreign
income and franchise tax returns required to be filed through the date hereof
and have paid all taxes

 

10

 

due thereon and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them,
except in each case as would not, individually or in the aggregate, result in a
Material Adverse Change or which ev3 LLC, the Company or any such subsidiary is
contesting in good faith.  As of the First
Closing Date and the Second Closing Date, if any, ev3 LLC, the Company and
their respective subsidiaries will have filed all necessary federal, state and
foreign income and franchise tax returns required to be filed through the First
Closing Date and the Second Closing Date , as applicable, and have paid all
taxes due thereon and, if due and payable, any related or similar assessment,
fine or penalty levied against any of them, except in each case as would not,
individually or in the aggregate, result in a Material Adverse Change or which
ev3 LLC, the Company or any such subsidiary is contesting in good faith.  ev3 LLC has made adequate charges, accruals
and reserves in the applicable financial statements referred to in Section 1(A)(i) above
in respect of all federal, state and foreign income and franchise taxes for all
periods as to which the tax liability of ev3 LLC, the Company or any of their
respective subsidiaries has not been finally determined.

 

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

 

(t)  Insurance. 
Each of ev3 LLC,  the Company and
their respective subsidiaries are insured with policies in such amounts and
with such deductibles and covering such risks as are generally deemed adequate
and customary for their businesses including, but not limited to, policies
covering real and personal property owned or leased by ev3 LLC, the Company or
their respective subsidiaries against theft, damage, destruction and acts of
vandalism.  Neither ev3 LLC nor the
Company has any reason to believe that it or any of their respective
subsidiaries will not be able (i) to renew its existing insurance coverage
as and when such policies expire or (ii) to obtain comparable coverage
from similar institutions as may be necessary or appropriate to conduct its
business as now conducted and at a cost that would not result in a Material
Adverse Change.  Neither of ev3 LLC, the
Company nor any of their respective subsidiaries has been denied any insurance
coverage which it has sought or for which it has applied.

 

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

 

11

 

(v)  Related
Party Transactions.  There are
no business relationships or related-party transactions involving ev3 LLC, the
Company or any of their respective subsidiaries or any other person required to
be described in the Prospectus which have not been described as required.

 

(w)  Disclosure Controls and Procedures.  The Company is aware of no reason that its
quarterly report on Form 10-Q for the quarter ended July 3, 2005
would not (1) be accompanied by the certifications required to be filed or
submitted by the Company’s chief executive officer and chief financial officer
pursuant to the Sarbanes-Oxley Act of 2002 and the rules and regulations thereunder
or (2) contain a statement to the effect that the Company’s principal
executive officer and principal financial officer concluded as of the end of
the period covered by such report that the Company’s disclosure controls and
procedures were effective such that the information relating to the Company,
including its consolidated subsidiaries, required to be disclosed in the
Company’s reports filed with the Commission (i) is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms of the Commission, and (ii) is accumulated and communicated to the
Company’s management, including its principal executive officer and principal
financial and accounting officer, as appropriate to allow timely decisions
regarding required disclosure.

 

(x)  No Unlawful Contributions or Other Payments.  None of ev3 LLC, the Company, their
respective subsidiaries or, to the best of ev3 LLC’s and the Company’s
knowledge, any employee or agent of ev3 LLC, the Company or any of their respective
subsidiaries, has made any contribution or other payment to any official of, or
candidate for, any federal, state or foreign office in violation of any law or
of the character required to be disclosed in the Prospectus.

 

(y)  Company’s Accounting System.  Except as disclosed in the Prospectus, each
of ev3 LLC and the Company maintains a system of accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management’s general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial statements of ev3
LLC and the Company in conformity with generally accepted accounting principles
as applied in the United States and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

 

(z)  Compliance with Environmental Laws.  Except as would not, individually or in the
aggregate, result in a Material Adverse Change (i) none of ev3 LLC, the
Company or any of their respective subsidiaries is in violation of any

 

12

 

applicable federal, state, local or foreign
law or regulation relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or wildlife, including without limitation,
applicable laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, “Materials of Environmental Concern”), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environment Concern (collectively, “Environmental
Laws”), which violation includes, but is not limited to, noncompliance with any
applicable permits or other governmental authorizations required for the
operation of the business of ev3 LLC, the Company or their respective
subsidiaries under applicable Environmental Laws, nor has ev3 LLC, the Company
or any of their respective subsidiaries received any written communication,
whether from a governmental authority, citizens group, employee or otherwise,
that alleges that ev3 LLC, the Company or any of their respective subsidiaries
is in violation of any applicable Environmental Law; (ii) there is no
claim, action or cause of action filed with a court or governmental authority,
no investigation with respect to which ev3 LLC or the Company has received
written notice, and no written notice by any person or entity alleging
potential liability for investigatory costs, cleanup costs, governmental
responses costs, natural resources damages, property damages, personal
injuries, attorneys’ fees or penalties arising out of, based on or resulting
from the presence, or release into the environment, of any Material of
Environmental Concern at any location owned, leased or operated by ev3 LLC, the
Company or any of their respective subsidiaries, now or in the past
(collectively, “Environmental Claims”), pending or, to the best of ev3 LLC’s or
the Company’s knowledge, threatened against ev3 LLC, the Company or any of
their respective subsidiaries or any person or entity whose liability for any
Environmental Claim ev3 LLC, the Company or any of their respective
subsidiaries has retained or assumed either contractually or by operation of
law; and (iii) to ev3 LLC’s and the Company’s knowledge, there are no past
or present actions, activities, circumstances, conditions, events or incidents
related to ev3 LLC, the Company or any of their respective subsidiaries,
including, without limitation, the release, emission, discharge, presence or
disposal of any Material of Environmental Concern, that would result in a
violation of any Environmental Law or form the basis of a potential
Environmental Claim against ev3 LLC, the Company or any of their respective
subsidiaries or against any person or entity whose liability for any
Environmental Claim ev3 LLC, the Company or any of their respective
subsidiaries has retained or assumed either contractually or by operation of
law.

 

(aa)  ERISA Compliance.  ev3 LLC, the Company, their respective
subsidiaries and any “employee benefit plan” (as defined under Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended, and the
regulations

 

13

 

and published interpretations thereunder
(collectively, “ERISA”)) established or maintained by ev3 LLC, the Company,
their respective subsidiaries or their “ERISA Affiliates” (as defined below)
are in compliance with ERISA, except where the failure to be so in compliance
would not result in a Material Adverse Change. 
“ERISA Affiliate” means, with respect to ev3 LLC, the Company or a
subsidiary, any member of any group of organizations described in Sections
414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and
the regulations and published interpretations thereunder (the “Code”) of which
ev3 LLC, the Company or such subsidiary is a member.  No “reportable event” (as defined under
ERISA) has occurred or is reasonably expected to occur with respect to any “employee
benefit plan” established or maintained by ev3 LLC, the Company, their subsidiaries
or any of their ERISA Affiliates, except where such occurrence would not have a
Material Adverse Change.  No “employee
benefit plan” established or maintained by ev3 LLC, the Company, their
respective subsidiaries or any of their ERISA Affiliates, if such “employee
benefit plan” were terminated, would have any “amount of unfunded benefit
liabilities” (as defined under ERISA), except where such liabilities would not
have a Material Adverse Change.  None of
ev3 LLC, the Company, their respective subsidiaries nor any of their ERISA
Affiliates has incurred or reasonably expects to incur any material liability
under (i) Title IV of ERISA with respect to termination of, or withdrawal
from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or
4980B of the Code, except where such liabilities would not have a Material
Adverse Change.  Each “employee benefit
plan” established or maintained by ev3 LLC, the Company or their respective
subsidiaries or any of their ERISA Affiliates that is intended to be qualified
under Section 401(a) of the Code satisfies the qualification
requirements under Section 401(a) of the Code except where the
failure to satisfy such requirements would not result in a Material Adverse
Change and, to the knowledge of ev3 LLC and the Company, nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification under Section 401(a) of the Code.

 

(bb)  Brokers. 
Other than as contemplated by this Agreement, there is no broker, finder
or other party that is entitled to receive from ev3 LLC, the Company or their
respective subsidiaries any brokerage or finder’s fee or other fee or
commission as a result of any transactions contemplated by this Agreement.

 

(cc)  No Outstanding Loans or Other Indebtedness.  There are no material outstanding loans,
advances (except normal advances for business expenses in the ordinary course
of business) or guarantees or indebtedness by ev3 LLC or the Company to or for
the benefit of any of the officers or directors of the Company except as
disclosed in the Prospectus.

 

(dd)  Compliance with Laws.  Neither ev3 LLC nor the Company has been
advised, nor has reason to believe, that it and each of their respective
subsidiaries

 

14

 

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

 

(ee)  FDA Proceedings.  To the best of ev3 LLC’s and the Company’s
knowledge, there are no rulemakings or similar proceedings before the FDA or
any similar entity in any other jurisdiction which involve ev3 LLC, the Company
or any of their respective subsidiaries or any of the processes or products
which the Prospectus discloses ev3 LLC, the Company or any of their respective
subsidiaries has developed, is developing or proposes to develop, or uses or proposes
to use which, if the subject of an action unfavorable to ev3 LLC, the Company
or any of their subsidiaries, would result in a Material Adverse Change.

 

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

 

Each of ev3 LLC and the Company acknowledge
that the Underwriters and, for purposes of the opinions to be delivered
pursuant to Section 5 hereof, counsel to the Company and counsel to the
Underwriters, will rely upon the accuracy and truthfulness of the foregoing
representations and hereby consents to such reliance.

 

B.  Representations and Warranties of the Selling
Stockholder.  The Selling
Stockholder represents, warrants and covenants to each Underwriter as follows:

 

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

 

(b)  The
Custody Agreement and Power of Attorney. 
Each of the (i) Custody Agreement signed by the Selling
Stockholder and the Company, as custodian (the “Custodian”), relating to the
deposit of the Common Shares to be sold by the

 

15

 

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

 

(c)  Title
to Common Shares to be Sold; All Authorizations Obtained.  The Selling Stockholder has good
and valid title to all of the membership units of ev3 LLC which will be
converted into Common Shares in connection with the Merger and may be sold by
the Selling Stockholder pursuant to this Agreement.  On the First Closing Date and the Second
Closing Date (as defined below), as applicable, the Selling Stockholder will
have, good and valid title to all of the Common Shares which may be sold by the
Selling Stockholder pursuant to this Agreement on such date and the legal right
and power, and all authorizations and approvals required by law to enter into
this Agreement and its Custody Agreement and Power of Attorney, to sell,
transfer and deliver all of the Common Shares which may be sold by the Selling
Stockholder pursuant to this Agreement and to comply with its other obligations
hereunder and thereunder.

 

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

 

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

 

16

 

Stockholder of the transactions contemplated
in this Agreement, except such as have been obtained or made and are in full
force and effect under the Securities Act, applicable state securities or blue
sky laws and from the NASD.

 

(f)  No
Registration or Other Similar Rights.  The
Selling Stockholder does not have any registration or other similar rights to
have any equity or debt securities registered for sale by the Company under the
Registration Statement or included in the offering contemplated by this
Agreement, except for such rights as are described in the Prospectus under “Shares
Eligible for Future Sale” and “Certain Relationships and Related Party
Transactions—Registration Rights Agreement”.

 

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

 

(h)  Disclosure
Made by the Selling Stockholder in the Prospectus.  All information about the Selling
Stockholder furnished by or with the approval of the Selling Stockholder in
writing expressly for use in the Registration Statement is, and on the First
Closing Date and the Second Closing Date will be, true, correct and complete in
all material respects, and does not, and on the First Closing Date and the
Second Closing Date will not, contain any untrue statement of a material fact
or omit to state any material fact necessary to make such information not
misleading.  All information about the
Selling Stockholder furnished by or with the approval of the Selling Stockholder
in writing expressly for use in the Prospectus is, and on the First Closing
Date and the Second Closing Date will be, true, correct and complete in all
material respects, and does not, and on the First Closing Date and the Second
Closing Date will not, contain any untrue statement of a material fact or omit
to state any material fact necessary to make such information, in light of the
circumstances under which they were made, not misleading.  The Selling Stockholder confirms as accurate
the number of shares of Common Stock set forth opposite the Selling Stockholder’s
name in the Prospectus under the caption “Principal and Selling Stockholders”
(both prior to and after giving effect to the sale of the Common Shares).

 

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

 

17

 

(j)  Confirmation of ev3 LLC and Company Representations
and Warranties.  The Selling
Stockholder has no reason to believe that the representations and warranties of
either ev3 LLC or the Company contained in Section 1(A) hereof are
not true and correct in all material respects, is familiar with the
Registration Statement and the Prospectus and has no knowledge of any material
fact, condition or information not disclosed in the Registration Statement or
the Prospectus which has had or may have a Material Adverse Change and is not
prompted to sell shares of Common Stock by any information concerning ev3 LLC
or the Company which is not set forth in the Registration Statement and the
Prospectus.

 

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

 

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

 

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

 

(a)  The
Firm Common Shares.  The
Company agrees to issue and sell to the several Underwriters the Firm Common
Shares upon the terms herein set forth. 
On the basis of the representations, warranties and agreements herein
contained, and upon the terms but subject to the conditions herein set forth,
the Underwriters agree, severally and not jointly, to purchase from the Company
the respective number of Firm Common Shares set forth opposite their names on Schedule A,
plus any additional number of Firm Common Shares which the Underwriters may
become obligated to purchase pursuant to the provisions of Section 10 hereof.  The purchase price per Firm Common Share to
be paid by the several Underwriters to the Company shall be $13.30 per share.

 

(b)  The
First Closing Date.  Delivery
of certificates for the Firm Common Shares to be purchased by the Underwriters
and payment therefor shall be made at the offices of King & Spalding
LLP, 1185 Avenue of the Americas, New York, NY 10036 (or such other place as
may be agreed to by the Company and the Representatives) at 9:00 a.m. New
York time, on the third (fourth, if the determination of the purchase price of
the Firm Common Shares occurs after 4:30 p.m. New York time) business day
after the date hereof (unless another time and date shall be agreed to by the
Representatives and the Company) (the time and date of such closing are called
the “First Closing Date”).  The Company
hereby acknowledges that circumstances

 

18

 

under which the Representatives may provide
notice to postpone the First Closing Date as originally scheduled include, but
are in no way limited to, any determination by the Company or the
Representatives to recirculate to the public copies of an amended or
supplemented Prospectus or a delay as contemplated by the provisions of Section 10.

 

(c)  The
Optional Common Shares; the Second Closing Date.  In addition, on the basis of the
representations, warranties and agreements herein contained, and upon the terms
but subject to the conditions herein set forth, the Company hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up
to an aggregate of 1,728,850 Optional Common Shares from the Company and the
Selling Stockholder hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 35,900 Optional
Common Shares from the Selling Stockholder. 
The purchase price per Optional Common Share to be paid by the several
Underwriters to the Company and the Selling Stockholder shall be $13.02 per
share.  The option granted hereunder is
for use by the Underwriters solely in covering any over-allotments in
connection with the sale and distribution of the Firm Common Shares.  No Optional Common Shares shall be sold or
delivered unless the Firm Common Shares previously have been, or simultaneously
are, sold and delivered.  The option
granted hereunder may be exercised at any time (but not more than once) upon
notice by the Representatives to the Company and the Selling Stockholder, which
notice may be given at any time within 30 days from the date of the
Prospectus.  Such notice shall set forth (i) the
aggregate number of Optional Common Shares as to which the Underwriters are
exercising the option, (ii) the names and denominations in which the
certificates for the Optional Common Shares are to be registered and (iii) the
time, date and place at which such certificates will be delivered (which time
and date may be simultaneous with, but not earlier than, the First Closing
Date; and in such case the term “First Closing Date” shall refer to the time
and date of delivery of certificates for the Firm Common Shares and the
Optional Common Shares).  Such time and
date of delivery, if subsequent to the First Closing Date, is called the “Second
Closing Date” and shall be determined by the Representatives and shall not be
earlier than three nor later than five full business days after delivery of
such notice of exercise.  If any Optional
Common Shares are to be purchased, (a) each Underwriter agrees, severally
and not jointly, to purchase the number of Optional Common Shares (subject to
such adjustments to eliminate fractional shares as the Representatives may
determine) that bears the same proportion to the total number of Optional
Common Shares to be purchased as the number of Firm Common Shares set forth on Schedule A
opposite the name of such Underwriter bears to the total number of Firm Common
Shares and (b) the Company and the Selling Stockholder agree, severally
and not jointly, to sell the number of Optional Common Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may
determine) that bears the same proportion to the total number of Optional
Common Shares to be sold as the number of Optional Common Shares set

 

19

 

forth in Schedule B opposite the name of
the Selling Stockholder (or, in the case of the Company, as the number of
Optional Common Shares to be sold by the Company as set forth in the paragraph “Introductory”
of this Agreement) bears to the total number of Optional Common Shares.  The Representatives may cancel the option at
any time prior to any notice of exercise of such option and prior to the
expiration of such option by giving written notice of such cancellation to the
Company and the Selling Stockholder.

 

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

 

(e)  Payment
for the Common Shares.  Payment
for the Common Shares to be sold by the Company shall be made at the First
Closing Date (and, if applicable, at the Second Closing Date) by wire transfer
of immediately available funds to the order of the Company.  Payment for the Common Shares to be sold by
the Selling Stockholder shall, if applicable, be made at the First Closing Date
or Second Closing Date, as applicable, by wire transfer of immediately
available funds to the order of the Custodian.

 

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

 

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

 

20

 

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

 

(g)  Delivery
of Prospectus to the Underwriters. 
Not later than 12:00 p.m. on the second business day following the
date the Common Shares are first released by the Underwriters for sale to the
public, the Company shall deliver or cause to be delivered, copies of the
Prospectus in such quantities and at such places as the Representatives shall
request.

 

Section 3.  Additional
Covenants.

 

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

 

(a)  Representatives’
Review of Proposed Amendments and Supplements.  During such period beginning on the date
hereof and ending on the later of the First Closing Date or such date, as in
the opinion of counsel for the Underwriters, the Prospectus is no longer
required by law to be delivered in connection with sales by an Underwriter or
dealer (the “Prospectus Delivery Period”), prior to amending or supplementing
the Registration Statement (including any registration statement filed under Rule 462(b) under
the Securities Act) or the Prospectus, the Company shall furnish to the
Representatives for review a copy of each such proposed amendment or
supplement, and the Company shall not file any such proposed amendment or
supplement to which the Representatives reasonably object.

 

21

 

(b)  Securities
Act Compliance.  After the
date of this Agreement and during the Prospectus Delivery Period, the Company
shall promptly advise the Representatives in writing (i) of the receipt of
any comments of, or requests for additional or supplemental information from,
the Commission, (ii) of the time and date of any filing of any
post-effective amendment to the Registration Statement or any amendment or
supplement to the Preliminary Prospectus or the Prospectus, (iii) of the
time and date that any post-effective amendment to the Registration Statement
becomes effective and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or of any order preventing or suspending the
use of the Prospectus, or of any proceedings to remove, suspend or terminate
from listing or quotation the Common Stock from any securities exchange upon
which it is listed for trading or included or designated for quotation, or of
the threatening or initiation of any proceedings for any of such purposes. If
the Commission shall enter any such stop order at any time, the Company will
use its commercially reasonable efforts to obtain the lifting of such order as
soon as is reasonably possible. 
Additionally, the Company agrees that it shall comply with the
provisions of Rules 424(b) and 430A, as applicable, under the
Securities Act and will use its commercially reasonable efforts to confirm that
any filings made by the Company under such Rule 424(b) were received
in a timely manner by the Commission.

 

(c)  Amendments
and Supplements to the Prospectus and Other Securities Act Matters.  If, during the Prospectus Delivery Period,
any event shall occur or condition exist as a result of which it is necessary
to amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if in the reasonable opinion of counsel for the
Underwriters it is otherwise necessary to amend or supplement the Prospectus to
comply with the Securities Act, the Company agrees to promptly prepare (subject
to Section 3(A)(a) hereof), file with the Commission and furnish at
its own expense to the Underwriters and to dealers, amendments or supplements
to the Prospectus so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus, as amended
or supplemented, will comply with the Securities Act.

 

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

 

(e)  Blue
Sky Compliance.  The Company
shall cooperate with the Representatives and counsel for the Underwriters to
qualify or register the Common

 

22

 

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

 

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

 

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

 

(h)  Earnings
Statement.  The Company will
timely file such reports pursuant to the Exchange Act as are necessary to make
generally available to its security holders and to the Representatives as soon
as practicable an earnings statement (which need not be audited) covering the
twelve-month period ending July 2, 2006 that satisfies the provisions of Section 11(a) of
the Securities Act.

 

(i)  Periodic
Reporting Obligations.  During
the Prospectus Delivery Period the Company shall file, on a timely basis, with
the Commission and the NASDAQ National Market all reports and documents
required to be filed under the Exchange Act. Additionally, the Company shall
report the use of proceeds from the issuance of the Common Shares as may be
required under Rule 463 under the Securities Act.

 

(j)  Company to Provide Interim Financial Statements.  Prior to the Closing Date, the Company will
furnish the Underwriters, as soon as they have been prepared by or are
available to the Company, a copy of any unaudited interim financial statements
of the Company for any period subsequent to the period covered by the most
recent financial statements appearing in the Registration Statement and the
Prospectus.

 

23

 

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

 

(l)  Agreement Not to Offer or Sell Additional Securities.  During the period commencing on the date
hereof and ending on the 180th day following the date of the Prospectus, the
Company will not, without the prior written consent of Piper and BAS (which
consent may be withheld at the sole discretion of Piper and BAS), directly or
indirectly, sell, offer, contract or grant any option to sell, pledge, transfer
or establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under
the Exchange Act, or otherwise dispose of or transfer, or announce the offering
of, or file any registration statement under the Securities Act in respect of,
any shares of Common Stock, options or warrants to acquire shares of the Common
Stock or securities exchangeable or exercisable for or convertible into shares
of Common Stock or publicly announce the intention to do any of the foregoing
(other than as contemplated by this Agreement with respect to the Common
Shares); provided, however, that the Company may (a) issue shares of its
Common Stock or options to purchase its Common Stock, or Common Stock upon
exercise of options or warrants, pursuant to any warrant, stock option, stock
bonus or other stock plan or arrangement described in the Prospectus, but only
if (i) the holders of such warrants, shares, options, or shares issued
upon exercise of such warrants or options have executed a lock up agreement in
the form of Exhibit E hereto or (ii) such warrants, shares, options
or shares issued upon exercise of such warrants or options are not exercisable
by their terms during the period commencing on the date hereof and ending on
the 180th day following the date of the Prospectus, as such period
may be extended pursuant to this Section 3A(l), or (b) file a
registration statement on Form S-8 with respect to the shares of Common
Stock subject to the stock options issued or to be issued pursuant to any stock
option, stock bonus or other stock plan or arrangement described in the
Prospectus, or (c) issue shares of its Common Stock or options to purchase
its Common Stock to the extent the Company is required to do so in connection
with the transactions contemplated by each of the Note Contribution and
Exchange Agreement, dated as of April 4, 2005 (filed as Exhibit 2.3
to the Registration Statement) and the Agreement and Plan of Merger, dated as
of April 4, 2005 (filed as Exhibit 2.1 to the Registration
Statement).  Notwithstanding the foregoing,
if (x) during the last 17 days of the 180-day restricted period the Company
issues an earnings release or material news or a material event relating to the
Company occurs, or (y) prior to the expiration of the 180-day restricted
period, the Company announces that it will release earnings results during the
16-day period beginning on the last day of the 180-day period, the restrictions
imposed in this clause shall continue to apply until the expiration of the 18-day
period beginning on the issuance of the earnings release or the occurrence of
the material news or material event.

 

24

 

(m)  Future Reports to the Representatives.  During the period of five years hereafter the
Company will furnish to the Representatives at 800 Nicollet Mall, Minneapolis,
MN 55402 Attention: Equity Capital Markets: (i) as soon as practicable
after the end of each fiscal year, copies of the Annual Report of the Company
containing the balance sheet of the Company as of the close of such fiscal year
and statements of income, stockholders’ equity and cash flows for the year then
ended and the opinion thereon of the Company’s independent public or certified
public accountants; (ii) as soon as practicable after the filing thereof,
copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed
by the Company with the Commission, the NASD or any securities exchange; and (iii) as
soon as available, copies of any report or communication of the Company mailed
generally to holders of its capital stock; provided, however, that the Company
shall not be required to furnish copies of such reports, documents or
communications that are filed with the Commission and available through EDGAR.

 

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

 

(o)  No Manipulation of Price.  The Company will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company to facilitate the
sale or resale of the Common Shares.

 

(p)  Directed Share Program.  In connection with the Directed
Share Program, the Company will ensure that the Directed Shares will be
restricted to the extent required by the NASD or the NASD rules from sale,
transfer, assignment, pledge or hypothecation for a period of three months
following the date of the effectiveness of the Registration Statement.  The Designated Underwriter will notify the
Company as to which Participants will need to be so restricted.  The Company will direct the transfer agent to
place stop transfer restrictions upon such securities for such period of time.  Should the Company release, or seek to release,
from such restrictions any of the Directed Shares, the Company agrees to
reimburse the Underwriters for any reasonable expenses (including, without
limitation, reasonable legal expenses) they incur in connection with such
release.

 

B.  Covenant of the Selling Stockholder.  The Selling Stockholder further
covenants and agrees with each Underwriter:

 

25

 

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

 

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

 

Section 4.  Payment of
Expenses.  The Company agrees
to pay all costs, fees and expenses incurred in connection with the performance
by the Company of its obligations hereunder and in connection with the
transactions contemplated hereby, including without limitation (i) all
expenses incident to the issuance and delivery of the Common Shares (including
all printing and engraving costs), (ii) all fees and expenses of the
registrar and transfer agent of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Common Shares to the Underwriters, (iv) all fees and expenses of
the Company’s counsel, independent public or certified public accountants and
other advisors engaged by the Company, (v) all costs and expenses incurred
in connection with the preparation, printing, filing, shipping and distribution
of the Registration Statement (including financial statements, exhibits, schedules,
consents and certificates of experts), the Preliminary Prospectus and the
Prospectus (including any Prospectus wrapper), and all amendments and
supplements thereto, and this Agreement, (vi) all filing fees, attorneys’
fees and expenses reasonably incurred by the Company or the Underwriters in
connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for
offer and sale under the state securities or blue sky laws or the provincial
securities laws of Canada, and, if requested by the Representatives, preparing
and printing a “Blue Sky Survey” or memorandum, and any supplements thereto,
advising the Underwriters of such qualifications, registrations and exemptions,
(vii) the filing fees incident to, and the reasonable fees and expenses of
counsel for the Underwriters in connection with, the NASD’s review and approval
of the Underwriters’ participation in the offering and distribution of the
Common Shares, (viii) the fees and expenses associated with including the
Common Stock on the NASDAQ National Market, (ix) all other fees, costs and
expenses referred to in Item 13 of Part II of the Registration Statement,
(x) the fees and expenses of the Custodian, (xi) all costs and expenses of the
Underwriters, including the reasonable fees and disbursements of counsel for
the Underwriters, in

 

26

 

connection with matters related to the Directed Shares which are
designated by the Company for sale to Participants, and (xii) any travel
expenses of the Company’s officers and employees and any other expenses of the
Company in connection with attending or hosting meetings with prospective
purchasers of the Common Shares, provided that the Company and the Underwriters
agree that expenses for any charter air travel in connection with such meetings
shall be borne equally by the Company and the Underwriters.  Except as provided in this Section 4, Section 6,
Section 8 and Section 9 hereof, the Underwriters shall pay their own
expenses, including the fees and disbursements of their counsel.

 

The Selling Stockholder further agrees with
each Underwriter to pay (directly or by reimbursement) all fees and expenses
incident to the performance of their obligations under this Agreement which are
not otherwise specifically provided for herein, including but not limited to (i) fees
and expenses of counsel and other advisors for the Selling Stockholder and (ii) expenses
and taxes incident to the sale and delivery of the Common Shares to be sold by
the Selling Stockholder to the Underwriters hereunder (which taxes, if any, may
be deducted by the Custodian under the provisions of Section 2 of this
Agreement).

 

Section 5.  Conditions
of the Obligations of the Underwriters.  The obligations of the several Underwriters
to purchase and pay for the Common Shares as provided herein on the First
Closing Date and, with respect to the Optional Common Shares, the Second
Closing Date, shall be subject to the accuracy of the representations and
warranties on the part of ev3 LLC, the Company and the Selling Stockholder set
forth in Sections 1(A) and 1(B) hereof as of the date hereof and the
Company and the Selling Stockholder as of the First Closing Date as though then
made and, with respect to the Optional Common Shares, as of the Second Closing
Date as though then made, to the timely performance by the Company and the
Selling Stockholder of their respective covenants and other obligations
hereunder, and to each of the following additional conditions:

 

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

 

(b)  Compliance
with Registration Requirements; No Stop Order; No Objection from NASD.  For the period from and after effectiveness
of this Agreement

 

27

 

and prior to the First Closing Date and, with
respect to the Optional Common Shares, the Second Closing Date:

 

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

 

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

 

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

 

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

 

(d)  Opinions
of Counsel for the Company. 
On each of the First Closing Date and the Second Closing Date the
Representatives shall have received the opinion of (i) King &
Spalding LLP, counsel for the Company, dated as of such closing date, the form
of which is attached as Exhibit A-1 (and the Representatives shall have
received an additional two conformed copies of such counsel’s legal opinion for
each of the several Underwriters) and (ii) Oppenheimer Wolff &
Donnelly LLP, special counsel for the Company, dated as of such closing date,
the form of which is attached as Exhibit A-2 (and the Representatives
shall have received an additional two conformed copies of such counsel’s legal
opinion for each of the several Underwriters).

 

(e)  Opinion
of Special Regulatory Counsel for the Company.  On each of the First Closing Date and the
Second Closing Date the Representatives shall have received the opinion of (i) King &
Spalding LLP, special U.S. regulatory counsel for the Company, dated as of such
closing date, the form of which is attached as Exhibit B-1 (and the
Representatives shall have received an additional two conformed copies of such
counsel’s legal opinion for each of the several Underwriters) and (ii)Taylor
Wessing, special foreign regulatory counsel for the Company, dated as of such
closing date, the form of which is attached as Exhibit B(2) (and the
Representatives shall have

 

28

 

received an additional two conformed copies
of such counsel’s legal opinion for each of the several Underwriters).

 

(f)  Opinion
of Special Patent Counsel for the Company.  On each of the First Closing Date and the
Second Closing Date the Representatives shall have received the opinion of King &
Spalding LLP, special patent counsel for the Company, dated as of such closing
date, the form of which is attached as Exhibit C (and the Representatives
shall have received an additional two conformed copies of such counsel’s legal
opinion for each of the several Underwriters).

 

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

 

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

 

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

 

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

 

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

 

(iv)  the transactions contemplated by
the Note Contribution and Exchange Agreement, dated as of April 4, 2005
(filed as Exhibit 2.3 to the Registration Statement) and the Agreement and
Plan of Merger, dated as of April 4, 2005 (filed as Exhibit 2.1 to
the Registration Statement) have been consummated in accordance with the terms
of such agreements.

 

29

 

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

 

(j)  Opinion of Counsel for the Selling Stockholder.  On each of the First Closing Date
and the Second Closing Date the Representatives shall have received the
favorable opinion of Oppenheimer Wolff & Donnelly LLP, counsel for the
Selling Stockholder, dated as of such Closing Date, the form of which is
attached as Exhibit D (and the Representatives shall have received an
additional two conformed copies of such counsel’s legal opinion for each of the
several Underwriters).

 

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

 

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

 

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

 

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

 

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

 

30

 

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

 

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

 

Section 6.  Reimbursement
of Underwriters’ Expenses.  If
this Agreement is terminated by the Representatives pursuant to Section 5,
Section 7, Section 10 (to the extent the termination pursuant to Section 10
is not as a result of (a) a default by an Underwriter that is a
Representative (a “Defaulting Representative”) or (b) a default by a
Defaulting Representative and one or more other defaulting Underwriters that is
not a Defaulting Representative), Section 11 or Section 17, or if the
sale to the Underwriters of the Common Shares on the First Closing Date is not
consummated because of any refusal, inability or failure on the part of the
Company or the Selling Stockholder to perform any agreement herein or to comply
with any provision hereof, the Company agrees to reimburse the Representatives
and the other Underwriters (or such Underwriters as have terminated this
Agreement with respect to themselves), severally, upon demand for all
out-of-pocket expenses that shall have been reasonably incurred by the
Representatives and the Underwriters in connection with the proposed purchase
and the offering and sale of the Common Shares, including but not limited to
fees and disbursements of counsel, printing expenses, travel expenses, postage,
facsimile and telephone charges.

 

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

 

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

 

31

 

party
hereto to any other party except that the provisions of Section 8 and Section 9
shall at all times be effective and shall survive such termination.

 

Section 8.  Indemnification.

 

(a)  Indemnification
of the Underwriters by the Company. 
The Company agrees to indemnify and hold harmless each Underwriter, its
officers and employees, and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act against any loss,
claim, damage, liability or expense, as incurred, to which such Underwriter or
such controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof
as contemplated below) arises out of or is based (i) upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or any amendment thereto, including any information
deemed to be a part thereof pursuant to Rule 430A under the Securities
Act, or the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading; or (ii) upon any untrue statement or alleged untrue statement
of a material fact contained in the Preliminary Prospectus or the Prospectus
(or any amendment or supplement thereto) , or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
or (iii) in whole or in part upon any inaccuracy in the representations
and warranties of ev3 LLC and the Company contained herein; or (iv) in
whole or in part upon any failure of the Company to perform its obligations
hereunder or under law ; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the fees and disbursements of
counsel chosen by Piper and BAS) as such expenses are reasonably incurred by
such Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by the Representatives expressly for use in the Registration Statement,
the Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto); and provided, further, that with respect to the Preliminary
Prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Common Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the

 

32

 

Underwriter pursuant to Section 2 and a
copy of the Prospectus (as then amended or supplemented, if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Common Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. The indemnity agreement set forth in this Section 8(a) shall
be in addition to any liabilities that the Company may otherwise have.

 

(b)  Indemnification
of the Underwriters by the Selling Stockholder. The Selling
Stockholder agrees to indemnify and hold harmless each Underwriter, its
officers and employees, and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act against any loss,
claim, damage, liability or expense, as incurred, to which such Underwriter or
such controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Selling Stockholder),
insofar as such loss, claim, damage, liability or expense (or actions in
respect thereof as contemplated below) arises out of or is based (i) upon
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A under the
Securities Act, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading but only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with information relating to the Selling Stockholder furnished in
writing to the Company by or with the approval of the Selling Stockholder
expressly for use in the Registration Statement or any amendments or
supplements thereto; or (ii) upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading but only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with information relating to the Selling Stockholder furnished in
writing to the Company by or with the approval of the Selling Stockholder
expressly for use in the Registration Statement, the Preliminary Prospectus,
the Prospectus or any amendments or supplements thereto; (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the
Selling Stockholder contained herein; or (iv) in whole or in part upon any
failure of the Selling Stockholder to perform its obligations hereunder or
under law; and to reimburse each Underwriter and each such controlling person
for any and all expenses (including the

 

33

 

fees and disbursements of one counsel chosen
by BAS and Piper) as such expenses are reasonably incurred by such Underwriter
or such controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action; provided, however, that the foregoing indemnity agreement
shall not apply to any loss, claim, damage, liability or expense to the extent,
but only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Selling
Stockholders by the Representatives expressly for use in any the Registration
Statement, the Preliminary Prospectus or the Prospectus (or any amendment or
supplement thereto); and provided, further, that with respect to the Preliminary
Prospectus, the foregoing indemnity agreement shall not inure to the benefit of
any Underwriter from whom the person asserting any loss, claim, damage,
liability or expense purchased Common Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then
amended or supplemented, if the Selling Stockholder shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Common Shares to
such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage, liability or
expense.  Each Underwriter hereby
acknowledges that the only information that the Selling Stockholder furnished
to the Company expressly for use in the Registration Statement, the Preliminary
Prospectus or the Prospectus (or any amendment or supplement thereto) are the
respective statements concerning the Selling Stockholder set forth in the table
under the caption “Principal and Selling Stockholders” in the Prospectus and
associated footnotes thereto.  The
liability of the Selling Stockholder under the indemnity agreement contained in
this paragraph 8(b) shall be limited to an amount equal to the net
proceeds received by the Selling Stockholder from the offering of the Optional
Common Shares sold by the Selling Stockholder pursuant to this Agreement.

 

(c)  Indemnification
of the Company, its Directors and Officers and the Selling Stockholder.  Each Underwriter agrees, severally and not
jointly, to indemnify and hold harmless the Company, each of its directors,
each of its officers who signed the Registration Statement, the Selling
Stockholder and each person, if any, who controls the Company or the Selling
Stockholder within the meaning of Section 15 of the Securities Act against
any loss, claim, damage, liability or expense, as incurred, to which the
Company, or any such director, officer, Selling Stockholder or controlling
person may become subject, under the Securities Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of such Underwriter), insofar as such loss, claim, damage,
liability or expense (or actions

 

34

 

in respect thereof as contemplated below)
arises out of or is based upon any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, the Preliminary
Prospectus or the Prospectus (or any amendment or supplement thereto), or
arises out of or is based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, the Preliminary
Prospectus, the Prospectus (or any amendment or supplement thereto), in
reliance upon and in conformity with written information furnished to the
Company and the Selling Stockholder by the Representatives expressly for use
therein; and to reimburse the Company, or any such director, officer, Selling
Stockholder or controlling person for any legal and other expense reasonably
incurred by the Company, or any such director, officer, Selling Stockholder or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or action.  Each of the Company and the Selling
Stockholder hereby acknowledges that the only information that the Underwriters
have furnished to the Company and the Selling Stockholder expressly for use in
the Registration Statement, the Preliminary Prospectus or the Prospectus (or
any amendment or supplement thereto) are the statements set forth in the table
in the first paragraph and in the third, seventh, fourteenth, fifteenth and
seventeenth through twenty-third paragraphs under the caption “Underwriting” in
the Prospectus; and the Underwriters confirm that such statements are
correct.  The indemnity agreement set
forth in this Section 8(c) shall be in addition to any liabilities
that each Underwriter may otherwise have.

 

(d)  Notifications
and Other Indemnification Procedures.  Promptly after receipt by an indemnified
party under this Section 8 of notice of the commencement of any action,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof, but the omission so
to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 8 or to the extent it is
not prejudiced as a proximate result of such failure. In case any such action
is brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party; provided,
however, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that a conflict may

 

35

 

arise between the positions of the
indemnifying party and the indemnified party in conducting the defense of any
such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available
to the indemnifying party, the indemnified party or parties shall have the
right to select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. Upon receipt of notice from the indemnifying party to such
indemnified party of such indemnifying party’s election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this Section 8
for any legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel
(together with local counsel), approved by the indemnifying parties (Piper and
BAS in the case of Section 8(c) and Section 9), representing the
indemnified parties who are parties to such action) or (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying party.

 

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

 

36

 

(f)  Indemnification
for Directed Shares.  In connection
with the offer and sale of the Directed Shares, the Company agrees, promptly
upon a request in writing, to indemnify and hold harmless the Underwriters from
and against any and all losses, liabilities, claims, damages and expenses
incurred by them as a result of the failure of the Participants to pay for and
accept delivery of Directed Shares which, by the end of the first business day
following the date of this Agreement, were subject to a properly confirmed
agreement to purchase.  The Company agrees
to indemnify and hold harmless the Designated Underwriter, its officers and
employees, and each person, if any, who controls the Designated Underwriter
within the meaning of the Securities Act or the Exchange Act against any loss,
claim, damage, liability or expense, as incurred, to which such Designated
Underwriter or such controlling person may become subject, (i) under the
laws or regulations of foreign jurisdictions where Directed Shares have been
offered; (ii) which is caused by any untrue statement or alleged untrue
statement of a material fact contained in any material prepared by or with the
consent of the Company for distribution to Participants in connection with the
Directed Share Program or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; (iii) which is caused by the failure of
any Participant to pay for and accept delivery of Directed Shares that such
Participant agreed to purchase; (iv) which is related to any Prospectus
wrapper delivered in connection with the reservation and sale of Directed
Shares; (v) which is caused by the violation of any applicable laws or
regulations of federal, state or foreign jurisdictions where Directed Shares
have been offered; or (vi) which is related to, arising out of, or in
connection with the Directed Share Program, other than losses, claims, damages,
liabilities or expenses that are finally judicially determined to have resulted
from the bad faith or gross negligence of the Designated Underwriters.  The indemnity agreement set forth in this
paragraph shall be in addition to any liabilities that the Company may
otherwise have.

 

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

 

37

 

one hand, and the Underwriters, on the other hand, in connection with
the offering of the Common Shares pursuant to this Agreement shall be deemed to
be in the same respective proportions as the total net proceeds from the
offering of the Common Shares pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Stockholder, and the total
underwriting discount received by the Underwriters, in each case as set forth
on the front cover page of the Prospectus bear to the aggregate initial
public offering price of the Common Shares as set forth on such cover.  The relative fault of the Company and the
Selling Stockholder, on the one hand, and the Underwriters, on the other hand,
shall be determined by reference to, among other things, whether any such
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact or any such inaccurate or alleged inaccurate
representation or warranty relates to information supplied by the Company or
the Selling Stockholder, on the one hand, or the Underwriters, on the other
hand, and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

 

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

 

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

 

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

 

38

 

Notwithstanding any other provision of this
Agreement, the liability of the Selling Stockholder to contribute pursuant to Section 9
shall be limited to the net proceeds received by the Selling Stockholder from
the offering of the Optional Common Shares sold by the Selling Stockholder
pursuant to this Agreement.

 

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

 

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

 

Section 11.  Termination of this Agreement.  Prior to the First Closing Date this
Agreement may be terminated by the Representatives by notice given to the
Company if at any time (i) trading or quotation in any of the Company’s
securities shall have been suspended or limited by the Commission or by the
NASDAQ National Market, or trading in securities generally on either the NASDAQ
Stock Market or the New York Stock Exchange shall have been suspended or limited,
or minimum or maximum prices shall have been generally established on any of
such stock exchanges

 

39

 

by the Commission or the NASD; (ii) a general banking moratorium
shall have been declared by any of federal or New York, Delaware or California
authorities; (iii) there shall have occurred any outbreak or escalation of
national or international hostilities or any crisis or calamity, or any change
in the United States or international financial markets, or any substantial
change or development involving a prospective substantial change in United
States’ or international political, financial or economic conditions, as in the
judgment of the Representatives is material and adverse and makes it impracticable
to market the Common Shares in the manner and on the terms described in the
Prospectus or to enforce contracts for the sale of securities; (iv) in the
commercially reasonable judgment of the Representatives there shall have
occurred any Material Adverse Change; or (v) the Company shall have
sustained a loss by strike, fire, flood, earthquake, accident or other calamity
of such character as in the reasonable judgment of the Representatives may
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured.  Any termination pursuant to this Section 11
shall be without liability on the part of (a) the Company or the Selling
Stockholder to any Underwriter, except that the Company and the Selling
Stockholder shall be obligated to reimburse the expenses of the Representatives
and the Underwriters pursuant to Sections 4 and 6 hereof, (b) any
Underwriter to the Company or the Selling Stockholder or (c) of any party
hereto to any other party except that the provisions of Section 8 and Section 9
shall at all times be effective and shall survive such termination.

 

Section 12.  Representations and Indemnities to Survive Delivery.  The respective indemnities, agreements,
representations, warranties and other statements of ev3 LLC, the Company, their
respective officers, the Selling Stockholder and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any Underwriter, the officers or
employees of any Underwriter or any person controlling any Underwriter, ev3
LLC, the Company, the officers or employees of ev3 LLC and the Company or any
person controlling ev3 LLC or the Company, or the Selling Stockholder, (ii) acceptance
of the Common Shares and payment for them hereunder and (iii) termination
of this Agreement.

 

Section 13.  Notices.  All
communications hereunder shall be in writing and shall be mailed, hand
delivered or telecopied and confirmed to the parties hereto as follows:

 

If to the Representatives:

 

Piper Jaffray & Co.

800 Nicollet Mall

Suite 800

Minneapolis, MN 55402

Facsimile:  (415) 277-1551

Attention:   Jeffrey A. Hoffman

 

and

 

40

 

Banc of America Securities LLC

9 West 57th Street

New York, NY 10019

Facsimile:  (212) 933-2217

Attention:  Thomas M. Morrison

 

with
a copy to:

 

Banc of America Securities LLC

9 West 57th Street

New York, New York 10019

Facsimile:  (212) 583-8567

Attention:  Legal Department

 

with
a copy to:

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019

Facsimile:  (212) 728-9222

Attention:  Steven J. Gartner, Esq.

 

If to the Company:

 

ev3 Inc.

4600 Nathan Lane North

Plymouth, MN 55442

Facsimile:  (763) 398-7240

Attention:  L. Cecily Hines, Esq.

 

with
a copy to:

 

King & Spalding LLP

1185 Avenue of the Americas LLP

New York, NY 10036

Facsimile:  (212) 556-2222

Attention:   Tracy Kimmel, Esq.

 

If to the Selling Stockholder:

 

Dale A.
Spencer

503 North Ferndale

Wayzata, MN 55391

41

 

Facsimile:  (952) 449-9011

 

and

 

ev3 Inc.

4600 Nathan
Lane North

Plymouth, MN
55442

Facsimile:  (763) 398-7240

Attention:  L. Cecily Hines, Esq.

 

with
a copy to:

 

Oppenheimer
Wolff & Donnelly LLP

Plaza VII
Building, Suite 3300

45 South
Seventh Street

Minneapolis,
MN 55402

Facsimile:  (612) 607-7100

Attention: D.
William Kaufman Esq.

 

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

 

Section 14.  Successors. 
This Agreement will inure to the benefit of and be binding upon the
parties hereto, including any substitute Underwriters pursuant to Section 10
hereof, and to the benefit of the employees, officers and directors and
controlling persons referred to in Section 8 and Section 9, and in
each case their respective successors, and personal representatives, and no
other person will have any right or obligation hereunder. The term “successors”
shall not include any purchaser of the Common Shares as such from any of the
Underwriters merely by reason of such purchase.

 

Section 15.  Partial Unenforceability.  The invalidity or unenforceability of any
Section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other Section, paragraph or provision hereof. If any
Section, paragraph or provision of this Agreement is for any reason determined
to be invalid or unenforceable, there shall be deemed to be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.

 

Section 16.  Governing Law Provisions.

 

(a)  GOVERNING
LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.

 

42

 

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

 

Section 17.  Failure of the Selling Stockholder to Sell and Deliver Optional Common
Shares.  If the Selling Stockholder shall
fail to sell and deliver to the Underwriters the Common Shares to be sold and
delivered by the Selling Stockholder pursuant to this Agreement at the First
Closing Date or the Second Closing Date, then the Underwriters shall have the
right, by written notice from the Representatives to the Company and the
Selling Stockholder, to postpone the First Closing Date or the Second Closing
Date, as the case may be, but in no event for longer than seven days in order
that the required changes, if any, to the Registration Statement and the
Prospectus or any other documents or arrangements may be effected.

 

Section 18.  General Provisions. 
This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof.  This Agreement may be executed
in two or more counterparts, each one of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement may not be amended or modified unless in writing by
all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party whom
the condition is meant to benefit. The Section headings herein are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.

 

43

 

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

 

[SIGNATURE PAGE FOLLOWS]

 

44

 

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

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  EV3 INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James M. Corbett

  	
   

  
	
   

  	
   

  	
  Name: James M. Corbett

  
	
   

  	
   

  	
  Title: President and Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EV3 LLC

  
	
   

  	
   

  
	
   

  	
   

  

 

	
   

  	
  By:

  	
  /s/ James M. Corbett

  	
   

  
	
   

  	
   

  	
  Name: James M. Corbett

  
	
   

  	
   

  	
  Title: President and Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Dale A. Spencer

  	
   

  
	
   

  	
  Dale A. Spencer

  

 

45

 

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

 

	
  PIPER JAFFRAY & CO.

  	
   

  
	
  BANC OF AMERICA SECURITIES LLC

  	
   

  
	
   

  	
   

  
	
  Acting as
  Representatives of the

  	
   

  
	
  several
  Underwriters named in

  	
   

  
	
  the attached
  Schedule A.

  	
   

  
	
   

  	
   

  
	
  PIPER JAFFRAY & CO.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jeff Hoffman

  	
   

  	
   

  
	
   

  	
  Managing
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BANC OF AMERICA SECURITIES LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gray
  Hampton

  	
   

  	
   

  
	
   

  	
  Managing Director

  	
   

  

 

 

SCHEDULE A

 

	
  UNDERWRITERS

  	
   

  	
  NUMBER OF FIRM

  COMMON SHARES TO

  BE PURCHASED

  	
   

  
	
  Piper Jaffray & Co.

  	
   

  	
  4,117,750

  	
   

  
	
  Banc of America Securities LLC

  	
   

  	
  4,117,750

  	
   

  
	
  Bear, Stearns & Co. Inc.

  	
   

  	
  2,353,000

  	
   

  
	
  Thomas Weisel Partners LLC

  	
   

  	
  1,176,500

  	
   

  
	
  Total

  	
   

  	
  11,765,000

  	
   

  

 

 

SCHEDULE B

 

	
  Selling Stockholder

  	
   

  	
  Maximum

  Number of

  Optional

  Common Shares

  to be Sold

  	
   

  
	
  Dale A.
  Spencer

  503 North Ferndale

  Wayzata, MN 55391

  	
   

  	
  35,900Exhibit 10.4

 

ev3 Inc.

 

AMENDED AND RESTATED

2005 INCENTIVE STOCK PLAN

 

(as amended through July 25,
2005)

 

 

TABLE OF CONTENTS

 

	
  § 1.
  BACKGROUND AND PURPOSE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  § 2. DEFINITIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Affiliate

  	
   

  
	
  2.2

  	
  Board

  	
   

  
	
  2.3

  	
  Change
  Effective Date

  	
   

  
	
  2.4

  	
  Change
  in Control

  	
   

  
	
  2.5

  	
  Code

  	
   

  
	
  2.6

  	
  Committee

  	
   

  
	
  2.7

  	
  Company

  	
   

  
	
  2.8

  	
  Director

  	
   

  
	
  2.9

  	
  Eligible
  Employee

  	
   

  
	
  2.10

  	
  Fair
  Market Value

  	
   

  
	
  2.11

  	
  ISO

  	
   

  
	
  2.12

  	
  1933 Act

  	
   

  
	
  2.13

  	
  1934 Act

  	
   

  
	
  2.14

  	
  Non-ISO

  	
   

  
	
  2.15

  	
  Option

  	
   

  
	
  2.16

  	
  Option
  Certificate

  	
   

  
	
  2.17

  	
  Option
  Price

  	
   

  
	
  2.18

  	
  Parent

  	
   

  
	
  2.19

  	
  Plan

  	
   

  
	
  2.20

  	
  Rule 16b-3

  	
   

  
	
  2.21

  	
  SAR
  Value

  	
   

  
	
  2.22

  	
  Stock

  	
   

  
	
  2.23

  	
  Stock Appreciation Right

  	
   

  
	
  2.24

  	
  Stock Appreciation Right Certificate

  	
   

  
	
  2.25

  	
  Stock
  Grant

  	
   

  
	
  2.26

  	
  Stock Grant Certificate

  	
   

  
	
  2.27

  	
  Stock
  Unit Grant

  	
   

  
	
  2.28

  	
  Subsidiary

  	
   

  
	
  2.29

  	
  Ten Percent Shareholder

  	
   

  
	
   

  	
   

  	
   

  
	
  § 3.
  SHARES AND GRANT LIMITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Shares Reserved

  	
   

  
	
  3.2

  	
  Source of Shares

  	
   

  
	
  3.3

  	
  Use of Proceeds

  	
   

  
	
  3.4

  	
  Grant Limits

  	
   

  
	
   

  	
   

  	
   

  
	
  § 4. EFFECTIVE DATE

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  § 5. COMMITTEE

  	
   

  	
   

  
				

 

 

	
  § 6. ELIGIBILITY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  § 7. OPTIONS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Committee Action

  	
   

  
	
  7.2

  	
  $100,000 Limit

  	
   

  
	
  7.3

  	
  Option Price

  	
   

  
	
  7.4

  	
  Payment

  	
   

  
	
  7.5

  	
  Exercise

  	
   

  
	
   

  	
   

  	
   

  
	
  § 8. STOCK APPRECIATION RIGHTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Committee Action

  	
   

  
	
  8.2

  	
  Terms
  and Conditions

  	
   

  
	
  8.3

  	
  Exercise

  	
   

  
	
   

  	
   

  	
   

  
	
  § 9. STOCK GRANTS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Committee Action

  	
   

  
	
  9.2

  	
  Conditions

  	
   

  
	
  9.3

  	
  Dividends, Voting Rights and Creditor Status

  	
   

  
	
  9.4

  	
  Satisfaction of Forfeiture Conditions

  	
   

  
	
  9.5

  	
  Income
  Tax Deduction

  	
   

  
	
   

  	
   

  	
   

  
	
  § 10.
  NON-TRANSFERABILITY

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  General Rule

  	
   

  
	
  10.2

  	
  Transfers to Family Members

  	
   

  
	
   

  	
   

  	
   

  
	
  § 11. SECURITIES REGISTRATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  § 12. LIFE OF PLAN

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  § 13. ADJUSTMENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Capital Structure

  	
   

  
	
  13.2

  	
  Available Shares

  	
   

  
	
  13.3

  	
  Transactions Described in § 424 of the Code

  	
   

  
	
  13.4

  	
  Fractional Shares

  	
   

  
	
   

  	
   

  	
   

  
	
  § 14. CHANGE IN CONTROL

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  § 15. AMENDMENT OR TERMINATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  § 16. MISCELLANEOUS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  16.1

  	
  Shareholder Rights

  	
   

  
	
  16.2

  	
  No Contract of Employment

  	
   

  
	
  16.3

  	
  Withholding

  	
   

  
	
  16.4

  	
  Construction

  	
   

  
	
  16.5

  	
  Other Conditions

  	
   

  
	
  16.6

  	
  Rule 16b-3

  	
   

  
	
  16.7

  	
  Coordination with Employment Agreements and Other Agreements

  	
   

  
				

 

 

§ 1.

BACKGROUND AND PURPOSE

 

The purpose of this Plan is to promote the interest of the Company by
authorizing the Committee to grant Options and Stock Appreciation Rights and to
make Stock Grants and Stock Unit Grants to Eligible Employees and Directors or
consultants in order (1) to attract and retain Eligible Employees,
Directors or consultants, (2) to provide an additional incentive to each
Eligible Employee, Director or consultant to work to increase the value of
Stock and (3) to provide each Eligible Employee, Director or consultant
with a stake in the future of the Company which corresponds to the stake of
each of the Company’s shareholders.

 

§ 2.

DEFINITIONS

 

2.1           Affiliate — means any
organization (other than a Subsidiary) that would be treated as under common
control with the Company under § 414(c) of the Code if “50 percent”
were substituted for “80 percent” in the income tax regulations under § 414(c) of
the Code.

 

2.2           Board — means the Board of
Directors of the Company.

 

2.3           Change Effective
Date — means either the date which includes the “closing” of the
transaction which makes a Change in Control effective if the Change in Control
is made effective through a transaction which has a “closing” or the date a
Change in Control is reported in accordance with applicable law as effective to
the Securities and Exchange Commission if the Change in Control is made
effective other than through a transaction which has a “closing”.

 

 

2.4           Change in Control — means a
change in control of the Company occurring after the effective date of this
Plan of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on
any similar schedule or form) promulgated under the 1934 Act, whether or
not the Company is then subject to such reporting requirement; provided,
however, that, without limitation, a Change in Control shall
include:  (i) the acquisition (other
than from the Company) after the date hereof by any person, entity or “group”
within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934
Act (excluding, for this purpose, the Company or its subsidiaries, any employee
benefit plan of the Company or its subsidiaries which acquires beneficial
ownership of voting securities of the Company, any qualified institutional
investor who meets the requirements of Rule 13d-1(b)(1) promulgated
under the 1934 Act, Warburg Pincus LLC and its affiliates, and The Vertical
Group, L.P. and its affiliates) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of 20% or more of either the then-outstanding
shares of common stock or the combined voting power of the Company’s
then-outstanding capital stock entitled to vote generally in the election of
directors; (ii) individuals who, as of the date hereof, constitute the
Board (the “Incumbent Board”) ceasing for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company’s
stockholders was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an

 

2

 

election or
nomination of an 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 Company) shall be, for purposes of this Agreement, considered
as though such person were a member of the Incumbent Board; or (iii) approval
by the stockholders of the Company of (A) a reorganization, merger, or
consolidation, in each case, with respect to which persons who were the
stockholders of the Company immediately prior to such reorganization, merger,
or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors
of the reorganized, merged, consolidated or other surviving corporation’s
then-outstanding voting securities, (B) a liquidation or dissolution of
the Company, or (C) the sale of all or substantially all of the assets of
the Company.

 

2.5           Code — means the Internal
Revenue Code of 1986, as amended.

 

2.6           Committee — means a committee
of the Board which shall have at least 2 members, each of whom shall be
appointed by and shall serve at the pleasure of the Board and at least 2 of
whom shall come within the definition of a “non-employee director” under Rule 16b-3,
or if no such committee of the Board has been appointed, the Board as a whole.

 

2.7           Company — means ev3 Inc. and
any successor to ev3 Inc.

 

2.8           Director — means any member of
the Board who is not an employee of the Company or a Parent or Subsidiary or
affiliate (as such term is defined in Rule 405 of the 1933 Act) of the
Company.

 

3

 

2.9           Eligible Employee
— means an employee of the Company or any Subsidiary or Parent or Affiliate to
whom the Committee decides for reasons sufficient to the Committee to make a
grant under this Plan.

 

2.10         Fair Market Value
— means either (a) the closing price on any date for a share of Stock as
reported by The Wall Street Journal or, if The Wall Street Journal
no longer reports such closing price, such closing price as reported by a
newspaper or trade journal selected by the Committee or, if no such closing
price is available on such date, (b) such closing price as so reported in
accordance with § 2.10(a) for the immediately preceding business day,
or, if no newspaper or trade journal reports such closing price or if no such
price quotation is available, (c) the price which the Committee acting in
good faith determines through any reasonable valuation method that a share of
Stock might change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell and both having reasonable
knowledge of the relevant facts.

 

2.11         ISO — means an option granted
under this Plan to purchase Stock which is intended to satisfy the requirements
of § 422 of the Code.

 

2.12         1933 Act — means the Securities
Act of 1933, as amended.

 

2.13         1934 Act — means the Securities
Exchange Act of 1934, as amended.

 

2.14         Non-ISO — means an option
granted under this Plan to purchase Stock which is intended to fail to satisfy
the requirements of § 422 of the Code.

 

2.15         Option — means an ISO or a
Non-ISO which is granted under § 7.

 

4

 

2.16         Option Certificate
— means the certificate (whether in electronic or written form) which sets
forth the terms and conditions of an Option granted under this Plan.

 

2.17         Option Price — means the price
which shall be paid to purchase one share of Stock upon the exercise of an
Option granted under this Plan.

 

2.18         Parent — means any corporation
which is a parent corporation (within the meaning of § 424(e) of the
Code) of the Company.

 

2.19         Plan — means this ev3 Inc. 2005
Incentive Stock Plan as effective as of the date approved by the shareholders
of the Company and as amended from time to time thereafter.  For each grant of an Option to an Eligible
Employee, Director or consultant who is a resident of France, the Plan shall
include the terms of the addendum titled, “Terms and Conditions for French
Option Grants”, which shall supercede the terms of the Plan to the extent that
the terms of such addendum conflict with the terms of the Plan.

 

2.20         Rule 16b-3 — means the
exemption under Rule 16b-3 to Section 16(b) of the 1934 Act or
any successor to such rule.

 

2.21         SAR Value — means the value
assigned by the Committee to a share of Stock in connection with the grant of a
Stock Appreciation Right under § 8.

 

2.22         Stock — means the common stock
of the Company.

 

2.23         Stock Appreciation
Right — means a right which is granted under § 8 to receive the appreciation
in a share of Stock.

 

5

 

2.24         Stock Appreciation
Right Certificate -- means the certificate (whether in electronic or
written form) which sets forth the terms and conditions of a Stock Appreciation
Right which is not granted as part of an Option.

 

2.25         Stock Grant — means a grant
under § 9 which is designed to result in the issuance of the number of
shares of Stock described in such grant rather than a payment in cash based on
the Fair Market Value of such shares of Stock.

 

2.26         Stock Grant
Certificate — means the certificate (whether in electronic or written form)
which sets forth the terms and conditions of a Stock Grant or a Stock Unit
Grant.

 

2.27         Stock Unit Grant
— means a grant under § 9 which is designed to result in the payment of
cash based on the Fair Market Value of the number of shares of Stock described
in such grant rather than the issuance of the number of shares of Stock
described in such grant.

 

2.28         Subsidiary — means
a corporation which is a subsidiary corporation (within the meaning of § 424(f) of
the Code) of the Company.

 

2.29         Ten Percent
Shareholder — means a person who owns (after taking into account the
attribution rules of § 424(d) of the Code) more than ten percent
of the total combined voting power of all classes of stock of either the
Company, a Subsidiary or Parent.

 

6

 

§ 3. 

SHARES AND GRANT LIMITS

 

3.1           Shares Reserved.  There shall (subject to § 13) be
reserved for issuance under this Plan 2,000,000 shares of Stock; provided,
however that no more than 2,000,000 shares of Stock may be issued in connection
with the exercise of ISOs.

 

3.2           Source of Shares.  The shares of Stock described in § 3.1
shall be reserved to the extent that the Company deems appropriate from
authorized but unissued shares of Stock and from shares of Stock which have
been reacquired by the Company.  All
shares of Stock described in § 3.1 shall remain available for issuance
under this Plan until issued pursuant to the exercise of an Option or a Stock
Appreciation Right or issued pursuant to a Stock Grant, and any such shares of
stock which are issued pursuant to an Option, a Stock Appreciation Right or a
Stock Grant which are forfeited thereafter shall again become available for
issuance under this Plan.  Finally, if
the Option Price under an Option is paid in whole or in part in shares of Stock
or if shares of Stock are tendered to the Company in satisfaction of any condition
to a Stock Grant, such shares thereafter shall become available for issuance
under this Plan and shall be treated the same as any other shares available for
issuance under this Plan.

 

3.3           Use of Proceeds.  The proceeds which the Company receives from
the sale of any shares of Stock under this Plan shall be used for general
corporate purposes and shall be added to the general funds of the Company.

 

3.4           Grant Limits.  No Eligible Employee, Director or consultant
in any calendar year shall be granted an Option to purchase (subject to § 13)
more than 250,000 shares of Stock or a Stock Appreciation Right based on the
appreciation with respect to (subject to § 13) more than 250,000 shares of
Stock, and no Stock Grant or

 

7

 

Stock Unit Grant shall be made to any Eligible Employee, Director or
consultant in any calendar year where the Fair Market Value of the Stock
subject to such grant on the date of the grant exceeds $10,000,000.  No more than 500,000 non-forfeitable shares
of Stock shall (subject to § 13) be issued pursuant to Stock Grants under § 9.

 

§ 4. 

EFFECTIVE DATE

 

The effective date of this Plan shall be the date the shareholders of
the Company (acting at a duly called meeting of such shareholders) approve the
adoption of this Plan.

 

§ 5.

COMMITTEE

 

This Plan shall be administered by the Committee.  The Committee acting in its absolute
discretion shall exercise such powers and take such action as expressly called
for under this Plan and, further, the Committee shall have the power to
interpret this Plan and (subject to § 14 and § 15 and Rule 16b-3)
to take such other action in the administration and operation of this Plan as
the Committee deems equitable under the circumstances, which action shall be
binding on the Company, on each affected Eligible Employee, Director or
consultant and on each other person directly or indirectly affected by such
action.  Furthermore, the Committee as a
condition to making any grant under this Plan to any Eligible Employee, Director
or consultant shall have the right to require him or her to execute an
agreement which makes the Eligible Employee, Director or consultant subject to
non-competition provisions and other restrictive covenants which run in favor
of the Company.

 

8

 

§ 6.

ELIGIBILITY

 

Only Eligible Employees who are employed by the Company or a Subsidiary
or Parent shall be eligible for the grant of ISOs under this Plan.  All Eligible Employees, Directors and
consultants shall be eligible for the grant of Non-ISOs and Stock Appreciation
Rights and for Stock Grants and Stock Unit Grants under this Plan.

 

§ 7.

OPTIONS

 

7.1           Committee Action.  The Committee acting in its absolute
discretion shall have the right to grant Options to Eligible Employees,
Directors and consultants under this Plan from time to time to purchase shares
of Stock, but the Committee shall not (subject to § 13) take any action,
whether through amendment, cancellation, replacement grants, or any other
means, to reduce the Option Price of any outstanding Options absent the
approval of the Company’s shareholders. 
Each grant of an Option to an Eligible Employee, Director or consultant
shall be evidenced by an Option Certificate, and each Option Certificate shall
set forth whether the Option is an ISO or a Non-ISO and shall set forth such
other terms and conditions of such grant as the Committee acting in its
absolute discretion deems consistent with the terms of this Plan; however, (a) if
the Committee grants an ISO and a Non-ISO to an Eligible Employee on the same
date, the right of the Eligible Employee to exercise the ISO shall not be
conditioned on his or her failure to exercise the Non-ISO and (b) if the
only condition to exercise of the Option is the completion of a period of
service, such period of service shall be no less than the one (1) year
period which starts on the date as
of which the

 

9

 

Option is granted unless the Committee determines that a shorter period
of service (or no period of service) better serves the Company’s interest.

 

7.2           $100,000 Limit.  No Option
shall be treated as an ISO to the extent that the aggregate Fair Market Value
of the Stock subject to the Option which would first become exercisable in any
calendar year exceeds $100,000.  Any such
excess shall instead automatically be treated as a Non-ISO.  The Committee shall interpret and administer
the ISO limitation set forth in this § 7.2 in accordance with § 422(d) of
the Code, and the Committee shall treat this § 7.2 as in effect only for
those periods for which § 422(d) of the Code is in effect.

 

7.3           Option Price.  The Option Price for each share of Stock
subject to an Option shall be no less than the Fair Market Value of a share of
Stock on the date the Option is granted; provided, however, if the Option is an
ISO granted to an Eligible Employee who is a Ten Percent Shareholder, the
Option Price for each share of Stock subject to such ISO shall be no less than
110% of the Fair Market Value of a share of Stock on the date such ISO is
granted.

 

7.4           Payment.  The Option Price shall be payable in full
upon the exercise of any Option and, at the discretion of the Committee, an
Option Certificate can provide for the payment of the Option Price either in
cash, by check or in Stock which has been held for at least 6 months and which
is acceptable to the Committee, or through any cashless exercise procedure
which is effected by an unrelated broker through a sale of Stock in the open
market and which is acceptable to the Committee, or in any combination of such
forms of payment.  Any payment made in
Stock shall be treated as equal to the Fair Market Value of such Stock on the
date the certificate for

 

10

 

such Stock (or proper evidence of such
certificate) is presented to the Committee or its delegate in such form as
acceptable to the Committee.

 

7.5           Exercise.

 

(a)                                  Exercise Period.  Each Option granted under this Plan shall be
exercisable in whole or in part at such time or times as set forth in the
related Option Certificate, but no Option Certificate shall make an Option
exercisable on or after the earlier of

 

(1)                                  the date which is the
fifth anniversary of the date the Option is granted, if the Option is an ISO
and the Eligible Employee is a Ten Percent Shareholder on the date the Option
is granted, or

 

(2)                                  the
date which is the tenth anniversary of the date the Option is granted, if the
Option is (a) a Non-ISO or (b) an ISO which is granted to an Eligible
Employee who is not a Ten Percent Shareholder on the date the Option is
granted.

 

(b)                                 Termination of
Status as Eligible Employee or Director. 
Subject to § 7.5(a), an Option Certificate may provide for the
exercise of an Option after an Eligible Employee’s, Director’s or consultant’s
status as such has terminated for any reason whatsoever, including death or
disability.

 

11

 

§ 8.

STOCK APPRECIATION RIGHTS

 

8.1           Committee Action.  The Committee acting in its absolute
discretion shall have the right to grant Stock Appreciation Rights to Eligible
Employees, Directors and consultants under this Plan from time to time, and
each Stock Appreciation Right grant shall be evidenced by a Stock Appreciation
Right Certificate or, if such Stock Appreciation Right is granted as part of an
Option, shall be evidenced by the Option Certificate for the related Option.

 

8.2           Terms and Conditions.

 

(a)                                  Stock Appreciation
Right Certificate.  If a Stock
Appreciation Right is granted independent of an Option, such Stock Appreciation
Right shall be evidenced by a Stock Appreciation Right Certificate, and such
certificate shall set forth the number of shares of Stock on which the Eligible
Employee’s, Director’s or consultant’s right to appreciation shall be based and
the SAR Value of each share of Stock. 
Such SAR Value shall be no less than the Fair Market Value of a share of
Stock on the date that the Stock Appreciation Right is granted.  The Stock Appreciation Right Certificate
shall set forth such other terms and conditions for the exercise of the Stock
Appreciation Right as the Committee deems appropriate under the circumstances,
but no Stock Appreciation Right Certificate shall make a Stock Appreciation
Right exercisable on or after the date

 

12

 

which is the
tenth anniversary of the date such Stock Appreciation Right is granted.

 

(b)                                 Option Certificate.  If a Stock Appreciation Right is granted
together with an Option, such Stock Appreciation Right shall be evidenced by an
Option Certificate, the number of shares of Stock on which the Eligible
Employee’s, Director’s or consultant’s right to appreciation shall be based
shall be the same as the number of shares of Stock subject to the related
Option, and the SAR Value for each such share of Stock shall be no less than
the Option Price under the related Option. 
Each such Option Certificate shall provide that the exercise of the
Stock Appreciation Right with respect to any share of Stock shall cancel the
Eligible Employee’s, Director’s or consultant’s right to exercise his or her
Option with respect to such share and, conversely, that the exercise of the
Option with respect to any share of Stock shall cancel the Eligible Employee’s,
Director’s or consultant’s right to exercise his or her Stock Appreciation
Right with respect to such share.  A
Stock Appreciation Right which is granted as part of an Option shall be
exercisable only while the related Option is exercisable.  The Option Certificate shall set forth such
other terms and conditions for the exercise of the Stock Appreciation Right as
the Committee deems appropriate under the circumstances.

 

13

 

(c)                                  Minimum Period of
Service.  If the only condition to
exercise of a Stock Appreciation Right is the completion of a period of
service, such period of service shall be no less than the one (1) year
period which starts on the date as of which the Stock Appreciation Right is
granted unless the Committee determines that a shorter period of service (or no
period of service) better serves the Company’s interest.

 

8.3           Exercise.  A Stock Appreciation Right shall be
exercisable only when the Fair Market Value of a share of Stock on which the
right to appreciation is based exceeds the SAR Value for such share, and the
payment due on exercise shall be based on such excess with respect to the
number of shares of Stock to which the exercise relates.  An Eligible Employee, Director or consultant
upon the exercise of his or her Stock Appreciation Right shall receive a
payment from the Company in cash or in Stock issued under this Plan, or in a
combination of cash and Stock, and the number of shares of Stock issued shall
be based on the Fair Market Value of a share of Stock on the date the Stock
Appreciation Right is exercised.  The
Committee acting in its absolute discretion shall have the right to determine
the form and time of any payment under this § 8.3.

 

§ 9.

STOCK GRANTS

 

9.1           Committee Action.  The Committee acting in its absolute
discretion shall have the right to make Stock Grants and Stock Unit Grants to
Eligible Employees, Directors or consultants. 
Each Stock Grant and each Stock Unit Grant shall be

 

14

 

evidenced by a Stock Grant Certificate, and each Stock Grant
Certificate shall set forth the conditions, if any, under which Stock will be
issued under the Stock Grant or cash will be paid under the Stock Unit Grant
and the conditions under which the Eligible Employee’s, Director’s or
consultant’s interest in any Stock which has been issued will become
non-forfeitable.

 

9.2           Conditions.

 

(a)                                        Conditions
to Issuance of Stock.  The Committee
acting in its absolute discretion may make the issuance of Stock under a Stock
Grant subject to the satisfaction of one, or more than one, condition which the
Committee deems appropriate under the circumstances for Eligible Employees,
Directors or consultants generally or for an Eligible Employee, a Director or a
consultant in particular, and the related Stock Grant Certificate shall set
forth each such condition and the deadline for satisfying each such
condition.  Stock subject to a Stock
Grant shall be issued in the name of an Eligible Employee, Director or
consultant only after each such condition, if any, has been timely satisfied,
and any Stock which is so issued shall be held by the Company pending the
satisfaction of the forfeiture conditions, if any, under § 9.2(b) for
the related Stock Grant.

 

(b)                                       Conditions on
Forfeiture of Stock or Cash Payment. 
The Committee acting in its absolute discretion may make any cash
payment due under a Stock Unit Grant or Stock issued in the

 

15

 

name of an Eligible Employee, Director or consultant under a Stock
Grant non-forfeitable subject to the satisfaction of one, or more than one,
objective employment, performance or other condition that the Committee acting
in its absolute discretion deems appropriate under the circumstances for
Eligible Employees, Directors or consultants generally or for an Eligible
Employee, a Director or a consultant in particular, and the related Stock Grant
Certificate shall set forth each such 
condition, if any, and the deadline, if any, for satisfying each such
condition.  An Eligible Employee’s, Director’s
or consultant’s non-forfeitable interest in the shares of Stock underlying a
Stock Grant or the cash payable under a Stock Unit Grant shall depend on the
extent to which he or she timely satisfies each such condition.  If a share of Stock is issued under this § 9.2(b) before
an Eligible Employee’s, Director’s or consultant’s interest in such share of
Stock is non-forfeitable, (1) such share of Stock shall not be available
for re-issuance under § 3 until such time, if any, as such share of Stock
thereafter is forfeited as a result of a failure to timely satisfy a forfeiture
condition and (2) the Company shall have the right to condition any such
issuance on the Eligible Employee, Director or consultant first signing an
irrevocable stock power in favor of the Company with respect to the forfeitable
shares of Stock issued to such Eligible Employee, Director or consultant in

 

16

 

order for the
Company to effect any forfeiture called for under the related Stock Grant
Certificate.

 

(c)                                        Minimum
Period of Service.  If the only
condition to the forfeiture of a Stock Grant or a Stock Unit Grant is the
completion of a period of service, such period of service shall be no less than
the three (3) year period which starts on the date as of which the Stock
Grant or Stock Unit Grant is made unless the Committee determines that a
shorter period of service (or no period of service) better serves the Company’s
interest.

 

9.3           Dividends, Voting
Rights and Creditor Status.

 

(a)                                  Cash Dividends.  Except as otherwise set forth in a Stock
Grant Certificate, if a dividend is paid in cash on a share of Stock after such
Stock has been issued under a Stock Grant but before the first date that an
Eligible Employee’s, Director’s or consultant’s interest in such Stock (1) is
forfeited completely or (2) becomes completely non-forfeitable, the
Company shall pay such cash dividend directly to such Eligible Employee,
Director or consultant.

 

(b)                                 Stock Dividends.  If a dividend is paid on a share of Stock in
Stock after such Stock has been issued under a Stock Grant but before the first
date that an Eligible Employee’s, Director’s or consultant’s interest in such
Stock (1) is forfeited completely or (2) becomes completely
non-forfeitable, the Company shall hold such dividend

 

17

 

Stock subject to the same conditions under § 9.2(b) as
the related Stock Grant.

 

(c)                                  Other.  If a dividend (other than a dividend
described in § 9.3(a) or § 9.3(b)) is paid with respect to a
share of Stock after such Stock has been issued under a Stock Grant but before
the first date that an Eligible Employee’s, Director’s or consultant’s interest
in such Stock (1) is forfeited completely or (2) becomes completely
non-forfeitable, the Company shall distribute or hold such dividend in
accordance with such rules as the Committee shall adopt with respect to
each such dividend.

 

(d)                                 Voting.  Except as otherwise set forth in a Stock
Grant Certificate, an Eligible Employee, Director or consultant shall have the
right to vote the Stock issued under his or her Stock Grant during the period
which comes after such Stock has been issued under a Stock Grant but before the
first date that an Eligible Employee’s, Director’s or consultant’s interest in
such Stock (1) is forfeited completely or (2) becomes completely
non-forfeitable.

 

(e)                                  General Creditor
Status.  Each Eligible Employee and
each Director and each consultant to whom a Stock Unit grant is made shall be
no more than a general and unsecured creditor of the Company with respect to
any cash payable under such Stock Unit Grant.

 

18

 

9.4           Satisfaction of
Forfeiture Conditions.  A share of
Stock shall cease to be subject to a Stock Grant at such time as an Eligible
Employee’s, Director’s or consultant’s interest in such Stock becomes
non-forfeitable under this Plan, and the certificate or other evidence of
ownership representing such share shall be transferred to the Eligible
Employee, Director or consultant as soon as practicable thereafter.

 

9.5           Income Tax Deduction.

 

(a)                                  General.  The Committee shall (where the Committee
under the circumstances deems in the Company’s best interest) either (1) make
Stock Grants and Stock Unit Grants to Eligible Employees subject to at least
one condition related to one, or more than one, performance goal based on the
performance goals described in § 9.5(b) which seems likely to result
in the Stock Grant or Stock Unit Grant qualifying as “performance-based compensation”
under § 162(m) of the Code or (2) make Stock Grants and Stock Unit
Grants to Eligible Employees under such other circumstances as the Committee
deems likely to result in an income tax deduction for the Company with respect
such Stock Grant or Stock Unit Grant.  A
performance goal may be set in any manner determined by the Committee,
including looking to achievement on an absolute or relative basis in relation
to peer groups or indexes.

 

(b)                                 Performance Goals.  A performance goal is described in this § 9.5(b) if
such goal relates to (1) the Company’s return over capital costs or
increases in return over capital costs, (2) the Company’s

 

19

 

total earnings or the growth in such earnings, (3) the Company’s
consolidated earnings or the growth in such earnings, (4) the Company’s
earnings per share or the growth in such earnings, (5) the Company’s net
earnings or the growth in such earnings, (6) the Company’s earnings before
interest expense, taxes, depreciation, amortization and other non-cash items or
the growth in such earnings, (7) the Company’s earnings before interest
and taxes or the growth in such earnings, (8) the Company’s consolidated
net income or the growth in such income, (9) the value of the Company’s
common stock or the growth in such value, (10) the Company’s stock price
or the growth in such price, (11) the Company’s return on assets or the growth
on such return, (12) the Company’s cash flow or the growth in such cash flow,
(13) the Company’s total shareholder return or the growth in such return, (14)
the Company’s expenses or the reduction of such expenses, (15) the Company’s
sales growth, (16) the Company’s overhead ratios or changes in such ratios,
(17) the Company’s expense-to-sales ratios or the changes in such ratios, or
(18) the Company’s economic value added or changes in such value added.

 

(c)                                  Adjustments.  When the Committee determines whether a
performance goal has been satisfied for any period, the Committee may exclude
any or all “extraordinary items” as determined under U.S. generally accepted
accounting principles and any other

 

20

 

unusual or
non-recurring items, including, without limitation, the charges or costs
associated with restructurings of the Company, discontinued operations, and the
cumulative effects of accounting changes. 
The Committee may also adjust any performance goal for a period as it
deems equitable in recognition of unusual or non-recurring events affecting the
Company, changes in applicable tax laws or accounting principles, or such other
factors as the Committee may determine (including, without limitation, any
adjustments that would result in the Company’s paying non-deductible
compensation to an Eligible Employee).

 

§ 10.

NON-TRANSFERABILITY

 

10.1         General Rule. 
Except as provided in § 10.2, no Option, Stock Grant, Stock
Unit Grant or Stock Appreciation Right shall be transferable by an Eligible
Employee, Director or consultant other than by will or by the laws of descent
and distribution, and any Option or Stock Appreciation Right shall be
exercisable during an Eligible Employee’s, Director’s or consultant’s lifetime
only by the Eligible Employee, Director or consultant.  The person or persons to whom an Option or
Stock Grant or Stock Unit Grant or Stock Appreciation Right is transferred by
will or by the laws of descent and distribution or pursuant to § 10.2,
thereafter shall be treated as the Eligible Employee, Director or consultant.

 

10.2         Transfers to Family
Members.  An Option or Stock
Grant, Stock Unit Grant or Stock Appreciation Right may be transferred by an
Eligible Employee,

 

21

 

Director or consultant to a “family member” (as defined for purposes of
Form S-8 under the 1933 Act) of such Eligible Employee, Director or
consultant or to a trust exclusively for the benefit of one or more of such
family members of such Eligible Employee, Director or consultant; provided such
transfer is made as a gift without consideration, and such transfer complies
with applicable securities laws.

 

§ 11.

SECURITIES REGISTRATION

 

As a condition to the receipt of shares of Stock under this Plan, the
Eligible Employee, Director or consultant shall, if so requested by the
Company, agree to hold such shares of Stock for investment and not with a view
of resale or distribution to the public and, if so requested by the Company,
shall deliver to the Company a written statement satisfactory to the Company to
that effect.  Furthermore, if so
requested by the Company, the Eligible Employee, Director or consultant shall
make a written representation to the Company that he or she will not sell or
offer for sale any of such Stock unless a registration statement shall be in
effect with respect to such Stock under the 1933 Act and any applicable state
securities law or he or she shall have furnished to the Company an opinion in
form and substance satisfactory to the Company of legal counsel satisfactory to
the Company that such registration is not required.  Certificates or other evidence of ownership
representing the Stock transferred upon the exercise of an Option or Stock
Appreciation Right or upon the lapse of the forfeiture conditions, if any, on
any Stock Grant may at the discretion of the Company bear a legend to the effect  that such
Stock has not been registered under the 1933 Act or any applicable state
securities law and that such Stock cannot be sold or offered for

 

22

 

sale in the absence of an effective
registration statement as to such Stock under the 1933 Act and any applicable
state securities law or an opinion in form and substance satisfactory to the
Company of legal counsel satisfactory to the Company that such registration is
not required.

 

§ 12.

LIFE OF PLAN

 

No Option or Stock Appreciation Right shall be granted or Stock Grant
or Stock Unit Grant made under this Plan on or after the earlier of:

 

(1)                                  the tenth anniversary
of the effective date of this Plan (as determined under § 4), in which
event this Plan otherwise thereafter shall continue in effect until all
outstanding Options and Stock Appreciation Rights have been exercised in full
or no longer are exercisable and all Stock issued under any Stock Grants under
this Plan have been forfeited or have become non-forfeitable, or

 

(2)                                  the date on which all
of the Stock reserved under § 3 has (as a result of the exercise of
Options or Stock Appreciation Rights granted under this Plan or the
satisfaction of the forfeiture conditions, if any, on Stock Grants) been issued
or no longer is available for use under this Plan, in which event this Plan
also shall terminate on such date.

 

23

 

§ 13.

ADJUSTMENT

 

13.1         Capital Structure.  The grant caps described in § 3.4, the
number, kind or class (or any combination thereof) of shares of Stock subject
to outstanding Options and Stock Appreciation Rights granted under this Plan
and the Option Price of such Options and the SAR Value of such Stock Appreciation
Rights as well as the number, kind or class (or any combination thereof) of
shares of Stock subject to outstanding Stock Grants and Stock Unit Grants made
under this Plan shall be adjusted by the Committee in a reasonable and
equitable manner to preserve immediately after

 

(a)                                  any
equity restructuring or change in the capitalization of the Company, including,
but not limited to, spin offs, stock dividends, large non-reoccurring
dividends, rights offerings or stock splits, or

 

(b)                                 any
other transaction described in § 424(a) of the Code which does not
constitute a Change in Control of the Company

 

the aggregate intrinsic value of each such
outstanding Option, Stock Appreciation Right, Stock Grant and Stock Unit Grant
immediately before such restructuring or recapitalization or other transaction.

 

13.2         Available Shares. 
If any adjustment is made with respect to any outstanding Option, Stock
Appreciation Right, Stock Grant or Stock Unit Grant under § 13.1, then the
Committee shall adjust the number, kind or class (or any combination thereof)
of shares of Stock reserved under § 3.1 so that there is a sufficient
number, kind and class of shares of Stock available for issuance pursuant to
each such Option, Stock Appreciation Right, Stock Grant and Stock Unit Grant as
adjusted under § 13.1 without seeking the approval of the Company’s
shareholders for such adjustment unless such approval is required under
applicable law or the rules of the stock exchange on

 

24

 

which shares of Stock are
traded.  Furthermore, the Committee shall
have the absolute discretion to further adjust such number, kind or class (or
any combination thereof) of shares of Stock reserved under § 3.1 in light
of any of the events described in § 13.1(a) and § 13.1(b) to
the extent the Committee acting in good faith determines that a further
adjustment would be appropriate and proper under the circumstances and in
keeping with the purposes of this Plan without seeking the approval of the
Company’s shareholders for such adjustment unless such approval is required
under applicable law or the rules of the stock exchange on which shares of
Stock are traded.

 

13.3         Transactions Described in § 424 of the
Code.   If there is a  corporate transaction described in § 424(a) of
the Code which does not constitute a Change in Control of the Company, the
Committee as part of any such transaction shall have the right to make Stock
Grants, Stock Unit Grants and Option and Stock Appreciation Right grants
(without regard to any limitations set forth under 3.4 of this Plan) to effect
the assumption of, or the substitution for, outstanding stock grants, stock
unit grants and option and stock appreciation right grants previously made by
any other corporation to the extent that such corporate transaction calls for
such substitution or assumption of such outstanding stock grants, stock unit
grants and stock option and stock appreciation right grants.  Furthermore, if the Committee makes any such
grants as part of any such transaction, the Committee shall have the right to
increase the number of shares of Stock available for issuance under § 3.1
by the number of shares of Stock subject to such grants without seeking the
approval of the Company’s shareholders for such adjustment unless such approval
is required under applicable law or the rules of the stock exchange on
which shares of Stock are traded.

 

25

 

13.4         Fractional Shares.  If any adjustment under this § 13 would
create a fractional share of Stock or a right to acquire a fractional share of
Stock under any Option, Stock Appreciation Right or Stock Grant, such
fractional share shall be disregarded and the number of shares of Stock
reserved under this Plan and the number subject to any Options or Stock
Appreciation Right grants and Stock Grants shall be the next lower number of
shares of Stock, rounding all fractions downward.  An adjustment made under this § 13 by
the Committee shall be conclusive and binding on all affected persons.

 

§ 14.

CHANGE IN CONTROL

 

If there is a Change in Control of the Company, then as of the Change
Effective Date for such Change in Control any and all conditions to the
exercise of all outstanding Options and Stock Appreciation Rights on such date
and any and all outstanding issuance and forfeiture conditions on any Stock
Grants and Stock Unit Grants on such date automatically shall be deemed 100%
satisfied as of such Change Effective Date, and the Board shall have the right
(to the extent expressly required as part of such transaction) to cancel such
Options, Stock Appreciation Rights, Stock Grants and Stock Unit Grants after
providing each Eligible Employee, Director and consultant a reasonable period
to exercise his or her Options and Stock Appreciation Rights and to take such
other action as necessary or appropriate to receive the Stock subject to any
Stock Grants and the cash payable under any Stock Unit Grants; provided, if any
issuance or forfeiture condition described in this § 14 relates to satisfying
any performance goal and there is a target for such goal, such issuance or

 

26

 

forfeiture condition shall be deemed satisfied under this § 14
only to the extent of such target unless such target has been exceeded before
the Change Effective Date, in which event such issuance or forfeiture condition
shall be deemed satisfied to the extent such target had been so exceeded.  A Change in Control shall affect a Stock
Appreciation Right or a Stock Unit Grant which is subject to § 409A of the
Code only if the Change in Control meets the requirements for a Change in
Control under § 409A of the Code.

 

§ 15.

AMENDMENT OR TERMINATION

 

This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate; provided, however, (a) no
amendment shall be made absent the approval of the shareholders of the Company
to the extent such approval is required under applicable law or the rules of
the stock exchange on which shares of Stock are listed and (b) no
amendment shall be made to § 14 on or after the date of any Change in
Control which might adversely affect any rights which otherwise would vest on
the related Change Effective Date.  The
Board also may suspend granting Options or Stock Appreciation Rights or making
Stock Grants or Stock Unit Grants under this Plan at any time and may terminate
this Plan at any time; provided, however, the Board shall not have the right
unilaterally to modify, amend or cancel any Option or Stock Appreciation Right
granted or Stock Grant made before such suspension or termination unless (1) the
Eligible Employee, Director or consultant consents in writing to such
modification, amendment or cancellation or (2) there is a dissolution or
liquidation of the Company or a transaction described in § 13.1 or § 14.

 

27

 

§ 16.

MISCELLANEOUS

 

16.1         Shareholder Rights.  No Eligible Employee, Director or consultant
shall have any rights as a shareholder of the Company as a result of the grant
of an Option or a Stock Appreciation Right pending the actual delivery of the
Stock subject to such Option or Stock Appreciation Right to such Eligible
Employee, Director or consultant.  An
Eligible Employee’s, Director’s or consultant’s rights as a shareholder in the
shares of Stock which remain subject to forfeiture under § 9.2(b) shall
be set forth in the related Stock Grant Certificate.

 

16.2         No Contract of
Employment.  The grant of an Option
or a Stock Appreciation Right or a Stock Grant or Stock Unit Grant to an
Eligible Employee, Director or consultant under this Plan shall not constitute
a contract of employment or a right to continue to serve on the Board and shall
not confer on an Eligible Employee, Director or consultant any rights upon his
or her termination of employment or service in addition to those rights, if
any, expressly set forth in this Plan or the related Option Certificate, Stock
Appreciation Right Certificate, or Stock Grant Certificate.

 

16.3         Withholding.  Each Option, Stock Appreciation Right, Stock
Grant and Stock Unit Grant shall be made subject to the condition that the
Eligible Employee, Director or consultant consents to whatever action the
Committee directs to satisfy the minimum statutory federal and state tax
withholding requirements, if any, which the Company determines are applicable
to the exercise of such Option or Stock Appreciation Right or to the
satisfaction of any forfeiture conditions with respect to Stock subject to a
Stock Grant or Stock Unit Grant issued in the name of the Eligible

 

28

 

Employee, Director or consultant.  No withholding shall be effected under this
Plan which exceeds the minimum statutory federal and state withholding requirements.

 

16.4         Construction.  All references to sections (§) are to
sections (§) of this Plan unless otherwise indicated.  This Plan shall be construed under the laws
of the State of Delaware.  Each term set
forth in § 2 shall, unless otherwise stated, have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.  Finally, if there is any conflict
between the terms of this Plan and the terms of any Option Certificate, Stock
Appreciation Right Certificate or Stock Grant Certificate, the terms of this
Plan shall control.

 

16.5         Other Conditions.  Each Option Certificate, Stock Appreciation
Right  Certificate or Stock Grant
Certificate may require that an Eligible Employee, Director or consultant (as a
condition to the exercise of an Option or a Stock Appreciation Right or the
issuance of Stock subject to a Stock Grant) enter into any agreement or make
such representations prepared by the Company, including (without limitation)
any agreement which restricts the transfer of Stock acquired pursuant to the
exercise of an Option or a Stock Appreciation Right or a Stock Grant or
provides for the repurchase of such Stock by the Company.

 

16.6         Rule 16b-3.  The Committee shall have the right to amend
any Option, Stock Grant or Stock Appreciation Right to withhold or otherwise
restrict the transfer of any Stock or cash under this Plan to an Eligible
Employee, Director or consultant as the Committee deems appropriate in order to
satisfy any condition or

 

29

 

requirement under Rule 16b-3 to the
extent Rule 16 of the 1934 Act might be applicable to such grant or
transfer.

 

16.7         Coordination with
Employment Agreements and Other Agreements. 
If the Company enters into an employment agreement or other agreement
with an Eligible Employee, Director or consultant which expressly provides for
the acceleration in vesting of an outstanding Option, Stock Appreciation Right,
Stock Grant or Stock Unit Grant or for the extension of the deadline to
exercise any rights under an outstanding Option, Stock Appreciation Right,
Stock Grant or Stock Unit Grant, any such acceleration or extension shall be
deemed effected pursuant to, and in accordance with, the terms of such
outstanding Option, Stock Appreciation Right, Stock Grant or Stock Unit Grant
and this Plan even if such employment agreement or other agreement is first
effective after the date the outstanding Option or Stock Appreciation Right was
granted or the Stock Grant or Stock Unit Grant was made.

 

30

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