Exhibit 10.4

*** INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS
REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.

Execution Version

STOCK PURCHASE AGREEMENT

by and between

MEDICIS PHARMACEUTICAL CORPORATION (“Seller”)

and

SOLTA MEDICAL, INC. (“Buyer”)

dated as of

September 12, 2011

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Table of Contents

 

     Page  

ARTICLE 1 DEFINITIONS AND REFERENCES

     2   

ARTICLE 2 PURCHASE AND SALE OF THE SHARES; PURCHASE PRICE

     2   

Section 2.1

  

Purchase and Sale of the Shares.

     2   

Section 2.2

  

Purchase Price.

     2   

Section 2.3

  

Payment of the Purchase Price.

     2   

Section 2.4

  

Working Capital Adjustment.

     2   

Section 2.5

  

Assumption of Obligations under the LipoSonix Agreement.

     4   

Section 2.6

  

Seller Contingent Payments.

     4   

Section 2.7

  

Payment of Seller Contingent Payments.

     12   

Section 2.8

  

Consent Requirement.

     20   

ARTICLE 3 CLOSING

     21   

Section 3.1

  

Closing.

     21   

Section 3.2

  

Closing Deliveries.

     21   

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER

     22   

Section 4.1

  

Organization and Qualification.

     22   

Section 4.2

  

Charter and Bylaws.

     23   

Section 4.3

  

Shares; Indebtedness.

     23   

Section 4.4

  

Authority; Enforceability.

     23   

Section 4.5

  

No Conflict; Required Filings and Consents.

     24   

Section 4.6

  

Material Contracts.

     24   

Section 4.7

  

Compliance.

     27   

Section 4.8

  

Absence of Certain Changes or Events.

     28   

Section 4.9

  

Liabilities.

     29   

Section 4.10

  

Absence of Litigation.

     30   

Section 4.11

  

Employee Benefit Plans.

     30   

Section 4.12

  

Employment and Labor Matters.

     32   

Section 4.13

  

Title to Assets; Leases; Sufficiency of Assets.

     33   

Section 4.14

  

Taxes.

     34   

Section 4.15

  

Environmental Matters.

     36   

Section 4.16

  

Intellectual Property.

     37   

Section 4.17

  

Insurance.

     41   

Section 4.18

  

Brokers.

     42   

Section 4.19

  

Certain Business Practices.

     42   

Section 4.20

  

Interested Party Transactions.

     43   

Section 4.21

  

Health Regulatory.

     43   

Section 4.22

  

FDA and International Regulatory and Related Matters.

     44   

Section 4.23

  

Product Liability; Product Warranties.

     49   

Section 4.24

  

Inventories.

     49   

Section 4.25

  

Trade Compliance Matters.

     50   

 

i

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Section 4.26

  

Manufacturing and Marketing Rights.

     51   

Section 4.27

  

Corporate Records.

     51   

Section 4.28

  

Financial Statements.

     51   

Section 4.29

  

LipoSonix Agreement.

     51   

Section 4.30

  

[Reserved].

     52   

Section 4.31

  

Exclusivity of Representations and Warranties.

     52   

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER

     52   

Section 5.1

  

Organization and Good Standing.

     52   

Section 5.2

  

Authority; Enforceability.

     52   

Section 5.3

  

No Conflict; Required Filings and Consents.

     53   

Section 5.4

  

Absence of Litigation.

     53   

Section 5.5

  

Available Funds.

     53   

Section 5.6

  

No Brokers.

     54   

Section 5.7

  

Investment Representation.

     54   

Section 5.8

  

Buyer Review.

     54   

Section 5.9

  

No Outside Reliance.

     54   

ARTICLE 6 COVENANTS

     55   

Section 6.1

  

Conduct of Business by the Company Pending the Closing.

     55   

Section 6.2

  

No Solicitation of Other Proposals.

     58   

Section 6.3

  

Access to Information; Confidentiality.

     59   

Section 6.4

  

Commercially Reasonable Efforts; Further Assurances.

     60   

Section 6.5

  

Employee Benefits.

     62   

Section 6.6

  

Notification of Certain Matters.

     63   

Section 6.7

  

Public Announcements.

     64   

Section 6.8

  

Claims.

     64   

Section 6.9

  

Delivery of Corporate Records.

     64   

Section 6.10

  

Certain Litigation Matters.

     65   

Section 6.11

  

Post-Closing Books and Records of the Company.

     65   

Section 6.12

  

FDA Approval Matters.

     65   

Section 6.13

  

Additional Covenants Regarding LipoSonix Agreement.

     65   

Section 6.14

  

Control of Business.

     69   

Section 6.15

  

Seller Marks.

     69   

Section 6.16

  

Audit and Preparation of Company Financial Statements.

     69   

Section 6.17

  

Buyer Financing.

     70   

Section 6.18

  

Transition Services Agreement.

     70   

Section 6.19

  

No Use of Corporate Name.

     70   

ARTICLE 7 CONDITIONS

     70   

Section 7.1

  

Conditions to Each Party’s Obligations.

     70   

Section 7.2

  

Additional Conditions to Obligations of Buyer.

     71   

Section 7.3

  

Additional Conditions to Obligations of Seller.

     71   

 

ii

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ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER

     72   

Section 8.1

  

Termination.

     72   

Section 8.2

  

Effect of Termination.

     73   

Section 8.3

  

Amendment.

     73   

Section 8.4

  

Waiver.

     73   

ARTICLE 9 INDEMNIFICATION

     74   

Section 9.1

  

Survival; Time Limitation.

     74   

Section 9.2

  

Indemnification; Remedies.

     74   

Section 9.3

  

Calculation of Losses; Indemnification Limitations.

     76   

Section 9.4

  

Notice of Claims

     78   

Section 9.5

  

Third Party Claims.

     78   

Section 9.6

  

Other Matters.

     80   

Section 9.7

  

Exclusive Remedies.

     80   

Section 9.8

  

No Special, Punitive or Consequential Damages.

     80   

ARTICLE 10 TAX

     80   

Section 10.1

  

Tax Allocation.

     80   

Section 10.2

  

Returns and Payments.

     81   

Section 10.3

  

Contests.

     81   

Section 10.4

  

Cooperation and Exchange of Information.

     82   

Section 10.5

  

Characterization of Payments.

     82   

Section 10.6

  

Transfer Taxes.

     83   

ARTICLE 11 MISCELLANEOUS

     83   

Section 11.1

  

Fees and Expenses.

     83   

Section 11.2

  

Notices.

     83   

Section 11.3

  

Severability.

     84   

Section 11.4

  

Entire Agreement.

     84   

Section 11.5

  

Assignment.

     84   

Section 11.6

  

Parties in Interest.

     85   

Section 11.7

  

Failure or Indulgence Not Waiver; Remedies Cumulative.

     85   

Section 11.8

  

Governing Law; Jurisdiction.

     85   

Section 11.9

  

Waiver of July Trial.

     86   

Section 11.10

  

Enforcement of Agreement; Specific Performance.

     86   

Section 11.11

  

Counterparts.

     86   

Section 11.12

  

Due Diligence Materials; Seller Disclosure Schedule.

     86   

ANNEX I DEFINITIONS

     I-1   

 

iii

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EXHIBITS

 

Exhibit A

   Statement of Working Capital

Exhibit B

   Form of Confidentiality Agreement

 

iv

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STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT, dated as of September 12, 2011, 2011 (this
“Agreement”), is entered into by and between Medicis Pharmaceutical Corporation,
a Delaware corporation (“Seller”), and Solta Medical, Inc., a Delaware
corporation (“Buyer”). Buyer and Seller are sometimes referred to herein as the
“Parties.”

WHEREAS, pursuant to that certain Agreement and Plan of Merger dated as of
June 16, 2008 (the “LipoSonix Agreement”) by and among Seller, Donatello, Inc.,
a direct wholly owned subsidiary of Seller, LipoSonix, Inc., a Delaware
corporation, Rebecca Robertson, as Equityholders’ Representative, and Wilfred
Jaeger, as Alternate Equityholders’ Representative, Donatello, Inc. merged into
LipoSonix, Inc., whereby LipoSonix, Inc. became a wholly-owned subsidiary of
Seller and is now Medicis Technologies Corporation, a Delaware corporation (the
“Company”);

WHEREAS, Seller owns one hundred percent (100%) of the issued and outstanding
shares of capital stock (the “Shares”) of the Company;

WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase from
Seller, the Shares, for the consideration and on the terms and conditions set
forth in this Agreement; and

WHEREAS, simultaneously with the execution and delivery of this Agreement,
Medicis Aesthetics Canada Ltd. (“MAC”), a Subsidiary of Seller, and Buyer, have
entered into an Asset Purchase Agreement of even date herewith (the “Asset
Purchase Agreement”), pursuant to which Medicis Aesthetics Canada Ltd. will
(i) sell to Buyer certain assets related to the business of the Company and
(ii) assign to Buyer all of its right, title and interest in, to and under
certain contracts, equipment, leases and rental contracts related to the
business of the Company.

NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the Parties hereto agree as follows:

--------------------------------------------------------------------------------

ARTICLE 1

DEFINITIONS AND REFERENCES

Capitalized terms used herein without definition shall have the respective
meanings assigned thereto in Annex I attached hereto and incorporated herein for
all purposes of this Agreement (such definitions to be equally applicable to
both the singular and plural forms of the terms defined). Unless otherwise
specified, all references herein to “Articles,” “Sections,” “Exhibits,”
“Annexes” or “Schedules” are to Articles, Sections, Exhibits, Annexes or
Schedules of this Agreement. The words “include,” “includes” and “including”
shall be deemed to be followed by the phrase “without limitation.” The words
“hereof,” “herein” and “herewith” and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole and not to
any particular provision of this Agreement. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.

ARTICLE 2

PURCHASE AND SALE OF THE SHARES; PURCHASE PRICE

Section 2.1 Purchase and Sale of the Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, Seller shall sell,
assign, transfer, convey and deliver to Buyer the Shares owned by Seller, free
and clear of all Liens, and Buyer shall deliver to Seller the portion of the
Purchase Price to be paid to Seller for the Shares at the Closing as provided in
this Article 2.

Section 2.2 Purchase Price. Upon the terms and subject to the conditions set
forth in this Agreement, the aggregate purchase price to be paid for the Shares
shall be (a) fourteen million five hundred fifty-eight thousand three hundred
seventy-eight dollars and sixteen cents ($14,558,378.16) (the “Base Purchase
Price”), plus (i) the amount, if any, by which the Final Working Capital exceeds
the Target Working Capital, or minus (ii) the amount, if any, by which the Final
Working Capital is less than the Target Working Capital (the Base Purchase
Price, as adjusted in accordance with Section 2.4, the “Purchase Price”), and
(b) the contingent payments to be paid by Buyer to Seller pursuant to the terms
and conditions set forth in Sections 2.6 and 2.7 of this Agreement
(collectively, the “Seller Contingent Payments”).

Section 2.3 Payment of the Purchase Price. At the Closing, upon the terms and
subject to the conditions set forth in this Agreement, Buyer shall pay fourteen
million five hundred fifty-eight thousand three hundred seventy-eight dollars
and sixteen cents ($14,558,378.16) of the Purchase Price in cash to Seller or
Seller’s designee in consideration for the Shares, by wire transfer of
immediately available funds pursuant to the wire transfer instructions provided
by Seller at least one (1) day prior to the Closing Date.

Section 2.4 Working Capital Adjustment.

(a) Not later than three (3) Business Days prior to the scheduled Closing Date,
Seller shall deliver to Buyer a schedule (the “Estimated Working Capital
Schedule”)

 

2

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summarizing Seller’s good faith estimate of the Working Capital of the Company
as of the Closing Date (such estimated Working Capital being the “Estimated
Working Capital”). Seller shall prepare the Estimated Working Capital Schedule
using the same accounting policies, methodologies, practices and assumptions as
used in the preparation of the Statement of Working Capital as of August 31,
2011 attached hereto as Exhibit A (the “Statement of Working Capital”), which
Seller (after reasonable consultation with Buyer or its designee) is delivering
to Buyer concurrently with the execution and delivery of this Agreement. Seller
shall provide Buyer with such information as Buyer may reasonably request to
verify the Estimated Working Capital Schedule. The Base Purchase Price shall be
adjusted either (i) upward by the amount the Estimated Working Capital is
greater than the Target Working Capital or (ii) downward by the amount the
Estimated Working Capital is less than the Target Working Capital.

(b) As promptly as practicable, and in any event within sixty (60) days,
following the Closing Date, Buyer shall deliver to Seller a schedule (the “Final
Working Capital Schedule”) with reasonable supporting detail summarizing Buyer’s
calculation of the Working Capital of the Company as of the Closing Date (such
Working Capital, subject to potential adjustments in accordance with this
Section 2.4, being the “Final Working Capital”). Buyer shall prepare the Final
Working Capital Schedule using the same accounting policies, methodologies,
practices and assumptions as used in the preparation of the Statement of Working
Capital. Buyer shall provide Seller with such information as Seller may
reasonably request to verify the Final Working Capital Schedule. In the event
that Buyer does not deliver the Final Working Capital Schedule within sixty
(60) days following the Closing Date, Buyer shall be deemed to have accepted the
Estimated Working Capital as the Final Working Capital and the Estimated Working
Capital shall be the Final Working Capital.

(c) Seller may dispute any amounts reflected on the Final Working Capital
Schedule; provided, however, that Seller shall have notified Buyer in writing of
each disputed item, specifying the amount thereof in dispute and setting forth,
in reasonable detail, the basis for such dispute, within thirty (30) days after
Buyer’s delivery of the Final Working Capital Schedule to Seller. In the event
of such a dispute, Seller and Buyer shall attempt to reconcile their
differences, and any resolution by them as to any disputed amounts shall be
final, binding and conclusive on Seller and Buyer. If Seller and Buyer are
unable to reach a resolution with such effect within fifteen (15) Business Days
after receipt by Buyer of Seller’s written notice of dispute, either Seller or
Buyer shall have the right, upon delivery of written notice to the other Party,
to submit the items remaining in dispute for resolution by an independent
accounting firm of nationally recognized standing which is reasonably acceptable
to both Seller and Buyer (a “Qualified Accountant”), which shall, within thirty
(30) days after such submission, deliver a report to Seller and Buyer setting
forth the resolution of such disputed items and the adjustment, if any, to be
made to the Final Working Capital, and such report shall be final, binding and
conclusive on Seller and Buyer, absent fraud. The fees and expenses of the
Qualified Accountant shall be borne by Seller, on the one hand, and Buyer, on
the other hand, in inverse proportion as they may prevail on the matters
resolved by the Qualified Accountant, which proportionate allocation will also
be determined by the Qualified Accountant and be included in the Qualified
Accountant’s report. In acting under this Agreement, the Qualified Accountant
shall be entitled to the privileges and immunities of arbitrators.

 

3

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(d) After the Closing, Buyer shall, and shall cause its respective employees and
agents to, provide Seller, its accountants and the Qualified Accountants access
at reasonable times to the personnel, properties and books and records of the
Company for the purpose of reviewing the Final Working Capital Schedule or in
connection with any dispute under this Section 2.4.

(e) Within three (3) Business Days after the final determination of the Final
Working Capital pursuant to this Section 2.4, (i) if the Final Working Capital
exceeds the Estimated Working Capital, Buyer shall pay to Seller the aggregate
amount of such excess, by wire transfer of immediately available funds to an
account designated by Seller; and (ii) if the Final Working Capital is less than
the Estimated Working Capital, Seller shall pay to Buyer the aggregate amount of
such deficiency, by wire transfer of immediately available funds to an account
designated by Buyer.

Section 2.5 Assumption of Obligations under the LipoSonix Agreement. In
accordance with Section 3.12 of the LipoSonix Agreement, effective as of the
Closing, Buyer hereby assumes the obligations set forth in the LipoSonix
Agreement to make the Contingent Payments as set forth in the LipoSonix
Agreement and hereby agrees to be bound by and to comply with the terms and
conditions set forth in the LipoSonix Agreement and the applicable terms of
Sections 3.9 through 3.11 of the LipoSonix Agreement. From and after the
Closing, Seller shall have no further obligation to make any Contingent Payments
pursuant to the LipoSonix Agreement. For the avoidance of doubt, the foregoing
provision does not, and shall not be deemed to, constitute an assignment of the
entire LipoSonix Agreement pursuant to Section 11.5 of the LipoSonix Agreement,
rather it constitutes only an assignment of all rights and obligations with
respect to Contingent Payments in accordance with Section 3.12(d) of the
LipoSonix Agreement.

Section 2.6 Seller Contingent Payments.

(a) Certain Definitions. For purposes of this Agreement, the following
definitions shall apply:

(i) “Additional LipoSonix Contingent Payment” means, for the period commencing
on the first fiscal quarter immediately following the occurrence of the earliest
of (A) December 31, 2019, (B) the date that is the last day of the “Seventh
Contingent Payment Year” under the LipoSonix Agreement and (C) the date on which
Buyer has made (or has been deemed to have made pursuant to Section 3.10 of the
LipoSonix Agreement) the aggregate “Sales/Profit Contingent Payments” under the
LipoSonix Agreement equal to ***, and ending on the Contingent Payment
Termination Date, the amount that would otherwise be payable by Buyer pursuant
to Section 2.5 of this Agreement (or its permitted assignee) under the LipoSonix
Agreement in respect of the “Sales/Profit Contingent Payment Amount” (as defined
in the LipoSonix Agreement) for the then applicable “Contingent Payment Year”
(as defined in the LipoSonix Agreement) had none of the events described in
clauses (A), (B) or (C) above occurred.

(ii) “Company Incremental Amount” means, with respect to any Contingent Payment
Year, the amount equal to (x) the sum of (1) the amount of Worldwide Net

 

4

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Sales for the Sales Payment Product for such Contingent Payment Year, (2) the
amount of Worldwide Gross Profit for the Gross Profit Payment Product for such
Contingent Payment Year and (3) the amount of Worldwide Ancillary Gross Profit
for the Contingent Payment Products for such Contingent Payment Year, minus
(y) the sum of (1) the amount of Worldwide Net Sales for the Sales Payment
Product for the immediately completed previous Contingent Payment Year (or, with
respect to the first Contingent Payment Year, the immediately completed previous
twelve (12) consecutive calendar month period), (2) the amount of Worldwide
Gross Profit for the Gross Profit Payment Product for the immediately completed
previous Contingent Payment Year (or, with respect to the first Contingent
Payment Year, the immediately completed previous twelve (12) consecutive
calendar month period) and (3) the amount of Worldwide Ancillary Gross Profit
for the Contingent Payment Products for the immediately completed previous
Contingent Payment Year (or, with respect to the first Contingent Payment Year,
the immediately completed previous twelve (12) consecutive calendar month
period); provided, that if the amount otherwise determined in accordance with
this definition for any Contingent Payment Year is not greater than zero, then
the Company Incremental Amount for such Contingent Payment Year shall be deemed
to be zero.

(iii) “Contingent Payment Commencement Date” means the first day of the fiscal
quarter following the fiscal quarter in which, after the “FDA Milestone” (as
defined in the LipoSonix Agreement) has been achieved, the LipoSonix Product is
first sold commercially to unaffiliated parties in the United States.

(iv) “Contingent Payment Product” means either the Gross Profit Payment Product
or the Sales Payment Product, as applicable.

(v) “Contingent Payment Termination Date” means the last day of the Contingent
Payment Year that is the seventh full Contingent Payment Year after (A) the FDA
Milestone has been achieved and (B) the Second Generation LipoSonix Product is
first sold commercially to unaffiliated parties in the United States.

(vi) “Contingent Payment Year” means each of the successive twelve
(12) consecutive calendar month periods beginning with the twelve (12) calendar
month period commencing on the Contingent Payment Commencement Date and ending
on the Contingent Payment Termination Date.

(vii) “FDA Milestone” shall be deemed to be achieved upon receipt by any member
of the Buyer Group of written approval or clearance from the FDA, or a successor
entity, allowing for the initiation of the marketing or sales of any version or
derivative of the second generation of LipoSonix Product, part number P005700-01
and successor thereto (the “Second Generation LipoSonix Product”), in the United
States; provided, that the FDA Milestone shall not be deemed to have been
achieved until all conditions and limitations contained in the written approval
or clearance from the FDA that preclude immediate marketing and
commercialization of the LipoSonix Product have been satisfied or waived.

(viii) “FDA Milestone Payment Amount” means the amount of: (a) $20,000,000, if
the FDA Milestone is achieved on or before April 2, 2012; (b) the difference
between (i) $20,000,000, minus the product of (x) the number of full thirty
(30) day periods

 

5

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between April 2, 2012 and October 1, 2012 that has passed prior to achieving the
FDA Milestone, times (y) $1,000,000, if the FDA Milestone is achieved after
April 2, 2012, but on or before October 1, 2012; and (c) $0, if the FDA
Milestone is achieved after October 1, 2012.

(ix) “Gross Profit Payment Product” means the LipoSonix Product, excluding the
Sales Payment Product.

(x) “LipoSonix Product” means (A) the Company’s LipoSonix System, including the
Sales Payment Product, which applies high intensity focused ultrasound for the
purpose of using thermal lipolysis to treat adipose tissue, as it has been
developed and commercialized by the Company prior to the Closing, and
(B) following the Closing, any Product of the Company (including the Sales
Payment Product), any modifications or enhancements of any Product of the
Company and any product of the Buyer Group that applies high intensity focused
ultrasound and that incorporates, uses, or is covered by the LipoSonix
Technology.

(xi) “LipoSonix Technology” means any technology, including any methods,
materials or products, that (i) was first disclosed in or is covered by (i.e.,
would infringe a claim of) any patents and patent applications owned by or
exclusively licensed by the Company and is disclosed in Section 4.16(a) of the
Seller Disclosure Schedule (including, without limitation, any continuation,
divisional or reissue of any patent application or patent disclosed in
Section 4.16(a) of the Seller Disclosure Schedule), or (ii) incorporates or uses
any trade secret of the Company disclosed in Section 2.6(a)(x) of the Seller
Disclosure Schedule.

(xii) “Sales Milestone” shall be deemed to be achieved upon the first occurrence
in which, with respect to any Contingent Payment Year, the sum of Worldwide Net
Sales for the Sales Payment Product, and Worldwide Gross Profit for the Gross
Profit Payment Product and Worldwide Ancillary Gross Profit for the Contingent
Payment Products recorded for such Contingent Payment Year exceeds $300,000,000.

(xiii) “Sales Milestone Payment Amount” means the amount of $30,000,000, less
any amounts paid or payable (including any amounts that may become payable) as a
“Sales Milestone Payment Amount” under the LipoSonix Agreement.

(xiv) “Sales Payment Product” means transducers for use as part of, or for use
with, the LipoSonix Product, and any other disposable or limited life items sold
for use with such transducers, including, but not limited to, treatment caps or
cartridges.

(xv) “Sales/Profit Contingent Payment Amount” means, with respect to any
Contingent Payment Year, an amount equal to the sum of (A) (x) the Sales/Profit
Contingent Payment Percentage multiplied by (y) the Company Incremental Amount
for such Contingent Payment Year and (B) the Additional LipoSonix Contingent
Payment.

(xvi) “Sales/Profit Contingent Payment Percentage” means 25%.

(xvii) “Worldwide Ancillary Gross Profit” means (A) total gross revenues
actually recognized from Contingent Payment Products, including, without
limitation, (1) the leasing and servicing of Contingent Payment Products,
(2) the use of Contingent Payment

 

6

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Products by third parties (such as on a “fee for service basis”) and
(3) licenses and similar arrangements pursuant to which a Person is granted the
right to manufacture and/or market, lease, sell, service or otherwise obtain
revenues from a Contingent Payment Product (but in each case excluding gross
revenues that are included in Worldwide Gross Profit or Worldwide Net Sales)
minus (B) the cost of such revenues, each as adjusted by any Worldwide Ancillary
Gross Profit Adjustments (including amortization and depreciation) and all as
recorded by Buyer (or any other applicable member of the Buyer Group if any such
licensing, leasing or servicing contemplated hereby is recorded by such member
of the Buyer Group but not by Buyer), all in accordance with standard allocation
procedures, allowance methodologies and accounting methods consistently applied,
which procedures, methodologies and methods shall be in accordance with GAAP.
Notwithstanding anything to the contrary in this Agreement or in any financial
statements prepared by Buyer with respect to any Contingent Payment Year or
portion thereof, or to the extent it may otherwise be required pursuant to GAAP,
the term “Worldwide Ancillary Gross Profit” shall not include: (A) any revenues
or other value received for the lease or service of a specified Contingent
Payment Product used for research, manufacturing or quality testing, clinical
trials, compassionate or humanitarian purposes including expanded access
programs (which provide access to therapies for no monetary consideration) or
charitable donations; (B) any revenues or other value received (and related
costs) by Buyer or any other member of the Buyer Group from the license of any
Intellectual Property related to the Contingent Payment Products (other than for
the right to manufacture and/or market, lease, sell, service or otherwise obtain
revenues from any Contingent Payment Products); or (C) any amounts otherwise
included in Worldwide Gross Profit or Worldwide Net Sales. For purposes of
calculating “Worldwide Ancillary Gross Profit”, cost of revenues of any member
of the Buyer Group shall exclude any payments, or amounts payable, to any other
member of the Buyer Group, to the extent that such payments or amounts payable
are in excess of actual costs incurred by such other member of the Buyer Group
in connection with the applicable transaction.

(xviii) “Worldwide Ancillary Gross Profit Adjustments” means all adjustments,
including the following items as applicable to each such Contingent Payment
Product, to the extent such adjustments are customary under industry practices
and are reflected as a reduction to gross revenue or an increase to cost of
goods sold in the consolidated financial statements of Buyer in accordance with
GAAP:

(A) credits or allowances granted upon returns, rejections or recalls (due to
spoilage, damage, expiration of useful life), price reductions, or billing
corrections;

(B) invoiced freight, postage, shipping and insurance, handling and other
transportation costs;

(C) credits or allowances granted including quantity, cash, bad debt and other
trade discounts;

(D) Taxes (excluding withholding Taxes and Taxes paid by Buyer on the net income
derived from licensing for manufacture and leasing of and servicing the
Contingent Payment Products), tariffs, customs duties, surcharges and other
governmental charges incurred in connection with the production, lease, service,
transportation, delivery, use,

 

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exportation or importation of Contingent Payment Products that are incurred at
the time of license for manufacture, lease or service or are directly related to
the license for manufacture, lease or service and not otherwise previously
deducted;

(E) discounts, refunds, rebates, returns, charge backs, fees, credits or
allowances (including billing corrections, amounts incurred in connection with
government-mandated rebate and discount programs, third party rebates and charge
backs, hospital buying group/group purchasing or leasing organization
administration fees and managed care organization rebates), distribution fees
and sales and other similar commissions to third parties, actually paid or
incurred and which effectively reduce gross revenue;

(F) warranties, guaranties and maintenance arrangements; and

(G) any other customary adjustments related to products licensed for
manufacture, leased or serviced and reasonably allocated to such Contingent
Payment Products as a portion of the gross revenue or related cost of goods
sold, in accordance with GAAP.

(xix) “Worldwide Gross Profit” means the difference between (A) the Worldwide
Net Sales of a specified Contingent Payment Product minus (B) the cost of goods
sold (as adjusted by any Worldwide Net Sales Adjustments), for such specified
Contingent Payment Product, each as recorded by Buyer (or any other applicable
member of the Buyer Group if any sales contemplated hereby are recorded by such
member of the Buyer Group but not by Buyer), all in accordance with standard
allocation procedures, allowance methodologies and accounting methods
consistently applied, which procedures, methodologies and methods shall be in
accordance with GAAP, but excluding from cost of goods sold of any member of the
Buyer Group any gross profit recorded by any member of the Buyer Group on any
sales to any other member of the Buyer Group.

(xx) “Worldwide Net Sales” means the gross amounts invoiced for sales by Buyer
(or any other applicable member of the Buyer Group if any sales contemplated
hereby are recorded by such member of the Buyer Group but not by Buyer) from the
sales of a specified Contingent Payment Product by a member of the Buyer Group
or its authorized or licensed distributor after the Closing to unaffiliated
third parties less the Worldwide Net Sales Adjustments, all in accordance with
standard allocation procedures, allowance methodologies and accounting methods
consistently applied, which procedures and methodologies shall be in accordance
with GAAP. For purposes of clarification, when measuring the Worldwide Net Sales
recorded in respect of sales of a specified Contingent Payment Product by any
Person other than a member of the Buyer Group, only the revenue recorded by
Buyer or another member of the Buyer Group shall be included (for example, the
transfer price or other amount received by Buyer or such other member of the
Buyer Group, in the event of any sales by an authorized or licensed distributor
of the specified Contingent Payment Product manufactured by Buyer), and the
amount of revenue that may be recorded or achieved by such other Person who is
not a member of the Buyer Group shall be disregarded. Notwithstanding anything
to the contrary in this Agreement or in any financial statements prepared by
Buyer with respect to any Contingent Payment Year or portion thereof, or to the
extent it may otherwise be required pursuant to GAAP, the term “Worldwide Net
Sales” shall not include (A) gross amounts invoiced for sales

 

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by Buyer or any member of the Buyer Group from transactions with another member
of the Buyer Group unless such other member of the Buyer Group is an end user of
the specified Contingent Payment Product; provided, however, that “Worldwide Net
Sales” shall in such event include the gross amounts invoiced for sales, if any,
recorded upon the further resale of such specified Contingent Payment Product by
such other member of the Buyer Group less the Worldwide Net Sales Adjustments or
(B) distribution to a third party of a specified Contingent Payment Product for
research, manufacturing or quality testing, clinical trials, compassionate or
humanitarian purposes including expanded access programs (which provide access
to therapies for no monetary consideration) or charitable donations.

In the event that Sales Payment Products are sold on a bundled basis with Gross
Profit Payment Products, the gross amount invoiced for such bundled sale will be
allocated for purposes of Sections 2.6(a)(xviii) and (xix) between the Sales
Payment Product and the Gross Profit Payment Product in proportion to the list
price that would generally apply to sales to the applicable purchaser.

(xxi) “Worldwide Net Sales Adjustments” means all adjustments, including the
following items as applicable to each such Contingent Payment Product, to the
extent such adjustments are customary under industry practices and are reflected
as a reduction to net sales or, for purposes of determining Worldwide Gross
Profit, an increase to cost of goods sold in the consolidated financial
statements of Buyer in accordance with GAAP:

(A) credits or allowances granted upon returns, rejections or recalls (due to
spoilage, damage, expiration of useful life), retroactive price reductions, or
billing corrections;

(B) invoiced freight, postage, shipping and insurance, handling and other
transportation costs;

(C) credits or allowances granted including quantity, cash, bad debt and other
trade discounts;

(D) Taxes (including sales, value-added and excise Taxes, but excluding
withholding Taxes and Taxes paid by Buyer on the net income derived from sales
of the Contingent Payment Products), tariffs, customs duties, surcharges and
other governmental charges incurred in connection with the production, sale,
transportation, delivery, use, exportation or importation of Contingent Payment
Products that are incurred at the time of sale or are directly related to the
sale and not otherwise previously deducted;

(E) discounts, refunds, rebates, returns, charge backs, fees, credits or
allowances (including billing corrections, amounts incurred in connection with
government-mandated rebate and discount programs, third party rebates and charge
backs, hospital buying group/group purchasing organization administration fees
and managed care organization rebates), distribution fees and sales commissions
to third parties, actually paid or incurred and which effectively reduce the
selling price;

(F) warranties, guaranties and maintenance arrangements; and

 

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(G) any other customary adjustments related to products sold and reasonably
allocated to such Contingent Payment Products as a portion of the total products
sold or, for purposes of determining Worldwide Gross Profit, related cost of
goods sold, in accordance with GAAP.

(b) Seller Contingent Payments. In the event that the Closing occurs, and
subject to the set-off rights of Buyer pursuant to Section 2.7(h) and Article 9
hereof, after the Closing, but before the Contingent Payment Termination Date,
Seller shall be entitled to receive the Seller Contingent Payments when and if
required to be made in accordance with the provisions of this Section 2.6 and
Section 2.7, and subject to the limitation on the Seller Contingent Payments set
forth in this Section 2.6 and Section 2.7. The Seller Contingent Payments shall
include the FDA Milestone Payment, the Sales Milestone Payment and the
Sales/Profit Contingent Payments, as applicable, none of which Seller Contingent
Payments shall bear interest.

(c) FDA Milestone Payment. Subject to the set-off rights of Buyer pursuant to
Section 2.7(h) and Article 9 hereof, Buyer shall make a one-time Seller
Contingent Payment equal to the FDA Milestone Payment Amount if and only if the
FDA Milestone is achieved on or before October 1, 2012 (the “FDA Milestone
Payment”).

(d) Sales Milestone Payment. Subject to the Contingent Payment Termination Date
and the set-off rights of Buyer pursuant to Section 2.7(h) and Article 9 hereof,
Buyer shall make a one-time Seller Contingent Payment (the “Sales Milestone
Payment”) equal to the Sales Milestone Payment Amount following achievement of
the Sales Milestone.

(e) Sales/Profit Contingent Payments. Subject to the Contingent Payment
Termination Date and the set-off rights of Buyer pursuant to Section 2.7(h) and
Article 9 hereof, Buyer shall make a Seller Contingent Payment, with respect to
the Worldwide Net Sales for the Sales Payment Product, the Worldwide Gross
Profit for the Gross Profit Payment Product, the Worldwide Ancillary Gross
Profit for the Contingent Payment Products, the “Worldwide Net Sales” (as
defined in the LipoSonix Agreement) for the “Sales Payment Product” (as defined
in the LipoSonix Agreement), the “Worldwide Gross Profit” (as defined in the
LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in the
LipoSonix Agreement) and the “Worldwide Ancillary Gross Profit” (as defined in
the LipoSonix Agreement) for the “Contingent Payment Products” (as defined in
the LipoSonix Agreement), equal to the Sales/Profit Contingent Payment Amount
for each Contingent Payment Year (each, a “Sales/Profit Contingent Payment” and
collectively, the “Sales/Profit Contingent Payments”), in accordance with
Section 2.7.

(f) Contingent Payments Not Certain. Each of Buyer and Seller hereby acknowledge
that the achievement of the FDA Milestone is uncertain and that Buyer and its
Affiliates may not achieve the FDA Milestone prior to October 1, 2012 or at all,
and it is therefore not assured that Buyer will be required to pay the FDA
Milestone Payment at all. Each of Buyer and Seller hereby further acknowledge
that the achievement of the Sales Milestone is uncertain and that Buyer and its
Affiliates may not achieve the Sales Milestone prior to the Contingent Payment
Termination Date or at all, and it is therefore not assured that Buyer will be
required to pay the Sales Milestone Payment at all. Each of Buyer and Seller
hereby further

 

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acknowledge that the amount of Worldwide Net Sales for the Sales Payment Product
and Worldwide Gross Profit for the Gross Profit Payment Product and the
Worldwide Ancillary Gross Profit for the Contingent Payment Products, if any,
that Buyer and its Affiliates may generate during any one or more Contingent
Payment Years is uncertain and that (i) Buyer and its Affiliates may not
generate any Worldwide Net Sales, Worldwide Gross Profit or Worldwide Ancillary
Gross Profit with respect to any Contingent Payment Product in any Contingent
Payment Year, and (ii) it is therefore not assured that Buyer will be required
to make any Sales/Profit Contingent Payments for any particular Contingent
Payment Year, or at all.

(g) Commercially Reasonable Efforts.

(i) Commencing on the Closing Date and until the Contingent Payment Termination
Date, Buyer shall use Commercially Reasonable Efforts to develop, market and
sell the LipoSonix Product, and shall use all Commercially Reasonable Efforts to
do so in a manner designed to achieve the overall growth and success (both in
terms of Worldwide Net Sales, Worldwide Gross Profit and Worldwide Ancillary
Gross Profit of the Contingent Payment Products) of such operations. In addition
to the foregoing and not in limitation in anyway thereof, Buyer hereby agrees
that, commencing on the Closing Date and until the Contingent Payment
Termination Date, Buyer shall not, and shall cause its Subsidiaries and
Affiliates (including the Company after the Closing) not to, take any actions or
fail to take any actions concerning the operations of the Company (or any
successor to the Company) with the intention of avoiding or reducing Buyer’s
obligations under this Agreement with respect to the development, marketing and
selling of the LipoSonix Product, including its obligations to make payment of
any Seller Contingent Payments hereunder or the Contingent Payments under the
LipoSonix Agreement.

(ii) For purposes of this Section 2.6(g) only, “Commercially Reasonable Efforts”
means efforts reasonably used by Buyer for Buyer’s own products (including
internally developed, acquired and in-licensed products) with similar commercial
potential (assuming continuing development of such product), taking into
consideration the competitiveness of the marketplace, the proprietary position
of the product, the regulatory structure involved, issues of safety and
efficacy, the profitability (not taking into account any payments payable under
this Agreement), the extent of market exclusivity, the likely timing of the
regulatory approval necessary to permit the product’s entry into the market, the
then current level of market penetration, patent protection, cost to develop the
product, promotable claims, health economic claims and other relevant factors,
in each case, taking into account the facts and circumstances at the time such
efforts are due.

(iii) In the event Seller asserts a Claim alleging that Buyer has failed to
satisfy the Commercially Reasonable Efforts requirements set forth in
Section 2.6(g)(i), any liability of Buyer under such Claim shall not exceed, and
Seller shall not be entitled to recover any Losses in excess of, an amount equal
to ***, which amount shall be reduced to *** after the FDA Milestone has been
achieved and the FDA Milestone Payment has been paid to Buyer; provided,
however, that no such limitation shall apply to the extent that Buyer (A) has
failed to satisfy the Commercially Reasonable Efforts requirements in connection
with the second sentence of Section 2.6(g)(i) or (B) has failed to satisfy the
Commercially Reasonable Efforts requirements in connection in the first sentence
of Section 2.6(g)(i) as a result of an Intentional

 

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Breach of the first sentence of Section 2.6(g)(i) by Buyer. Notwithstanding
anything to the contrary herein, to the extent that any Additional LipoSonix
Contingent Payments become payable to Seller, Buyer shall have no obligation to,
and Seller shall have no right to make any Claim for Losses arising out of any
obligation of Buyer to, use Commercially Reasonable Efforts or any other level
of efforts to achieve overall growth and success with respect to the Additional
LipoSonix Contingent Payment, but will have only the obligations set forth in
the LipoSonix Agreement with respect thereto. The limitation in this
Section 2.6(g)(iii) is a limitation on liability and not a statement of
liquidated damages.

(h) Cooperation on FDA Milestone

(i) After the Closing and until the FDA Milestone is achieved, Buyer shall
notify Seller of any material communications with any applicable Governmental
Authority (including the FDA), whether written or oral, as soon as reasonably
practicable, but in no event later than three (3) Business Days after the
receipt of such communications, and within such same time period, Buyer shall
provide Seller with copies of any such written communications and written
summaries of any such oral communications. Buyer shall also provide to Seller
monthly updates regarding the progress of the Company’s regulatory filings and
strategy for achieving the FDA Milestone.

(ii) After the Closing and until the FDA Milestone is achieved, the Joint
Steering Committee (the “JSC”) shall make recommendations with respect to the
progress of the Company’s regulatory filings and strategy for achieving the FDA
Milestone, including regulatory filings to the applicable Governmental Authority
(including the FDA), and responding to any communications or requests for
information from any applicable Governmental Authority (including the FDA). The
JSC shall be composed of four members, two of which shall be appointed by Buyer
and two by Seller. To the extent that the JSC is unable to reach agreement with
respect to an issue or resolve a dispute for a period of fifteen (15) days, such
matter shall be submitted to direct negotiation and shall be resolved between
the Chief Executive Officers of Buyer and Seller. Notwithstanding the foregoing,
all final determinations with respect to any filings and interactions of Buyer
with any Governmental Authority shall be ultimately made by Buyer.

(iii) Notwithstanding the foregoing, Seller shall have no obligations whatsoever
with respect to the achievement of the FDA Milestone and shall not be liable
whatsoever to any Person for Buyer’s inability to achieve the FDA Milestone.

Section 2.7 Payment of Seller Contingent Payments.

(a) FDA Milestone Payment. On or prior to the thirtieth (30th) day following the
achievement of the FDA Milestone, Buyer shall deliver to Seller the FDA
Milestone Payment Amount; provided, however, that Buyer shall not be required to
make, and Seller shall not be entitled to receive, the FDA Milestone Payment if
the FDA Milestone is achieved after October 1, 2012.

(b) Sales/Profit Contingent Payment Amount Certificates.

 

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(i) On or prior to the twentieth (20th) day following the last day of each
fiscal quarter during each Contingent Payment Year, Buyer shall deliver to
Seller a certificate (each, a “Quarterly Contingent Payment Certificate”),
setting forth for such fiscal quarter (A) (i) the amount of Worldwide Net Sales
for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit
Payment Product and Worldwide Ancillary Gross Profit for the Contingent Payment
Products, (ii) for the Gross Profit Payment Product, the number of units
produced, the number of units sold, the average manufacturing cost per unit, and
the average sales price per unit, (iii) for the Sales Payment Product, a
detailed list of units produced, a detailed list of units sold, and the sales
price per unit sold, (iv) the unconsolidated revenue and gross profit of each
entity within the Buyer Group that is derived from the LipoSonix Product and
(v) an allocation of Worldwide Net Sales for the Sales Payment Product and
Worldwide Gross Profit for the Gross Profit Payment Product from sales and an
allocation of Worldwide Ancillary Gross Profit for the Contingent Payment
Products from licensing, leasing and provision of services (each identified
separately) by each member of the Buyer Group, (B) if applicable, (i) the amount
of “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the “Sales
Payment Product” (as defined in the LipoSonix Agreement), “Worldwide Gross
Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment
Product” (as defined in the LipoSonix Agreement) and “Worldwide Ancillary Gross
Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment
Products” (as defined in the LipoSonix Agreement), (ii) for the “Gross Profit
Payment Product” (as defined in the LipoSonix Agreement), the number of units
produced, the number of units sold, the average fully-loaded manufacturing cost
per unit, and the average sales price per unit, (iii) for the “Sales Payment
Product” (as defined in the LipoSonix Agreement), a detailed list of units
produced, a detailed list of units sold, and the sales price per unit sold,
(iv) the unconsolidated revenue and gross profit of each entity within the Buyer
Group that is derived from the “LipoSonix Product” (as defined in the LipoSonix
Agreement) and (v) an allocation of “Worldwide Net Sales” (as defined in the
LipoSonix Agreement) for the “Sales Payment Product” (as defined in the
LipoSonix Agreement) and “Worldwide Gross Profit” (as defined in the LipoSonix
Agreement) for the “Gross Profit Payment Product” (as defined in the LipoSonix
Agreement) from sales and an allocation of “Worldwide Ancillary Gross Profit”
(as defined in the LipoSonix Agreement) for the “Contingent Payment Products”
(as defined in the LipoSonix Agreement) from licensing, leasing and provision of
services (each identified separately) by each member of the Buyer Group, and
(C) the amount, if any, to be set off by Buyer against the Seller Contingent
Payments.

(ii) On or prior to the twentieth (20th) day following the last day of each
Contingent Payment Year, Buyer shall deliver to Seller a certificate (each, a
“Contingent Payment Certificate”), setting forth for such Contingent Payment
Year (i) the amount of Worldwide Net Sales for the Sales Payment Product,
Worldwide Gross Profit for the Gross Profit Payment Product and Worldwide
Ancillary Gross Profit for the Contingent Payment Products, (ii) for the Gross
Profit Payment Product, the number of units produced, the number of units sold,
the average fully-loaded manufacturing cost per unit, and the average sales
price per unit, (iii) for the Sales Payment Product, the number of units
produced, the number of units sold, and the average sales price per unit,
(iv) the unconsolidated revenue and gross profit of each entity within the Buyer
Group that is derived from the LipoSonix Product and (v) an allocation of
Worldwide Net Sales for the Sales Payment Product and Worldwide Gross Profit for
the Gross Profit Payment Product from sales and an allocation of Worldwide
Ancillary Gross Profit

 

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for the Contingent Payment Products from licensing, leasing and provision of
services (each identified separately) by each member of the Buyer Group, (B) if
applicable, (i) the amount of “Worldwide Net Sales” (as defined in the LipoSonix
Agreement) for the “Sales Payment Product” (as defined in the LipoSonix
Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for
the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) and
“Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for
the “Contingent Payment Products” (as defined in the LipoSonix Agreement),
(ii) for the “Gross Profit Payment Product” (as defined in the LipoSonix
Agreement), the number of units produced, the number of units sold, the average
fully-loaded manufacturing cost per unit, and the average sales price per unit,
(iii) for the “Sales Payment Product” (as defined in the LipoSonix Agreement), a
detailed list of units produced, a detailed list of units sold, and the sales
price per unit sold, (iv) the unconsolidated revenue and gross profit of each
entity within the Buyer Group that is derived from the “LipoSonix Product” (as
defined in the LipoSonix Agreement) and (v) an allocation of “Worldwide Net
Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product”
(as defined in the LipoSonix Agreement) and “Worldwide Gross Profit” (as defined
in the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined
in the LipoSonix Agreement) from sales and an allocation of “Worldwide Ancillary
Gross Profit” (as defined in the LipoSonix Agreement) for the “Contingent
Payment Products” (as defined in the LipoSonix Agreement) from licensing,
leasing and provision of services (each identified separately) by each member of
the Buyer Group, and (C) (i) Buyer’s determination of the Sales/Profit
Contingent Payment Amount, if any, for such Contingent Payment Year (including
the calculation thereof, in reasonable detail) and (ii) the amount, if any, set
off by Buyer against the Seller Contingent Payments.

(c) Seller Audit Rights. Buyer hereby grants, and shall cause the other members
of the Buyer Group to grant, Seller and its representatives and advisers, at
Seller’s sole expense, the right, exercisable no more than once during each
thirty (30) day period following the receipt by Seller of a Contingent Payment
Certificate, subject to the execution of, and compliance with, a confidentiality
agreement with Buyer in substantially the form attached hereto as Exhibit B
(which shall permit disclosure of information to Seller), to examine and have
full access to the Buyer Group’s personnel, books of account and records of
Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for
the Gross Profit Payment Product, Worldwide Ancillary Gross Profit for the
Contingent Payment Products, “Worldwide Net Sales” (as defined in the LipoSonix
Agreement) for the “Sales Payment Product” (as defined in the LipoSonix
Agreement), “Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for
the “Gross Profit Payment Product” (as defined in the LipoSonix Agreement) or
“Worldwide Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for
the “Contingent Payment Products” (as defined in the LipoSonix Agreement) for
the applicable Contingent Payment Year with respect to which the most recent
Contingent Payment Certificate has been delivered, as well as the immediately
prior Contingent Payment Year (or, with respect to the first Contingent Payment
Year after the Contingent Payment Commencement Date, the immediately completed
previous twelve (12) consecutive calendar month period), at the location of such
records on prior written notice of at least ten (10) days, for the purpose of
verifying and assessing the amount of Worldwide Net Sales for the Sales Payment
Product, Worldwide Gross Profit for the Gross Profit Payment Product, Worldwide
Ancillary Gross Profit for the Contingent Payment Products, “Worldwide Net
Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product”
(as defined in the LipoSonix Agreement), “Worldwide Gross

 

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Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit Payment
Product” (as defined in the LipoSonix Agreement) or “Worldwide Ancillary Gross
Profit” (as defined in the LipoSonix Agreement) for the “Contingent Payment
Products” (as defined in the LipoSonix Agreement) for such Contingent Payment
Years (each such review shall be referred to herein as a “Contingent Payment
Audit”). Notwithstanding the foregoing, absent fraud, willful misconduct, or the
discovery (following the completion of any Contingent Payment Audit) of a
material fact in existence at the time of such Contingent Payment Audit and not
disclosed by Buyer to Seller or its representatives in the course of conducting
such Contingent Payment Audit, which material fact, if taken into account in the
calculation of the applicable Sales/Profit Contingent Payment Amount, would have
resulted in an increase in such Sales/Profit Contingent Payment Amount, Seller
or its representatives shall not be permitted to review any records of Worldwide
Net Sales, Worldwide Gross Profit or Worldwide Ancillary Gross Profit with
respect to any Contingent Payment Product or of “Worldwide Net Sales” (as
defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in the
LipoSonix Agreement) or “Worldwide Ancillary Gross Profit” (as defined in the
LipoSonix Agreement) with respect to any “Contingent Payment Product” (as
defined in the LipoSonix Agreement) for any Contingent Payment Year for which a
Contingent Payment Audit has previously been performed. For the purpose of
conducting a Contingent Payment Audit, Seller may hire, at its expense, one or
more auditors or attorneys of Seller’s choosing to assist in such examination;
provided, that such auditors or attorneys have entered into confidentiality
agreements with Buyer in substantially the form attached hereto as Exhibit B
(which shall permit disclosure of information to Seller). Seller and such
representatives shall have access to all of the books, records and personnel
required in the good faith judgment of the Seller to perform any Contingent
Payment Audit for a thirty (30) day period, beginning on the date on which
access to substantially all of such books and records is first given to Seller.
Nothing in this Section 2.7(c) shall be deemed to require any member of the
Buyer Group to keep any books of account or records other than those which they
maintain in the ordinary course of business in its usual and customary practice,
to retain any such books of account or records for any period in excess of the
period for which they retain such records in the ordinary course of business in
their usual and customary practice, or to provide access to any books and
records other than that specified above, and no presumption shall be made
against any member of the Buyer Group as a result of the absence of any such
books and records as a result of the disposition of any such books and records
in the ordinary course of business after such period as provided above;
provided, however, that in no case shall any member of the Buyer Group dispose
of such books of account or records with respect to a Contingent Payment Year
earlier than the date one hundred eighty (180) days following the last day of
the subsequent Contingent Payment Year or, if such Contingent Payment Year is
the last Contingent Payment Year, one hundred eighty (180) days following the
last day of such Contingent Payment Year; and, provided further, that once
Seller gives notice of its intention to commence a Contingent Payment Audit with
respect to a Contingent Payment Year or Contingent Payment Years, the Buyer
Group shall keep and retain all books of account relating to Worldwide Net Sales
for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit
Payment Product, Worldwide Ancillary Gross Profit for the Contingent Payment
Products, “Worldwide Net Sales” (as defined in the LipoSonix Agreement) for the
“Sales Payment Product” (as defined in the LipoSonix Agreement), “Worldwide
Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross Profit
Payment Product” (as defined in the LipoSonix Agreement) and “Worldwide
Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the
“Contingent Payment

 

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Products” (as defined in the LipoSonix Agreement) for the Contingent Payment
Year or Contingent Payment Years for which such Contingent Payment Audit is
being conducted that are identified in a request or requests from Seller with
respect to the Sales/Profit Contingent Payment Amount for such Contingent
Payment Year or Contingent Payment Years.

(d) Dispute Notice. In the event that Seller does not agree with the
Sales/Profit Contingent Payment Amount set forth on any Contingent Payment
Certificate, Seller shall be entitled, during the period following delivery of
such Contingent Payment Certificate and ending on the later of (i) ninety
(90) days after delivery of such Contingent Payment Certificate and (ii) thirty
(30) days following the completion of a Contingent Payment Audit commenced in
connection with the delivery of such Contingent Payment Certificate (the
“Dispute Period”), to give Buyer written notice (a “Dispute Notice”) of such
disagreement. In the event that Seller does not deliver a Dispute Notice during
the Dispute Period, the Sales/Profit Contingent Payment Amount set forth on such
Contingent Payment Certificate shall irrevocably be deemed to be the final
Sales/Profit Contingent Payment Amount for such Contingent Payment Year and all
purposes of this Agreement, absent fraud and willful misconduct.

(e) Agreed Contingent Payment. In the event that Seller delivers a Dispute
Notice within the Dispute Period, Seller and Buyer shall for a period of not
less than thirty (30) days after delivery of the Dispute Notice attempt in good
faith to resolve the Sales/Profit Contingent Payment Amount that is in dispute
(the “Disputed Contingent Payment Amount”), and mutually determine any
adjustments to such Sales/Profit Contingent Payment Amount (the “Agreed
Contingent Payment Amount”). Buyer and Seller shall, subject to the execution of
a confidentiality agreement in substantially the form attached hereto as Exhibit
B, provide each other with such information, records and material kept in the
ordinary course of business in such Party’s possession and which such Party may
disclose without violating confidentiality obligations to third parties, as is
reasonably necessary and appropriate in attempting to resolve such Disputed
Contingent Payment Amount, including the delivery of a copy to Seller of any
such information, records and material, to the extent then available, that was
used to calculate the amount of Worldwide Net Sales for the Sales Payment
Product, Worldwide Gross Profit for the Gross Profit Payment Product, Worldwide
Ancillary Gross Profit for the Contingent Payment Products, “Worldwide Net
Sales” (as defined in the LipoSonix Agreement) for the “Sales Payment Product”
(as defined in the LipoSonix Agreement), “Worldwide Gross Profit” (as defined in
the LipoSonix Agreement) for the “Gross Profit Payment Product” (as defined in
the LipoSonix Agreement), “Worldwide Ancillary Gross Profit” (as defined in the
LipoSonix Agreement) for the “Contingent Payment Products” (as defined in the
LipoSonix Agreement) and the Sales/Profit Contingent Payment Amount set forth on
each relevant Contingent Payment Certificate. If the final Agreed Contingent
Payment Amount determined pursuant to this Section 2.7(e) is greater than the
Sales/Profit Contingent Payment Amount set forth on the relevant Contingent
Payment Certificate by an amount equal to more than $1,000,000, Buyer shall pay
all of the reasonable out-of-pocket costs and expenses actually incurred by
Seller in connection with such Contingent Payment Audit.

(f) Arbitration of Disputes. In the event that no agreement can be reached by
Seller and Buyer as to the calculation of the Disputed Contingent Payment Amount
within ninety (90) days after delivery of a Dispute Notice and such disagreement
relates only to the amount of Worldwide Net Sales for the Sales Payment Product,
Worldwide Gross Profit for the Gross

 

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Profit Payment Product, Worldwide Ancillary Gross Profit for the Contingent
Payment Products, “Worldwide Net Sales” (as defined in the LipoSonix Agreement)
for the “Sales Payment Product” (as defined in the LipoSonix Agreement),
“Worldwide Gross Profit” (as defined in the LipoSonix Agreement) for the “Gross
Profit Payment Product” (as defined in the LipoSonix Agreement) or “Worldwide
Ancillary Gross Profit” (as defined in the LipoSonix Agreement) for the
“Contingent Payment Products” (as defined in the LipoSonix Agreement), then,
pursuant to this Section 2.7(f), either Party shall have the right to submit the
Disputed Contingent Payment Amount to arbitration by the Los Angeles, California
office of one (1) of the following entities or their respective successors, or
such other accountants as Seller and Buyer may mutually agree, so long as such
entity or its successors is not the principal regularly-engaged outside
accountant to Buyer or the Company or any auditor that may have assisted Seller
in any Contingent Payment Audit: Deloitte & Touche LLP, KPMG, Ernst & Young LLP,
PricewaterhouseCoopers, BDO Seidman, LLP, Grant Thornton LLP, or any successor
entity to the foregoing (individually, an “Accountant,” and collectively, the
“Accountants”). Seller and Buyer shall jointly select which of the Accountants
will perform the calculation within thirty (30) days after Seller and Buyer
determine that they are unable to settle the amount independently; provided,
that in the event that Seller and Buyer are unable to agree upon the Accountant
to perform such calculation within such thirty (30) day period, then each of
Seller and Buyer shall select one of the Accountants and such Accountants shall
jointly select a third Accountant to perform such calculation; provided,
further, that any Accountant consulted or selected in accordance with this
sentence shall enter into a confidentiality agreement with Buyer in
substantially the form attached hereto as Exhibit B. The Accountant selected in
accordance with the foregoing sentence shall be responsible for the
determination of the Disputed Contingent Payment Amount (the “Appraiser”). The
engagement and charge of the Appraiser shall be limited to determining the
Worldwide Net Sales, Worldwide Gross Profit, Worldwide Ancillary Gross Profit,
“Worldwide Net Sales” (as defined in the LipoSonix Agreement), “Worldwide Gross
Profit” (as defined in the LipoSonix Agreement) and “Worldwide Ancillary Gross
Profit” (as defined in the LipoSonix Agreement) of any identified Contingent
Payment Product for the applicable Contingent Payment Year used to calculate the
Disputed Contingent Payment Amount, and the Appraiser shall not be entitled to
determine whether any products sold by Buyer or its Affiliates are Gross Profit
Payment Products, Sales Payment Products, “Gross Profit Payment Products” (as
defined in the LipoSonix Agreement) or “Sales Payment Products” (as defined in
the LipoSonix Agreement) for purposes of this Agreement or any other matter (and
any dispute with respect thereto shall be resolved in accordance with
Section 11.8). The Appraiser shall determine the Disputed Contingent Payment
Amount within the limitations set forth above within ninety (90) days after the
date of such Appraiser’s engagement and the Appraiser shall be provided with
such information and records, which may include on-site access and access to
personnel, relating to such dispute as it may reasonably request. Any Disputed
Contingent Payment Amount determined by an Appraiser in accordance with this
Section 2.7(f) shall be deemed to be the final Sales/Profit Contingent Payment
Amount for the applicable Contingent Payment Year for all purposes of this
Agreement. The fees and expenses of the Appraiser shall be paid by Seller,
provided, that if the final Sales/Profit Contingent Payment Amount determined by
the Appraiser in any examination conducted pursuant to this Section 2.7(f) is
greater than the Sales/Profit Contingent Payment Amount set forth on the
relevant Contingent Payment Certificate by an amount equal to more than
$1,000,000, then Buyer shall pay all of the fees and expenses of the Appraiser
and all reasonable out-of-pocket costs and expenses actually incurred by Seller
in connection with any Contingent Payment Audit.

 

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(g) Final Calculation and Payment of Sales/Profit Contingent Payment and Sales
Milestone Payment. With respect to any Sales/Profit Contingent Payment Amount
for any Contingent Payment Year:

(i) In the event Seller does not deliver a Dispute Notice with respect to the
Sales/Profit Contingent Payment Amount set forth on the Contingent Payment
Certificate delivered for such Contingent Payment Year within the Dispute
Period, or Seller delivers to Buyer a written notice informing Buyer of its
agreement with the Sales/Profit Contingent Payment Amount set forth on such
Contingent Payment Certificate, the Sales/Profit Contingent Payment Amount set
forth in the relevant Contingent Payment Certificate shall irrevocably be deemed
to be the final such Sales/Profit Contingent Payment Amount for such Contingent
Payment Year for all purposes of this Agreement, absent fraud and willful
misconduct, and Buyer shall, within ten (10) days after such determination, pay
to Seller the amounts required to be paid based on such Sales/Profit Contingent
Payment Amount and, if the Sales Milestone has also been achieved during such
Contingent Payment Year, the Sales Milestone Payment Amount, subject to
Section 2.7(h) hereof.

(ii) In the event that Seller delivers a Dispute Notice pursuant to
Section 2.7(d) with respect to a Sales/Profit Contingent Payment Amount, and
Buyer and Seller shall mutually determine the Agreed Contingent Payment Amount,
then the Agreed Contingent Payment Amount shall irrevocably be deemed to be the
final such Sales/Profit Contingent Payment Amount for such Contingent Payment
Year for all purposes of this Agreement, absent fraud and willful misconduct,
and Buyer shall, within ten (10) days after such Agreed Contingent Payment
Amount is determined, pay to Seller the amounts required to be paid based on
such Sales/Profit Contingent Payment Amount and, if the Sales Milestone has also
been achieved during such Contingent Payment Year, the Sales Milestone Payment
Amount, subject to Section 2.7(h) hereof.

(iii) In the event that the final Sales/Profit Contingent Payment Amount for
such Contingent Payment Year is determined by an Appraiser pursuant to
Section 2.7(f) above, then Buyer shall, within ten (10) days after such
determination, pay to Seller the amounts required to be paid based on such
Sales/Profit Contingent Payment Amount and, if the Sales Milestone has also been
achieved during such Contingent Payment Year, the Sales Milestone Payment
Amount, subject to Section 2.7(h) hereof.

(iv) The determination of any Sales/Profit Contingent Payment Amount and Sales
Milestone Payment pursuant to Sections 2.7(g)(i)-(iii) shall, in the absence of
fraud and willful misconduct, be conclusive, and in the absence of fraud and
willful misconduct, Buyer and its Affiliates and Subsidiaries, Seller and
Appraiser shall each be free from any and all liability resultant from such
determination except as expressly set forth herein. Furthermore, Buyer shall not
be required to make, and Seller shall not be entitled to receive, the Sales
Milestone Payment if the Sales Milestone is achieved after the Contingent
Payment Termination Date.

 

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(h) Unilateral Right of Set-Off. Subject to the express limitations and
procedures set forth in Article 9 and Section 6.13 hereof, the obligation of
Buyer to make any Seller Contingent Payment shall be qualified by the right of
Buyer to reduce the amount of any one or more of (i) the FDA Milestone Payment
Amount, (ii) the Sales Milestone Payment Amount or (iii) the Sales/Profit
Contingent Payment Amount for any Contingent Payment Year, by the amount of any
Losses actually incurred or suffered, or more likely than not to be incurred or
suffered, by Buyer for which Buyer is entitled to indemnification pursuant to
Article 9, but, except for Claims based on fraud, in no event shall such Seller
Contingent Payments be reduced by, (A) with respect to indemnification pursuant
to Section 9.2(a)(i) (except in respect of the representations and warranties
made under Sections 4.3, 4.4, 4.14, 4.18 and 4.29), Section 9.2(a)(ii) (except
in respect of an Intentional Breach by Seller of the covenants or agreements
described in such Section), Section 9.2(a)(iii) (except in respect of an
Intentional Breach by Seller of the covenants or agreements described in such
Section), Section 9.2(a)(vii) and Section 9.2(a)(viii), more than an amount
equal to the sum of (x) *** of the sum of the Purchase Price and the FDA
Milestone Payment (to the extent actually paid by Buyer to Seller) and (y) ***
of the Seller Contingent Payments, other than the FDA Milestone Payment,
actually paid by Buyer to Seller hereunder, and (B) with respect to
indemnification pursuant to (1) Section 9.2(a)(i) with respect to the
representations and warranties made under Sections 4.3(a), 4.4, 4.18 and 4.29
and (2) Section 9.2(a)(v), more than an amount equal to *** of the sum of
(x) the Purchase Price and (y) the Seller Contingent Payments actually paid by
Buyer to Seller hereunder; provided, that (x) the right of Buyer to reduce any
Seller Contingent Payment pursuant to this Section 2.7(h) is subject to the
limitations, notice requirements and procedures set forth in Article 9,
including Sections 9.3 through 9.5; (y) with respect to Losses more likely than
not to be incurred or suffered with respect to any Third Party Claim, the amount
by which the Seller Contingent Payments are reduced shall not exceed the amount
stated in any notice provided by Buyer of such Claim in accordance with Article
9 (if such amount is reasonably available); and (z) in the event that Buyer is
entitled to indemnification pursuant to Article 9 and entitled to offset
hereunder, but its recovery is limited by clause (A) or (B) of this sentence,
Buyer shall be entitled to recover any unrecovered amount as to which Buyer is
entitled to indemnification pursuant to Article 9 and entitled to offset
hereunder from future Contingent Payments, subject to limitations set forth in
clauses (A) and (B) of this sentence. In the event that (A) Buyer sets off the
amount of any Seller Contingent Payment by the amount of any Losses that have
not been, at the time such Seller Contingent Payment is made, incurred by Buyer
or (B) Seller objects to a Claim as set forth in Section 9.4, and it is later
finally determined that the full amount of such Losses will not be incurred by
Buyer, or the applicable Buyer Indemnified Person is not entitled to
indemnification pursuant to Article 9 with respect to any portion of such
Losses, as the case may be, then, following such determination, Buyer shall pay
to Seller, promptly after such determination, the amount of the prior reduction
attributable to such Losses that will not be incurred by Buyer (or for which the
applicable Buyer Indemnified Person is not entitled to indemnification). Any
amounts paid to the Seller pursuant to the immediately preceding sentence shall
be (i) increased by simple interest on such amount calculated at the Interest
Rate to and including the date of payment based on a 365-day year, without
compounding, (ii) made by wire transfer of immediately available funds to an
account designated by Seller, and (iii) treated as an adjustment to the Purchase
Price for tax reporting purposes. Subject to Section 9.7, Buyer shall have no
right to set-off or reduce the amount of any Seller Contingent Payment otherwise
required to be paid pursuant to this Section 2.7 except as is expressly set
forth in this Section 2.7(h).

 

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(i) No Security. The Parties understand and agree that (a) the contingent rights
to receive any Seller Contingent Payment will not be represented by any form of
certificate, are not transferable, except by operation of Laws relating to
descent and distribution, divorce and community property, and do not constitute
an equity or ownership interest in Buyer, (b) Seller shall not have any rights
as a security holder of the Company or Buyer as a result of such Seller’s
contingent right to receive any Seller Contingent Payment hereunder and (c) no
interest is payable with respect to any Seller Contingent Payment.

(j) Seller Contingent Payments Not Royalties. The Seller Contingent Payments
provided for pursuant to this Article 2 are provided as a result of bona fide
difficulties in determining the present value of the Company. The Seller
Contingent Payments represent (and shall be reported by Buyer as) additional
consideration for the Shares and are not intended to be royalty payments. Buyer
agrees that the Seller Contingent Payments will be reported by Buyer as deferred
payments subject to installment sale treatment under Section 453 of the Code
(and will be reported by Buyer in part as payments of interest pursuant to
Section 483 or Section 1274 of the Code).

Section 2.8 Consent Requirement. If, after the Closing and prior to the
Contingent Payment Termination Date:

(a) Buyer (or a Subsidiary or Affiliate thereof) shall cease to own a majority
of the outstanding voting securities of the Company (or of any other Subsidiary
of Buyer that is engaged in developing, manufacturing, marketing or selling the
LipoSonix Product (a “Successor Subsidiary”)); or

(b) Buyer or any of its Subsidiaries, including the Company, shall, in one or a
series of transactions, sell, license or transfer to any Person all or
substantially all of the Intellectual Property used in developing,
manufacturing, marketing or selling the LipoSonix Product to any Person;

then, (i) Buyer, prior to entering into such transaction or transactions, shall
obtain Seller’s written consent, which shall not be unreasonably withheld, and
(ii) any Person acquiring a majority of the outstanding voting securities of the
Company or a Successor Subsidiary after the Closing in a transaction described
in Section 2.8(a) or acquiring all or substantially all of the Intellectual
Property used in developing, marketing or selling the LipoSonix Product in a
transaction described in Section 2.8(b), as the case may be (the “Acquiring
Person”), shall explicitly assume in writing the obligations of Buyer to make
the Seller Contingent Payments as set forth in this Agreement and shall agree in
writing to be bound by and to comply with the terms and conditions set forth in
this Agreement and the terms and conditions of Sections 2.6 and 2.7 of this
Agreement (including but not limited to the requirements set forth in
Section 2.6(g)). For purposes of this Section 2.8, Seller shall be deemed to
have unreasonably withheld its consent if with respect to the transaction or
transactions described in this Section 2.8, the Acquiring Person expressly
assumes the obligations as set forth in clause (ii) of this Section 2.8 and if
such Acquiring Person is a Qualified Acquiring Person. A “Qualified Acquiring
Person”

 

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means a Person (i) who (A) is directly engaged in any business that develops,
manufactures, sells, markets or distributes pharmaceutical, medical device or
any other healthcare products or devices, and (B) has earnings before interest,
taxes, depreciation and amortization (or EBITDA) of no less than $10,000,000 in
each of the two fiscal years immediately preceding the transaction or
transactions described in this Section 2.8 or (ii) that is an Affiliate of a
financial sponsor, private equity firm or similar organization, which Affiliate
(together with the Company or Successor Subsidiary), (A) immediately after the
closing of such acquisition, has a consolidated ratio of total debt to EBITDA
(as such term is defined in the Credit Agreement) for the 12-month period ended
the date of such transaction that is no greater than 4.0 to 1(4.0x), and
(B) has, on a pro forma basis, earnings before interest, taxes, depreciation and
amortization (or EBITDA) of no less than $10,000,000 in each of the two fiscal
years immediately preceding the transaction or transactions described in this
Section 2.8. Upon and following Seller’s written consent and the express
assumption and agreement by the Person referred to in this Section 2.8, Buyer
shall have no further obligation to make any further Seller Contingent Payments
pursuant to this Agreement. For the avoidance of doubt, this Section 2.8 shall
not apply to an acquisition of a majority of the outstanding voting securities
of Buyer or a change of control of Buyer that does not involve a separate
transfer of the assets or equity securities of the Company; it being understood
that, following any such transaction, this Section 2.8 shall continue to apply
to any future transactions described under clauses (a) or (b) above.

ARTICLE 3

CLOSING

Section 3.1 Closing. Upon the terms and subject to the conditions set forth in
this Agreement, the closing of the Contemplated Transactions (the “Closing”)
shall take place at the Washington, DC offices of Hogan Lovells US LLP at 10:00
a.m. (local time), as soon as practicable, provided, that if all of the
conditions set forth in Article 7 are not satisfied or waived on or before such
date (other than those conditions which by their nature are intended to be
fulfilled at the Closing), the Closing shall be held on the date which is five
(5) Business Days after the date on which all such conditions shall have been
satisfied or waived, or at such other time, date and place as the parties may
agree (the date on which the Closing shall occur pursuant to this Section 3.1 is
referred to herein as the “Closing Date”). The transfer of the Shares pursuant
to Section 2.1 shall be deemed to become effective as of 12:01 a.m. on the
Closing Date.

Section 3.2 Closing Deliveries. At the Closing:

(a) Buyer shall deliver to Seller evidence of the wire transfers referred to in
Section 2.3;

(b) Seller shall deliver to Buyer one or more stock certificates evidencing the
Shares being sold by Seller, which certificates shall be duly endorsed to Buyer
or accompanied by dully executed stock powers; and

 

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(c) each Party shall deliver the certificates and other documents and
instruments required to be delivered by or on behalf of such Party pursuant to
Article 7 and the other provisions of this Agreement, as applicable.

ARTICLE 4

REPRESENTATIONS AND

WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as follows (it being understood
that each representation and warranty contained in this Article 4 is subject to:
(a) the exceptions and disclosures set forth in the section or subsection of the
disclosure schedule delivered by Seller (the “Seller Disclosure Schedule”)
corresponding to the particular section or subsection in this Article 4 in which
such representation and warranty appears; (b) any exceptions or disclosures
explicitly cross-referenced in such section or subsection of the Seller
Disclosure Schedule by reference to another section or subsection of the Seller
Disclosure Schedule); and (c) any exceptions or disclosures set forth in any
other section of subsection of the Seller Disclosure Schedule to the extent it
would be clear to a reasonable person that the disclosure contained in such
section or subsection should qualify such non-referenced representation or
warranty without the necessity of repetitive disclosure or cross-reference):

Section 4.1 Organization and Qualification.

(a) Seller is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware. The Company is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Delaware and has all the requisite corporate power and authority
necessary to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. The Company is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
waivers, qualifications, certificates, Orders and approvals (collectively,
“Approvals”) necessary to own, lease and operate its assets and properties and
to carry on its business as it is now being conducted, except where the failure
to possess any such Approval would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. The
Company is duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction (including any applicable non-U.S.
jurisdiction) where the character of the assets or properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
does not have and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.

(b) The Company has no Subsidiaries and does not control, directly or
indirectly, or have any direct or indirect equity participation or similar
interest (or right convertible into any such interest) in any corporation,
partnership, limited liability company or other entity or business association.
The Company is not a participant in any joint venture or similar arrangement.

 

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Section 4.2 Charter and Bylaws. Seller has heretofore provided to Buyer true and
complete copies of the Charter and Bylaws, as modified, supplemented, amended or
restated. Such Charter and Bylaws are in full force and effect, and no other
organizational documents are applicable to or binding upon the Company.

Section 4.3 Shares; Indebtedness.

(a) The authorized capital stock of the Company consists of 100 shares of Common
Stock, 100 shares of which are issued and outstanding as of the date of this
Agreement and constitute the Shares. Seller is the sole beneficial and record
owner of the Shares free and clear of all Liens. Except for the Shares, there
are no other outstanding equity securities in the Company. Seller has, and shall
have at the Closing, good and valid title, free and clear of all Liens, to the
Shares, with full right and lawful authority to sell and transfer such Shares to
Buyer pursuant to this Agreement. Except as set forth in this Agreement, there
are no outstanding Contracts or other rights to subscribe for or purchase, or
Contracts or other obligations to issue, sell or grant any rights to acquire,
any Shares or other shares of capital stock of any class of the Company. All of
the Shares are duly authorized, validly issued and outstanding and are fully
paid, and were issued in all material respects in conformity with all applicable
state and federal securities laws. There are no preemptive or similar rights
(under Contract or otherwise) in respect of any of the Shares.

(b) As of the Closing, the Company will have no outstanding Indebtedness. As of
the Closing, except for liabilities or obligations set forth in (i) the
Unaudited Financial Statements or (ii) the Statement of Working Capital, the
Company will have no liabilities or obligations of any nature (whether known or
unknown, absolute or contingent, liquidated or unliquidated, due or to become
due, accrued, fixed or otherwise) that are related to any business or operation
of Seller (or a Subsidiary or Affiliate thereof, other than the business or
operations of the Company).

Section 4.4 Authority; Enforceability. Seller has all necessary corporate power
and authority to execute and deliver this Agreement and each other instrument
and document required to be executed and delivered by it at or prior to the
Closing, and to perform its obligations hereunder and thereunder and to
consummate the Contemplated Transactions. The execution and delivery by Seller
of this Agreement, the performance by Seller of its obligations hereunder and
thereunder, and the consummation by Seller of the Contemplated Transactions have
been approved by Seller’s Board of Directors, duly and validly authorized by all
necessary action and no other proceedings on the part of Seller are necessary to
authorize this Agreement or to perform Seller’s obligations hereunder or
thereunder or to consummate the Contemplated Transactions. This Agreement has
been duly and validly executed and delivered by Seller, or will be duly and
validly executed and delivered by Seller at or prior to Closing, and assuming
the due authorization, execution and delivery thereof by Buyer, constitutes a
legal, valid and binding obligation of Seller enforceable against it in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar Laws
relating to or affecting creditors’ rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

 

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Section 4.5 No Conflict; Required Filings and Consents.

(a) The execution and delivery by Seller of this Agreement and each other
instrument and document required by this Agreement to be executed and delivered
by Seller do not, and the performance of this Agreement and each other
instrument and document required by this Agreement to be executed and delivered
by Seller, shall not, (i) conflict with or violate the certificate of
incorporation or the bylaws of Seller or the Charter or the By-Laws,
(ii) subject to the filings and other matters referred to in Section 4.5(b),
conflict with or violate in any respect any Law or Order, in each case
applicable to Seller or the Company, or by which any of their respective
properties, rights or assets is bound or affected, or (iii) except as set forth
in Section 4.5(a) of the Seller Disclosure Schedule result in any material
breach or material violation of or constitute a material default (or an event
that with notice or lapse of time or both would become a material default)
under, or materially impair the Company’s rights or alter the rights or
obligations of any party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the termination of any
Material Contract or in the creation of a Lien on any of the properties, rights
or assets of the Company pursuant to any bond, indenture, Contract, permit,
franchise or other instrument or obligation to which the Company is a party or
by which the Company or its properties, rights or assets is bound or affected.

(b) The execution and delivery by Seller of this Agreement and each other
instrument and document required by this Agreement to be executed and delivered
by Seller at or prior to the Closing do not, and the performance of this
Agreement and any instrument required by this Agreement to be executed and
delivered by Seller at or prior to the Closing, shall not, require Seller or the
Company to obtain any Approval of any Person, observe any waiting period imposed
by, or make any filing with or notification to, any Governmental Authority,
except (i) for compliance with any applicable requirements of the pre-merger
notification requirements of the HSR Act, and any applicable Foreign Competition
Laws or (ii) as set forth in Section 4.5(b) of the Seller Disclosure Schedule.

Section 4.6 Material Contracts.

(a) Section 4.6(a) of the Seller Disclosure Schedule sets forth, as of the date
of this Agreement, a true and complete list, and if oral, an accurate and
complete summary, of all Contracts to which the Company is a party or by which
its properties, rights or assets are bound which are material to the Company or
the operation of its business as conducted or as planned by the Company to be
conducted as of the date hereof (collectively, “Material Contracts;” provided,
however, that the LipoSonix Agreement shall not be deemed a Material Contract),
including, without limitation, the following Contracts:

(i) employment Contracts, consulting Contracts or sales and distributor
Contracts with any employee, consultant, sales representative, distributor or
other agent of the Company (other than offer letters with employees providing
for “at will” employment with the Company with no obligation to pay severance),
and all severance, change in control or similar Contracts with any current or
former stockholder, director, officer, employee, consultant, sales
representative, distributor or other agent, or any member of their immediate
family or any Affiliate of the Company that would result in any obligation
(absolute or contingent) of the Company to make any payment to any current or
former stockholder,

 

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director, officer, employee, consultant, sales representative, distributor or
other agent, or any member of their immediate family or any Affiliate of the
Company following either the Contemplated Transactions, termination of
employment (or the relevant relationship), or both;

(ii) labor or collective bargaining Contracts (if any);

(iii) Contracts for pre-clinical or other testing, clinical or marketing trials
relating to the Company’s Products and Contracts with physicians, hospitals,
clinics or other healthcare providers, or other scientific or medical advisors;

(iv) any Contract reasonably likely to involve revenues, receipts, expenditures
or liabilities in excess of $30,000 per annum or $50,000 in the aggregate, which
is not cancelable by the Company (without penalty, cost or other liability) upon
thirty (30) days’ notice;

(v) promissory notes, credit agreements, loans, indentures, evidences of
Indebtedness or other instruments and Contracts relating to the borrowing or
lending of money, whether as borrower, lender or guarantor, in each case,
relating to Indebtedness or obligations in excess of $50,000;

(vi) any interest rate swaps, caps, floors or option Contracts or any other
interest rate risk management arrangement or foreign exchange Contracts;

(vii) Contracts containing any provision limiting in any respect the freedom of
the Company (or which after the Closing purport to limit or would limit the
freedom of Buyer or any of its Subsidiaries or Affiliates) to engage in any line
of business, to develop, market or distribute products or services, to compete
with any Person, to operate at any location in the world or to change sales
quotas or targets under any Contracts with distributors, sales representatives,
or other agents;

(viii) joint venture or partnership agreements or joint development,
distribution or similar Contracts pursuant to which any third party is entitled
or obligated to develop or distribute any products or provide any services on
behalf of the Company or pursuant to which the Company is entitled or obligated
to develop, manufacture, supply, process, produce or distribute any Products or
provide any services on behalf of any third party;

(ix) any Contract that is primarily a guarantee, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or Indebtedness
of any other Person (except for Contracts in the ordinary course of business or
standard agreements with end users and business partners);

(x) any currently effective Contract, or any Contract that has expired or been
terminated which has surviving provisions, providing for indemnification of any
Person with respect to liabilities relating to any current or former business of
the Company or any predecessor Person;

 

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(xi) any Contract with any Governmental Authority or with any labor union;

(xii) Contracts for the acquisition, directly or indirectly (by merger or
otherwise) of assets (whether tangible or intangible), including any capital
stock of another Person, for consideration in excess of $50,000;

(xiii) Contracts involving the issuance or repurchase of any capital stock or
other equity interest of the Company;

(xiv) performance or payment guarantees, keep well arrangements and other
similar credit support obligations or arrangements;

(xv) leases or subleases in respect of (A) any Real Property or (B) any material
rights, assets or property;

(xvi) Contracts under which (A) the Company has granted exclusive or
non-exclusive rights to Products or (B) another party processes, produces or
manufactures, or will process, produce or manufacture, Products;

(xvii) Contracts concerning Intellectual Property, including any agreements
described in Sections 4.16(h) and 4.16(k) of this Agreement;

(xviii) stockholders’ rights plan or agreement, “poison pill” or similar plan or
Contract;

(xix) any settlement agreement entered into within the last three (3) years;

(xx) Contracts with customers, suppliers and distributors involving amounts in
excess of $50,000; and

(xxi) Except for those Contracts that will be terminated prior to the Closing,
any Contract containing an obligation that is related to any business or
operation of Seller (or a Subsidiary or Affiliate thereof, other than the
Company) and unrelated to the business or operations of the Company.

(b) Seller has made available to Buyer true and complete copies of each Material
Contract, together with all amendments and supplements thereto, or, if no
written Contract exists, an accurate and complete description of such Material
Contract. Except as set forth in Section 4.6(b)-1 of the Seller Disclosure
Schedule, other than Material Contracts that have terminated or expired in
accordance with their terms, each Material Contract is in full force and effect,
is a valid and binding obligation of the Company and, to the Knowledge of
Seller, of each other party thereto and is enforceable against the Company and,
to the Knowledge of Seller, against each other party thereto, and such Material
Contracts will continue to be (i) valid, binding and enforceable against the
Company and, to the Knowledge of Seller, of each other party thereto, and
(ii) in full force and effect immediately following the Closing, with no
alteration or acceleration or increase in fees or liabilities, payments,
obligations or burdens. The

 

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Company is not alleged to be and, to the Knowledge of Seller, no other party is
or is alleged to be in, or has received notice of any, default under, or breach
or violation of, any Material Contract and, to the Knowledge of Seller, no event
has occurred which, with the giving of notice or passage of time or both, would
constitute such a default, breach or violation and Seller has no reasonable
basis for suspecting that any such default, breach or violation exists or will
be forthcoming. No break-up or other similar fee is due or owing by the Company
in connection with any prior negotiations, discussions or arrangements regarding
any transaction, similar to the Contemplated Transaction or otherwise, or other
Contract. Except as set forth in Section 4.6(b)-2 of the Seller Disclosure
Schedule, the Company is not currently involved, nor has it been involved since
December 31, 2010, in any dispute with any counterparty to any Material
Contract, and the Company has not received written or, to the Knowledge of
Seller, oral notice since December 31, 2010 from any such counterparty to the
effect that such counterparty intends to terminate or otherwise alter or modify
the terms of any such Material Contract.

(c) Section 4.6(c) of the Seller Disclosure Schedule sets forth any Material
Contract which, by its terms, will be modified or adjusted, will become
terminable by any other party thereto, or will require consent by or
notification to any other party thereto, in each case, as a result of the
execution of this Agreement or the consummation of the Contemplated
Transactions.

(d) The Company has no liability pursuant to any grant from the National
Institutes of Health, and no event has occurred which, with the giving of notice
or the passage of time or both, would cause any liability to Buyer or any of its
Affiliates with respect to any such grant, and the Company has no reasonable
basis for suspecting that any such liability exists or will be forthcoming
(whether as a result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby).

Section 4.7 Compliance.

(a) The Company is in compliance with, and is not in default or violation of
(i) its Charter or Bylaws, (ii) any Law or Order by which the Company or its
properties, rights or assets are bound or affected, and (iii) the terms of all
bonds, indentures, Contracts, permits, franchises and other instruments or
obligations to which the Company or by which the Company or its properties,
rights or assets are bound or affected, except in the case of clauses (ii)
and (iii) for immaterial noncompliance, defaults or violations. The Company is
in material compliance with the terms of all applicable Approvals.

(b) The Company (i) is not, to the Knowledge of Seller, under investigation by
any Governmental Authority with respect to any violation of any Approval or any
Law or Order and (ii) has not been charged with, has not received notice of, or
to the Knowledge of Seller, has not been threatened to be charged with, any
revocation, withdrawal, suspension, cancellation, termination or modification of
any Approval or any Law or Order applicable to the Company.

(c) Section 4.7(c) of the Seller Disclosure Schedule sets forth a complete and
accurate list of all material permits issued to or held by the Company. Such
listed permits are the only material permits that are required for the Company
to conduct its business as presently

 

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conducted. Each such permit is in full force and effect; the Company is in
material compliance with the terms of each such permit; and, to the Knowledge of
Seller, no suspension or cancellation or material modification of such permit is
threatened.

Section 4.8 Absence of Certain Changes or Events.

(a) During the period from December 31, 2010 to the date hereof, the Company has
conducted its business only in the ordinary course of business consistent with
past practice, and, since December 31, 2010, there has not been any change,
development, circumstance, condition, event, occurrence, damage, destruction or
loss that has had or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.

(b) Except as described in Section 4.8(b) of the Seller Disclosure Schedule,
during the period from December 31, 2010 to the date hereof:

(i) there has not been (A) any change by the Company in its accounting or cash
management methods, principles or practices (including with respect to reserves,
revenue recognition, timing for payments of accounts payable, collections of
accounts receivable and depreciation or amortization policies or rates) or
(B) any revaluation by the Company of any of its assets, including writing down
the value of inventory or writing off notes or accounts receivable;

(ii) the Company has not amended or otherwise modified its Charter or Bylaws, or
altered through merger, liquidation, reorganization, restructuring or in any
other fashion the structure or ownership of the Company;

(iii) the Company has not declared, set aside or paid any dividend or other
distribution (whether in cash, stock (or similar equity interest) or property or
any combination thereof) in respect of any of its capital stock; or amended the
terms of, repurchased, redeemed or otherwise acquired any of its securities;

(iv) the Company has not sold, transferred, delivered, leased, subleased,
licensed, sublicensed, mortgaged, pledged, encumbered, impaired or otherwise
disposed of (in whole or in part), or created, incurred, assumed or caused to be
subjected to any Lien on, any of the rights, assets or properties of the Company
(including any Intellectual Property or accounts receivable), except for the
sale of inventory and disposal of obsolete assets in the ordinary course of
business consistent with past practice;

(v) the Company has not acquired any rights, assets or properties other than in
the ordinary course of business consistent with past practice;

(vi) there has not been any damage, destruction or loss (whether or not covered
by insurance) with respect to any material rights, assets or properties of the
Company;

(vii) the Company has not (A) incurred or modified any Indebtedness or issued
any debt securities or any warrants or rights to acquire any debt security,
(B) assumed, guaranteed or endorsed or otherwise become responsible for, the
obligations of any Person,

 

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(C) entered into any off-balance sheet financing arrangement or any accounts
receivable or payable financing arrangement, or (D) made any loans or advances
(except for advances of reasonable business expenses in the ordinary course of
business consistent with past practice);

(viii) the Company has not authorized or made any capital expenditures outside
of the ordinary course of business consistent with past practice and in excess
of $50,000;

(ix) there has not been any (A) increase in, acceleration of or provision for
compensation, benefits (fringe or otherwise) or other rights to any employee,
contractor or subcontractor of the Company except in the ordinary course of
business consistent with past practice, (B) grant, agreement to grant, or
amendment or modification of any grant or agreement to grant, any severance,
bonus, termination, retention or similar payment to any employee, contractor or
subcontractor of the Company except in the ordinary course of business
consistent with past practice, (C) loan or advance of money or other property by
the Company to any of its employees, contractors or subcontractors (except for
advances of business expenses in the ordinary course of business consistent with
past practice), or (D) establishment, adoption, entrance into, amendment or
termination of any Employee Plan (except as otherwise required by applicable
Law), collective bargaining agreement or other labor agreement;

(x) there has not been any termination, lay off, or resignation of any executive
or management employee or key employee at the Company, or any hiring to fill any
executive or management position or key employee position at the Company; and to
the Knowledge of Seller, there is no impending resignation or termination of
employment of any such executive or management employee or key employee;

(xi) there has not been any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to such
employees;

(xii) the Company has not (A) made or changed any Tax election or changed any
method of Tax accounting, (B) settled or compromised any federal, state, local
or foreign Tax liability, (C) filed any amended Tax Return, (D) entered into any
closing agreement relating to any Tax, (E) agreed to an extension of a statute
of limitations, or (F) surrendered any right to claim a Tax refund; and

(xiii) there has not been any other event or condition of any character that,
either individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect on the Company.

Section 4.9 Liabilities. The Company does not have any liabilities or
obligations of any nature (whether known or unknown, absolute or contingent,
liquidated or unliquidated, due or to become due, accrued, fixed or otherwise),
and there is no existing fact, condition or circumstance which could reasonably
be expected to result in such liabilities or obligations, except liabilities or
obligations (a) disclosed in the unaudited listing of assets and liabilities of
the Company as of June 30, 2011, (b) not required to be disclosed under GAAP or
(c) incurred since June 30, 2011 in the ordinary course of business consistent
with past practice (excluding any incurrence of Indebtedness), except as
described in Section 4.9 of the Company Disclosure Schedule.

 

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Section 4.10 Absence of Litigation. Except as described in Section 4.10 of the
Seller Disclosure Schedule, since the “Effective Time” (as defined in the
LipoSonix Agreement), there have been no (a) Claims pending on behalf of or
against or, to the Knowledge of Seller, Claims threatened on behalf of or
against the Company (or Seller or its Affiliates with respect to the Company) or
its properties, rights or assets (including cease and desist letters or requests
for a license), (b) Order outstanding to which the Company or its properties,
rights or assets is subject, (c) Claim which questions or challenges (i) the
validity of this Agreement or (ii) any action taken or to be taken by the
Company pursuant to this Agreement or in connection with the Contemplated
Transactions. No director, officer, employee, consultant or agent of the Company
has asserted a Claim or demand for payment or has a basis for a Claim or demand
for payment against the Company in respect of the period prior to and including
the Closing (other than accrued and unpaid compensation earned in the ordinary
course of business).

Section 4.11 Employee Benefit Plans.

(a) As of the date of this Agreement, Section 4.11(a) of the Seller Disclosure
Schedule lists and, in the case of employee benefit plans not reduced to
writing, describes all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)),
including, without limitation, multiemployer plans within the meaning of
Section 3(37) of ERISA, and all incentive and compensation plans, including
without limitation all cash (including without limitation bonus) and equity
(including without limitation stock option, restricted stock, stock purchase,
stock appreciation rights), incentive, deferred compensation, retirement or
supplemental retirement, severance, golden parachute, vacation, cafeteria,
dependent care, medical care, employee assistance program, education or tuition
assistance programs, insurance and other similar fringe or employee benefit
plans, programs or arrangements, whether written or oral, and any employment or
executive compensation or severance Contracts, written or otherwise, for the
benefit of, or relating to, any present or former employee, director or
independent contractor of the Company, (i) which is or has been entered into,
contributed to, established by, participated in and/or maintained by the Company
or any trade or business (whether or not incorporated) which is a member of a
controlled group or which is under common control with the Company (an “ERISA
Affiliate”) within the meaning of Section 414 of the Code, or (ii) under which
the Company or ERISA Affiliate has any liability whether or not such plan is
terminated (together, the “Employee Plans”). Seller has provided to Buyer
correct and complete copies of (where applicable) (i) summary plan descriptions
related to each Employee Plan, (ii) the most recent determination letters or
opinion letters received from the IRS for each Employee Plan, (iii) the three
most recent IRS Forms 5500 Annual Report for each Employee Plan, (iv) the most
recent audited financial statement and actuarial valuation report for each
Employee Plan, (v) the most recent discrimination testing results for each
Employee Plan and (vi) all correspondence with, rulings by or opinions by the
United States Internal Revenue Service (the “IRS”) or the U.S. Department of
Labor for each Employee Plan. No Employee Plans are maintained, sponsored, or
contributed to by the Company and the Company does not have, and following the
Closing will not have, any liability with respect to any Employee Plans, except
as set forth in (i) the Unaudited Financial Statements or (ii) the Statement of
Working Capital.

 

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(b) (i) There has been no “prohibited transaction,” as such term is defined in
Section 406 of ERISA and Section 4975 of the Code, with respect to any Employee
Plan (and which is not otherwise exempt); (ii) there has been no breach of
fiduciary obligations imposed under Title I of ERISA with respect to any
Employee Plan; (iii) there are no Claims pending (other than routine claims for
benefits) or, to the Knowledge of Seller, threatened against any Employee Plan
or against the assets of any Employee Plan; (iv) all Employee Plans conform to,
and in their operation and administration are in all material respects in
compliance with, the terms thereof and requirements prescribed by any and all
statutes (including ERISA and the Code), Orders and governmental Regulations
currently in effect with respect thereto and any other applicable Laws; (v) the
Company and ERISA Affiliates have performed in all material respects all
obligations required to be performed by them under each Employee Plan and are
not in default under or in violation of, and Seller Company has no Knowledge of
any default or violation by any other Person with respect to, any of the
Employee Plans; and (vi) each Employee Plan intended to qualify under
Section 401(a) of the Code is so qualified (and each corresponding trust is
exempt under Section 501 of the Code), and has received or is the subject of a
favorable determination or opinion letter from the IRS, and nothing has occurred
which may reasonably be expected to cause the loss of such qualification (or
exemption).

(c) No Employee Plan is an “employee pension benefit plan” (within the meaning
of Section 3(2) of ERISA) subject to Title IV of ERISA or a “multiemployer plan”
(within the meaning of Section 3(37) of ERISA), and neither the Company nor any
ERISA Affiliate has or has ever had an obligation to contribute, or incurred any
liability in respect of a contribution, to any such employee pension benefit
plan or multiemployer plan.

(d) No Employee Plan is (i) a “voluntary employees’ beneficiary association”
(within the meaning of Section 501(c)(9) of the Code), (ii) an “employee stock
ownership plan” (within the meaning of Section 4975(e)(7) of the Code) or
otherwise invests in “employer securities” (within the meaning of Section 409(l)
of the Code), (iii) a “multiple employer plan,” as described in Code
Section 413(c) or Sections 4063 or 4064 of ERISA, or (iv) a “multiple employer
welfare arrangement” as defined in Section 3(40)(A) of ERISA (a “MEWA”). If any
Employee Plan is a MEWA, the benefits thereunder are fully insured.

(e) Each Employee Plan that is a “group health plan” (within the meaning of Code
Section 5000(b)(1)) has been operated in compliance in all material respects
with the group health plan continuation coverage requirements of Section 4980B
of the Code and Sections 601 through 608 of ERISA (“COBRA Coverage”),
Section 4980D of the Code and Sections 701 through 713 of ERISA, Title XXII of
the Public Health Service Act and the provisions of the Social Security Act, as
amended, to the extent such requirements are applicable. No Employee Plan or
other written or oral agreement exists which obligates the Company to provide
health care coverage or medical, surgical, hospitalization, death or similar
benefits (whether or not insured) to any current or former employee, director or
consultant of the Company following such current or former employee’s,
director’s or consultant’s termination of employment, service or consultancy
with the Company, other than COBRA Coverage or similar state law coverage.

(f) Except as set forth in Section 4.11(f) of the Seller Disclosure Schedule, no
Employee Plan exists that, as a result of the execution and delivery of this
Agreement or the Contemplated Transactions (whether alone or in connection with
any subsequent event(s)), could

 

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result in (i) severance pay or any increase in severance pay upon any
termination of employment after the date of this Agreement, (ii) accelerating
the time of payment or vesting or result in any payment or funding (through a
grantor trust or otherwise) of compensation or benefits under, increase the
amount payable or result in any other material obligation pursuant to, any of
the Employee Plans or (iii) any breach or violation of, or default under, any of
the Employee Plans. The Company has not made any payments, is not obligated to
make any payments, and is not a party to any agreements that as a result of the
Contemplated Transactions (whether alone or in connection with any subsequent
event(s) could obligate it to make any payments, that will not be deductible
under Section 280G of the Code.

(g) All contributions and payments with respect to each Employee Plan that are
required to be made by the Company with respect to periods ending on or prior to
the Closing Date have been, or will be, made or accrued before the Closing Date
in accordance with the terms of the applicable Employee Plan.

Section 4.12 Employment and Labor Matters.

(a) As of the date of this Agreement, Section 4.12(a) of the Seller Disclosure
Schedule identifies (i) all current directors and officers of the Company and
(ii) all current employees, consultants and agents (including sales
representatives and distributors) employed or engaged by the Company and, for
each individual identified in clauses (i) or (ii), sets forth each such
individual’s rate of pay or annual compensation, job title and date of hire. As
of the date of this Agreement, except as set forth in Section 4.12(a) of the
Seller Disclosure Schedule, there are no employment, consulting, commission,
incentive or bonus pay, severance pay, retention or continuation pay,
termination or indemnification agreements or other similar Contracts of any
nature (whether in writing or not) between the Company and any current or former
stockholder, officer, director, employee, consultant, labor organization or
other representative of the Company’s employees providing for payments in an
aggregate amount of $50,000 or greater, nor is any such Contract presently being
negotiated. There are no collective bargaining agreements or other similar
Contracts (whether in writing or not) between the Company and any current or
former officer, employee, labor organization or other representative of the
Company’s employees, nor is any such Contract presently being negotiated. Seller
has provided to Buyer complete and correct copies of all such agreements and
Contracts. The Company has not failed to make or is not otherwise delinquent in
payments to any of its employees or consultants for any wages, salaries,
overtime pay, commissions, bonuses, benefits or other compensation for any
services or otherwise arising under any policy, practice, Contract, plan,
program or Law. Except as set forth in Section 4.12(a) of the Seller Disclosure
Schedule, none of the Company’s employment policies or practices is currently
being audited or investigated by any Governmental Authority or Court. Except as
set forth in Section 4.12(a) of the Seller Disclosure Schedule, there is no
pending or, to the Knowledge of Seller, threatened Claim, unfair labor practice
charge, or other charge or inquiry against the Company brought by or on behalf
of any employee, prospective employee, former employee, retiree, labor
organization or other representative of the employee, or other individual or any
Governmental Authority with respect to employment practices brought by or before
any Court or Governmental Authority.

(b) Except as set forth in Section 4.12(b) of the Seller Disclosure Schedule,
(i) there are no controversies pending or, to the Knowledge of Seller,
threatened, between the

 

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Company, on the one hand, and its employees or consultants, on the other hand;
(ii) the Company is not a party to any collective bargaining agreement or other
labor union Contract applicable to Persons employed by the Company nor are there
any activities or proceedings of any labor union to organize any such employees
of the Company; (iii) since December 31, 2009, there have been no strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Company; and (iv) there are no employment-related
grievances pending or, to the Knowledge of Seller, threatened. Except as set
forth in Section 4.12(b)-1 of the Seller Disclosure Schedule, the Company is not
a party to, or otherwise bound by, any consent decree with, or citation or other
Order by, any Governmental Authority relating to employees or employment
practices. The Company is in compliance in all material respects with all
applicable Laws, Contracts and policies relating to employment, employment
practices, wages, hours and terms and conditions of employment, including the
obligations of the Worker Adjustment and Retraining Notification Act of 1988, as
amended (the “WARN Act”), and similar Laws, and all other notification and
bargaining obligations arising under any collective bargaining agreement, by Law
or otherwise. The Company has not effectuated a “plant closing” or “mass layoff”
as those terms are defined in the WARN Act and similar Laws, affecting in whole
or in part any site of employment, facility, operating unit or employee of the
Company, without complying with all provisions of the WARN Act or implemented
any early retirement, separation or window program within the past two
(2) years, nor has the Company planned or announced any such action or program
for the future.

Section 4.13 Title to Assets; Leases; Sufficiency of Assets.

(a) The Company has good and marketable title to all of its real or personal
properties (whether owned or leased), rights and assets, free and clear of all
Liens. The Company does not currently own nor has ever owned any real property
or interest therein, nor has received any notice of any Lien with respect to any
of its leasehold interests.

(b) Section 4.13(b) of the Seller Disclosure Schedule contains a complete and
accurate list of all leases of real property to which the Company is a party or
by which it holds a leasehold interest or is otherwise obligated (collectively,
“Real Property”). Seller has provided to Buyer complete and accurate copies of
all such leases for Real Property. Each Real Property lease to which the Company
is a party is legal, valid, binding and in full force and effect in accordance
with its terms, and all rents and additional rents due to date from the Company
on each such lease have been paid. As of the date of this Agreement, the Company
has not received written notice that it is in material default under any Real
Property lease to which the Company is a party, and there exists no material
default by the Company, or to the Knowledge of Seller, by any other party under
any such lease. Except as set forth in Section 4.13(b) of the Seller Disclosure
Schedule, there are no leases, subleases, licenses, concessions or any other
Contracts to which the Company is a party granting to any Person other than the
Company any right to possession, use occupancy or enjoyment of any of the Real
Property or any portion thereof and the Company is not obligated under or bound
by any option, right of first refusal, purchase Contract, or other Contract to
sell or otherwise dispose of any Real Property or any other interest in any Real
Property.

 

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(c) Section 4.13(c) of the Seller Disclosure Schedule contains a complete and
accurate list of all leases of all property (other than Real Property) to which
the Company is a party or by which it holds a leasehold interest.

(d) Except as set forth in Section 4.13(d) of the Seller Disclosure Schedule,
the tangible assets of the Company constitute all of the properties, assets,
rights and facilities owned, used, held for use, intended for use, leased or
licensed by the Company, Seller or its Affiliates in the operation of the
business of the Company. To the Knowledge of Seller, the tangible assets of the
Company constitute all of the properties, assets, rights and facilities
necessary and sufficient to enable the Company, immediately following the
Closing, to continue to conduct the business of the Company in the same manner
as currently conducted.

Section 4.14 Taxes. For purposes of this Agreement, “Tax” or “Taxes” shall mean
taxes, duties, fees, premiums, assessments, imposts, levies and governmental
impositions of any kind, payable to any federal, state, local or foreign
Governmental Authority, including, but not limited to, those on or measured by
or referred to as income, franchise, profits, gross receipts, goods and
services, capital, ad valorem, advance, corporation, custom duties, alternative
or add-on minimum taxes, estimated, environmental, disability, registration,
value added, sales, use, service, real or personal property, capital stock,
license, payroll, withholding, employment, social security, workers’
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes, and
interest, penalties and additions to tax imposed with respect thereto; and “Tax
Returns” shall mean returns, reports, forms and information statements,
including any schedule or attachment thereto, with respect to Taxes required to
be filed with the IRS or any other Governmental Authority or taxing authority or
agency, domestic, state, local or foreign, including consolidated, combined and
unitary tax returns. Except as set forth in Section 4.14 of the Seller
Disclosure Schedule:

(a) All Tax Returns required to be filed by or on behalf of the Company have
been timely filed, and all such Tax Returns are true, complete and correct in
all material respects.

(b) All Taxes shown as due on such Tax Returns and payable by or with respect to
the Company and all other material Taxes payable by or with respect to the
Company have been timely paid. All assessments for Taxes due and owing by or
with respect to the Company with respect to completed and settled examinations
or concluded litigation have been paid. The Company has not incurred a Tax
liability since December 31, 2010 other than a Tax liability in the ordinary
course of business consistent with past practice. There are no Tax Liens on any
assets, properties or rights of the Company except Liens for current Taxes not
yet due and payable.

(c) No Claim or, to the Knowledge of Seller, audit has commenced and no notice
has been given that such audit or other proceeding is pending or threatened with
respect to the Company or any group of entities of which the Company is or has
been a member in respect of any Taxes (an “Affiliated Group”). No Tax deficiency
or claim for additional Taxes has been asserted or, to the Knowledge of Seller,
threatened to be asserted against the Company or any Affiliated Group by any
Taxing authority. No Claim has ever been made by a Taxing authority in any
jurisdiction in which the Company does not file Tax Returns that the Company is
or may be subject to taxation by that jurisdiction.

 

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(d) The Company has not requested or been granted any waiver of any federal,
state, local or foreign statute of limitations with respect to, or any extension
of a period for the assessment of, any Tax. No extension or waiver of time
within which to file any Tax Return of, or applicable to, the Company has been
granted or requested which has not since expired.

(e) The Company is not and, to the Knowledge of Seller, has never been (nor does
the Company have any liability for unpaid Taxes because it once was) a member of
an affiliated, consolidated, combined or unitary group. The Company is not a
party to any Tax allocation, Tax indemnity or Tax sharing agreement nor is the
Company liable for the Taxes of any other person under Treasury Regulations
§1.1502-6 (or any similar provision of state, local or foreign law), as
transferee or successor, by Contract, or otherwise. The Company is not and, to
the Knowledge of Seller, has never been a partner in a partnership or a
participant in an arrangement or the owner of an entity that is or may be
treated as a partnership for federal income Tax purposes.

(f) The Company has complied with all applicable Laws relating to the payment
and withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to Sections 1441, 1442 and 3406 of the Code or similar provisions under
any foreign Laws) and has, within the time and in the manner required by Law,
withheld from payments to employees, independent contractors and other persons
and paid over to the proper Governmental Authorities all amounts required to be
so withheld and paid over under all applicable Laws.

(g) The Company will not be required to include any item of income in, or
exclude any item of deduction from, taxable income for any taxable period or
portion thereof ending after the Closing Date as a result of any (i) change in
the method of accounting for a taxable period or portion thereof ending on or
prior to the Closing Date, (ii) prepaid amount received on or prior to the
Closing Date or (iii) intercompany transaction completed on or prior to the
Closing Date.

(h) The Company has collected all sales, use and value added Taxes required to
be collected, and has remitted on a timely basis to the appropriate taxing
authorities all sales, use and value added Taxes required to be paid, or has
been furnished properly completed exemption certificates.

(i) No closing agreement pursuant to Section 7121 of the Code (or any similar
provision of state, local or foreign Law) has been entered into by or with
respect to the Company.

(j) No power of attorney has been executed with respect to any matter relating
to Taxes of the Company, which is currently in force.

(k) The Company has not been a party to any distribution occurring during the
last two years in which the parties to such distribution treated the
distribution as one to which Section 355 or Section 361 of the Code is
applicable; nor has the Company been a party to any distribution that could
constitute part of a “plan” or “series of related transactions” (within the
meaning of Section 355(e) of the Code) in conjunction with the transactions
contemplated by this Agreement.

 

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(l) The Company has not entered into any transactions that are part of any
“reportable transaction” under Sections 6011, 6111 or 6112 of the Code (or any
similar provision under any state or local Law).

(m) The Company has not participated in or cooperated with an international
boycott, within the meaning of Section 999 of the Code, nor has the Company had
operations that are or may hereafter become reportable under Section 999 of the
Code.

(n) The Company has complied in all material respects with tax-related
requirements that the arm’s-length nature of the terms of any transactions
between and among the Company, Seller or Affiliates be documented.

(o) The Company is not a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code and has not been a United States
real property holding corporation at any time during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.

(p) The Company does not have any deferred compensation plan or arrangement that
is described in Section 409A(a)(1)(A)(i) of the Code.

Section 4.15 Environmental Matters.

(a) The Company is in compliance in all material respects with all applicable
Environmental Laws.

(b) The Company has been duly issued and maintains all Environmental Permits
necessary to operate the Company as currently operated and a complete list of
all such Environmental Permits, all of which are valid and in full force and
effect, is set forth in Section 4.15(b) of the Seller Disclosure Schedule.

(c) The Company does not have any material liability, known or unknown,
contingent or absolute, under any Environmental Law, and the Company is not
responsible for any such liability of any other person under any Environmental
Law, whether by contract, by operation of law or otherwise. There are no
pending, or to the Knowledge of Seller, threatened, Environmental Claims.

(d) The Company does not currently own, lease or operate, use or install, and
has not formerly owned, leased or operated, used or installed, and, to Seller’s
Knowledge, the Real Property does not contain: (i) underground improvements,
including but not limited to treatment or storage tanks, used currently or in
the past for the management of Hazardous Materials; (ii) a dump or landfill;
(iii) filled in lands or wetlands; or (iv) PCBs, mold, lead-based paint, toxic
mold, or asbestos-containing materials. The Company has not caused a Release of
Hazardous Materials, and to Seller’s Knowledge, there has been no Release of
Hazardous Materials, in each case at, on, under, or from the Real Property or
any other property currently or formerly owned, leased or operated by the
Company, such that the Company is or could be liable for Remediation with
respect to such Hazardous Materials.

 

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(e) The Company has not arranged, by Contract or otherwise, for the
transportation, disposal or treatment of Hazardous Materials at any location
such that it is or would be liable for Remediation of such location pursuant to
Environmental Laws.

(f) To the Knowledge of Seller, no Lien in favor of any Person relating to or in
connection with any Environmental Claim has been filed or has attached to the
Real Property. No authorization, notification, recording, filing, consent,
waiting period, Remediation, or approval is required under any Environmental Law
in order to consummate the Contemplated Transactions.

Section 4.16 Intellectual Property.

(a) Section 4.16(a) of the Seller Disclosure Schedule lists all: (i) patents,
provisional and non-provisional patent applications, registered trademarks,
trade names, and service marks, registered copyrights and domain names owned by
or licensed to the Company (“Scheduled Company Intellectual Property”),
including where applicable the jurisdictions, both domestic and foreign, in
which each such item of Intellectual Property has been issued or registered or
in which any application for such issuance and registration has been filed;
(ii) written licenses, sublicenses and other agreements to which the Company is
a party and pursuant to which any Person is authorized to use any Scheduled
Company Intellectual Property and any other Intellectual Property owned by the
Company; (iii) written licenses, sublicenses, and other agreements to which the
Company is a party (other than licenses related to commercial off-the-shelf
software programs) and pursuant to which the Company is authorized to use any
Intellectual Property of any third party, including patents, patent
applications, Trade Secrets, trademarks, and copyrights (“Third Party
Intellectual Property Rights”) which are incorporated in, are, or form a part
of, or cover any Product or the second generation of LipoSonix Product, part
number P005700-01 or which are material to the Company’s operations, including
any fully-paid, royalty-free, worldwide, irrevocable, perpetual,
nonexclusive licenses in and to the Intellectual Property of any Person pursuant
to consulting agreements between the Company and such Person (all of which
consulting agreements are separately identified on Section 4.16(a)(iii) of the
Seller Disclosure Schedule as “License Consulting Agreements”); and (iv) all
agreements to which the Company is a party that provide for an optional or
contingent license, sublicense, or other agreement as described in clauses
(ii) or (iii) above in this paragraph. All ownership interests or encumbrances
held by any third parties in the Scheduled Company Intellectual Property
(including, but not limited to licenses, Liens, or security interests) are noted
in Section 4.16(a)-2 of the Seller Disclosure Schedule. All (x) Scheduled
Company Intellectual Property and (y) Trade Secrets that are used in and
material to the business, Products and the second generation of LipoSonix
Product, part number P005700-01 of the Company (the “Material Company Trade
Secrets”), are, except where otherwise noted in Section 4.16(a)-3 of the Seller
Disclosure Schedule, valid, enforceable, have been duly maintained, are in full
force and effect, and have not been cancelled, expired, withdrawn, lapsed,
invalidated, or abandoned. The Company is not obligated to, and Buyer shall not
be obligated as a result of the consummation of the transactions contemplated
herein to, pay any royalties and/or fees to any third party under any patent,
trademark, copyright, or other Intellectual Property license, other than as set
forth in Section 4.16(a) of the Seller Disclosure Schedule.

 

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(b) The Company has taken all action necessary in its reasonable discretion to
obtain and/or maintain the enforceability and registration of all Scheduled
Company Intellectual Property.

(c) Except as set forth in Section 4.16(c) of the Seller Disclosure Schedule,
the Company has not sent to any third party or otherwise communicated to another
Person since the “Effective Time” (as defined in the LipoSonix Agreement), any
charge, complaint, Claim, demand or notice asserting that such Person has
infringed, misappropriated, or acted in conflict with any of the Scheduled
Company Intellectual Property or any other Intellectual Property owned by the
Company or that any charge, complaint, Claim, demand, or notice asserting any
such other Person has conducted any acts of unfair competition against the
Company, nor, to the Knowledge of Seller, is any such infringement,
misappropriation, conflict or act of unfair competition occurring or threatened.

(d) Except as set forth in Section 4.16(d) of the Seller Disclosure Schedule,
since the “Effective Time” (as defined in the LipoSonix Agreement), neither
Seller or the Company has received and Seller does not have Knowledge of any
allegations, assertions, or suggestions of any charge, complaint, Claim, demand
or notice that the Company has infringed, misappropriated, or acted in conflict
with any Intellectual Property owned by any third party, that the Company has
conducted any acts of unfair competition or other legal wrong against any third
party and to its Knowledge there is no basis for any such allegations,
assertions, or suggestions of any charge, complaint, Claim, demand or notice.
Except as set forth in Section 4.16(d) of the Seller Disclosure Schedule,
neither Seller or the Company has received and Seller does not have Knowledge of
any notice (i) that the Scheduled Company Intellectual Property and the Material
Company Trade Secrets are invalid, unenforceable or otherwise defective,
inoperable, unregisterable, or unpatentable, except for communications from
patent offices received in the normal course of patent prosecution or (ii) that
the Company needs a license under any patents, trademarks, copyrights or other
Intellectual Property of any third party. Neither Seller or the Company has
received any offer to take a license for any patents, trademarks, copyrights, or
other Intellectual Property of any third party to carry on its business as it is
now being conducted or contemplated to be conducted including the development,
manufacture, sale and other commercialization of Products or the second
generation of LipoSonix Product, part number P005700-01.

(e) Except as set forth in Section 4.16(e) of the Seller Disclosure Schedule, to
the Knowledge of Seller, there is no unauthorized use, disclosure, infringement
or misappropriation of any rights of the Company in the Scheduled Company
Intellectual Property and the rights of the Company in any other Intellectual
Property, or any Third Party Intellectual Property Rights licensed to the
Company, by any third party, including any employee or former employee of the
Company, and, except as set forth in Section 4.16(e) of the Seller Disclosure
Schedule, there are no royalties, fees, or other payments or compensation
payable to the Company by any third party by reason of the Company’s ownership,
use, sale, or disposition of Intellectual Property.

 

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(f) Except as set forth in Section 4.16(f) of the Seller Disclosure Schedule,
the Company is not nor will the Company be, as a result of the execution and
delivery of this Agreement, or the performance of its obligations hereunder, in
breach of any license, sublicense, or Material Contract involving Intellectual
Property, or violate any Third Party Intellectual Property Rights thereby.

(g) Any Product currently being manufactured in the United States for export to
any other jurisdiction foreign to the United States, including Europe, any
Product currently being developed by the Company for sale in the United States,
including the second generation of LipoSonix Product, part number P005700-01,
and the business of the Company as presently conducted in the United States and
in any jurisdiction foreign to the United States, including Europe, do not
interfere with, conflict with, infringe upon, misappropriate, or otherwise
violate any Intellectual Property of any third party. No action or Claim is
pending or, to the Knowledge of Seller, threatened alleging that the Product,
the second generation of LipoSonix Product, part number P005700-01 or the
operation of such business interferes with, conflicts with, infringes upon,
misappropriates, or otherwise violates the Intellectual Property rights of any
third party and, to the Knowledge of Seller, there is no basis therefor.

(h) Each current and former officer, employee, and consultant of the Company has
executed and provided to the Company an agreement sufficient to ensure that the
Company becomes, will become or may elect to become the owner or assignee of any
Intellectual Property such current or former officer, employee, or consultant of
the Company creates within the scope of his or her employment, or, in the case
of a non-employee, from the services such current or former officer, employee,
or consultant of the Company, performs for the Company, unless or except to the
extent that the Company is entitled to become or elects to become the owner or
assignee of such Intellectual Property by operation of Law.

(i) Except as set forth in Section 4.16(i) of the Seller Disclosure Schedule, no
former stockholder, equityholder, partner, director, officer or employee of the
Company (or any predecessor in interest) has or will have, after giving effect
to the transactions contemplated by this Agreement, any legal or equitable
right, title, or interest in or to, or any right to use, directly or indirectly,
in whole or in part, any Scheduled Company Intellectual Property and any other
Intellectual Property of the Company.

(j) The Intellectual Property that is used by the Company in the conduct of its
business was either: (i) developed by employees of the Company within the scope
of their employment; (ii) developed on behalf of the Company by a third party,
and all ownership rights therein have been assigned or otherwise transferred to
or vested in the Company pursuant to written agreements; or (iii) licensed or
acquired from a third party pursuant to a written license, assignment, or other
contract that is in full force and effect and under which the Company is not in
material breach.

(k) The Company has entered into written confidentiality agreements with all
employees and third parties to whom the Company has disclosed material
Company-owned confidential Intellectual Property.

 

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(l) The Company has taken reasonable measures to protect the confidentiality of
its Trade Secrets, including requiring its former and current officers,
employees, consultants, and all other Persons having access thereto to execute
written non-disclosure agreements. No Material Company Trade Secret has been
disclosed or authorized to be disclosed to any third party other than pursuant
to a written non-disclosure agreement that adequately protects the Company’s
proprietary interests in and to such Trade Secrets. To the Knowledge of Seller,
no party to any non-disclosure agreement with the Company is in breach or
default thereof.

(m) To the Knowledge of Seller, there is no patent, patent application,
publication, knowledge, use, sale, or offer for sale of or by the Company or any
third party, that prevents or interferes with the enforcement of the Company’s
Intellectual Property or that affects the validity of the issued claims or the
patentability of the pending claims of any of the Company’s patents or patent
applications, except for any information cited to, from or communicated with
patent authorities.

(n) Section 4.16(n) of the Seller Disclosure Schedule sets forth a list of all
licenses, sublicenses, or other agreements pursuant to which the Company has
in-licensed or acquired rights to any Intellectual Property together with a list
of all milestones therein and whether such milestones have been completed or not
as of the date of this Agreement.

(o) The Company has taken commercially reasonable steps to regularly scan its
computer systems and all owned or licensed computer software with up-to-date
virus detection software. To the Knowledge of Seller, neither its computer
systems nor any owned or licensed computer software contain any viruses. For the
purposes of this Agreement, “viruses” includes any computer code intentionally
designed to disrupt, disable, or harm in any manner the operation of any
software or hardware. To the Knowledge of Seller, neither its computer systems
nor any owned or licensed computer software contain any worms, bombs, backdoors,
disabling device code, or any design or routine which causes software to be
erased, rendered inoperable, or otherwise become incapable of being used, either
automatically or upon command by any party.

(p) The Company has taken commercially reasonable steps to restrict access to
its computer systems to only those parties authorized by the Company and have
further taken steps to detect and limit any unauthorized access of its computer
systems. The Company has taken commercially reasonable steps to patch, fix, or
otherwise update its own computer software and/ or close any security holes that
it has discovered in its own computer systems and computer software. The Company
has further taken commercially reasonable steps to install all updates, patches,
or fixes released by the licensor to maintain up-to-date licensed computer
software and to close any security holes found in its licensed computer
software. To the extent that the Company is not itself authorized to modify or
fix any licensed computer software in which it discovers a security issue, the
Company has taken commercially reasonable steps to notify the licensor of such
software and obtain updated licensed computer software from the licensor.

(q) The Company does not maintain any proprietary software for use in or with,
or contemplated to be used in or with, its Products or the second generation of
LipoSonix Product, part number P005700-01, which is subject to any open source
licensing agreement and

 

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which thereby requires the Company to disclose the source code of said
proprietary software. The use of any open source software in conjunction with
its Products or the second generation of LipoSonix Product, part number
P005700-01 (i) is de minimis; (ii) is wholly separable therefrom; or
(iii) otherwise exempts the Company from having to disclose any proprietary
software.

(r) [Reserved.]

(s) No Intellectual Property covered by, or that is the subject of, the ***, is
currently used in, or is necessary to, any Product or the second generation of
LipoSonix Product, part number P005700-01 of the Company. The commercialization,
marketing, licensing, use, or sale of any Product or the second generation of
LipoSonix Product, part number P005700-01 (as it currently exists) of the
Company does not and will not result in any obligation on the part of the
Company or Buyer, or any of their respective Affiliates, to pay any royalties or
fees or to issue any securities pursuant to the terms of the ***. To the
Knowledge of Seller, no Future Inventions (as such term is defined in the ***)
have been made or conceived, whether individually or jointly, by any one or more
of the parties to the ***.

(t) No Intellectual Property covered by, or that is the subject of, the ***,
will be used in, or will be necessary to, any Product or the second generation
of LipoSonix Product, part number P005700-01 of the Company subsequent to the
termination of the *** due to the expiration of the Licensed Patents as defined
in Section 1.2 therein. The commercialization, marketing, licensing, use, or
sale of any Product or the second generation of LipoSonix Product, part number
P005700-01 of the Company will not result in any obligation on the part of the
Company or Buyer, or any of their respective Affiliates, to pay any royalties or
fees or to issue any securities pursuant to the terms of the *** subsequent to
the expiration of the Licensed Patents as defined in Section 1.2 therein. To the
Knowledge of Seller, no Future Inventions (as such term is defined in the ***)
have been made or conceived, whether individually or jointly, by any one or more
of the parties to the ***.

Section 4.17 Insurance. Section 4.17-1 of the Seller Disclosure Schedule sets
forth a complete and accurate list of all primary insurance policies and
fidelity bonds covering the assets, business, equipment, properties, rights and
operations of the Company. As of the date of this Agreement, Section 4.17-2 of
the Seller Disclosure Schedule also contains (a) a list of all claims filed by
the Company since the “Effective Time” (as defined in the LipoSonix Agreement)
which are covered by the insurance policies maintained by the Company and (b) a
list of all claims (including any pending claims subject to a reservation of
rights) made by the Company since the “Effective Time” (as defined in the
LipoSonix Agreement) for which coverage was denied by any insurer, and, to the
Knowledge of Seller, the estimated amounts of such claims as listed in
Section 4.17-2 of the Seller Disclosure Schedule as have been reasonably
determined. Each insurance policy listed in Section 4.17-1 of the Seller
Disclosure Schedule that was renewed on or after December 31, 2010 was renewed
on substantially the same terms and conditions as the corresponding expiring
policy. There is no Claim by or against the Company pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds or which exceeds coverage
limitations. No reservation of rights or denial of coverage has been issued by
the underwriters of such policies or bonds with respect to any Claim pending
against the Company. All premiums

 

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payable under all such policies and bonds have been paid and the Company is
otherwise in full compliance with the terms of such policies and bonds (or other
policies and bonds providing substantially similar insurance coverage). The
Company has not taken any action or failed to take any action which, with notice
or the lapse of time or both, would constitute a breach or default, or permit
termination or modification, of any of such insurance policies or bonds. The
Company maintains insurance for the business and operations of the Company in
amounts and on such terms as are (i) in compliance with applicable Law and any
Contract(s) to which the Company is a party and (ii) reasonable and customary
for businesses of the type conducted by the Company and covering risks which are
normally insured by companies possessing similar assets and carrying on
businesses of the type conducted by the Company. No insurer under any such
policy or bond has cancelled or generally disclaimed liability under any such
policy or bond or, to the Knowledge of Seller, indicated any intent to do so or
to materially increase the premiums payable under or not renew any such policy.
To the Knowledge of Seller, there is not any threatened termination of, notice
of cancellation of, notice of non-renewal of or material premium increase with
respect to any of such policies or bonds. With respect to incidents known to
Seller that occurred prior to the Closing and which would reasonably result in a
claim after the Closing, Seller has provided the relevant underwriters of such
policies or bonds with notice of such incidents or will do so prior to the
Closing. The Company has complied in all material respects with all applicable
requirements (including contractual, statutory and regulatory requirements)
governing the purchase of insurance (including the requirements to provide
and/or retain evidence of such insurance).

Section 4.18 Brokers. Other than Deutsche Bank, no broker (including real estate
brokers), financial advisor, finder or investment banker or other Person is
entitled to any broker’s, financial advisor’s, finder’s or other fee or
commission in connection with the Contemplated Transactions based upon
arrangements made by or on behalf of Seller or the Company.

Section 4.19 Certain Business Practices. None of the Company or any of its
directors, officers, employees or, to the Knowledge of Seller, consultants,
sales representatives, distributors or agents, in such capacity and on behalf of
the Company, has (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful payments relating to political activity or
(b) violated any applicable money laundering or anti-terrorism Law. The Company
and its directors, officers, employees and, to the Knowledge of Seller,
consultants, sales representatives, distributors, agents and business partners
have complied at all times, and are in compliance, with all applicable U.S. and
non-U.S. anti-corruption laws with respect to the Company, including but not
limited to the U.S. Foreign Corrupt Practices Act, as amended (15 U.S.C.
§§ 78dd-1 et seq.). In this regard, the Company and its directors, officers,
employees and, to the Knowledge of Seller, consultants, sales representatives,
distributors, agents and business partners, in such capacity and on behalf of
the Company, have not given, offered, agreed or promised to give, or authorized
the giving directly or indirectly, of any money or other thing of value to
anyone as an inducement or reward for favorable action or forbearance from
action or the exercise of influence.

Section 4.20 Interested Party Transactions. Except as disclosed in Section 4.20
of the Seller Disclosure Schedule, there are no existing, and since the
“Effective Time” (as defined in the LipoSonix Agreement) there have been no,
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arrangements, or any related series thereof, between the Company, on the one
hand, and any of the directors, officers or other Affiliates (including Seller
and its Subsidiaries), or any of their respective Affiliates or family members,
on the other hand (except for amounts (i) due as salaries and bonuses in the
ordinary course of business consistent with past practice, (ii) in reimbursement
of ordinary expenses in the ordinary course of business consistent with past
practice or (iii) in the case of Seller, for accounts payables and accrued
liabilities paid, or accounts receivable received, in the ordinary course of
business consistent with past practice). There is no Indebtedness owed to the
Company by any employee, consultant, officer, director, sales representative,
distributor or agent of the Company, other than salary advances or travel
expenses in the ordinary course of business consistent with past practice. To
the Knowledge of Seller, no officer or director of the Company has any direct or
indirect ownership interest in any Affiliate of the Company (other than stock
ownership interest in Seller) or any firm or corporation with which the Company
has a business relationship, or any firm or corporation that competes with the
Company, except that officers or directors of the Company and members of their
immediate families may own stock in publicly-traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any Material Contract.

Section 4.21 Health Regulatory.

(a) The Company has not engaged, and no other Person (i) who has a direct or
indirect ownership interest (as defined in 42 C.F.R. § 1001.1001(a)(2)) in the
Company, or (ii) who has an ownership or control interest (as defined in 42
C.F.R. § 420.201) in the Company, or (iii) who is an officer, director, agent
(as defined in 42 C.F.R. § 1001.1001(a)(2)), or managing employee (as defined in
42 C.F.R. § 420.201) of the Company, has engaged on behalf of the Company in any
activities which are prohibited by, or are cause for civil penalties or
mandatory or permissive exclusion from any Federal Health Care Program under,
any applicable Law, including, without limitation, 42 U.S.C. §§ 1320a-7,
1320a-7a, 1320a-7b, 1395nn or 31 U.S.C. § 3729, or the regulations promulgated
pursuant to such statutes, in each case to the extent applicable to the Company.

(b) Neither the Company, nor any officer, director, managing employee, or, to
Seller’s Knowledge, agent of the Company is a party to, or bound by, any order,
individual integrity agreement, corporate integrity agreement or other similar
formal agreement with any Governmental Authority resulting from a failure, or
alleged failure, to comply with applicable Laws.

(c) To Seller’s Knowledge, no person has filed or has threatened to file a
whistleblower action against the Company under any Law, including under the
False Claims Act of 1863 (31 U.S.C. 3729 et seq.).

(d) The Company has an operational healthcare compliance program, including a
code of ethics or has adopted a code of ethics that governs all employees,
including sales representatives, which interact with physician and hospital
customers, and such employees’ interactions with their physician and hospital
customers.

 

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(e) The Company is not a “covered entity,” nor a “Business Associate” as those
terms are defined under the Health Insurance Portability and Accountability Act
of 1996 and the regulations promulgated thereunder, as each is amended from time
to time (“HIPAA”).

(f) The Company has not engaged in any activities, or otherwise acted in a
manner, prohibited by or in violation of any Law governing the maintenance, use,
disclosure, privacy, and/or security of, and standard transactions related to,
Personal Information, including, but not limited to, the Gramm-Leach-Bliley Act
and its implementing regulations (“GLBA”), HIPAA, as amended by HITECH, state
health information privacy laws, and state data breach notification laws
(collectively, “Privacy and Security Laws”); there is no charge, proceeding or,
to the Knowledge of Seller, investigation by any Governmental Authority with
respect to a violation of any applicable Privacy and Security Laws that is now
pending or, to the Knowledge of Seller, threatened with respect to the Company;
and the Company has not received any requests or demands from a Governmental
Authority or any other party to make available its internal practices, books,
and/or records relating to its use and disclosure of health information for
purposes of determining a covered entity’s or the Company’s compliance with
HIPAA or with other applicable privacy laws.

(g) There are no facts, circumstances or conditions that would reasonably be
expected to form the basis for any Action against or affecting the Company
relating to or arising under Privacy and Security Laws; and the Company has not
acted in a manner regarding the maintenance, use, disclosure, privacy, or
security of Personal Information that, to the Knowledge of Seller, would trigger
a notification or reporting requirement under any Contract.

(h) For purposes of this Section 4.21, (i) “Action” means any suit, claim,
action, proceeding, arbitration, mediation or investigation; and (ii) “Personal
Information” means all financial, health, and/or other personal information,
including, but not limited to, “nonpublic personal information” as defined under
GLBA and “individually identifiable health information” as defined under HIPAA,
that identifies, relates to, describes, is capable of being associated with, or
with respect to which there is a reasonable basis to believe the information can
be used to identify, an individual.

Section 4.22 FDA and International Regulatory and Related Matters.

(a) FDA Legal Compliance and Permits.

(i) General Compliance. The Company is conducting and has conducted its business
and operations in compliance in all material respects with the Federal Food,
Drug, and Cosmetic Act (the “FD&C Act”), 21 U.S.C. § 301 et. seq., and all
applicable regulations promulgated by the United States Food and Drug
Administration (“FDA”) (collectively, “FDA Law and Regulation”).

(ii) Inspections. Except as set forth in Section 4.22(a)(ii) of the Seller
Disclosure Schedule, the Company’s Bothell, Washington facility has not been
inspected by the FDA or any state regulatory authority.

(iii) Enforcement. The Company has not received any written notice or, to the
Knowledge of Seller, other communication from the FDA or any state regulatory

 

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authority alleging noncompliance with any applicable FDA Law and Regulation. The
Company is not subject to any enforcement proceedings by the FDA or any state
regulatory authority and, to the Knowledge of Seller, no such proceedings have
been threatened. There is no civil, criminal or administrative action, suit,
demand, claim, complaint, hearing, investigation, demand letter, warning letter,
untitled letter or proceeding pending against the Company and the Company has no
liability (whether actual or contingent) for failure to comply with any FDA Law
and Regulation. There is no act, omission, event, or circumstance of which
Seller has Knowledge that would reasonably be expected to give rise to or lead
to any such action, suit, demand, claim, complaint, hearing, investigation,
notice, demand letter, warning letter or proceeding or any similar liability.
There has not been any violation of any FDA Law and Regulation by the Company in
its product development efforts, submissions, record keeping and reports to FDA
or any state regulatory authority that would reasonably be expected to require
or lead to investigation, corrective action or regulatory enforcement action.
There is no civil or criminal proceeding pending or, to the Knowledge of Seller,
threatened relating to the Company or any Company employee which involves a
matter within the FDA or any state regulatory authority’s jurisdiction. To the
Knowledge of Seller, no director, officer, employee, consultant or agent of the
Company has: (A) made any untrue statement of material fact or fraudulent
statement to the FDA or any other Governmental Authority; (B) failed to disclose
a material fact required to be disclosed to the FDA or any other Governmental
Authority; or (C) committed an act, made a statement, or failed to make a
statement that would reasonably be expected to provide the basis for the FDA or
any other Governmental Authority to invoke its policy respecting “Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities,” as set forth in
56 Fed.Reg. 46191 (September 10, 1991), or similar policy. The Company has never
been and is not now subject to FDA’s Application Integrity Policy or similar
policy by any other Government Entity. No director, officer or employee of the
Company, and to the Knowledge of Seller, no consultant or agent of the Company
has been convicted of any crime or, to the Knowledge of Seller, engaged in any
conduct for which debarment is mandated or permitted by 21 U.S.C. § 335a. No
director, officer or employee of the Company, and to the Knowledge of Seller, no
consultant or agent of the Company has been convicted of any crime or engaged in
any conduct for which such Person or entity could be excluded from participating
in the federal health care programs under Section 1128 of the Social Security
Act, as amended, or any similar law or regulation. No current director, officer,
employee, consultant or agent of the Company, or, to the Knowledge of Seller,
former director or officer of the Company is listed on an “Exclusion List,”
meaning the current (x) HHS/OIG List of Excluded Individuals/Entities (available
through the Internet at http://www.oig.hhs.gov), (y) General Services
Administration’s List of Parties Excluded from Federal Programs (available
through the Internet at http://www.epls.gov) and (z) FDA Debarment List
(available through the Internet at
http://www.fda.gov/ora/compliance_ref/debar/).

(iv) Registration and Listing. The Company has designed, and currently
manufactures the Products at its Bothell, Washington facility for distribution
exclusively outside of the United States. The Company has not and does not
market or commercially distribute the Products in the United States. The
Company’s facility is registered with the FDA and the Company has listed the
LipoSonix Product with the FDA under the applicable FDA registration and listing
regulations and such registration and listing is current as of the Closing.

 

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(v) Quality System Regulation. To the Knowledge of Seller, the Company has
designed and developed the LipoSonix Product and all other Products in
commercial distribution in material compliance with the applicable provisions of
the Quality System Regulation set forth in 21 C.F.R. § 820.30, including Design
Control provisions.

(vi) No Adulteration or Misbranding. The Company has not introduced in U.S.
commercial distribution during the period of six (6) calendar years immediately
preceding the date hereof any of the Products which were upon their shipment by
the Company adulterated or misbranded in violation of 21 U.S.C. § 331.

(vii) Clinical Trials. All studies, tests, including preclinical tests, and
clinical trials in respect of the Company’s business being conducted by or on
behalf of the Company that have been or will be submitted to any Governmental
Authority, including the FDA and its counterparts worldwide, including in the
European Union, in connection with any approval or authorization to market the
Products, are being or have been conducted in compliance in all material
respects with applicable Laws and Regulations, including those Laws and
Regulations designed to protect patients. The Company has not received any
written notices, correspondence or, to the Knowledge of Seller, other
communication in respect of the Company’s business from the FDA or other
Governmental Authority requiring the termination or suspension of any clinical
trials conducted by, or on behalf of, the Company, and, to the Knowledge of
Seller, neither the FDA nor any other Governmental Authority is considering such
action. The Company has not received written notification from a Governmental
Authority of the rejection of data obtained from any clinical trial conducted
by, or on behalf of, the Company with respect to the Company’s business or the
Products, which data were submitted to the Governmental Authority and which were
necessary to obtain regulatory approval or clearance of a particular Product.

(viii) Exportation of Products. All Products that have been exported from the
United States by the Company have been exported in compliance in all material
respects with the applicable export requirements of the FDA Law and Regulation.
The Company has complied in all material respects with all notification and
reporting requirements applicable to the export requirements of the FDA Law and
Regulation.

(ix) Labeling, Promotion, and Advertising. To the extent applicable, the Company
has complied in all material respects with all FDA Law and Regulation pertaining
to product labeling, advertising and promotion.

(x) List of Permits. Section 4.22(a)(x) of the Seller Disclosure Schedule sets
forth a true and complete list of all required permits, licenses, registrations,
certificates, orders, clearances or approvals issued under the FD&C Act (“FD&C
Permits”) and held by the Company. Each such FD&C Permit is in full force and
effect and, to the Knowledge of Seller, no suspension, revocation, cancellation
or material modification of such FD&C Permit is threatened and there is no basis
for believing that such FD&C Permit will not be renewable upon expiration. Each
such FD&C Permit will continue in full force and effect immediately following
the Closing.

(b) International Regulatory and Related Matters.

 

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(i) General Compliance. The Company is conducting and has conducted its business
and operations in all EU member states and in other countries in which it
currently is marketing the Products in compliance in all material respects with
all applicable Laws and Regulations, including the essential requirements for
affixing the CE mark to Products and related guidelines, as well as provisions
in European Union (“EU”) and EU member state legislation governing the disposal
of waste electrical products and, where applicable, governing product liability,
electrical safety, and electromagnetic compatibility (collectively, “Applicable
Non-U.S. Laws and Regulations” with respect to all legislation described in this
paragraph (i) as applicable to the Products or activities of the Company).

(ii) Enforcement. Except as set forth in Section 4.22(b)(ii) of the Seller
Disclosure Schedule, the Company has not received any written notice or, to the
Knowledge of Seller, other communication from any non-U.S. regulatory
agency/conformity assessment body (“Non-U.S. Regulatory Agency”) or other
national authority alleging noncompliance with any Applicable Non-U.S. Laws and
Regulations. The Company is not subject to any enforcement proceedings by a
Non-U.S. Regulatory Agency or other national authority and, to Seller’s
Knowledge, no such proceedings have been threatened. There is no civil, criminal
or administrative action, suit, demand, claim, complaint, hearing,
investigation, demand letter, warning letter or proceeding pending against the
Company and the Company has no liability (whether actual or contingent) for
failure to comply with any Applicable Non-U.S. Laws and Regulations. There is no
act, omission, event, or circumstance of which the Company has Knowledge that
would reasonably be expected to give rise to or lead to any such action, suit,
demand, claim, complaint, hearing, investigation, notice, demand letter, warning
letter or proceeding or any similar liability. There has not been any violation
of any Applicable Non-U.S. Laws and Regulations by the Company in its product
development efforts, submissions, record keeping and reports to any Non-U.S.
Regulatory Agency or other national authority, or any declaration of conformity
that it may have made that would reasonably be expected to require or lead to
investigation, corrective action or regulatory enforcement action. There is no
civil or criminal proceeding relating to the Company or any employee of the
Company which involves a matter within or related to the jurisdiction of such
Non-U.S. Regulatory Agency or other national authority.

(iii) Facilities Licenses and Permits. The Company has complied with all
Applicable Non-U.S. Laws and Regulations pertaining to licenses and permits
including requirements as to facilities where the Products are manufactured,
processed, or held in any country, other than the U.S., where the Products are
marketed.

(iv) CE Marking/Premarket Clearance. Each Product owned or distributed by the
Company and in current commercial distribution is in compliance in all material
respects with applicable marketing authorization, conformity assessments and
quality systems requirements of the relevant country, and, in the EU member
states, is marketed under, and is covered by, a medical device CE mark. Each
Product is marketed in compliance with the regulatory requirements in each
country where the Product is commercialized, and in the EU member states, on the
basis of which the CE mark was affixed under the following EU legislation:
Council Directive 93/42/EEC of 14 June 1993 concerning medical devices,
Directive 2004/108/EC of the European Parliament and of the Council of
15 December 2004 on the approximation of the laws of the EU member states
relating to electromagnetic compatibility

 

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and repealing Directive 89/336/EEC of the European Parliament and of the Council
of 12 December 2006 on the harmonisation of the laws of EU member states
relating to electrical equipment designed for use within certain voltage limits
and any applicable national legislation in any EU member state implementing
Council Directive 93/42/EEC, Directive 2004/108/EC and Directive 2006/95/EC.

(v) Commercial Distribution in EU and Other Countries Outside the United States.
Section 4.22(b)(v) of the Seller Disclosure Schedule lists all Products that are
in current commercial distribution or aimed for future distribution in the EU or
other countries outside the United States.

(vi) Compliance with EU WEEE Directive. Regarding any Product that is in current
commercial distribution in the EU the Company complies with (A) the requirements
set forth by the Directive 2002/96/EC on waste electrical and electronic
equipment and (B) any national legislation implementing Directive 2002/96/EC in
any EU member state where such Product is marketed; in particular, to the extent
possible under the national legislation in the respective EU member states, the
Company (x) concluded agreements with all Persons distributing such Products in
the EU securing compliance with Directive 2002/96/EC or (y) joined systems
enabling purchasers of the products to return any electronic or electric waste
from or in connection with the products free of charge to the distributor.

(vii) Quality Management System Regulation and Reporting.

(A) The Company has been audited by BSI Management Systems, its registrar and
found to be in compliance with ISO 13485 and continues to operate in material
compliance with ISO 13485.

(B) With the exception of those suppliers identified in Section 4.22(b)(vii)(B)
of the Seller Disclosure Schedule, the Company and its suppliers that are
subject to such requirements are, and have been since July 2007, in compliance
with, and the Product in commercial distribution is designed, manufactured,
prepared, assembled, packaged, labeled, stored, installed, serviced, and
processed in compliance with, ISO 13485 and all other applicable quality
standards.

(C) The Company is in compliance with record-keeping and reporting requirements
for adverse event reporting under Applicable Non-U.S. Laws and Regulations of
countries in which the Products are investigated or marketed.
Section 4.22(b)(vii)(C) of the Seller Disclosure Schedule sets forth all adverse
event reports submitted to Governmental Authorities under Applicable Non-U.S.
Laws and Regulations.

(viii) No Unlawful Shipments. The Company has not introduced into commercial
distribution, in the six (6) years prior to the date of this Agreement, any
Products that are, or that were, upon their shipment by the Company, in
violation of Applicable Non-U.S. Laws and Regulations.

(ix) Labeling, Promotion, and Advertising. All Products are and have been
labeled, promoted, and advertised in all material respects accordance with their
marketing authorization (if any), within the scope of their exemption from such
authorization, or in

 

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accordance with applicable Non-U.S. Laws and Regulations, including EU or
national legislation and guidelines governing the labeling, promotion and
marketing of products falling within the category governing the Products.

(x) List of Permits. Section 4.22(b)(x) of the Seller Disclosure Schedule sets
forth a list of all permits, licenses, registrations, certificates, orders,
clearances or approvals which are held by the Company and which relate to the
Company’s activities outside the U.S. (“Non-U.S. Permits”). Such Non-U.S.
Permits are the only permits that are required for the Company to conduct its
business outside the U.S. as presently conducted. Each such Non-U.S. Permit is
in full force and effect and, to the Knowledge of Seller, no suspension,
revocation, cancellation or material modification of such Non-U.S. Permit is
threatened and there is no basis for believing that such Non-U.S. Permit will
not be renewable upon expiration. Each such Non-U.S. Permit will continue in
full force and effect immediately following the Closing.

Section 4.23 Product Liability; Product Warranties. Except as set forth in
Section 4.23 of the Seller Disclosure Schedule, all Products and services sold,
rented, leased, provided or delivered by the Company to customers conform, in
all material respects, to applicable contractual commitments, express and
implied warranties, product and service specifications, and, to the Knowledge of
Seller, and other than as reserved for in the ordinary course of business, the
Company has no liability for replacement or repair thereof or other damages in
connection therewith. Except as set forth in Section 4.23 of the Seller
Disclosure Schedule, no Product or service sold, leased, rented, provided or
delivered by the Company to customers on or prior to the Closing is subject to
any guaranty, warranty (other than warranties imposed by law) or other indemnity
beyond the applicable standard terms and conditions of sale, rent or lease.
Except as set forth in Section 4.23 of the Seller Disclosure Schedule, the
Company does not have any liability arising out of any injury to a Person or
property as a result of the ownership, possession, provision or use of any
equipment, Product or service sold, rented, leased, provided or delivered by the
Company on or prior to the Closing. All product liability claims that have been
asserted against the Company, whether covered by insurance or not and whether
litigation has resulted or not, are listed and summarized in Section 4.23 of the
Seller Disclosure Schedule.

Section 4.24 Inventories. The inventories of the Company are in good and
merchantable condition, are suitable and usable for the purposes for which they
are intended and are in a condition such that they can be sold or used in the
ordinary course of the business consistent with past practice. The Company has
good and marketable title to its inventories free and clear of all Liens. Except
as reserved against by the Company (which reserve is set forth in Section 4.24
of the Seller Disclosure Schedule), the inventories of the Company do not
consist, in any material amount, of items that are obsolete or damaged.

Section 4.25 Trade Compliance Matters.

(a) The Company is in compliance in all material respects with all applicable
export control and economic sanctions laws and regulations of the United States
and other countries, including but not limited to the U.S. Export Administration
Regulations (“EAR”) (15 C.F.R. 730 et seq.), the EAR’s rules on Restrictive
Trade Practices or Boycotts (15 C.F.R. Part 760, the so-called “Anti-boycott
Regulations”), and the economic sanctions rules and regulations

 

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implemented under statutory authority and/or Presidential Executive Orders and
administered by the U.S. Treasury Department’s Office of Foreign Assets Control
(31 C.F.R. Part 500 et seq.; collectively, the “OFAC Regulations”).

(b) The Company has not, directly or indirectly, exported, re-exported, sold or
otherwise transferred any goods, software, or technology subject to the EAR in
violation of the EAR or any OFAC Regulations. In the five (5) year period
immediately preceding the date of this Agreement, the Company has not been a
party to or a beneficiary under any contract under which goods have been sold or
services provided, directly or indirectly, to customers in countries subject to
sanctions under the OFAC Regulations without the proper license or other
authorization from the U.S. Government. In addition, the Company has not engaged
in any other transactions, or otherwise dealt, with any Person or entity with
whom U.S. persons are prohibited from dealing under the EAR or the OFAC
Regulations, including but not limited to any person or entity designated by
OFAC on the list of Specially Designated Nationals and Blocked Persons.

(c) There has been and is no charge, proceeding or, to the Knowledge of Seller,
investigation by any Governmental Authority with respect to a violation of any
applicable U.S. or non-U.S. export, import control or economic sanctions Laws
and Regulations including the EAR and the OFAC Regulations that is now pending
or, to the Knowledge of Seller, has been asserted or threatened with respect to
the Company.

(d) Except as set forth in Section 4.25(d) of the Seller Disclosure Schedule,
the Company is in compliance in all material respects with all applicable U.S.
and non-U.S. customs Laws and Regulations, including any export or import
declaration filing, payment of customs duties, compliance with import quotas,
import registration or any other similar requirements related to the exportation
or importation of goods or services by the Company. As of the date of this
Agreement, Section 4.25(d) of the Seller Disclosure Schedule lists each special
import or export program in which the Company participates, including any
temporary importation, bonded warehouse, expedited customs clearance or
processing, drawback or similar program entitling the Company to customs or Tax
benefits related to the importation or exportation of its goods or services. The
Company is in compliance in all material respects with all requirements imposed
under any such programs. Except as set forth in Section 4.25(d) of the Seller
Disclosure Schedule, there is no charge, proceeding or, to the Knowledge of
Seller, investigation by any Governmental Authority with respect to a material
violation of any applicable U.S. or non-U.S. customs Laws or Regulations that is
now pending or, to the Knowledge of Seller, threatened with respect to the
Company.

(e) Neither the Company nor its representatives nor any person acting for, or on
behalf of the Company, has paid, promised to pay, or authorized the payment of
any money, or offered, given, promised to give, or authorized the giving of
anything of value to any Government Official or to any person, in each case,
under the circumstances where the Company, its representative or such person
knew or reasonably ought to have known (after due and proper inquiry) that all
or a portion of such money or thing of value would be offered, given or
promised, directly or indirectly, to a Government Official: (i) for the purpose
of (a) influencing any act or decision of a Government Official in their
official capacity; (b) inducing a Government Official to do or omit to do any
act in violation of their lawful duties; (c) securing

 

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any improper advantage; (d) inducing a Government Official to influence or
affect any act or decision of any Governmental Authority, any company, business,
enterprise or other entity owned, in whole or part, or controlled by an
Governmental Authority, or any political party; or (e) assisting the Company or
its representative or any person acting on behalf of the Company in obtaining or
retaining business for or with, or directing business to, the Company, its
representative or such person; and (ii) in a manner which would constitute or
have the purpose or effect of public or commercial bribery, acceptance of or
acquiescence in extortion, kickbacks or other unlawful or improper means of
obtaining business or any improper advantage in violation of an anticorruption
Laws and Regulations.

Section 4.26 Manufacturing and Marketing Rights. Except as set forth in
Section 4.26 of the Seller Disclosure Schedule, the Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its Products
to any other Person and is not bound by any agreement that affects the Company’s
exclusive right to develop, manufacture, assemble, distribute, market or sell
its Products.

Section 4.27 Corporate Records. The minute books and other similar records of
the Company contain accurate records, in all material respects, of actions taken
at any meeting of the Board of Directors of the Company or any committee thereof
and of written consents executed in lieu of the holding of any such meeting.

Section 4.28 Financial Statements. Section 4.28-1 of the Seller Disclosure
Schedule sets forth the unaudited listing of assets and liabilities of the
Company as of December 31, 2010, and the unaudited statements of revenue and
direct expenses for the year ended December 31, 2010 (the “Unaudited 2010
Financial Statement”). Section 4.28-2 of the Seller Disclosure Schedule sets
forth the unaudited listing of assets and liabilities of the Company as of
June 30, 2011, and the unaudited statements of revenue and direct expenses for
the six month period ended June 30, 2011 (the “Unaudited Interim Financial
Statements”, and together with the Unaudited 2010 Financial Statement, the
“Unaudited Financial Statements”). The Unaudited Financial Statements (x) fairly
present the financial condition and results of operations of the Company at and
as of the date and for the period indicated and (y) were compiled from books and
records regularly maintained by management of Seller used to prepare the
financial statements of Seller.

Section 4.29 LipoSonix Agreement.

(a) Seller has made available to Buyer a true and complete copy of the LipoSonix
Agreement, together with all schedules, exhibits, amendments, supplements,
modifications and waivers. The LipoSonix Agreement is in full force and effect,
is a valid and binding obligation of Seller and of each other party thereto and
is enforceable against Seller and each other party thereto, and the LipoSonix
Agreement will continue to be (i) valid, binding and enforceable against Seller
and each other party thereto, and (ii) in full force and effect immediately
following the Closing, with no alteration or acceleration or increase in fees or
liabilities, payments, obligations or burdens. Seller is not alleged to be and
no other party is or is alleged to be in, or has received notice of any, default
under, or breach or violation of the LipoSonix Agreement and, to the Knowledge
of Seller, no event has occurred which, with the giving of notice or passage of
time or both, would constitute such a default, breach or violation

 

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and Seller has no reasonable basis for suspecting that any such default, breach
or violation exists or will be forthcoming. Seller is not currently involved,
nor has it been involved since the “Effective Time” (as defined in the LipoSonix
Agreement), in any dispute with any counterparty to the LipoSonix Agreement, and
the Company has not received or provided written or, to the Knowledge of Seller,
oral notice since the “Effective Time” (as defined in the LipoSonix Agreement),
from or to any counterparty to the effect with respect to any such dispute.
Seller has made no claims for indemnification under the LipoSonix Agreement, and
to the Knowledge of Seller, there were no representations and warranties made by
the Company under the LipoSonix Agreement that were inaccurate, and no breaches
of any covenants made by the Company under the LipoSonix Agreement.

(b) No fees or payments of any kind will be due from either Seller or Buyer
under the LipoSonix Agreement as a result of the consummation of the
Contemplated Transactions. No “Mandatory Prepayment Amount” (as defined in the
LipoSonix Agreement) will be payable from either Buyer or Seller under the
LipoSonix Agreement, at the Closing or at any time in the future.

Section 4.30 [Reserved].

Section 4.31 Exclusivity of Representations and Warranties. Except as expressly
set forth in this Article 4, Seller makes no representations or warranties,
express or implied, with respect to the Company or any of the business, assets,
liabilities or operations of the Company, and any such other representations or
warranties are hereby expressly disclaimed.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES

OF BUYER

Buyer hereby represents and warrant to Seller as follows:

Section 5.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, the state of its incorporation, and has all corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now conducted.

Section 5.2 Authority; Enforceability. Buyer has all requisite corporate power
and authority to execute and deliver this Agreement and each other instrument
and document required to be executed and delivered by it at or prior to the
Closing, and to perform its obligations hereunder and thereunder and to
consummate the Contemplated Transactions. The execution and delivery by Buyer of
this Agreement and the performance of its obligations hereunder and thereunder
have been duly and validly authorized by the Board of Directors of Buyer. No
other corporate proceedings on the part of Buyer are necessary to authorize the
consummation of the Contemplated Transactions. This Agreement has been duly and
validly executed and delivered by Buyer, or will be duly and validly executed
and delivered by Buyer at or prior to Closing, and assuming the due
authorization, execution and delivery thereof by Seller,

 

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constitutes a legal, valid and binding obligation of Buyer enforceable against
it in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
Laws relating to or affecting creditors’ rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

Section 5.3 No Conflict; Required Filings and Consents.

(a) The execution and delivery by Buyer of this Agreement and each other
instrument and document required by this Agreement to be executed and delivered
by Buyer do not, and the performance of this Agreement and each other instrument
and document required by this Agreement to be executed and delivered by Buyer,
shall not, (i) conflict with or violate the certificate of incorporation or
bylaws of Buyer, (ii) any resolution adopted by the Board of Directors or
stockholders of Buyer or (ii) subject to the filings and other matters referred
to in Section 5.3(b), conflict with or violate in any material respect any Law
or Order in each case applicable to Buyer or by which it or any of its
properties, rights or assets are bound or affected.

(b) The execution and delivery by Buyer of this Agreement and each other
instrument and document required by this Agreement to be executed and delivered
by Buyer at or prior to the Closing do not, and the performance by Buyer of this
Agreement and each instrument required by this Agreement to be executed and
delivered by Buyer at or prior to the Closing shall not, require Buyer to obtain
any Approval of any Person, observe any waiting period imposed by, or make any
filing with or notification to, any Governmental Authority, except for
compliance with any applicable requirements of the pre-merger notification
requirements of the HSR Act and applicable Foreign Competition Laws, and except
as would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Buyer.

Section 5.4 Absence of Litigation. As of the date hereof, there is no Claim
pending against or, to the Knowledge of Buyer, threatened against Buyer which
questions or challenges (a) the validity of this Agreement, or (b) any action
taken or to be taken by Buyer pursuant to this Agreement or in connection with
the Contemplated Transactions.

Section 5.5 Available Funds. Buyer has as of the date of this Agreement, and
will have on the Closing Date and on the date on which the FDA Milestone Payment
is due, a sufficient amount of cash (without giving effect to any unfunded
financing regardless of whether any such financing is committed) to satisfy
Buyer’s payment obligations required to be made at the Closing under this
Agreement and upon the achievement of the FDA Milestone in the form of the FDA
Milestone Payment, (ii) the resources and capabilities (financial or otherwise)
to perform its obligations hereunder, and (iii) has not incurred any obligation,
commitment, restriction or liability of any kind, which would impair or
adversely affect such resources and capabilities.

Section 5.6 No Brokers. Other than Morgan Keegan & Co., there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Buyer who is or might be entitled to any fee or
commission in connection with the consummation of the Contemplated Transactions.

 

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Section 5.7 Investment Representation. Buyer has such knowledge and experience
in financial and business matters that it is capable of evaluating the risks and
merits associated with the acquisition of the Shares, and Buyer is purchasing
the Shares for its own account and not with a view to the sale or distribution
thereof (within the meaning of securities Laws).

Section 5.8 Buyer Review. Buyer represents that it is a sophisticated entity
that was advised by knowledgeable counsel and, to the extent it deemed
necessary, other advisors in connection with this Agreement and has conducted
its own independent review and evaluation of the Company and its business. Buyer
acknowledges that the Shares have not been registered under the Securities Act
of 1933, as amended (the “Securities Act”), or any state securities law and
Buyer must bear the economic risk of its investment in the Shares until and
unless the offer and sale of such Shares is subsequently registered under the
Securities Act and all applicable state securities laws or an exemption from
such registration is applicable. Buyer is an “accredited investor” within the
meaning of Regulation D under the Securities Act.

Section 5.9 No Outside Reliance. Buyer expressly acknowledges and agrees that
(i) the representations and warranties contained in Article 4 are the only
representations and warranties Seller is making regarding the Company and that
Seller is not making any representations and warranties with respect to any
other information about the Company provided to Buyer in the course of its due
diligence investigation of the Company; (ii) except as specifically set forth in
this Agreement, Seller is transferring the Shares and the properties and assets
held by the Company “as is, where is, and with all faults;” (iii) except for the
representations and warranties expressly set forth in Article 4, Buyer is not
relying on any representations or warranties of any kind whatsoever, whether
oral or written, express or implied, arising out of any statute, regulation or
common law right or remedy, or otherwise, from Seller or the Company or
directors, officers, employees, agents, stockholders, affiliates, consultants,
counsel, accountants, investment bankers or representatives of any of them, as
to any matter, concerning the Company or the properties or assets of the
Company, or set forth, contained or addressed in any due diligence materials
(including the completeness thereof). Without limiting the generality of the
foregoing, Buyer expressly acknowledges and agrees that, except to the extent
expressly addressed by Article 4, any financial information, projections or
other information contained in any documents or other materials (including the
“Confidential Information Memorandum” or documents in the “virtual data room”)
or management presentations that have been or are in the future provided to
Buyer or any of its Affiliates, agents, lenders or representatives are not and
will not be deemed to be representations or warranties of Seller.

ARTICLE 6

COVENANTS

Section 6.1 Conduct of Business by the Company Pending the Closing. Seller
covenants and agrees that, between the date of this Agreement and the earlier to
occur of the Closing and the termination of this Agreement pursuant to its
terms, unless Buyer shall otherwise specifically consent in writing in advance
(provided that such consent shall only be requested and provided if consistent
with applicable Law and provided further that such consent shall not be
unreasonably withheld, conditioned or delayed), or unless otherwise expressly
provided for by

 

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this Agreement, Seller shall cause the Company to (i) conduct its business only
in the ordinary course of business and in a manner consistent with past practice
and (ii) conduct its business in compliance with all applicable Laws and Orders.
Seller shall cause the Company to use its commercially reasonable efforts to
(A) preserve intact the business organization and assets and Intellectual
Property of the Company, (B) keep available the services of the Company’s
present officers, employees, consultants, sales representatives, distributors
and sales agents (other than terminations in the ordinary course of business
consistent with past practice), (C) maintain in effect Material Contracts (other
than those Material Contracts that expire in accordance with their terms or
terminations expressly provided for by this Agreement), and (D) preserve the
Company’s present relationships with advertisers, publishers, sponsors,
customers, licensees, suppliers, sales representatives, distributors and other
Persons with which the Company has business relations. By way of amplification
and not limitation, Seller shall cause the Company to not, between the date of
this Agreement and the earlier to occur of the Closing and the termination of
this Agreement pursuant to its terms, directly or indirectly do, or propose to
do, any of the following without the prior written consent of Buyer (provided
that such consent shall only be requested and provided if consistent with
applicable Law and provided further that such consent shall not be unreasonably
withheld, conditioned or delayed), unless otherwise expressly provided for by
this Agreement or otherwise expressly set forth in Section 6.1 of the Seller
Disclosure Schedule:

(a) amend or otherwise change the Charter or Bylaws or alter through merger,
liquidation, reorganization, reclassification, recapitalization, restructuring
or in any other fashion the corporate structure or capital structure or
ownership of the Company;

(b) (i) issue, grant, sell, transfer, deliver, pledge, promise, dispose of or
encumber, or authorize the issuance, grant, sale, transfer, deliverance, pledge,
promise, disposition or encumbrance of, or alter or modify the terms of rights
or obligations under any shares of capital stock of any class or series (common
or preferred) or securities or other instruments (including notes or other
evidences of Indebtedness) convertible into, or subscription rights, options or
warrants to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible instruments or
securities or any other ownership interest or stock-based rights of the Company,
(ii) adopt, ratify or effectuate a stockholders’ rights plan or agreement or
similar plan or Contract, or (iii) redeem, purchase or otherwise acquire,
directly or indirectly, any of the capital stock of the Company;

(c) (i) other than cash dividends or other cash distributions to Seller in the
ordinary course of business consistent with past practice, declare, set aside or
pay any dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of any of its capital stock, (ii) split,
combine or reclassify any of its capital stock, (iii) effect a recapitalization;
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for, shares of its capital stock, or (iv) amend the terms
of, repurchase, redeem or otherwise acquire, directly or indirectly, any of its
securities;

(d) sell, transfer, assign, lease, sublease, license, sublicense, mortgage,
pledge, encumber, impair or otherwise dispose of (in whole or in part), or
create, incur, assume or cause to be subjected to any Lien on, any of the
assets, properties or securities of the Company (including any Intellectual
Property or accounts receivable), except for the sale of inventory in the
ordinary course of business consistent with past practice;

 

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(e) (i) acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) or organize or form any corporation, limited liability company,
partnership, association, joint venture, trust or other entity or Person or any
business organization or division thereof, or (ii) acquire any rights, assets or
properties other than in the ordinary course of business consistent with past
practice;

(f) (i) incur or modify any Indebtedness or issue any debt securities or any
warrants or rights to acquire any debt security, (ii) assume, guarantee or
endorse or otherwise become responsible for, the obligations of any other
Person, (iii) enter into any off-balance sheet financing arrangement or any
accounts receivable or payable financing arrangement, or (iv) make any loans,
advances or enter into any other financial commitments other than advances of
reasonable expenses to employees in the ordinary course of business consistent
with past practice;

(g) authorize or make any capital expenditures outside of the ordinary course of
business consistent with past practice, or in excess of $100,000;

(h) (i) increase, accelerate or provide for additional compensation or fringe
benefits of, or grant, agree to grant, pay or otherwise make payable any
incentive, bonus or similar compensation or rights, to any present or former
director, officer, employee, consultant, sales representative, distributor or
agent of the Company, (ii) grant any severance, retention, continuation or
termination pay to any present or former director, officer, employee,
consultant, sales representative, distributor or agent of the Company outside of
the ordinary course of business consistent with past practice, (iii) loan or
advance any money or other property to any present or former director, officer,
employee, consultant, sales representative, distributor or agent of the Company
(except for advances of business expenses in the ordinary course of business
consistent with past practice), (iv) establish, adopt, enter into, amend or
terminate any Employee Plan or any plan, agreement, program, policy, trust, fund
or other arrangement that would be an Employee Plan if it were in existence as
of the date of this Agreement (except as may otherwise be required pursuant to
Applicable Law), (v) terminate or lay off any executive or management employee
or key employee (except for termination for “cause”), or (vi) grant any equity
or equity-based awards or stock-based rights;

(i) fail to give any notices or other information required to be given to the
employees of the Company, any collective bargaining unit representing any group
of employees of the Company or any applicable Governmental Authority under the
WARN Act, the National Labor Relations Act, the Code, COBRA, or other applicable
Law in connection with the Contemplated Transactions;

(j) hire or retain, or continue to retain or employ, any employee or consultant
having access to confidential or proprietary information of the Company unless
such employee or consultant enters into, or has entered into, a proprietary
information and inventions agreement in the form customarily used by the Company
or an agreement containing substantially similar and no less restrictive
confidentiality and inventions assignment provisions, or amend or otherwise
modify, or grant a waiver under, any such confidentiality or proprietary
information agreement with any such Person;

 

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(k) change any accounting or cash management policies, procedures or practices
used by the Company (including with respect to reserves, revenue recognition,
timing for payments of accounts payable and collection of accounts receivable)
unless required by a change in Law or GAAP;

(l) (i) enter into any Contract that if entered into prior to the date hereof
would be a Material Contract other than in the ordinary course of business
consistent with the past practices of the Company and not exceeding $50,000,
(ii) modify, amend, extend or supplement in any material respect, transfer or
terminate any Material Contract or waive, release or assign any rights or Claims
thereto or thereunder other than in the ordinary course of business consistent
with the past practices of the Company and not exceeding $50,000, (iii) enter
into or extend any lease or sublease with respect to Real Property with any
third party, (iv) modify, amend or transfer in any way or terminate any license
agreement, standstill or confidentiality agreement with any third party, or
waive, release or assign any rights or Claims thereto or thereunder, (v) enter
into any agreement or arrangement that limits or otherwise restricts or that
could by its terms be reasonably expected to restrict the Company or its
Affiliates or successors or that by its terms could, after the Effective Time,
limit or restrict Buyer or any of its respective Subsidiaries or Affiliates or
successors thereto, from engaging or competing in any line of business or in any
geographic area, (vi) enter into or amend any agreement pursuant to which any
other party is granted manufacturing, marketing or other development or
distribution rights of any type or scope with respect to any Product or any of
the Company’s technologies or (vii) enter into, modify, amend or supplement any
Contract to provide exclusive rights or obligations or any non-competition or
similar obligations or restrictions;

(m) (i) make or change any Tax election or change any method of tax accounting,
(ii) settle or compromise any federal, state, local or foreign Tax liability,
(iii) file any amended Tax Return, (iv) enter into any closing agreement
relating to any Tax, (v) agree to an extension or waiver of any limitation
period applicable to any claim or assessment in respect of Taxes, or
(vi) surrender any right to claim a Tax refund;

(n) enter into any operating leases;

(o) except as required by Law, modify or change in any material respect any
existing permit or operating license listed in Section 4.7(c) of the Seller
Disclosure Schedule;

(p) pay, discharge, satisfy or settle any Claim or waive, assign or release any
material rights or claims, except any Claim which settlement would not impose
any injunctive or similar Order on the Company or restrict in any way the
business of the Company, or exceed $50,000 in cost, liability or value to the
Company;

(q) commence, join, make an appeal with respect to or settle a lawsuit, action,
Claim or similar proceeding other than (i) for the routine collection of bills,
(ii) to enforce its rights with respect to Intellectual Property, (iii) in such
cases where Seller in good faith determines that failure to commence suit would
result in the material impairment of a valuable

 

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aspect of its business, provided, that Seller consults with Buyer prior to the
Company filing or taking of any action with respect to such lawsuit, action,
Claim or similar proceeding, or (iv) pursuant to this Agreement;

(r) engage in, enter into or modify or amend any Contract, transaction,
Indebtedness, commitment or other arrangement with, directly or indirectly, any
of the directors, officers, employees, consultants, agents, or other Affiliates
of the Company, or any of their respective Affiliates or family members, other
than offer letters and other standard documents, in the Company’s forms (and not
providing any rights to severance or similar payments), which have been provided
to Buyer, with any new employees or consultants hired or retained after the date
of this Agreement;

(s) fail to maintain in full force and effect all self-insurance and insurance,
as the case may be, currently in effect, except that existing policies may be
replaced by new or successor policies of substantially similar coverage and at a
substantially similar cost;

(t) commence any proceeding for any voluntary liquidation, dissolution, or
winding up of the Company, including but not limited to initiating any
bankruptcy proceedings on its behalf;

(u) fill any orders for, or conduct any further business with, any third parties
that are subject to a United States trade embargo;

(v) take any action if such action would or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company;

(w) fail to maintain in full force and effect all material permits, licenses,
registrations, certificates, orders, clearances or approvals held by the
Company; or

(x) authorize any of the foregoing, or agree or enter into or amend any Contract
or commitment to do any of the foregoing.

Section 6.2 No Solicitation of Other Proposals.

(a) From the date hereof until the earlier to occur of the Closing and the
termination of this Agreement pursuant to its terms, Seller shall not, nor shall
Seller permit the Company or any of its Affiliates to, nor shall it authorize,
direct or permit any of their respective directors, officers, employees,
consultants, advisors, representatives or agents (collectively, the “Seller
Representatives”) to, directly or indirectly, (i) solicit, facilitate, initiate,
knowingly encourage or take any action to solicit, facilitate, initiate or
knowingly encourage, any inquiries or communications regarding or the making of
any proposal or offer that constitutes or may constitute an Acquisition
Proposal, or (ii) participate or engage in any discussions or negotiations with,
or provide any information to or take any other action with the intent to
facilitate the efforts of, any Person concerning any possible Acquisition
Proposal or any inquiry or communication which would reasonably be expected to
result in an Acquisition Proposal. For purposes of this Agreement, the term
“Acquisition Proposal” shall mean any inquiry, proposal or offer from any Person
(other than Buyer or any of its Affiliates) relating to (i) any merger,
consolidation, reorganization or other direct or indirect business combination,
recapitalization, liquidation,

 

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winding-up of, or similar transaction, involving the Company, (ii) the issuance
or acquisition of shares of capital stock or other equity securities of the
Company, (iii) the sale, lease, exchange, license (whether exclusive or not), or
other disposition of a substantial portion of the Intellectual Property of the
Company or a substantial portion of the business or other assets of the Company,
or (iv) any other transaction, the consummation of which would reasonably be
expected to impede, interfere with, prevent or materially delay the Closing or
any of the other transactions contemplated hereby or which would reasonably be
expected to diminish significantly the benefits to Buyer or its Affiliates of
the transactions contemplated hereby; provided, however, that an Acquisition
Proposal shall not include any of the foregoing relating to Seller or any of its
Subsidiaries other than the Company. Seller shall immediately cease and cause to
be terminated, and shall cause all Seller Representatives to immediately
terminate and cause to be terminated, all existing discussions or negotiations
with any Persons conducted heretofore with respect to, or that could reasonably
be expected to lead to, an Acquisition Proposal. Seller shall take all
reasonable actions to ensure that each Seller Representative complies with the
provisions of this Section 6.2(a). Without limiting the foregoing, any action or
conduct by any Seller Representative that would be a violation of this
Section 6.2(a) if taken by Seller, whether or not such Person is purporting to
act on behalf of Seller, shall be deemed to be a breach of this Section 6.2(a)
by Seller.

(b) Nothing in this Section 6.2 shall permit Seller to enter into any agreement,
orally or in writing, with respect to an Acquisition Proposal during the term of
this Agreement. In addition to the other obligations of Seller set forth in this
Section 6.2, Seller shall immediately advise Buyer orally and in writing of any
request for information with respect to any Acquisition Proposal, or any inquiry
with respect to or which could result in an Acquisition Proposal, the material
terms and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the Person making the same.

Section 6.3 Access to Information; Confidentiality.

(a) From the date hereof until the earlier to occur of the Closing and the
termination of this Agreement pursuant to its terms, consistent with applicable
Law, upon reasonable notice, Seller shall afford to the officers, employees,
accountants, counsel and other representatives and agents of Buyer and its
Affiliates (collectively “Buyer Representatives”) reasonable access (with
reasonable prior notice, and during regular business hours) to the Company’s
properties, records, databases, source code, books, Contracts, commitments and
other information, and, during such period, Seller shall make available to Buyer
and the Buyer Representatives the appropriate individuals for discussion of the
Company’s business, properties and personnel as Buyer or the Buyer
Representatives may reasonably request. Notwithstanding the foregoing, in
exercising Buyer’s access rights under this Section 6.3, (i) Buyer and the Buyer
Representatives shall not be permitted to interfere unreasonably with the
conduct of the business of the Company, Seller or any of its Affiliates,
(ii) the auditors and accountants of the Company, Seller or any of its
Affiliates shall not be obligated to make any work papers available to any
Person unless and until such Person has signed a customary agreement relating to
such access to work papers in form and substance reasonably acceptable to such
auditors or accountants and (iii) if the Parties are in an adversarial
relationship in litigation or arbitration, the furnishing of information,
documents or records in accordance with this Section 6.3(a) shall be subject to
applicable rules relating to discovery.

 

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(b) Buyer shall keep all non-public information obtained pursuant to
Section 6.3(a) confidential in accordance with the terms of the Confidentiality
Agreement, dated April 7, 2011, between Seller and Buyer (the “Confidentiality
Agreement”). The Confidentiality Agreement shall continue in full force and
effect prior to the Closing and after any termination of this Agreement. The
Confidentiality Agreement shall be deemed to have been terminated at the Closing
Date solely with respect to information relating to the Company and its products
and business; provided, however, that Buyer acknowledges that any and all other
information provided to it by Seller or its representatives concerning Seller
and its Affiliates shall remain subject to the terms and conditions of the
Confidentiality Agreement. Anything contained in the Confidentiality Agreement
to the contrary notwithstanding, Seller and Buyer hereby agree that each such
Party may issue press release(s) or make other public announcements regarding
the transactions contemplated in this Agreement only in accordance with
Section 6.7.

(c) Buyer hereby agrees that it shall, and shall cause Buyer Representatives to,
keep confidential any Confidential Information not related to the Company, its
products or business that Buyer obtains as a result of the Contemplated
Transactions and to promptly deliver to Seller or destroy (upon Seller’s
request) any such Confidential Information, including all copies, reproductions,
and extracts thereof.

(d) Seller hereby agrees that it shall, and shall cause Seller Representatives
to, keep confidential any Confidential Information related to the Company, its
assets (tangible and intangible), employees, finances, businesses and
operations.

Section 6.4 Commercially Reasonable Efforts; Further Assurances.

(a) Upon the terms and subject to the conditions set forth in this Agreement,
each Party shall use its commercially reasonable efforts to take, or cause to be
taken, all actions, and do, or cause to be done, and to assist and cooperate
with the other Parties in doing, all things necessary, proper or advisable under
applicable Law to consummate and make effective, in the most expeditious manner
practicable, the Contemplated Transactions. Each Party shall use its
commercially reasonable efforts to (i) as promptly as practicable, obtain all
Approvals necessary to consummate the Contemplated Transactions, (ii) make all
filings required by applicable Law required in connection with the
authorization, execution and delivery of this Agreement by Buyer and Seller and
the consummation by them of the Contemplated Transactions, (iii) furnish all
information required for any application or other filing to be made pursuant to
any Law or any applicable Regulations of any Governmental Authority in
connection with the Contemplated Transactions and all information reasonably
requested by any Governmental Authority in connection with the Contemplated
Transactions, and (iv) obtain the expiration or termination of any applicable
waiting period and any required clearances under the HSR Act or any applicable
Foreign Competition Laws.

(b) Subject to the terms and conditions herein provided and without limiting the
foregoing, Seller and Buyer shall promptly (but in no event later than fifteen
(15) days after the date hereof) make or cause their “ultimate parent entities,”
as that term is defined in the HSR Act and the Regulation promulgated thereunder
to make, in consultation and cooperation with the other Party, (i) an
appropriate filing of a notification and report form pursuant to the HSR Act
relating to the Contemplated Transactions and (ii) all other necessary
registrations, declarations, notices and filings relating to the Contemplated
Transactions with other Governmental Authorities under any applicable Foreign
Competition Laws.

 

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(c) Subject to applicable confidentiality restrictions or restrictions required
by Law, Buyer and Seller shall notify the other promptly upon the receipt of
(i) any comments or questions from any officials of any Governmental Authority
in connection with any filings made pursuant to this Section 6.4 or the
Contemplated Transactions and (ii) any request by any officials of any
Governmental Authority for amendments or supplements to any filings made
pursuant to any Laws or Regulations of any Governmental Authority or answers to
any questions, or the production of any documents, relating to an investigation
of the Contemplated Transactions by any Governmental Authority. Whenever any
event occurs that is required to be set forth in an amendment or supplement to
any filing made pursuant to this Section 6.4, each Party will promptly inform
the other of such occurrence and cooperate in filing promptly with the
applicable Governmental Authority such amendment or supplement. Without limiting
the generality of the foregoing, each Party shall provide to the other (or the
other’s respective advisors) upon request copies of all correspondence
(including any submissions and document productions) between such Party and any
Governmental Authority relating to the Contemplated Transactions. The Parties
may, as they deem advisable and necessary, designate any competitively sensitive
materials provided to the other under this Section 6.4 as “outside counsel
only.” Such materials and the information contained therein shall be given only
to outside counsel of the recipient and will not be disclosed by such outside
counsel to employees, officers, or directors of the recipient without the
advance written consent of the Party providing such materials. In addition, to
the extent reasonably practicable, all discussions, telephone calls, and
meetings with a Governmental Authority regarding the Contemplated Transactions
shall include representatives of both Parties. Subject to applicable Law, the
Parties will consult and cooperate with each other in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, and
proposals made or submitted to any Governmental Authority regarding the
Contemplated Transactions by or on behalf of any Party.

(d) Without limiting the foregoing, Buyer shall use reasonable best efforts to
promptly take, in order to consummate the Contemplated Transactions by the End
Date, all actions necessary to (i) secure the expiration or termination of any
applicable waiting period and any required clearances under the HSR Act or any
applicable Foreign Competition Laws and (ii) resolve any objections asserted
with respect to the Contemplated Transactions raised by any Governmental
Authority, and to prevent the entry of any court Order and to have vacated,
lifted, reversed or overturned any Order that would prevent, prohibit, restrict,
or delay the consummation of the Contemplated Transactions, including:
(A) executing settlements, undertakings, consent decrees, stipulations, or other
agreements with any Governmental Authority, (B) selling, divesting, licensing,
or otherwise conveying particular assets or categories of assets or businesses
of Buyer, (C) agreeing to sell, divest, license, or otherwise convey any
particular assets or categories of assets or businesses of Buyer
contemporaneously with or subsequent to the Closing, and (D) permitting Seller
to sell, divest, license, or otherwise convey any particular assets or
categories of assets or businesses of the Company prior to the Closing;
provided, however, that Buyer shall not be required to take any action that
would be material to the business or financial condition of Buyer and its
Subsidiaries, taken as a whole, or material to the business or financial
condition of the Company. No actions taken pursuant to this Section 6.4 shall be
considered for purposes of determining whether a Material Adverse Effect on the

 

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Company or Buyer has occurred. Buyer shall, in consultation with Seller, respond
to and seek to resolve as promptly as reasonably practicable any objections
asserted by any Governmental Authority with respect to the Contemplated
Transactions.

(e) Buyer shall not, and shall cause its Affiliates not to, acquire or agree to
acquire, by merging with or into or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets, if the entering into of a definitive agreement relating to, or the
consummation of such acquisition, merger or consolidation would reasonably be
expected to: (i) impose any material delay in the obtaining of, or materially
increase the risk of not obtaining, any consents of any Governmental Authority
necessary to consummate the Contemplated Transactions or the expiration or
termination of any applicable waiting period; (ii) materially increase the risk
of any Governmental Authority seeking or entering an Order prohibiting the
consummation of the Contemplated Transactions; (iii) materially increase the
risk of not being able to remove any such Order on appeal or otherwise; or
(iv) materially delay or prevent the consummation of the Contemplated
Transactions.

(f) The Parties shall use their commercially reasonable efforts to satisfy or
cause to be satisfied all of the conditions precedent that are set forth in
Article 7, as applicable to each of them, and to cause the Contemplated
Transactions to be consummated in the most expeditious manner practicable. Each
Party, at the reasonable request of another Party, shall promptly execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the Contemplate Transactions.

Section 6.5 Employee Benefits.

(a) From and after the Closing, Buyer shall provide employees of the Company
(the “Employees”) with employee benefits (including hourly wage or salary level)
that are substantially similar in the aggregate to those employee benefits
provided to similarly situated employees of Buyer. Nothing in this
Section 6.5(a) shall restrict in any way the ability of Buyer or the Company to
terminate any Employee at any time.

(b) To the extent permitted by an applicable Buyer employee benefit plan or
arrangement, Buyer shall give Employees full credit for purposes of eligibility
to participate and vesting under the employee benefit plans or arrangements
maintained by Buyer or its U.S. Affiliates in which such Employees participate
for such Employees’ service with the Company to the same extent recognized by
comparable plans of the Company immediately prior to the Closing Date.
Notwithstanding the foregoing, with respect to any welfare benefit plans
maintained by Buyer or its U.S. Affiliates for the benefit of Employees on and
after the Closing Date, Buyer shall use commercially reasonable efforts to
(i) cause to be waived any eligibility requirements or pre-existing condition
limitations to the same extent waived under comparable plans of the Company
immediately prior to the Closing Date and (ii) give effect, in determining any
deductible and maximum out-of-pocket limitations, to amounts paid by such
Employees in the year of the Closing Date with respect to similar plans
maintained by the Company.

 

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(c) Nothing contained in this Agreement shall (i) constitute or be deemed to be
an amendment to any Employee Plan or any other compensation or benefit plan,
program or arrangement of the Company, (ii) prevent the amendment or termination
of any Employee Plan or interfere with the right or obligation of Buyer or the
Company to make such changes as are necessary to conform with applicable Law or
(iii) create any third-party beneficiary rights in any Employee (including any
beneficiary or depending thereof) in respect of any compensation or benefits
that may be provided under any plan or arrangement of Buyer.

Section 6.6 Notification of Certain Matters.

(a) Seller shall give prompt notice to Buyer, and Buyer shall give prompt notice
to Seller, of the occurrence or non-occurrence of any fact, condition or event
of which Seller has Knowledge or which Buyer has Knowledge, as applicable, the
occurrence or non-occurrence of which would result in any representation or
warranty contained in this Agreement being untrue or inaccurate in any material
respect (or, in the case of any representation or warranty qualified by its
terms by materiality (including the words “material” or “Material Adverse
Effect”), then untrue or inaccurate in any respect) had such representation or
warranty been made as of the time of occurrence or discovery of such fact,
condition or event and any failure of Seller or Buyer, as the case may be, to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 6.6 shall not limit or
otherwise affect the remedies available hereunder to the Party receiving such
notice, including the right to indemnification.

(b) Each of Buyer and Seller shall give prompt notice to the other Party of
(i) any notice or other communication from any Person alleging that the Approval
of such Person is or may be required in connection with this Agreement or the
Contemplated Transactions, (ii) any notice, document, request, court papers or
other communication from any Governmental Authority or other third party in
connection with this Agreement or the Contemplated Transactions, (iii) any Claim
relating to or involving or otherwise affecting such Party that relates to this
Agreement or the Contemplated Transactions, or (iv) any fact, event, change,
development, circumstance, condition or effect that such Party has determined
would reasonably be expected to delay or impede the ability of such Party to
consummate the Contemplated Transactions or to fulfill their respective
obligations set forth herein or therein.

(c) Seller shall give prompt notice to Buyer of (i) the occurrence of a default,
breach or violation or event that, with notice or lapse of time or both, would
become a default, breach or violation under any Material Contract of the
Company, (ii) any fact, event, change, development, circumstance, condition or
effect that has had or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company, and (iii) any of its
representations or warranties contained herein failing to be true and correct in
all material respects (or, in the case of any representation or warranty
qualified by its terms by materiality (including the words “material” or
“Material Adverse Effect”), failure to be true or accurate in any respect).

(d) Seller shall give any notices to third parties, and use commercially
reasonable efforts to obtain any Approvals from third parties, (i) necessary to
consummate the

 

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Contemplated Transactions (including but not limited to those Approvals set
forth on Sections 4.5(a) and 4.5(b) of the Seller Disclosure Schedule), and
(ii) otherwise required under any Contracts in connection with the consummation
of the Contemplated Transactions. If Seller shall fail to obtain any such
Approval from a third party, Seller shall use its commercially reasonable
efforts to take such actions as are reasonably requested by Buyer (and Buyer
agrees to cooperate therewith as reasonably requested) to limit the adverse
effect upon Seller and Buyer, their respective Subsidiaries and Affiliates, and
their respective businesses resulting, or which would result after the Closing,
from the failure to obtain such consent. Notwithstanding the foregoing, Seller
and Buyer shall cooperate with each other and shall use commercially reasonable
efforts to have the guarantee described in Section 6.6(d) of the Seller
Disclosure Schedule released prior to the Closing.

Section 6.7 Public Announcements. On or prior to Closing, no Party hereto will
make any press release, public statement, public announcement or public filing
with any Governmental Authority (including any exhibit thereto containing a copy
of this Agreement) with respect to this Agreement or any of the Contemplated
Transactions (including with respect to the matters set forth in Section 6.7 of
the Seller Disclosure Schedule) without the prior written consent of the other
Party; provided, however, that either Party may make any press release, public
statement, public announcement or public filing which such Party determines is
required by applicable Law or stock listing requirements and provided further,
that the Party making such press release, public statement, public announcement
or public filing shall provide to the other Party a copy of such press release,
public statement, public announcement or public filing as early as is reasonably
practicable prior to the making thereof, and will consult with the other Party
regarding the contents thereof prior to making any such press release, public
statement, public announcement or public filing.

Section 6.8 Claims. Prior to the Closing, Seller shall not settle or compromise
any Claim brought in connection with the Contemplated Transactions by any
present, former or purported holder of any securities of the Company or other
present, former or purported counterparty to a Material Contract with the
Company without the prior written consent of Buyer; provided, that such consent
shall not be unreasonably withheld, conditioned or delayed.

Section 6.9 Delivery of Corporate Records. At or before the Closing, Seller
shall deliver to Buyer or its designee correct and complete copies of all of the
Company’s minute books of all stockholders, Board of Directors and committee
meetings, unanimous or other consents, corporate seals, stock ledgers, true and
complete copies of the Charter and Bylaws, and other similar records and items
reasonably requested by Buyer from Seller.

Section 6.10 Certain Litigation Matters. After the Closing, with respect to the
legal proceedings described in paragraph 2 of Section 4.10(a) of the Seller
Disclosure Schedule, Buyer shall assume and continue to perform all of the
obligations of the Company and Seller to coordinate the defense of the
defendants, engage legal counsel (whether it continues to engage Clifford Chance
LLP or otherwise), and pay for and reimburse any legal costs and expenses
(including court costs and attorneys’ fees) of the defendants; provided,
however, that all costs and expenses incurred by Buyer or the Company in
connection with such legal proceedings shall be borne equally by Buyer and
Seller; provided, further, that Seller’s obligations with respect to the legal
proceedings described in paragraph 2 of Section 4.10(a) of the Seller Disclosure

 

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Schedule shall be limited to the amount set forth in Section 6.10 of the Seller
Disclosure Schedule and, following the reimbursement by Seller to Buyer of such
amount in accordance with Section 6.10 of the Seller Disclosure Schedule, Seller
shall be deemed to have paid such amount in full and shall have no additional
obligations or liability of any kind whatsoever with respect thereto.

Section 6.11 Post-Closing Books and Records of the Company. Until the end of the
Contingent Payment Termination Date, Buyer shall maintain all books and records
of the Company relating to periods ending on or prior to the Closing. If at any
time after the Closing, Seller requires access to certain of such book(s) or
record(s), Buyer shall, at its option, (i) deliver copies of such book(s) and/or
record(s) specified in reasonable detail by Seller at Seller’s cost or
(ii) make available such book(s) and/or record(s) as are specified in reasonable
detail by Seller to Seller during normal business hours at a mutually agreed
time and place, which information Seller agrees to keep confidential and not to
disclose to any Person except to its representatives on a “need to know” basis.

Section 6.12 FDA Approval Matters.

(a) Prior to the Closing, Seller shall notify Buyer of any communications with
the FDA or any Governmental Authority in any other jurisdiction, including
outside of the United States, or any other Governmental Authority, whether
written or oral, as soon as reasonably practicable, but in no event later than
three (3) Business Days after the receipt of such communication, and within such
same time period, Seller shall provide Buyer with copies of any such written
communications and written summaries of any such oral communications.

(b) Prior to the Closing, from time to time and at the reasonable request of
Buyer, Seller shall provide Buyer with updates concerning the progress of the
Company’s regulatory filings and strategy for obtaining necessary regulatory
Approvals to market and sell the LipoSonix Product. Seller shall reasonably
consult with Buyer regarding any regulatory filing prior to finalizing such
filings and delivering them to the relevant Governmental Authorities.

Section 6.13 Additional Covenants Regarding LipoSonix Agreement.

(a) Notwithstanding anything to the contrary in this Agreement (including
Article 9), this Section 6.13 shall govern the rights and obligations of the
Parties with respect to matters involving indemnification claims under Article 9
of the LipoSonix Agreement. In the event of any inconsistency between this
Section 6.13 and Article 9 of this Agreement, the provisions of this
Section 6.13 shall be controlling.

(b) In the event that (i) Seller (as “Parent” under the LipoSonix Agreement) or
a “Parent Indemnified Person” (as defined in the LipoSonix Agreement) affiliated
with Seller (a “Medicis Indemnitee”) submits an indemnification claim under
Article 9 of the LipoSonix Agreement (a “LipoSonix Indemnification Claim”) or
(ii) Buyer (or another Buyer Indemnified Person) provides notice of an
indemnification claim under Article 9 of this Agreement with respect to Losses
arising out of or resulting from the same or a substantially similar matter (or
the same or substantially similar facts, events or circumstances) as those
forming the basis for a

 

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LipoSonix Indemnification Claim by a Medicis Indemnitee (whether such Buyer
indemnification claim is submitted before or after such Medicis Indemnitee
submits such LipoSonix Indemnification Claim), Buyer and Seller agree as
follows:

(i) Buyer shall, as reasonably requested by Seller, cooperate with such Medicis
Indemnitee in connection with such Medicis Indemnitee’s efforts to seek recovery
under Article 9 of the LipoSonix Agreement with respect to such LipoSonix
Indemnification Claim (it being understood that Seller shall reimburse Buyer for
its reasonable out of pocket expenses incurred in providing such cooperation);

(ii) Buyer shall set off against Contingent Payments then payable, or that
become payable in the future, under the LipoSonix Agreement an amount equal to
the amount of Losses with respect to such LipoSonix Indemnification Claim which
“Parent” or the “Surviving Corporation” (as such terms are defined in the
LipoSonix Agreement) is entitled to off-set against such Contingent Payments in
accordance with Section 3.11(h) and Article 9 of the LipoSonix Agreement; it
being understood that, as between Seller and Buyer, Buyer shall be responsible
for making the determination whether Losses are “more likely than not to be
incurred or suffered” for purposes of the LipoSonix Agreement, including
Section 3.11(h) and Article 9 of the LipoSonix Agreement, and such determination
shall be controlling for purposes of Section 3.11(h) and Article 9 of the
LipoSonix Agreement with respect to such LipoSonix Indemnification Claim;

(iii) Buyer agrees to provide (or if requested by Seller, join with Seller or
such Medicis Indemnitee in providing) such notices or other communications
reasonably requested by Seller or such Medicis Indemnitee for purposes of
complying with and/or preserving rights under Article 9 of the LipoSonix
Agreement (including Section 9.11 of the LipoSonix Agreement) and
Section 3.11(h) of the LipoSonix Agreement with respect to such LipoSonix
Indemnification Claim and in order to preserve and effectuate the off-set rights
set forth in the LipoSonix Agreement with respect thereto;

(iv) in the event that it is finally determined that such Medicis Indemnitee is
entitled to indemnification under Article 9 of the LipoSonix Agreement with
respect to such LipoSonix Indemnification Claim and that “Parent” or the
“Surviving Corporation” (as such terms are defined in the LipoSonix Agreement)
are entitled to retain some or all of the amounts previously off-set prior to
such final determination under Section 3.11(h) and Article 9 of the LipoSonix
Agreement (or which Buyer was otherwise entitled to off-set pursuant to the
terms of the LipoSonix Agreement) with respect to such LipoSonix Indemnification
Claim, Buyer agrees to promptly pay to Seller an amount equal to such off-set
amount, less the sum of (x) any reasonable and documented out-of-pocket expenses
incurred by Buyer as contemplated in clause (i) above (provided such
documentation is promptly provided to Seller) in connection with such LipoSonix
Indemnification Claim and (y) any amount to which Buyer is finally determined to
be entitled to recover from Seller, if any, pursuant to a valid indemnification
claim timely submitted in accordance with Article 9 of this Agreement with
respect to Losses arising out of or resulting from the same or a substantially
similar matter (or the same or substantially similar facts, events or
circumstances) as those forming the basis for the LipoSonix Indemnification
Claim;

 

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(v) in the event that it is finally determined that such Medicis Indemnitee is
entitled to indemnification under Article 9 of the LipoSonix Agreement with
respect to such LipoSonix Indemnification Claim and that “Parent” or the
“Surviving Corporation” (as such terms are defined in the LipoSonix Agreement)
are entitled to off-set some or all of such Losses against future Contingent
Payments under Section 3.11(h) and Article 9 of the LipoSonix Agreement with
respect to such LipoSonix Indemnification Claim, but no Contingent Payments (or
an insufficient amount of Contingent Payments to fully offset such Losses) had
otherwise become payable under the LipoSonix Agreement prior to such final
determination against which such Losses could be off-set under Section 3.11(h)
and Article 9 of the LipoSonix Agreement with respect to such LipoSonix
Indemnification Claim, Buyer agrees to off-set such Losses against future
Contingent Payments (up to an amount equal to the aggregate amount of such
Losses) in accordance with Section 3.11(h) and Article 9 of the LipoSonix
Agreement and to, thereafter, promptly pay to Seller an amount equal to such
off-set amount, less the sum of (x) any reasonable and documented out-of-pocket
expenses incurred by Buyer as contemplated in clause (i) above (provided such
documentation is promptly provided to Seller) in connection with such LipoSonix
Indemnification Claim and (y) any amount to which Buyer is finally determined to
be entitled to recover from Seller, if any, pursuant to a valid indemnification
claim timely submitted in accordance with Article 9 of this Agreement with
respect to Losses arising out of or resulting from the same or substantially
similar matter (or the same or substantially similar facts, events or
circumstances) as those forming the basis for the LipoSonix Indemnification
Claim;

(vi) to the extent that Buyer (or another Buyer Indemnified Person) provides
notice of an indemnification claim under Article 9 of this Agreement with
respect to Losses arising out of or resulting from the same or a substantially
similar matter (or the same or substantially similar facts, events or
circumstances) as those forming the basis for a LipoSonix Indemnification Claim
by a Medicis Indemnitee (whether such Buyer indemnification claim is submitted
before or after such Medicis Indemnitee submits such LipoSonix Indemnification
Claim), Buyer agrees that, notwithstanding anything in Article 9 of this
Agreement to the contrary, (x) resolution of, and any recovery with respect to,
the portion of such Buyer indemnification claim that arises out of or results
from the same or a substantially similar matter (or the same or substantially
similar facts, events or circumstances) as those forming the basis for a
LipoSonix Indemnification Claim shall be tolled under this Agreement pending a
final determination of such LipoSonix Indemnification Claim, (y) such Buyer
indemnification claim shall remain subject to all other limitations on and
conditions to indemnification set forth in Article 9 of this Agreement, and
(z) such Buyer Indemnified Persons shall not be entitled to recover any Losses
from Seller under Article 9 of this Agreement with respect to such Buyer
indemnification claim (or the applicable portion thereof that is tolled
hereunder) unless and until a final determination is made with respect to such
LipoSonix Indemnification Claim and then only to the extent that the amount of
Losses to which such Buyer Indemnified Person is otherwise entitled to recover
from Seller with respect to such Buyer indemnification claim (or applicable
portion thereof that is tolled hereunder) pursuant to the terms of Article 9 of
this Agreement exceeds the amount which “Parent” or the “Surviving Corporation”
(as such terms are defined in the LipoSonix Agreement) are entitled to off-set
against Contingent Payments under Section 3.11(h) and Article 9 of the LipoSonix
Agreement;

 

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(vii) Buyer agrees to provide written notification to Seller of any
indemnification claim it intends to assert under Article 9 of the LipoSonix
Agreement prior to submitting any such claim under the LipoSonix Agreement and
to allow Seller to participate, at its sole expense, in any such indemnification
claim (it being understood that the other provisions of this Section 6.13 shall
apply in the event Buyer also submits an indemnification claim against Seller
under Article 9 of this Agreement and/or a Medicis Indemnitee also submits a
LipoSonix Indemnification Claim under Article 9 of the LipoSonix Agreement with
respect to Losses arising out of or resulting from the same or a substantially
similar matter (or the same or substantially similar facts, events or
circumstances) as those forming the basis for such LipoSonix Indemnification
Claim;

(viii) in the event any indemnification claim under the LipoSonix Agreement
involves a “Third Party Claim” (as defined in the LipoSonix Agreement), the
procedure with respect to third party claims set forth in Section 9.10 of the
LipoSonix Agreement shall govern to the extent inconsistent with the procedures
for Third Party Claims under Section 9.5 of this Agreement; it being understood
that, if both Buyer and a Medicis Indemnitee have asserted indemnification
claims under Article 9 of the LipoSonix Agreement with respect to Losses arising
out of or resulting from the same or a substantially similar matter (or the same
or substantially similar facts, events or circumstances), Buyer shall be
entitled to make the determination as to (and to control) the defense of such
“Third Party Claim” under Article 9 of the LipoSonix Agreement;

(ix) if Buyer complies with all of its obligations under this Section 6.13 with
respect to indemnification claims and off-set rights under the LipoSonix
Agreement, Seller agrees to indemnify Buyer for any Losses actually incurred or
suffered as a result of any actions taken or not taken at the direction of
Seller pursuant to this Section 6.13; it being understood that, to the extent
Buyer’s failure to comply with its obligations under this Section 6.13 with
respect to any indemnification claim under the LipoSonix Agreement results in
Seller’s or Buyer’s inability to off-set all or a portion of any Losses against
amounts under Section 3.11(h) or Article 9 of the LipoSonix Agreement that it
would otherwise have been entitled to off-set had Buyer timely complied with all
of its obligations hereunder and under the LipoSonix Agreement (the “Lost Offset
Amount”), such Lost Offset Amount shall reduce dollar-for-dollar the amount of
any Losses to which Seller is otherwise obligated to indemnify Buyer under
Article 9 of this Agreement with respect to any indemnification claims
thereunder;

(x) consistent with the foregoing provisions of this Section 6.13, for the
avoidance of doubt, Buyer shall not be deemed to have suffered a Loss for
purposes of Article 9 of this Agreement, to the extent that: (I) Buyer off-sets
such Losses against Contingent Payments under Section 3.11(h) and Article 9 of
the LipoSonix Agreement (including future Contingent Payments) or (II) Buyer was
otherwise entitled to off-set such Losses against the Contingent Payments under
Section 3.11(h) and Article 9 of the LipoSonix Agreement (including future
Contingent Payments) but failed to timely and properly exercise such off-set
rights; and

(xi) the Parties agree to provide each other with copies of all notices provided
under Article 9 or Section 3.11(h) of the LipoSonix Agreement to any third
Person with respect to any indemnification claims or effort to exercise off-set
rights thereunder.

 

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(c) In the event that Buyer submits an indemnification claim under Article 9 of
the LipoSonix Agreement, including on behalf of the “Surviving Corporation” (as
such term is defined in the LipoSonix Agreement), Seller agrees to provide (or
if requested by Buyer, join with Buyer in providing) such notices as reasonably
requested by Buyer in order to preserve and effectuate the off-set rights set
forth in the LipoSonix Agreement with respect thereto.

Section 6.14 Control of Business. Subject to the terms of this Agreement, Buyer
acknowledges on behalf of itself and its Affiliates and its and their directors,
officers, employees, Affiliates, agents, representatives, successors and assigns
that the operation of the Company remain in the dominion and control of Seller,
as applicable, until the Closing and that none of the foregoing Persons will
provide, directly or indirectly, any directions, orders, advice, aid, assistance
or information to any director, officer or employee of the Company, as
applicable, except as specifically contemplated or permitted by this Article 6
or as otherwise consented to in advance by an executive officer of Seller, as
applicable.

Section 6.15 Seller Marks. Notwithstanding anything in this Agreement to the
contrary, Buyer acknowledges and agrees that Buyer does not possess and is not
obtaining pursuant to this Agreement, any rights in, or to use (whether by
license or otherwise), the name “Medicis” or any service marks, trademarks,
trade names, identifying symbols, logos, emblems, signs, insignia or Internet
domain names related thereto or containing or comprising any of the foregoing,
including any transliterations thereof or any name or mark confusingly similar
thereto (collectively, the “Seller Marks”). Buyer acknowledges and agrees that
as between Buyer, on the one hand, and Seller and its Affiliates, on the other
hand, all right, title and interest in and to the Seller Marks are owned
exclusively by Seller and its Affiliates. Upon the Closing, Buyer shall
(a) cease any and all use of all Seller Marks in any and all forms (whether used
alone, in a stylized version or with other marks or designs), on any and all
items and materials including, without limitation, any websites, Internet domain
names, business cards, schedules, stationery, packaging materials, displays,
signs, promotional materials, manuals, forms, computer software and other
business documents and materials (“Documents and Materials”); and (b) destroy,
remove or replace all Seller Marks from all Documents and Materials of any type
and regardless of form or format that are in the possession or control of Buyer.

Section 6.16 Audit and Preparation of Company Financial Statements. From and
after the date hereof, Seller and Buyer shall cooperate in the negotiation of a
letter agreement to be entered into by Seller and Buyer governing the terms and
conditions of Seller’s cooperation with Buyer in connection with Buyer’s
obligation (if any) to prepare and file a Current Report on Form 8-K containing
the information required therein, including the audited and unaudited financial
statements of the Company required by Rule 3-05 of Regulation S-X of the
Securities and Exchange Commission (the “SEC”) together with the unqualified
audit opinion of Ernst & Young LLP, Seller’s registered independent accounting
firm, and the pro forma financial information with respect to the transactions
contemplated by this Agreement to the extent required by Article 11 of
Regulation S-X of the SEC.

Section 6.17 Buyer Financing. From and after the date hereof, Buyer shall use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to arrange
and obtain the proceeds of the revolving line of credit and term loan as
described in the letter from Silicon Valley Bank dated

 

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September 7, 2011 and addressed to Buyer, including using its commercially
reasonable efforts to: (i) enter into definitive agreements with respect thereto
on the terms and conditions contained in the letter as promptly as practicable
after the date hereof and (ii) satisfy on a timely basis all conditions
applicable to Buyer that are within Buyer’s control in such definitive
agreements.

Section 6.18 Transition Services Agreement. Prior to the Closing, the Parties
shall use commercially reasonable efforts to negotiate and enter into a
transition services agreement on terms reasonably acceptable to the Parties,
pursuant to which Seller would provide certain temporary services to the Company
after the Closing on a transitional basis in order to avoid interruption of the
Company’s business.

Section 6.19 No Use of Corporate Name. On the Closing Date or the first Business
Day after the Closing Date, Buyer shall cause the Company to change its name
from “Medicis Technologies Corporation” to a name that does not contain the word
“Medicis” or any transliterations thereof or any name confusingly similar
thereto, and deliver evidence that Buyer has made the filing required pursuant
to this sentence with the Secretary of State of the State of Delaware and that
the filing has become effective as of the Closing Date or such first Business
Day in accordance with the DGCL.

ARTICLE 7

CONDITIONS

Section 7.1 Conditions to Each Party’s Obligations. The respective obligations
of each Party to consummate the Contemplated Transactions shall be subject to
the satisfaction or waiver at or prior to the Closing of the following
conditions:

(a) HSR Act; Foreign Competition Laws. Any applicable waiting period under the
HSR Act relating to the Contemplated Transactions, if any, shall have expired or
been terminated and any approvals required under applicable Foreign Competition
Laws shall have been obtained.

(b) No Governmental Restriction, Etc. There shall not be in effect any Order
asserted by any Governmental Authority of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the Contemplated
Transactions; provided, that prior to asserting the failure of this condition
the Party asserting its failure shall have used its reasonable best efforts to
have such Order vacated.

Section 7.2 Additional Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the Contemplated Transactions shall also be subject to the
satisfaction or waiver at or prior to the Closing of the following conditions:

(a) Representations and Warranties. The representations and warranties of Seller
contained in this Agreement (which shall, for purposes of this Section 7.2(a),
be read without any qualification contained therein as to materiality, including
the words “material” or “Material Adverse Effect”) shall be true and correct on
the date hereof and on and as of the Closing, with the same effect as if made on
and as of the Closing (other than such representations

 

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that are made as of a specified date, which shall be true and correct as of such
date), except where failures of such representations and warranties to be so
true and correct have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company;
provided, however, that the representations and warranties of Seller contained
in Sections 4.1, 4.2, 4.3(a) and 4.4 shall be true and correct in all material
respects on the date hereof and on and as of the Closing, with the same effect
as if made on and as of the Closing (other than such representations that are
made as of a specified date, which shall be true and correct in all material
respects as of such date). Buyer shall have received a certificate to such
effect signed by an authorized officer of Seller.

(b) Agreements and Covenants. Seller shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing; and Buyer
shall have received a certificate to such effect signed by an authorized officer
of Seller.

(c) No Material Adverse Change. There shall not have occurred any fact, event,
change, development, circumstance or effect which, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect on the Company.

(d) Resignation of Directors and Officers. Seller shall have received letters of
resignation, effective as of the Closing, from each of the directors and
officers of the Company.

(e) FIRPTA. Seller shall have delivered to Buyer written certification of the
non-foreign status of Seller within the meaning of, and in accordance with the
provisions of, Treasury Regulations § 1.1445-2(h)(2).

(f) No Governmental Restriction, Etc. There shall not be any pending action,
suit or proceeding asserted by any Governmental Authority (i) challenging or
seeking to restrain or prohibit the consummation of the Contemplated
Transactions or (ii) seeking to require Buyer to take any of the actions
specified in clauses (A) through (D) of Section 6.4(d) that would be material to
the business or financial condition of Buyer and its Subsidiaries, taken as a
whole, or material to the business or financial condition of the Company.

Section 7.3 Additional Conditions to Obligations of Seller. The obligation of
Seller to consummate the Contemplated Transactions by this Agreement shall also
be subject to the satisfaction or waiver at or prior to the Closing of the
following conditions:

(a) Representations and Warranties. The representations and warranties of Buyer
contained in this Agreement (which shall, for purposes of this Section 7.3(a),
be read without any qualification contained therein as to materiality, including
the words “material” or “Material Adverse Effect”) shall be true and correct on
the date hereof and on and as of the Closing, with the same effect as if made on
and as of the Closing (other than such representations that are made as of a
specified date, which shall be true and correct as of such date), except where
failures of such representations and warranties to be so true and correct have
not had, and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Buyer. Seller shall have received a
certificate to such effect signed by an authorized officer of Buyer.

 

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(b) Agreements and Covenants. Buyer shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing; and Seller
shall have received a certificate to such effect signed by an authorized officer
of Buyer.

ARTICLE 8

TERMINATION, AMENDMENT AND WAIVER

Section 8.1 Termination. This Agreement may be terminated and the Contemplated
Transactions may be abandoned at any time prior to the Closing:

(a) By mutual written consent of the Parties;

(b) By either Buyer or Seller if the Closing shall not have occurred on or
before January 11, 2012 (as the same may be extended pursuant to this
Section 8.1(b), the “End Date”); provided, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any Party whose
willful failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to have occurred on or
before such date; and provided, further, that if the consummation of the
Contemplated Transactions is subject to the notification requirement and waiting
period under the HSR Act or any applicable Foreign Competition Laws and the
expiration of the applicable waiting period under the HSR Act or any applicable
Foreign Competition Laws has not been obtained by the End Date, the End Date
shall be automatically extended, without further action of the Parties, until
March 12, 2012; or

(c) By either Buyer or Seller, if a Court or Governmental Authority shall have
issued an Order or taken any other action, in each case which has become final
and non-appealable and which restrains, enjoins or otherwise prohibits the
transactions contemplated herein; provided, that the issuance of such final,
non-appealable Order shall not be attributable to the breach of this Agreement
by the Party seeking termination pursuant to this Section 8.1(c);

(d) By Buyer, if Buyer is not in breach of its obligations under this Agreement,
and if (i) at any time that any of the representations and warranties of Seller
herein become untrue or inaccurate such that Section 7.2(a) would not be
satisfied (treating such time as if it were the Closing for purposes of this
Section 8.1(d)) or (ii) there has been a breach on the part of Seller of any of
its covenants or agreements contained in this Agreement such that Section 7.2(b)
would not be satisfied (treating such time as if it were the Closing for
purposes of this Section 8.1(d)), and, in both case (i) and case (ii), such
breach (if curable) has not been cured within thirty (30) days after notice to
Seller by Buyer; provided, however, that no such cure period shall be required
for a breach which by its nature cannot be cured; or

(e) By Seller, if it is not in breach of its obligations under this Agreement,
and if (i) at any time that any of the representations and warranties of Buyer
herein become untrue or inaccurate such that Section 7.3(a) would not be
satisfied (treating such time as if it were the Closing for purposes of this
Section 8.1(e)) or (ii) there has been a breach on the part of Buyer of any of
their respective covenants or agreements contained in this Agreement such that
Section 7.3(b) would not be satisfied (treating such time as if it were the
Closing for purposes of

 

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this Section 8.1(e)), and, in both case (i) and case (ii), such breach (if
curable) has not been cured within thirty (30) days after written notice to
Buyer by Seller; provided, however, that no such cure period shall be required
for a breach which by its nature cannot be cured.

Section 8.2 Effect of Termination.

(a) In the event of the termination of this Agreement pursuant to Section 8.1
(which termination will be effective immediately upon the delivery of written
notice of the terminating Party to the other Parties hereto), this Agreement
(other than this Section 8.2 (Effect of Termination) and Sections 6.3 (Access to
Information; Confidentiality), 6.7 (Public Announcements) and 11.1 through 11.10
(Miscellaneous) and any related definitional provisions herein, which shall
survive such termination) will forthwith become void and be of no further force
and effect, and there will be no liability on the part of the Parties or any of
their respective officers or directors to the other and all rights and
obligations of any Party hereto will cease, except that nothing herein will
relieve any Party from liability for any Intentional Breach by such Party, prior
to termination of this Agreement in accordance with its terms, of any
representation, warranty, covenant or agreement contained in this Agreement.

Section 8.3 Amendment. Any provision of this Agreement may be amended or waived
prior to the Closing if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by Seller and Buyer or in the case of a
waiver, by the Party against whom the waiver is to be effective.

Section 8.4 Waiver. At any time prior to the Closing, Buyer, on the one hand,
and Seller, on the other, may, to the extent permitted by Law, extend the time
for the performance of any of the obligations or other acts required by the
other Party hereunder, waive any inaccuracies in the representations and
warranties made to such Party and contained herein or in any document delivered
pursuant hereto and waive compliance with any of the agreements or conditions
for the benefit of such Party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the Party
or Parties to be bound thereby. For the avoidance of doubt, no such waiver
granted pursuant to the foregoing shall limit an Indemnified Person’s right to
indemnification under Article 9 with respect to the matter waived, except to the
extent specified in such waiver.

ARTICLE 9

INDEMNIFICATION

Section 9.1 Survival; Time Limitation. All representations, warranties,
covenants and obligations in this Agreement will survive the Closing and the
consummation of the Contemplated Transactions, subject to the following:

(a) If the Closing occurs, Seller will have indemnification obligations under
this Article 9, subject to Section 9.7, with respect to (i) any breach, untruth
or inaccuracy of any representation or warranty of Seller contained in Article 4
of this Agreement (other than the representations and warranties in
Sections 4.3, 4.4, 4.18 and 4.29 of this Agreement, as to which a Claim may be
made at any time, and the representations and warranties in Section 4.14, as to

 

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which a Claim may be made until ninety (90) days after the expiration of the
applicable statute of limitations) or (ii) any Claim for indemnification
pursuant to Section 9.2(a)(ii) (except in respect of an Intentional Breach by
Seller of the covenants or agreements described in such Section),
Section 9.2(a)(vii) or Section 9.2(a)(viii), only if on or before the twelve
(12) month anniversary of the Closing Date, Buyer notifies Seller as set forth
in Sections 9.4 or 9.5, as applicable, of this Agreement.

(b) If the Closing occurs, Buyer will have indemnification obligations under
this Article 9, subject to Section 9.7, with respect to any breach, untruth or
inaccuracy of any representation or warranty of Buyer contained in Article 5 of
this Agreement (other than the representations and warranties in Sections 5.2,
5.5 through 5.9 of this Agreement, as to which a Claim may be made at any time),
only if on or before the twelve (12) month anniversary of the Closing Date,
Seller notifies Buyer as set forth in Sections 9.4 or 9.5, as applicable, of
this Agreement.

Section 9.2 Indemnification; Remedies.

(a) Subject to the limitations set forth in this Article 9, Buyer and its
Affiliates (including, from and after the Closing, the Company) and each of
their respective officers, directors, agents, representatives, employees,
successors and permitted assigns (hereinafter referred to individually as a
“Buyer Indemnified Person” and collectively as “Buyer Indemnified Persons”)
shall be indemnified by Seller, as set forth in this Article 9, from and against
any and all amounts payable, payments, losses, damages, claims, demands, actions
or causes of action, liabilities, settlements, judgments, costs and expenses,
including interest, penalties, fines and fees (including reasonable attorneys’
fees and costs of Claims) (collectively, “Losses”), arising out of or resulting
from any of the following matters:

(i) the breach, untruth or inaccuracy of any representation or warranty of
Seller contained in Article 4 of this Agreement or in any schedule, exhibit or
certificate delivered by Seller pursuant hereto, determined in each case and for
all purposes without regard to any materiality (including the word “material”),
Material Adverse Effect or similar qualifier contained therein (other than
Sections 4.6(a) and 4.8(a), for which breaches, untruths or inaccuracies shall
be determined without disregarding any materiality (including the word
“material”), Material Adverse Effect or similar qualifier contained therein);

(ii) the breach or nonperformance by Seller of any of its covenants or
agreements contained in this Agreement to be performed prior to or at the
Closing, determined in each case and for all purposes without regard to any
materiality (including the word “material”), Material Adverse Effect or similar
qualifier contained therein;

(iii) the breach or nonperformance by Seller of any of its covenants or
agreements contained in this Agreement to be performed after the Closing,
determined in each case and for all purposes without regard to any materiality
(including the word “material”), Material Adverse Effect or similar qualifier
contained therein;

(iv) the following Taxes and, except as otherwise provided in Section 10.3, any
Losses incurred in contesting or otherwise in connection with any such Taxes:
(A)

 

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Taxes imposed on the Company with respect to Tax periods ending on or before the
Closing Date; (B) with respect to Tax periods beginning before the Closing Date
and ending after the Closing Date, Taxes imposed on the Company which are
allocable, pursuant to Section 10.1, to the portion of such period ending on the
Closing Date; (C) Taxes of any Person attributable to any taxable period for
which the Company (or any predecessor or subsidiary thereof) is held liable
under Treasury Regulations Section 1.1502-6 (or any similar provision of state,
local or foreign law) by reason of the Company (or any predecessor or
subsidiary) being (or having been) included in any consolidated, affiliated,
combined, aggregate or unitary group at any time before the Closing Date;
(D) Taxes imposed on any Person other than the Company for which the Company is
liable under an agreement entered into on or before the Closing Date; (E) any
Taxes imposed in connection with the transactions contemplated by this Agreement
(including by reason of the Company ceasing to be a member of any Affiliated
Group); and (F) Taxes imposed on the Company, as a result of any breach of
warranty or misrepresentation under Section 4.14; provided, that payments under
this paragraph shall only be made to the extent that the amount exceeds any
accrual or reserve for Taxes included in the calculation of Final Working
Capital;

(v) the breach or nonperformance by Seller of its obligations set forth in the
LipoSonix Agreement;

(vi) matters with respect to which and to the extent that Seller or its
Affiliates are entitled to indemnification pursuant to Article 9 of the
LipoSonix Agreement, only if and to the extent that (A) a Buyer Indemnified
Person is not otherwise entitled to indemnification under the LipoSonix
Agreement and (B) such Losses are off-set against Contingent Payments under
Section 3.11(h) and Article 9 of the LipoSonix Agreement;

(vii) the breach, untruth or inaccuracy of any representation or warranty of
Seller, or the breach or nonperformance by MAC, of any of its covenants or
agreements, contained in the Asset Purchase Agreement;

(viii) any claim based upon breach of product warranty, strict liability in
tort, negligent design or manufacture of product, or any other product liability
claim (whether in tort, contract or otherwise), arising from the materials,
design, testing, manufacture, packaging or labeling (including instructions for
use) with respect to any Product sold or manufactured by the Company prior to
Closing; and

(ix) any amounts payable to any director, officer, employee, agent, consultant
or advisor of the Company as a result of announcement or the consummation of the
transactions contemplated hereby, including change-in-control payments (whether
triggered by the change-in-control alone or in combination with a later
termination of employment), severance payments, retention or “stay” bonuses,
special or closing bonuses or similar payments, in each case that the Company or
Buyer is or will become contractually obligated to pay under any Contract with
the Company or Seller.

(b) Subject to the limitations set forth in this Article 9, Seller and its
Affiliates and each of their respective officers, directors, agents,
representatives, employees, successors and permitted assigns (hereinafter
referred to individually as a “Seller Indemnified Person” and collectively as
“Seller Indemnified Persons”) shall be indemnified by Buyer, as set forth in
this Article 9 from and against any and all Losses arising out of or resulting
from any of the following matters:

 

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(i) the breach, untruth or inaccuracy of any representation or warranty of Buyer
contained in Article 5 of this Agreement or in any schedule, exhibit or
certificate delivered by Buyer pursuant hereto, determined in each case and for
all purposes without regard to any materiality (including the word “material”),
Material Adverse Effect or similar qualifier contained therein;

(ii) the breach or nonperformance by Buyer of any of its covenants or agreements
contained in this Agreement, determined in each case and for all purposes
without regard to any materiality (including the word “material”), Material
Adverse Effect or similar qualifier contained therein; and

(iii) the breach or nonperformance by Buyer of the obligations set forth in the
LipoSonix Agreement to make the Contingent Payments as set forth in the
LipoSonix Agreement.

(c) Nothing in this Agreement shall limit the liability of any Party for any
breach of any representation, warranty, covenant or agreement in this Agreement
if this Agreement is terminated.

Section 9.3 Calculation of Losses; Indemnification Limitations.

(a) For the purposes of calculating the amount of Losses pursuant to
Section 9.2(a)(i) and Section 9.2(b)(i), the representations and warranties in
this Agreement shall be read without any materiality (including the word
“material”), Material Adverse Effect or similar qualifiers.

(b) Subject to Section 9.7, the Buyer Indemnified Persons or the Seller
Indemnified Persons (each, an “Indemnified Person”), as the case may be, shall
not be entitled to indemnification pursuant to Sections 9.2(a)(i) (except in
respect of the representations and warranties made under Sections 4.3, 4.4,
4.14, 4.18 and 4.29, as to which the limitation in this Section 9.3(b) shall not
apply), 9.2(a)(ii) (except in respect of an Intentional Breach by Seller of the
covenants or agreements described in such Section, as to which the limitation in
this Section 9.3(b) shall not apply), 9.2(a)(iii) (except in respect of an
Intentional Breach by Seller of the covenants or agreements described in such
Section, as to which the limitation in this Section 9.3(b) shall not apply),
9.2(a)(vii), 9.2(a)(viii) and 9.2(b)(i) (except in respect of the
representations and warranties made under Sections 5.2, 5.5 through 5.9, as to
which the limitation in this Section 9.3(b) shall not apply) for any Losses
until the aggregate amount of all Losses incurred by the Buyer Indemnified
Persons or the Seller Indemnified Persons, as the case may be, exceeds *** (the
“Threshold”), in which case the Indemnified Persons shall be entitled to
indemnification for the full amount of Losses including the Threshold (i.e.,
back to dollar one); provided, however, that only individual Claims with a value
in excess of *** shall be included in the Threshold or be counted for
determining the amount of Losses to be indemnified to the Buyer Indemnified
Persons or the Seller Indemnified Persons, as the case may be.

 

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(c) For the avoidance of doubt, the limitations in Section 9.3(b) shall not
apply to any Claim for indemnification pursuant to Sections 9.2(a)(ii) and
9.2(a)(iii) in respect of an Intentional Breach by Seller of the covenants or
agreements described in such Sections, Sections 9.2(a)(iv) through (vi),
Section 9.2(a)(ix) and Sections 9.2(b)(ii) and 9.2(b)(iii).

(d) Notwithstanding anything in this Agreement to the contrary, subject to
Section 9.7, the right of the Buyer Indemnified Persons to seek indemnification
(i) pursuant to Section 9.2(a)(i) (except in respect of the representations and
warranties made under Sections 4.3, 4.4, 4.14, 4.18 and 4.29),
Section 9.2(a)(ii) (except in respect of an Intentional Breach by Seller of the
covenants or agreements described in such Section), Section 9.2(a)(iii) (except
in respect of an Intentional Breach by Seller of the covenants or agreements
described in such Section), Section 9.2(a)(vii) and Section 9.2(a)(viii), shall
be limited to and capped at an amount equal to the sum of (x) *** of the sum of
the Purchase Price and the FDA Milestone Payment (to the extent actually paid by
Buyer to Seller) and (y) *** of the Seller Contingent Payments, other than the
FDA Milestone Payment, actually paid by Buyer to Seller hereunder and shall be
satisfied exclusively by off-setting against the Seller Contingent Payments; and
(ii) pursuant to (A) Section 9.2(a)(i) with respect to the representations and
warranties made under Sections 4.3(a), 4.4, 4.18 and 4.29 and
(B) Section 9.2(a)(v), shall be limited to and capped at an amount equal to ***
of the sum of (x) the Purchase Price and (y) the Seller Contingent Payments
actually paid by Buyer to Seller hereunder; provided, that, in the event that
Buyer is entitled to indemnification pursuant to Articles 9, but its recovery is
limited by clause (i) or (ii) of this sentence, Buyer shall be entitled to
recover any unrecovered amount as to which Buyer is entitled to indemnification
pursuant to Article 9 from future Contingent Payments, subject to limitations
set forth in clauses (i) and (ii) of this sentence.

(e) Subject to Section 9.7, any Claim required to be made by Seller or Buyer, as
the case may be, on or prior to the expiration of the applicable survival period
set forth in Section 9.1, and not made, shall be irrevocably and unconditionally
released and waived by such party.

(f) The amount of any Losses for which indemnification is provided under this
Article 9 shall be net of any amounts actually recovered or recoverable by the
Indemnified Party under insurance policies or otherwise with respect to such
Losses and, to the extent applicable, shall be subject to the obligations and
limitations set forth in Section 6.13. The Indemnified Party shall use
commercially reasonable efforts to obtain full recovery under all insurance
policies covering any Losses to the same extent as it would if such Losses were
not subject to indemnification hereunder. In the event that an insurance or
other recovery is made by any party with respect to any Losses for which any
such person has been indemnified hereunder and has received funds in the amount
of the Losses or portion thereof (including under the off-set provisions of the
LipoSonix Agreement), then a refund equal to the aggregate amount of the
recovery shall be made promptly to the Indemnifying Party.

Section 9.4 Notice of Claims. In the event any Indemnified Person wishes to
pursue its, his or her rights to indemnification under this Article 9, if the
matter does not involve a Third Party Claim under Section 9.5 hereof, the
Indemnified Person shall give written notice thereof to the Indemnifying Party
stating that an indemnification Claim or Claims pursuant to Section 9.2 or any
other provision of this Agreement is being made, describing the basis for such
Claim with

 

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reasonable specificity and specifying in reasonable detail the Losses in respect
of such Claim (provided that the Indemnified Person shall not be bound by any
estimate of Losses made in good faith and contained in such description). Within
thirty (30) days from the receipt of such notice, the Indemnifying Party shall
provide a written notice to such Indemnified Person indicating whether the
Indemnifying Party objects to such Claim. If no such objection notice is
received by such Indemnified Person within such thirty (30) day period, the
Indemnifying Party waives any objection to such Indemnified Person being
indemnified for such Claim pursuant to this Agreement under this Article 9. If
such notice of objection is provided within such period, the Indemnifying Party
and the Indemnified Person or its, his or her representative(s) shall then
attempt in good faith for thirty (30) days to agree upon the rights of the
respective parties with respect to each of such Claims. If no such resolution
can be reached after good faith negotiation, such Indemnified Person or the
Indemnifying Party may institute proceedings in a court of competent
jurisdiction (in accordance with Section 11.8) to resolve any such dispute, and
each such Indemnified Person and the Indemnifying Party, subject to
Section 6.13, shall seek to resolve such dispute in as expeditious a manner as
practicable. In the case of any such proceeding, the Indemnified Person and the
Indemnifying Party shall each be responsible for the payment of its own fees and
expenses.

Section 9.5 Third Party Claims.

(a) In the event that an Indemnified Person is made a defendant in or party to
any Claim instituted by any third party, the liability or the costs or expenses
of which are Losses indemnifiable pursuant to this Article 9 (any such third
party Claim being referred to as a “Third Party Claim”), such Indemnified Party
shall give the party from whom indemnification hereunder is sought (the
“Indemnifying Party”) prompt written notice thereof specifying in reasonable
detail the Losses with respect to such Third Party Claim (including a good faith
estimate of such Losses, if reasonably available); provided, however, that the
delay or failure to give such notice shall only relieve the Indemnifying Party
of its indemnification obligations under this Article 9 to the extent, if at
all, that the Indemnifying Party is materially prejudiced by reasons of such
delay or failure; and provided further, that such written notice must in all
events be provided on or before the expiration of the applicable survival period
set forth in Section 9.1. Thereafter, the Indemnified Party shall deliver to the
Indemnifying Party, promptly following the Indemnified Party’s receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim, other than privileged
documents and those notices and documents separately addressed to the
Indemnifying Party.

(b) The Indemnifying Party will have the right to assume the defense, at its own
expense and by counsel reasonably acceptable to the Indemnified Party, of the
Indemnified Party against any Third Party Claim so long as (i) the Indemnifying
Party gives written notice to the Indemnified Party within thirty (30) days
after it first receives notice of such Third Party Claim pursuant to
Section 9.5(a) that it will defend the Indemnified Party against the Third Party
Claim, (ii) the Third Party Claim involves only money damages and does not seek
an injunction or other equitable relief against the Indemnified Party, (iii) the
Indemnified Party has not been advised by counsel that a conflict is likely to
exist if the same counsel were to represent the Indemnified Party and the
Indemnifying Party in connection with conducting the defense of the Third Party
Claim, (iv) the Third Party Claim does not relate to or otherwise arise in
connection any criminal or regulatory enforcement action, (v) the Third Party
Claim does not relate to the

 

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payment or non-payment of Taxes and (vi) the Indemnifying Party conducts the
defense of the Third Party Claim diligently. If the Indemnifying Party does not,
within fifteen (15) days of it first receiving notice of a Third Party Claim
pursuant to Section 9.5(a), elect to assume the defense of such Third Party
Claim, or if the Indemnified Party assumes such defense and, thereafter, any of
the conditions in subclauses (i) through (vi) above of this Section 9.5(b)
exist, the applicable Indemnified Party may assume the defense of, defend
against, negotiate, settle or otherwise deal with such Third Party Claim, at the
Indemnifying Party’s expense. If the applicable Indemnified Party defends any
Third Party Claim pursuant to the preceding sentence or pursuant to subclauses
(i) through (vi) above of this Section 9.5(b), then the Indemnifying Party shall
reimburse the applicable Indemnified Party for the reasonable costs and expenses
of defending such Third Party Claim upon submission of periodic bills, and the
Indemnifying Party shall cooperate in the defense of such Third Party Claim. If
the Indemnifying Party assumes the defense of any Third Party Claim pursuant to
and in accordance with this Section 9.5(b), the Indemnifying Party shall keep
the Indemnified Parties apprised of the status of such Third Party Claim and any
significant developments with respect thereto and the applicable Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim.

(c) If the Indemnifying Party assumes the defense of a Third Party Claim
pursuant to and in accordance with Section 9.5(b), the Indemnified Parties shall
cooperate in the defense or prosecution thereof and the Indemnified Parties
shall agree to any settlement, compromise or discharge of a Third Party Claim
that the Indemnifying Party may recommend if such settlement, compromise or
discharge (i) does not require any payment or other action by, or limitation
(including injunctive or any other equitable relief) on, any Indemnified Party
and (ii) fully releases such Indemnified Parties in connection with such Third
Party Claim. In no event shall the Indemnifying Party admit any liability with
respect to such Third Party Claim or settle, compromise, pay or discharge such
Third Party Claim without the prior written consent of the Indemnified Parties.

(d) Notwithstanding the foregoing provisions of Sections 9.5(b) and (c), the
provisions of Section 6.13(b)(viii) shall apply in lieu of the provisions of
Sections 9.5(b) and (c) to the extent the same Third Party Claim covered under
this Section 9.5(b) is also the basis for an indemnification claim by a Medicis
Indemnitee under the LipoSonix Agreement, as contemplated in Section 6.13.

Section 9.6 Other Matters. Notwithstanding anything in this Agreement, any
amounts payable pursuant to the indemnification obligations under this Article 9
shall be paid without duplication and in no event shall any Party hereto be
indemnified under different provisions of this Agreement for the same Losses.
Without limiting the generality of the foregoing, Buyer shall make no claim for
indemnification under this Article 9 in respect of any matter that is taken into
account in the calculation of any adjustment to the Purchase Price pursuant to
Section 2.4 or for which Buyer was entitled to offset against Contingent
Payments pursuant to Section 3.11(h) and Article 9 of the LipoSonix Agreement.

Section 9.7 Exclusive Remedies. Notwithstanding anything to the contrary herein,
the Parties hereby agree that, except for Claims based on fraud, from and after
the Closing, the exclusive remedy for any breach of a representation or
warranty, covenant or agreement

 

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contained in this Agreement shall be the indemnification provisions set forth in
this Article 9; provided, however, that nothing in this Article 9 shall prohibit
any Party from seeking specific performance or injunctive relief against any
other Party in respect of a breach by such other Party of any covenant
hereunder.

Section 9.8 No Special, Punitive or Consequential Damages. Notwithstanding
anything to the contrary in this Agreement, except in the case of fraud, no
Party shall be liable to or otherwise responsible for special, punitive or
consequential damages, other than: (i) special, punitive or
consequential damages awarded to a third party pursuant to a Third Party Claim;
and (ii) consequential damages awarded to a Party pursuant to a Claim for
indemnification under this Article 9 pursuant to Section 9.2(a)(i) (other
than with respect of the representations and warranties made under Sections 4.3,
4.14, 4.18 and 4.29) or pursuant to Section 9.2(b)(i).

ARTICLE 10

TAX

Section 10.1 Tax Allocation. In the case of Taxes that are payable with respect
to a taxable period that begins before the Closing Date and ends after the
Closing Date, the portion of any such Tax that is allocable to the portion of
the period ending on the Closing Date shall be:

(a) in the case of Taxes that are either (x) based upon or related to income,
receipts, payroll or other compensation for services or (y) imposed in
connection with any sale or other transfer or assignment of property (real or
personal, tangible or intangible) (other than conveyances pursuant to this
Agreement), deemed equal to the amount which would be payable if the taxable
year ended with the Closing Date (except that, solely for purposes of
determining the marginal tax rate applicable to income or receipts during such
period in a jurisdiction in which such tax rate depends upon the level of income
or receipts, annualized income or receipts may be taken into account if
appropriate for an equitable sharing of such Taxes); and

(b) in the case of Taxes not described in Section 10.1(a) that are imposed on a
periodic basis and measured by the level of any item, deemed to be the amount of
such Taxes for the entire period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding period)
multiplied by a fraction the numerator of which is the number of calendar days
in the period ending on the Closing Date and the denominator of which is the
number of calendar days in the entire period.

Section 10.2 Returns and Payments.

(a) Seller shall prepare and file in a timely manner all Tax Returns relating to
the Company that are due on or before the Closing Date and all income Tax
Returns for Tax years of the Company ended on or before the Closing Date
regardless of whether such income Tax Returns are filed before or after the
Closing Date. Seller shall pay in a timely manner all Taxes that are due with
respect to such Tax Returns. Such Tax Returns shall be prepared, and each item
thereon treated, in a manner consistent with past practices employed with
respect to the Company and shall utilize accounting methods, elections and
conventions that do not have the effect of distorting the allocation of income
or expense between the Tax periods covered by

 

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such Tax Returns and subsequent Tax periods. Buyer shall have the right to
review such Tax Returns insofar as they pertain to the Company for fifteen
(15) days prior to the filing of such Tax Returns, and Seller agrees to discuss
with Buyer in good faith the items reflected on such Tax Return and any
adjustments reasonably requested by Buyer.

(b) Except as otherwise provided in Section 10.2(a), Buyer shall prepare and
file or cause to be prepared and filed in a timely manner all Tax Returns
relating to the Company with respect to Tax periods beginning before the Closing
Date (“Pre-Closing Date Tax Returns”), as well as all Tax Returns relating to
the Company with respect to Tax periods beginning on or after the Closing Date.
Pre-Closing Date Tax Returns shall be prepared, and each item thereon treated,
in a manner consistent with past practices employed with respect to the Company
(except to the extent counsel for Buyer determines there is no reasonable basis
in Law therefor or determines that a Tax Return cannot be so prepared and filed
or an item so reported without being subject to penalties) and shall utilize
accounting methods, elections and conventions that do not have the effect of
distorting the allocation of income or expense between the Tax periods covered
by such Tax Returns and subsequent Tax periods. With respect to any Pre-Closing
Date Tax Return, Seller shall have the right to review such Tax Return for
fifteen (15) days prior to the filing of such Tax Return, and Buyer shall
discuss in good faith the items reflected on such Tax Return and any adjustments
reasonably requested by Seller. At the same time that Buyer provides to Seller
as copy of a Pre-Closing Date Tax Return for Seller’s review, Buyer shall also
provide to Seller a written schedule of allocation calculations (if applicable)
pursuant to Section 10.1. If the Parties are unable in good faith to agree on
such allocation, the dispute shall be submitted to a Qualified Accountant for
its determination, which shall be binding upon the Parties (and the Parties
shall bear equally the costs of such determination). Buyer shall timely pay any
Taxes due with respect to a Pre-Closing Date Tax Return and Seller shall
promptly reimburse Buyer for Taxes allocable (pursuant to Section 10.1) to the
portion of the Taxable period occurring on or before the Closing Date, except to
the extent the Taxes allocable to the period on or before the Closing Date have
been paid previously by Seller or reflected in the determination of Final
Working Capital.

Section 10.3 Contests.

(a) After the Closing Date, Buyer shall promptly notify Seller in writing of any
written notice of a proposed adjustment or claim in an audit or administrative
or judicial proceeding involving Buyer or the Company which, if determined
adversely to the taxpayer, would be grounds for indemnification under Article 9;
provided, however, that a failure to give such notice will not affect Buyer’s
right to indemnification thereunder except to the extent, if any, that, but for
such failure, Seller could have avoided the Tax liability in question.

(b) In the case of an audit or administrative or judicial proceeding that
relates solely to taxable periods ending on or before the Closing Date, Seller
shall have the right at Seller’s expense to participate in and control the
conduct of such audit or proceeding. Seller shall keep Buyer informed of the
progress of any such audit or proceeding, and Buyer also may participate in any
such audit or proceeding at its expense. Seller shall not settle any proceeding
without the consent of Buyer, which consent shall not be unreasonably withheld,
if the settlement would adversely affect the Company. If Seller does not assume
the defense of any such audit or proceeding, Buyer may defend the same in such
manner as it may deem appropriate at its expense, including, but not limited to,
settling such audit or proceeding.

 

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(c) With respect to any other audit or proceeding not controlled by Seller, such
audit or proceeding shall be controlled by Buyer; provided, that Buyer shall
keep Seller apprised of the status of such audit or proceeding and Seller shall
have the right to participate at its own expense in such audit or proceeding.

Section 10.4 Cooperation and Exchange of Information. Seller and Buyer will each
provide the other with such cooperation and information as any of them
reasonably may request of the other in filing any Tax Return, amended Tax Return
or claim for refund, determining a liability for Taxes or a right to a refund of
Taxes, participating in or conducting any audit or other proceeding in respect
of Taxes or making representations to or furnishing information to parties
subsequently desiring to purchase either of the Company or a part of the
business acquired from the Company by Buyer. Such cooperation and information
shall include providing copies of relevant Tax Returns or portions thereof,
together with accompanying schedules, related work papers and documents relating
to rulings or other determinations by Tax authorities. Seller and Buyer shall
(and Buyer after the Closing Date will cause the Company and its Subsidiaries,
if any, to) retain all Tax Returns, schedules and work papers, records and other
documents in their possession relating to Tax matters of the Company and its
Subsidiaries, if any, for the taxable period first ending after the Closing Date
and for all prior taxable periods until the later of (i) the expiration of the
statute of limitations of the taxable periods to which such Tax Returns and
other documents relate, or (ii) six (6) years following the due date (without
extension) for such Tax Returns. Any information obtained under this
Section 10.4 shall be kept confidential except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in conducting
an audit or other proceeding.

Section 10.5 Characterization of Payments. Buyer and Seller agree to treat all
payments made by any of them to or for the benefit of the others (including any
payments to the Company) under the indemnity provisions of this Agreement and
for any misrepresentations or breach of warranties or covenants as adjustments
to the purchase price for Tax purposes and that such treatment shall govern for
purposes hereof except to the extent that the Laws of a particular jurisdiction
provide otherwise, in which case such payments shall be made in an amount
sufficient to indemnify the relevant party on an after-Tax basis.

Section 10.6 Transfer Taxes. All transfer, documentary, sales, use, registration
and any other such Taxes and related fees (including any penalties, interest and
additions to Tax) (“Transfer Taxes”) arising out of or incurred in connection
with this Agreement shall be borne equally by Seller and Buyer. The Party that
is legally required to file a Tax Return relating to Transfer Taxes shall be
responsible for preparing and timely filing such Tax Return.

ARTICLE 11

MISCELLANEOUS

Section 11.1 Fees and Expenses. Except as specifically provided to the contrary
in this Agreement, all costs and expenses incurred in connection with this
Agreement and the

 

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Contemplated Transactions shall be paid by the Party incurring such expenses,
whether or not the transactions contemplated hereby are consummated; provided,
however, that Buyer and Seller shall share equally all out-of-pocket fees and
expenses (including fees and expenses of counsel) payable in connection with
regulatory filings, including under the HSR Act and any applicable Foreign
Competition Laws.

Section 11.2 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested, or by facsimile or telecopier,
as follows:

(a) If to Buyer, to:

Solta Medical, Inc.

25881 Industrial Boulevard

Hayward, CA 94545

Attention: Stephen J. Fanning

Telecopy: (510) 786-6880

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

Wilson Sonsini Goodrich & Rosati

Professional Corporation

One Market, Spear Tower, Suite 3300

San Francisco, CA 94105

Attention: Robert T. Ishii

Telecopy: (415) 947-2099

(b) If to Seller, to:

Medicis Pharmaceutical Corporation

7720 North Dobson Road

Scottsdale, AZ 85256

Attention: Mark A. Prygocki and Seth L. Rodner

Telecopy: (480) 291-8806

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

Hogan Lovells US LLP

Columbia Square

555 Thirteenth Street, N.W.

Washington, DC 20004-1109

Attention: Joseph E. Gilligan

Telecopy: (202) 637-5910

or to such other address as the Party to whom notice is to be given may have
furnished to the other Party in writing in accordance herewith. All such notices
or communications shall be

 

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deemed to be received (i) in the case of personal delivery, nationally
recognized overnight courier or registered or certified mail, on the date of
such delivery, and (ii) in the case of facsimile or telecopier or electronic
mail, upon receipt of the appropriate facsimile or telecopier confirmation.
Communications by electronic mail shall not constitute notice.

Section 11.3 Severability. If any term or other provision of this Agreement, or
the application thereof, is invalid, illegal, void or incapable of being
enforced by any rule of Law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
and the application of such term or provision to other Persons or circumstances
will be interpreted so as reasonably to effect the intent of the Parties hereto.
Any provision of this Agreement held invalid, illegal, void or unenforceable
only in part or degree will remain in full force and effect to the extent not
held invalid, illegal, void or unenforceable.

Section 11.4 Entire Agreement. This Agreement (including all exhibits, annexes
and schedules hereto and thereto) and other documents and instruments delivered
pursuant hereto or thereto constitute the entire agreement and supersede all
prior representations, agreements, understandings and undertakings (other than
the Confidentiality Agreement), both written and oral, among the Parties, or any
of them, with respect to the subject matter hereof and thereof and no Party is
relying on any prior oral or written representations, agreements, understandings
or undertakings (other than the Confidentiality Agreement) with respect to the
subject matter hereof and thereof.

Section 11.5 Assignment. This Agreement shall not be assigned by operation of
Law or otherwise without the prior written consent of the other Party. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.

Section 11.6 Parties in Interest. Subject to Section 11.5 hereof, this Agreement
shall be binding upon and inure solely to the benefit of each Party and each of
their respective permitted successors and assigns, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person, other than the Indemnified Persons who shall be third party
beneficiaries hereof, to the extent set forth in Article 9, any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.

Section 11.7 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of any Party in the exercise of any right hereunder will
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor will any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise available.

Section 11.8 Governing Law; Jurisdiction. This Agreement and all disputes
controversies or claims relating to, arising out of or under, or in connection
with this Agreement and the Contemplated Transactions, including the
negotiation, execution and performance hereunder and thereunder, shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of choice of law or conflicts of law rules or provisions (whether of
the State of

 

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Delaware or any other jurisdiction). Each of the Parties hereto irrevocably and
unconditionally (a) consents to submit itself to the sole and exclusive personal
jurisdiction of the state courts of the State of Delaware or any court of the
United States located in the State of Delaware in connection with any dispute,
claim, or controversy arising out of or relating to this Agreement or the
Contemplated Transactions, (b) agrees that it shall not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, and (c) agrees that it shall not bring any action, suit, or
proceeding in connection with any dispute, claim, or controversy arising out of
or relating to this Agreement or the Contemplated Transactions in any court or
tribunal other than the state courts of the State of Delaware or any court of
the United States located in the State of Delaware. Each of the Parties hereto
further agrees and covenants that if subject matter jurisdiction over any
action, suit, or proceeding in connection with any dispute, claim, or
controversy arising out of or relating to this Agreement or the Contemplated
Transactions exists in the Court of Chancery of the State of Delaware by reason
of Section 111 of the DGCL or if there otherwise exists a good faith basis for
concluding that the Court of Chancery of the State of Delaware would have
subject matter jurisdiction in connection with any such action, suit, or
proceeding, then any such action, suit, or proceeding shall be brought
exclusively in the Court of Chancery of the State of Delaware, and each Party
agrees that it shall not attempt to deny or defeat subject matter jurisdiction
over such action, suit, or proceeding in the Court of Chancery of the State of
Delaware. Each of the Parties hereto irrevocably and unconditionally consents to
service being made through the notice procedures set forth in Section 11.2. Each
of the Parties hereto hereby agrees that service of any process, summons, notice
or document by prepaid certified or registered mail to the respective addresses
set forth in Section 11.2 shall be effective service of process for any action,
suit, or proceeding in connection with any dispute, claim, or controversy
arising out of or relating to this Agreement and any of the Contemplated
Transactions. Nothing herein shall be deemed to limit or prohibit service of
process by any other manner as may be permitted by applicable law. Each of the
Parties hereto hereby agrees that this Agreement involves at least $100,000 and
that this Agreement has been entered into in express reliance on 6 Del. C. §
2708.

Section 11.9 Waiver of July Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE CONTEMPLATED
TRANSACTIONS OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF. EACH OF THE PARTIES HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE CONTEMPLATED TRANSACTIONS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11.9.

Section 11.10 Enforcement of Agreement; Specific Performance. The Parties agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is

 

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accordingly agreed that the Parties shall be entitled to an injunction to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in the state courts of the State of Delaware or any
court of the United States located in the State of Delaware, this being in
addition to any other remedy to which such Party is entitled at law or in
equity.

Section 11.11 Counterparts. This Agreement may be executed and delivered in one
or more counterparts, and by the different Parties hereto in separate
counterparts, each of which when executed and delivered shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement. The exchange of a fully executed Agreement (in counterparts or
otherwise) by facsimile or by electronic delivery in portable document format
(PDF) format shall be sufficient to bind the parties to the terms and conditions
of this Agreement.

Section 11.12 Due Diligence Materials; Seller Disclosure Schedule.

(a) For purposes of this Agreement, the phrase “provided to Buyer” shall mean
the posting by Seller of the various materials, documents and information
produced by Seller throughout Buyer’s due diligence review process to a virtual
data room managed by Seller or otherwise delivered to Buyer or any of its
representatives, up until 5:00 p.m. (Pacific Daylight Time) on Monday,
September 12, 2011.

(b) The Seller Disclosure Schedules include descriptions of certain Contracts
which may not meet the threshold requirements for disclosure that are set forth
in this Agreement. The inclusion of such Contracts does not mean that all
Contracts to which Company is a party are included in the Schedules or that such
Contracts are deemed to be material. Similarly, the Seller Disclosure Schedules
may include certain information that does not meet the minimum standards of
materiality requiring disclosure thereunder. The inclusion of such information
does not mean that all information contained therein is deemed to be material.

[The remainder of this page is intentionally left blank.]

 

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IN WITNESS WHEREOF, Seller and Buyer have executed and delivered this Stock
Purchase Agreement or caused this Stock Purchase Agreement to be executed and
delivered by their respective officers thereunto duly authorized as of the date
first written above.

 

BUYER: SOLTA MEDICAL, INC. By:  

/s/ Stephen J. Fanning

Name:   Stephen J. Fanning Title:   Chairman, President and Chief Executive
Officer

SELLER:   MEDICIS PHARMACEUTICAL CORPORATION

By:  

/s/ Mark A. Prygocki

Name:   Mark A. Prygocki Title:  

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ANNEX I

DEFINITIONS

“Accountant” has the meaning set forth in Section 2.7(f).

“Action” has the meaning set forth in Section 4.21(h)(i).

“Acquisition Proposal” has the meaning set forth in Section 6.2(a).

“Acquiring Person” has the meaning set forth in Section 2.8.

“***” has the meaning set forth in Section ***.

“Additional LipoSonix Contingent Payment” has the meaning set forth in
Section 2.6(a)(i).

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

“Affiliated Group” has the meaning set forth in Section 4.14(c).

“Agreed Contingent Payment Amount” has the meaning set forth in Section 2.7(e).

“Agreement” has the meaning set forth in the Preamble.

“Applicable Non-U.S. Laws and Regulations” has the meaning set forth in
Section 4.22(b)(i).

“Appraiser” has the meaning set forth in Section 2.7(f).

“Approvals” has the meaning set forth in Section 4.1(a).

“Asset Purchase Agreement” has the meaning set forth in the Recitals.

“Base Purchase Price” has the meaning set forth in Section 2.2.

“Business Day” means any day other than a Saturday, Sunday or day on which banks
are permitted to close in the State of New York or the State of Arizona.

“Buyer” has the meaning set forth in the Preamble.

“Buyer Group” means Buyer and its direct and indirect Subsidiaries and
Affiliates, including, after the Closing, the Company.

“Buyer Indemnified Person(s)” has the meaning set forth in Section 9.2(a).

“Buyer Representatives” has the meaning set forth in Section 6.3(a).

 

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“Bylaws” means the Bylaws of the Company.

“***” has the meaning set forth in Section ***.

“Charter” means the Certificate of Incorporation of the Company.

“Claim” means any claim, suit, action, arbitration, cause of action, complaint,
allegation, criminal prosecution, investigation, demand letter, or proceeding,
whether at law or at equity, before or by any Court, Governmental Authority,
arbitrator, other tribunal, or any other Person, and any information request
from a Governmental Authority.

“Closing” has the meaning set forth in Section 3.1.

“Closing Date” has the meaning set forth in Section 3.1.

“COBRA Coverage” has the meaning set forth in Section 4.11(e).

“Code” means the U.S. Internal Revenue Code of 1986, as amended, from time to
time, and the Regulations promulgated and rulings issued thereunder.

“Commercially Reasonable Efforts” has the meaning set forth in
Section 2.6(g)(ii).

“Common Stock” means the Common Stock, par value $0.01, of the Company.

“Company” has the meaning set forth in the Recitals.

“Company Incremental Amount” has the meaning set forth in Section 2.6(a)(ii).

“Confidential Information” means any information (in whatever form, whether
written, oral, electronic or otherwise) concerning the businesses and affairs of
a Disclosing Party and all analyses, compilations, forecasts, studies or other
documents which contain or reflect any such information; provided, however, that
the term “Confidential Information” shall not include (a) information that is or
becomes publicly available other than as a direct or indirect result of
disclosure by a Receiving Party or its Representatives or (b) information that
becomes available to the Receiving Party on a nonconfidential basis from a
source (other than such Disclosing Party or its Representatives) that, to the
Knowledge of such Receiving Party, is not prohibited from disclosing such
information to such Receiving Party by any legal, contractual or fiduciary
obligation to such Disclosing Party.

“Confidentiality Agreement” has the meaning set forth in Section 6.3(b).

“Contemplated Transactions” means all of the transactions and other matters
contemplated by this Agreement.

“Contingent Payments” has the meaning set forth in Section 3.9(b) of the
LipoSonix Agreement.

“Contingent Payment Audit” has the meaning set forth in Section 2.7(c).

 

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“Contingent Payment Certificate” has the meaning set forth in
Section 2.7(b)(ii).

“Contingent Payment Commencement Date” has the meaning set forth in
Section 2.6(a)(iii).

“Contingent Payment Product” has the meaning set forth in Section 2.6(a)(iv).

“Contingent Payment Termination Date” has the meaning set forth in
Section 2.6(a)(v).

“Contingent Payment Year” has the meaning set forth in Section 2.6(a)(vi).

“Contract” means any contract, plan, undertaking, understanding, agreement,
license, sublicense, consent, lease, note, mortgage or other binding commitment,
whether written or oral.

“Control” (including the terms “controlled by” and “under common control with”)
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of stock or other equity or similar interests, as trustee or executor,
by Contract or credit arrangement or otherwise.

“Court” means any court or arbitration tribunal of the United States, any
domestic state, or any foreign country, and any political subdivision or agency
thereof.

“Credit Agreement” means that certain Loan and Security Agreement between
Silicon Valley Bank and Buyer entered into as of March 9, 2009, as amended.

“DGCL” means the General Corporation Law of the State of Delaware.

“Disclosing Party” means a Party that discloses Confidential Information to a
Receiving Party or to any Representative of such Receiving Party.

“Dispute Notice” has the meaning set forth in Section 2.7(d).

“Dispute Period” has the meaning set forth in Section 2.7(d).

“Disputed Contingent Payment Amount” has the meaning set forth in
Section 2.7(e).

“Documents and Materials” has the meaning set forth in Section 6.13.

“EAR” has the meaning set forth in Section 4.25(a).

“Employees” has the meaning set forth in Section 6.5(a).

“Employee Plans” has the meaning set forth in Section 4.11(a).

“End Date” has the meaning set forth in Section 8.1(b).

“Environmental Claims” means all Claims pursuant to Environmental Laws,
including but not limited to, those based on, arising out of or otherwise
relating to: (i) the Remediation, presence or Release of, or exposure to,
Hazardous Materials or other environmental conditions

 

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initiated, existing or occurring prior to the Closing Date at, on, under, above,
from, or about any Real Property or any other real property currently or
formerly owned, leased or operated by the Company or any of its predecessors or
Affiliates; (ii) the off-site Release, treatment, transportation, storage or
disposal prior to the Closing Date of Hazardous Materials originating from the
Real Property or any other real property currently or formerly owned, leased or
operated by the Company or any of its predecessors or Affiliates; (iii) any
violations of Environmental Laws by the Company or any of its predecessors or
Affiliates prior to the Closing Date, including reasonable expenditures
necessary to cause the Company to be in compliance with or resolve violations of
Environmental Laws.

“Environmental Laws” means any and all Laws, Orders, codes, or other legally
enforceable requirement (including, without limitation, common law) of the
United States, or any state, local, municipal or other U.S. Governmental
Authority, regulating, relating to or imposing liability or standards of conduct
concerning Hazardous Materials, or the protection of the environment, human
health, employee health and safety, or natural resources, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. §§ 9601 et seq.

“Environmental Permits” means any and all permits, licenses, registrations,
notifications, exemptions and any other Approvals under any Environmental Laws.

“ERISA” has the meaning set forth in Section 4.11(a).

“ERISA Affiliate” has the meaning set forth in Section 4.11(a).

“Estimated Working Capital” has the meaning set forth in Section 2.4(a).

“Estimated Working Capital Schedule” has the meaning set forth in
Section 2.4(a).

“EU” has the meaning set forth in Section 4.22(b)(i).

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

“FD&C Act” has the meaning set forth in Section 4.22(a)(i).

“FD&C Permits” has the meaning set forth in Section 4.22(a)(x).

“FDA” has the meaning set forth in Section 4.22(a)(i).

“FDA Law and Regulation” has the meaning set forth in Section 4.22(a)(i).

“FDA Milestone” has the meaning set forth in Section 2.6(a)(vii).

“FDA Milestone Payment” has the meaning set forth in Section 2.6(c).

“FDA Milestone Payment Amount” has the meaning set forth in
Section 2.6(a)(viii).

“Federal Health Care Program” has the meaning set forth in 42 U.S.C.
§ 1320a-7b(f).

 

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“Final Working Capital” has the meaning set forth in Section 2.4(b).

“Final Working Capital Schedule” has the meaning set forth in Section 2.4(b).

“Foreign Competition Laws” means any non-U.S. Laws and Orders that are designed
or intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization, lessening of competition or restraint of trade.

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

“GLBA” has the meaning set forth in Section 4.21(f).

“Governmental Authority” means any governmental agency or authority of the
United States, any domestic state, or any foreign country, and any political
subdivision or agency thereof, and includes any authority having governmental or
quasi-governmental powers, including any administrative agency or commission.

“Gross Profit Payment Product” has the meaning set forth in Section 2.6(a)(ix).

“Hazardous Materials” means any wastes, substances, radiation, or materials
(whether solids, liquids or gases): (i) which are hazardous, toxic, infectious,
explosive, radioactive, carcinogenic, or mutagenic; (ii) which are or become
defined as “pollutants,” “contaminants,” “hazardous materials,” “hazardous
wastes,” “hazardous substances,” “chemical substances,” “radioactive materials,”
“solid wastes,” or other similar designations in, or otherwise subject to
regulation under, any Environmental Laws; (iii) the presence of which on the
Real Property cause or threaten to cause a nuisance pursuant to applicable
statutory or common law upon the Real Property or to adjacent properties;
(iv) which contain without limitation polychlorinated biphenyls (“PCBs”), mold,
methyl-tertiary butyl ether (“MTBE”), asbestos or asbestos-containing materials,
lead-based paints, toxic mold, urea-formaldehyde foam insulation, or petroleum
or petroleum products (including, without limitation, crude oil or any fraction
thereof); or (v) which pose a hazard to human health, safety, natural resources,
employees, or the environment.

“HIPAA” has the meaning set forth in Section 4.21(e).

“HITECH” means the Health Information Technology for Economic and Clinical
Health Act provisions of the American Recovery and Reinvestment Act of 2009,
Pub. Law No. 111-5 and its implementing regulations for which compliance is
required as of the date of this Agreement.

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

“Indebtedness” means (i) all indebtedness (whether or not contingent) for
borrowed money, (ii) all obligations (contingent or otherwise) for the deferred
purchase price of assets, property or services (other than current trade
payables incurred in the ordinary course of business), (iii) all obligations
evidenced by notes, bonds, debentures or other similar instruments, (iv) all
indebtedness created or arising under any conditional sale or other title
retention

 

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agreement with respect to property, (v) all obligations under capital leases,
(vi) all obligations, contingent or otherwise, as an account party under
acceptance, letter of credit or similar facilities, (vii) all obligations under
any currency, interest rate or other hedge agreement or any other hedging
arrangement, (viii) all direct or indirect guarantee, support or keep well
obligations in respect of obligations of the kind referred to in clauses (i)
through (vii) above, and (ix) all obligations of the kind referred to in
clauses (i) through (viii) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any
Lien on property (including, without limitation, accounts and Contract rights)
owned by the Company, whether or not the Company has assumed or become liable
for the payment of such obligation; provided, however, that the Contingent
Payments under the LipoSonix Agreement shall not be deemed an Indebtedness of
the Company or Seller.

“Indemnified Person” has the meaning set forth in Section 9.3(b).

“Indemnifying Party” has the meaning set forth in Section 9.5(a).

“Intellectual Property” means all patents (utility models and inventor’s
certificates), provisional and non-provisional patent applications, trademarks,
trade names, service marks, trade dress, copyrights and any applications
therefor, domain names, schematics, technology, know-how, Trade Secrets,
Confidential Information, customer lists, technical information, technical data,
process technology, plans, drawings and blue prints, inventions, algorithms,
devices, systems, processes, computer software programs and applications (source
code or object code form), and tangible or intangible proprietary information.

“Intentional Breach” means a material breach that is a consequence of an act
knowingly undertaken by the breaching party with the intent of causing a breach
of this Agreement.

“Interest Rate” means the U.S. Prime Rate as published in the Wall Street
Journal from time to time plus one and a half percent (1.5%), on the date that
funds were initially set-off by Buyer pursuant to Section 2.7(h).

“IRS” has the meaning set forth in Section 4.11(a).

“JSC” has the meaning set forth in Section 2.6(h)(ii).

“Knowledge” means (i) in the case of Seller, the actual knowledge of a
particular fact or other matter of Jens Quistgaard, Michael Hoffman, Nancy
McKinley, Michael Fritts, Charles Desilets, Keith Sullivan and Blake Little;
(ii) in the case of Buyer, the actual knowledge of a particular fact or other
matter of any individual who is serving as an executive officer of Buyer as of
the date hereof; and (iii) in each case, after the reasonable inquiry of the
aforementioned persons.

“Law” means all laws, statutes, ordinances, directives, Regulations and similar
mandates of any Governmental Authority, including all Orders of Courts having
the effect of law in each such jurisdiction.

“Lien” means any mortgage, pledge, security interest, attachment, encumbrance,
lien (statutory or otherwise), license, claim, option, conditional sale
agreement, right of first refusal,

 

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first offer, termination, participation or purchase or charge of any kind
(including any agreement to give any of the foregoing); provided, however, that
the term “Lien” shall not include (i) statutory liens for Taxes, which are not
yet due and payable, (ii) statutory or common law liens to secure landlords,
lessors or renters under leases or rental agreements confined to the premises
rented, (iii) deposits or pledges made in connection with, or to secure payment
of, workers’ compensation, unemployment insurance, old age pension or other
social security programs mandated under applicable Laws, (iv) statutory or
common law liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens, and
(v) restrictions on transfer of securities imposed by applicable state and
federal securities Laws.

“LipoSonix Agreement” has the meaning set forth in the Recitals.

“LipoSonix Indemnification Claim” has the meaning set forth in Section 6.13(b).

“LipoSonix Product” has the meaning set forth in Section 2.6(a)(x).

“LipoSonix Technology” has the meaning set forth in Section 2.6(a)(xi).

“Losses” has the meaning set forth in Section 9.2(a).

“Lost Offset Amount” has the meaning set forth in Section 6.13(b)(ix).

“MAC” has the meaning set forth in the Recitals.

“Material Adverse Effect” means any fact, event, change, development,
circumstance or effect (i) that, when such term is used in relation to the
Company (A) is materially adverse to the business, financial condition, assets,
liabilities, or results of operations of the Company, or (B) would materially
impair or delay the ability of Seller to perform its obligations hereunder,
including the consummation of the Contemplated Transactions or (ii) that, when
such term is used in relation to Buyer, would materially impair or delay the
ability of Buyer to perform its obligations hereunder, including the
consummation of the Contemplated Transactions. Any fact, event, change,
development, circumstance, or effect shall not be deemed to have a Material
Adverse Effect if such fact, event, change, development, circumstance or effect
results or arises from (i) changes or conditions generally affecting the
Company’s industry, except to the extent such fact, event, change, development,
circumstance or effect disproportionately affects (relative to other
participants in the Company’s industry) the Company, (ii) changes in general
economic or political conditions (including armed hostilities or terrorist
actions), except to the extent such changes or conditions disproportionately
affect (relative to other participants in the Company’s industry) the Company,
(iii) changes in accounting requirements or principles or in applicable Law or
other legal or regulatory conditions, except to the extent such changes
disproportionately affect (relative to other participants in the Company’s
industry) the Company, (iv) any failure, in and of itself, by Seller or the
Company to meet internal or external projections or forecasts or revenue or
earnings predictions, (v) the public announcement, or notification to any
Person, of this Agreement and the Contemplated Transactions or the consummation
of the Contemplated Transactions or (vi) the performance of or compliance with
the express terms of this Agreement.

“Material Company Trade Secrets” has the meaning set forth in Section 4.16(a).

 

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“Material Contracts” has the meaning set forth in Section 4.6(a).

“Medicis Indemnitee” has the meaning set forth in Section 6.13(b).

“MEWA” has the meaning set forth in Section 4.11(d).

“Non-U.S. Permits” has the meaning set forth in Section 4.22(b)(x).

“Non-U.S. Regulatory Agency” has the meaning set forth in Section 4.22(b)(ii).

“OFAC Regulations” has the meaning set forth in Section 4.25(a).

“Order” means any judgment, order, decision, writ, injunction, ruling or decree
of, or any settlement under the jurisdiction of, any Court or Governmental
Authority.

“Parties” has the meaning set forth in the Preamble.

“PCBs” has the meaning set forth in the definition of “Hazardous Materials” in
Annex I.

“Person” means an individual, corporation, partnership, association, trust,
unincorporated organization, limited liability company, joint venture, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act).

“Personal Information” has the meaning set forth in Section 4.21(h)(ii).

“Pre-Closing Date Tax Returns” has the meaning set forth in Section 10.2(b).

“Privacy and Security Laws” has the meaning set forth in Section 4.21(f).

“Product” means any product (including any component thereof) manufactured,
shipped, sold, marketed, distributed, and/or otherwise introduced into the
stream of commerce by or on behalf of the Company, including any product sold
within or outside of the United States by the Company as the distributor, agent,
or pursuant to any other contractual relationship with a non-U.S. manufacturer.

“Purchase Price” has the meaning set forth in Section 2.2.

“Qualified Accountant” has the meaning set forth in Section 2.4(c).

“Qualified Acquiring Person” has the meaning set forth in Section 2.8.

“Quarterly Contingent Payment Certificate” has the meaning set forth in
Section 2.7(b)(i).

“Real Property” has the meaning set forth in Section 4.13(b).

“Receiving Party” means a Party or any Representative of such Party that
receives Confidential Information from a Disclosing Party.

 

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“Regulation” means any rule, regulation, policy or interpretation of any
Governmental Authority having the effect of Law.

“Release” means any presence or exposure to or emission, spill, seepage, leak,
escape, leaching, discharge, injection, pumping, pouring, emptying, dumping,
disposal, migration, release or threatened release of Hazardous Materials into
or upon the environment, including the air, soil, improvements, surface water,
groundwater, the sewer, septic system, storm drain, publicly owned treatment
works, or waste treatment, storage, or disposal systems.

“Remediation” means any investigation, clean-up, removal action, remedial
action, restoration, repair, response action, corrective action, monitoring,
sampling and analysis, installation, reclamation, closure, or post-closure in
connection with the suspected, threatened or actual Release of Hazardous
Materials.

“Sales Milestone” has the meaning set forth in Section 2.6(a)(xii).

“Sales Milestone Payment” has the meaning set forth in Section 2.6(d).

“Sales Milestone Payment Amount” has the meaning set forth in
Section 2.6(a)(xiii).

“Sales Payment Product” has the meaning set forth in Section 2.6(a)(xiv).

“Sales/Profit Contingent Payment” has the meaning set forth in Section 2.6(e).

“Sales/Profit Contingent Payment Amount” has the meaning set forth in
Section 2.6(a)(xv).

“Sales/Profit Contingent Payment Percentage” has the meaning set forth in
Section 2.6(a)(xvi).

“Scheduled Company Intellectual Property” has the meaning set forth in
Section 4.16(a).

“Second Generation LipoSonix Product” has the meaning set forth in
Section 2.6(a)(vii).

“SEC” has the meaning set forth in Section 6.16.

“Securities Act” has the meaning set forth in Section 5.8.

“Seller” has the meaning set forth in the Preamble.

“Seller Contingent Payments” has the meaning set forth in Section 2.2.

“Seller Disclosure Schedule” has the meaning set forth in the preamble to
Article 4.

“Seller Indemnified Person(s)” has the meaning set forth in Section 9.2(b).

“Seller Marks” has the meaning set forth in Section 6.13.

“Seller Representatives” has the meaning set forth in Section 6.2(a).

 

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“Shares” has the meaning set forth in the Recitals.

“Statement of Working Capital” has the meaning set forth in Section 2.4(a).

“Subsidiary” or “Subsidiaries” of the Company, Seller, Buyer or any other Person
means any corporation, partnership, joint venture, limited liability company,
trust, unincorporated organization, association or other legal entity of which
the Company, Seller, Buyer or such other Person, as the case may be, (i) owns,
directly or indirectly, greater than 50% of the stock or other equity interests
the holder of which is generally entitled to vote as a general partner or for
the election of the board of directors or other governing body of a corporation,
partnership, joint venture, limited liability company, trust, unincorporated
organization, association or other legal entity or (ii) has any arrangement,
understanding or agreements entitling the Company, Seller, Buyer or other Person
to vote as a general partner or for the election of a majority of the board of
directors or other governing body of a corporation, partnership, joint venture,
limited liability company, trust, unincorporated organization, association or
other legal entity.

“Successor Subsidiary” has the meaning set forth in Section 2.8(a).

“Target Working Capital” shall mean ***.

“Tax” has the meaning set forth in Section 4.14.

“Tax Returns” has the meaning set forth in Section 4.14.

“Third Party Claim” has the meaning set forth in Section 9.5(a).

“Third Party Intellectual Property Rights” has the meaning set forth in
Section 4.16(a).

“Threshold” has the meaning set forth in Section 9.3(b).

“Trade Secrets” means information, including but not limited to, know-how,
Confidential Information, customer lists, software (source code and object
code), technical information, data (including pharmacological, toxicological,
preclinical and clinical test data and results), process technology, plans,
drawings and blue prints, anywhere in the world that derives independent
economic value, actual or potential, from not generally being known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use and that is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.

“Transfer Taxes” has the meaning set forth in Section 10.6.

“Unaudited 2010 Financial Statement” has the meaning set forth in Section 4.28.

“Unaudited Financial Statements” has the meaning set forth in Section 4.28.

“Unaudited Interim Financial Statements” has the meaning set forth in
Section 4.28.

“WARN Act” has the meaning set forth in Section 4.12(b).

 

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“Worldwide Ancillary Gross Profit” has the meaning set forth in
Section 2.6(a)(xvii).

“Worldwide Ancillary Gross Profit Adjustments” has the meaning set forth in
Section 2.6(a)(xviii).

“Worldwide Gross Profit” has the meaning set forth in Section 2.6(a)(xix).

“Worldwide Net Sales” has the meaning set forth in Section 2.6(a)(xx).

“Worldwide Net Sales Adjustments” has the meaning set forth in
Section 2.6(a)(xxi).

 

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