Document:

Exhibit 10.41

 

***CERTAIN CONFIDENTIAL
INFORMATION CONTAINED IN THIS DOCUMENT (INDICATED BY ASTERISKS) HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER 17 C.F.R. SECTIONS
200.80(B)(4), 200.83 AND 230.406.

 

PURCHASE
AND SALE AGREEMENT

 

among

 

ALLERGAN,
INC.,

 

ALLERGAN
SALES, INC.

 

and

 

MDF
ACQUISITION CORP.

 

dated

 

May 14,
1999

 

 

PURCHASE
AND SALE AGREEMENT

 

This PURCHASE AND SALE
AGREEMENT (the “Agreement”), dated
this 14th day of May, 1999 is entered into among MDF ACQUISITION CORP., a
Delaware corporation (“Buyer”),
ALLERGAN, INC., a Delaware corporation, and ALLERGAN SALES, INC., a California
corporation (collectively, with Allergan, Inc., “Seller”).

 

RECITALS

 

WHEREAS, Seller
manufactures, markets and distributes certain alpha hydroxy acid-based (“AHA”) skin care products, including Seller’s
product lines sold generally under the trademarks “M.D. Formulations” and “M.D.
Forte”;

 

WHEREAS, Seller desires
to sell to Buyer, and Buyer desires to purchase from Seller, certain assets
hereinafter described, and Seller desires to grant to Buyer, and Buyer desires
to obtain from Seller, a license to certain rights hereinafter described, all
upon the terms and conditions and for the purchase price hereinafter set forth;
and

 

WHEREAS, each of Jesse
Hansen & Co., a California corporation (“JH&Co.”), and Doctors Formula PTY LTD, a corporation
formed under the laws of Australia (“Doctors
Formula”), have agreed to guaranty certain obligations of Buyer
under this Agreement; and

 

WHEREAS, each of
JH&Co. and Doctors Formula is referred to in this Agreement as a “Principal” and collectively as the “Principals”;

 

NOW, THEREFORE, in
consideration of the foregoing premises, which are hereby incorporated as part
of this Agreement, and the mutual covenants set forth herein, Buyer and Seller
hereby agree as follows:

 

ARTICLE 1
- DEFINITIONS

 

The following terms
(except as otherwise expressly provided) for all purposes of this Agreement
shall have the following respective meanings (it being understood that the
terms defined in this Agreement, whether in this Article 1 or otherwise,
shall include in the singular number the plural, and in the plural number the
singular):

 

1.1      “Acquired Assets” shall have the
meaning set forth in Section 2.1.

 

1.2      “Affiliate(s)” shall mean with respect
to any Person (as defined below), any Person that, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control a
corporation (or other entity), if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation (or other entity) whether through the ownership of
voting securities, by contract or otherwise.

 

 

1.3      “Agreement” shall mean this PURCHASE
AND SALE AGREEMENT, including the Exhibits and Schedules attached hereto.

 

1.4      “Assumed Contracts” shall mean the
agreements, licenses and other contracts set forth on Schedule 1.4
hereto.

 

1.5      “Assumed Liabilities” shall have the
meaning set forth in Section 2.2(a)(2).

 

1.6      “Books and Records” shall mean
originals or copies of all books, financial and other records and any
information and data (or portions thereof) which has been reduced to written,
electronically formatted, recorded or encoded form relating solely to the
research, development, registration, marketing and sale of the Products in the
Territory (as such terms are defined below), the Acquired Assets or the Assumed
Liabilities, including without limitation, to the extent relating solely to the
aforesaid items, customer lists and related sales histories, credit policies
and credit information with respect to existing customers, existing cost and
pricing data, existing business plans, market research reports, competitor
information, reference catalogs, patent and trademark files, and all existing
Product data and studies including results of pre-clinical and clinical studies
and other Product evaluation studies, adverse experience information and
product complaints concerning the Products, and correspondence (including
without limitation with the U.S. Food and Drug Administration or the equivalent
regulatory agencies in other countries in the Territory).

 

1.7      “Buyer Recipient” shall have the
meaning set forth in Section 5.15.

 

1.8      “Closing” shall mean the consummation
of the transactions and the closing activities contemplated by this Agreement,
to be conducted on the Closing Date, with effect at and as of the Effective
Time (as defined below).

 

1.9      “Closing Date” shall mean the date
specified in accordance with the provisions of Section 6.1.

 

1.10    “Count” shall have the meaning set forth
in Section 2.2(a)(3).

 

1.11    “Damages” shall have the meaning set
forth in Section 8.1.

 

1.12    “Development Agreement” shall mean the
Development Agreement in the form attached hereto as Exhibit A.

 

1.13    “Effective Time” shall have the meaning
set forth in Section 6.1.

 

1.14    “Encumbrance” shall mean any claim,
security interest, security agreement, lien, pledge, charge, escrow, option,
proxy, right of first refusal, preemptive right, mortgage, license, sublicense,
or prior assignment.

 

1.15    “Exhibit” shall mean an Exhibit annexed
to this Agreement, each of which is hereby incorporated as a part of this
Agreement.

 

2

 

1.16    “Field of Use” shall mean the research,
development, manufacture, marketing, and sale of AHA skin care products, (1) to
skin care aestheticians worldwide and (2) to Physicians outside of the
United States but expressly excluding the manufacturing, marketing, selling or
distribution of such products to Physicians in the United States.

 

1.17    “Fixed Assets” shall mean the equipment,
furniture, leasehold improvements, and other fixed assets owned by Seller in
Seller’s Colonial Heights, Virginia facility relating solely to the Products,
as set forth in Schedule 1.17.

 

1.18    “Governmental Authority” shall mean any
United States or foreign, federal, state, local or other governmental
department, commission, board, bureau, agency, court or other similar entity.

 

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

 

1.20    “Indemnified Party” shall mean any party
entitled to indemnification pursuant to Article 8 hereof and shall include
such party’s Affiliates, successors and permitted assigns.

 

1.21    “Indemnifying Party” shall mean any
party liable for indemnification pursuant to Article 8 hereof and shall
include such party’s successors and permitted assigns.

 

1.22    “Intangible Assets” shall mean all of
the following owned by Seller or its Affiliates primarily relating to the
Acquired Assets or the research, development, registration, marketing and sale of
the Products in the Territory and in the Field of Use: All service marks,
know-how, goodwill, labels and other trade rights, whether or not registered
(but excluding all Marks (as defined below) contained thereon), copyrights,
copyright registrations and applications therefor, customer identities and
related sales histories. The term “Intangible Assets” includes all
manufacturing know-how related to the M.D. Formulations product line and
excludes all manufacturing know-how related to the M.D. Forte product line. The
term “Intangible Assets” does not include the Books and Records pertaining to
such assets.

 

1.23    “Inventory” shall mean all inventories
(including Product samples) owned by Seller or its Affiliates of any finished
Product held for sale in the Territory and in the Field of Use. Inventory shall
also include at least $500,000 worth of raw materials inventory (valued based
on Seller’s book value for such inventory without any deductions for excess or
obsolete materials) plus such additional amounts determined by Seller in its
sole discretion. Inventory expressly excludes any finished Product inventory
manufactured on or after June 9, 1999 unless included by Seller in Seller’s
sole discretion.

 

1.24    “Legal Requirement” shall mean any
federal, state, local, municipal, foreign or other law, statute, legislation,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement or requirement issued or adopted by any Governmental Authority.

 

1.25    “Marks” shall have the meaning set forth
in Section 5.13(a).

 

3

 

1.26    “Material Adverse Effect” shall mean any
event, circumstance, development or occurrence, that taken individually or
together with other events, circumstances, developments or occurrences, has
caused, resulted in or had, or is reasonably likely to cause, result in or
have, a material adverse effect on the Acquired Assets, or the aggregate sales
of the Products in the Territory.

 

1.27    “Note” shall have the meaning set forth
in Section 2.2(a)(1).

 

1.28    “Party” or “Parties” shall mean the parties to this Agreement, i.e.,
Seller and Buyer and their respective successors and assigns to the extent
permitted in accordance with Section 9.6.

 

1.29    “Permitted Encumbrances” shall mean (a) any
Encumbrance for taxes, assessments and other governmental charges not yet due
and payable or that may subsequently be paid without penalty or that is being
contested in good faith by appropriate proceedings and will be satisfied in
full by Seller and which would not reasonably be expected to have a Material
Adverse Effect, and (b) any Encumbrance arising under or as contemplated
by the Assumed Contracts.

 

1.30    “Person” shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, a limited
liability company, any organization (whether incorporated or not) and a
Governmental Authority.

 

1.31    “Physician” shall mean any healthcare
provider, including but not limited to, any medical doctor, osteopathic doctor,
nurse, nurse practitioner, nurse’s aid, or physician’s assistant, and expressly
including any healthcare specialist including, but not limited to,
dermatologists, plastic surgeons or other surgeons, general practitioners,
internists, family practitioners, pediatricians, obstetrics and gynecologists,
ophthalmologists, opticians, optometrists, ophthalmic surgeons and
neurologists, and including any healthcare organization, including but not limited
to, hospitals, group purchasing organization, hospices, nursing homes,
physician practices groups, ambulatory surgery centers, managed care
organizations such as HMOs, PPOs, PSOs, PBMs, and the like, and including any
distributor or wholesaler which services the above-referenced health care
providers (for distribution to the above providers).

 

1.32    “Product(s)” shall mean the following
aesthetic skin care products (in each case as more fully described in Schedule 1.32
attached hereto): (1) Seller’s M.D. Formulations® product lines
worldwide; and (2) Seller’s M.D. Forte® product lines in all
markets outside of the United States. “Product(s)” shall not include any of the
M.D. Forte® line of products sold in the United States.

 

1.33    “Purchase Price” shall have the meaning
set forth in Section 2.2(a)(1).

 

1.34    “Regulatory Permits” shall mean the
pending or approved United States and worldwide regulatory permits, waivers,
certificates, consents and approvals (including applications therefor) to own,
manufacture, assemble, market, distribute and/or sell the Products in the
Territory that are owned by Seller, including but not limited to those set
forth on Schedule 1.34.

 

1.35    “Required Consents” shall have the
meaning set forth in Section 5.4(b).

 

1.36    “Sublicense Agreement” shall mean the
Sublicense Agreement in the form attached

 

4

 

hereto as Exhibit B.

 

1.37    “Supply Agreement” shall mean the Supply
Agreement in the form attached hereto as Exhibit C.

 

1.38    “Territory” shall mean, with respect to
Seller’s M.D. Formulations® product lines, worldwide and, with
respect to Seller’s M.D. Forte® product lines, worldwide with the
exception of the United States.

 

1.39    “Third Party Claim” shall have the
meaning set forth in Section 8.4(a).

 

1.40    “Trademark Rights” shall mean those
trademarks listed on Schedule 1.40, including applications and
registrations therefor and the associated goodwill.

 

1.41    “United States” shall mean the United
States of America and its territories and possessions, including the
Commonwealth of Puerto Rico.

 

ARTICLE 2
- THE TRANSACTION

 

2.1      The Transaction.

 

(a)       At
the Closing, subject to the terms and conditions set forth in this Agreement,
Seller shall sell, convey, transfer, assign, and deliver to Buyer, and Buyer
shall purchase and accept from Seller, all of Seller’s right, title and
interest in the Territory to the following assets (in each case, subject to any
rights of Seller pursuant to Section 5.14 below) (the “Acquired Assets”): (1) the Trademark
Rights, including all goodwill associated therewith; (2) rights to the
Products, including the formulation of the Products, in the Field of Use in the
Territory; (3) the Regulatory Permits; (4) the Inventory; (5) the
Assumed Contracts, but only to the extent they relate to the Products in the
Territory; (6) the Books and Records; (7) the Intangible Assets; (8) an
irrevocable, non-exclusive, royalty-free license to any and all manufacturing
know-how related to the M.D. Forte product line; (9) the Fixed Assets; and
(10) all worldwide rights to the Transferred Formulations Pipeline
Products (as defined in the Development Agreement) and all rights to the
Transferred Forte Pipeline Products (as defined in the Development Agreement)
and the Crossover Pipeline Products (as defined in the Development Agreement)
in the Field of Use in the Territory.

 

2.2      Consideration.

 

(a)       In
consideration of the aforesaid sale, conveyance, transfer, assignment and
delivery of the Acquired Assets and the grant of the rights under the
Sublicense Agreement:

 

(1)       The
Buyer shall pay to Seller US $9,771,260 (the “Purchase
Price”) payable by delivery of US $9,000,000 in immediately
available funds at the Closing (the “Initial
Payment”) and US $771,260 in immediately available funds within
seven days of the Closing (the “Second
Payment”); and

 

5

 

(2)       As
of the Effective Time, the Buyer shall assume, and shall be solely and
exclusively liable with respect to, and shall pay, perform, discharge and
satisfy when due, subject to the terms and conditions of this Agreement, the
liabilities of Seller and its Affiliates that are specifically enumerated below
(collectively, the “Assumed Liabilities”):

 

(i)        all
liabilities of Seller and its Affiliates under the Assumed Contracts (as
amended pursuant to Section 5.1(b)(3) of this Agreement) and under
the Sublicense Agreement that arise after the Effective Time;

 

(ii)       subject
only to any express rights Buyer may have under the Supply Agreement, all
liabilities for Damages to third parties or their property arising out of the
sale of the Products in the Territory by Buyer after the Effective Time;
provided, however, that Buyer shall not assume, and Seller shall retain, any
such liabilities for any Damages attributable to Products sold by Seller prior
to the Effective Time; and

 

(iii)      subject
only to any express rights Buyer may have under the Supply Agreement, all
liabilities in respect of Product returned to and accepted by Buyer after the
Effective Time.

 

(3)       Buyer
hereby agrees to pay the Second Payment to Buyer within seven days of the
Closing. Promptly after Closing, Seller and Buyer shall conduct and agree upon
a physical count of the Inventory to be transferred to Buyer at the Effective
Time (the “Count”). Inventory
valued at $1,000,000 (the “Initial Inventory”)
shall promptly thereafter be physically transferred to Buyer or Buyer’s
designee to an address specified by Buyer, at Buyer’s expense. All Inventory
other than the Initial Inventory shall be physically transferred to Buyer or
Buyer’s designee to an address specified by Buyer, at Buyer’s expense, promptly
after Seller has received the Second Payment. Title to the Inventory in excess
of the Initial Inventory shall not pass to Buyer until Seller has received the
Second Payment. Seller hereby agrees to refund to Buyer all or part of the
Second Payment in an amount equal to the product of multiplying (i) the
amount, if any, that the value of the Inventory is less than US $2,574,000 by (ii) 49%,
For purposes of the valuation of Inventory, all finished goods Inventory shall
be valued according to Seller’s 1998 standard cost of goods (using generally
accepted accounting principles consistently applied). No value shall be
attributable to the raw materials Inventory. The valuation of the Inventory
shall be reduced by the 1998 standard cost of goods (using generally accepted
accounting principles consistently applied) associated with expired or
unsaleable finished goods Inventory. Seller shall determine what Inventory is
unsaleable, using good faith, in its discretion. Seller shall deliver a report
to Buyer within 45 days of the Closing Date, including Seller’s determination
of the valuation of the Inventory. If Buyer disagrees with Seller’s valuation,
Buyer must notify Seller within 20 days of receiving Seller’s report with a
written rationale for Buyer’s disagreement. If Buyer does not so notify Seller
of its disagreement, Seller’s determination of the Inventory valuation shall be
deemed conclusive. If Buyer does so notify Seller, Buyer and Seller agree to
negotiate in good faith for 30 days to resolve the dispute. Thereafter, the
parties agree to submit the dispute to a mutually acceptable third party, whose
decision shall be final. The parties agree to share equally in the costs of
retaining the third party. Between the execution date of this Agreement and the
date on which the Count takes place, and except as provided in Section 5.16
of this Agreement, Seller shall act in the ordinary course of business regarding
the use of Inventory. Seller, however, makes no representation or warranty
regarding the amount of

 

6

 

Inventory available or
the quality of Inventory, including but not limited to, the amount of Inventory
that is non-saleable by reason of damage, defect, or expired dating. Buyer
shall have no right to return any Inventory to Seller for any reason.

 

(b)       Buyer
and Seller shall allocate the Purchase Price to broad categories constituting
components of the Acquired Assets in accordance with the basis of allocation
set forth in Schedule 2.2. Each party will report the transactions
contemplated by this Agreement in accordance with the agreed upon allocation,
except to the extent that modifications are necessary to reflect changes in the
Acquired Assets and Assumed Liabilities between the date hereof and the Closing
Date, for all federal, state, local and other tax purposes, but such allocation
shall not constrain reporting for other purposes.

 

2.3      At the Closing:

 

(a)       Buyer
shall pay the Initial Payment by wire transfer of immediately available funds
to such account or accounts identified in writing by Seller to Buyer prior to
the Closing Date;

 

(b)       Seller
shall execute and deliver to Buyer such bills of sale, assignments and other
instruments of transfer, sale and conveyance, as may be necessary to properly
and completely transfer the Acquired Assets to Buyer and as shall be reasonably
requested by Buyer’s counsel;

 

(c)       Buyer
shall execute and deliver to Seller such agreements, undertakings and other
good and sufficient instruments of assumption, as may be necessary to properly
and completely cause the Assumed liabilities to be binding on Buyer in
accordance with the terms hereof and as shall be reasonably requested by Seller’s
counsel;

 

(d)       the
parties shall execute, enter into and deliver to one another the Sublicense
Agreement, the Development Agreement (as finally negotiated pursuant to Section 5.19
of this Agreement) and the Supply Agreement; and

 

(e)       each
party shall deliver to the other party such other instruments, documents and
certificates as may be reasonably requested by such other party or its counsel.

 

ARTICLE 3
- REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller hereby represents
and warrants to Buyer as of the date hereof and as of the Closing Date (except
to the extent any representation or warranty relates to a specific date) as
follows:

 

3.1      Corporate Organization, Power and Authority.

 

Allergan, Inc. and
Allergan Sales, Inc. are corporations duly organized, validly existing and
in good standing under the laws of the State of Delaware and the State of
California, respectively. Allergan, Inc. and Allergan Sales, Inc.
have the requisite corporate power and authority to own, operate or lease the
properties that they purport to own, operate or lease and to carry on their
respective businesses as they are now being conducted and are duly licensed or
qualified as foreign corporations in each domestic or foreign jurisdiction in
which the nature of

 

7

 

the business conducted by
them or the character or location of the properties owned or leased by them
makes such licensing or qualification necessary, except where the failure to be
so licensed or qualified would not reasonably be expected to have a Material
Adverse Effect. Allergan, Inc. and Allergan Sales, Inc. have the requisite corporate power and
authority to execute, deliver and perform all of their obligations under this
Agreement and the other agreements, certificates, documents and instruments
contemplated hereby and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Seller of this Agreement and the other
agreements, certificates, documents and instruments contemplated hereby and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of Seller
and no other or further corporate proceedings will be necessary for their
execution and delivery by Seller, the performance by Seller of its obligations
hereunder and thereunder and the consummation by Seller of the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by Seller and constitutes a legal, valid and binding obligation of
Seller. The Sublicense Agreement, the Development Agreement and the Supply
Agreement, when duly executed and delivered by Seller at the Closing, will
constitute legal, valid and binding obligations of Seller.

 

3.2      Litigation.

 

Except as set forth on Schedule 3.2:

 

(a)       There
is no suit, action, arbitration, or legal, administrative or other proceeding,
or governmental investigation pending, or, to Seller’s knowledge, threatened
against Seller and/or its Affiliates relating to their manufacture, marketing
or sale of the Products in the Territory or the Acquired Assets.

 

(b)       Seller
and/or its Affiliates are not subject to any outstanding judgment, decree,
writ, order, injunction or arbitration award of any Person, arising out of or
related to their manufacture, marketing or sale of the Products in the
Territory, or any default in respect thereof.

 

(c)       Seller
and/or its Affiliates are not engaged in, and none of them has any knowledge
of, any pending or threatened legal action to recover monies due to, or damages
sustained by, Seller and/or its Affiliates in connection with the manufacture,
marketing or sale of the Products in the Territory.

 

3.3      Product Line Sales.

 

Seller represents that Schedule 3.3
accurately reflects the net sales of the Products for calendar years 1997 and
1998 and for the fiscal quarter ended March 26, 1999, which have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis and present fairly the status of the Products covered
therein for the periods covered by the Schedule.

 

3.4      Title of Assets.

 

Seller has good and valid
title to the Acquired Assets, and Seller owns the Acquired Assets free and
clear of any Encumbrances other than Permitted Encumbrances.

 

8

 

3.5      No Notices.

 

Seller has received no
written notice from any Governmental Authority or trade organization that it is
currently in violation of or is failing to comply with any Legal Requirement or
of any obligation on the part of Seller to undertake, or bear all or any
portion of the cost of, any product recall or corrective action with respect to
defective Products.

 

3.6      “As Is” Sale.

 

With the exception of the
representations and warranties in this Article 3, Buyer acknowledges that
the Acquired Assets are sold on an “As Is” and “Where Is” basis, that Buyer
relied on its own independent information and belief in deciding to enter into
this transaction, that Buyer assumes all risks associated with the quality and
nature of the Acquired Assets and that the cash portion of the Purchase Price
shall be due, payable, and non-refundable regardless of whether Buyer is able
to or does manufacture and/or distribute any of the Products.

 

ARTICLE 4
- REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby represents
and warrants to Seller as of the date hereof and as of the Closing Date (except
to the extent any representation or warranty relates to a specific date) as
follows:

 

4.1      Corporate Organization, Power and Authority.

 

Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Buyer has the requisite corporate power and
authority to own, operate or lease the properties that it purports to own,
operate or lease and to carry on its business as it is now being conducted.
Buyer has the requisite corporate power and authority to execute, deliver and
perform all of its obligations under this Agreement and the other agreements,
certificates, documents and instruments contemplated hereby and to consummate
the transactions contemplated hereby and thereby. The execution and delivery by
Buyer of this Agreement and the other agreements, certificates, documents and
instruments contemplated hereby and the consummation by Buyer of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Buyer and no other or further
corporate proceedings will be necessary for their execution and delivery by
Buyer, the performance by Buyer of its obligations hereunder or thereunder and
the consummation by Buyer of the transactions contemplated hereby and thereby.
This Agreement has been duly executed and delivered by Buyer and constitutes a
legal, valid and binding obligation of Buyer. The Sublicense Agreement, the
Development Agreement and the Supply Agreement, when duly executed and
delivered by Buyer at the Closing, will constitute legal, valid and binding
obligations of Buyer.

 

4.2      Consents and Approvals; No Violations.

 

Neither the execution,
delivery and performance by Buyer of this Agreement and the other agreements,
certificates, documents and instruments contemplated hereby, nor the
consummation by Buyer of the transactions contemplated hereby and thereby will
require any

 

9

 

notice to, filing with,
or the consent, approval, waiver or authorization of any Person. The execution
and delivery of this Agreement and the other agreements contemplated hereby and
the consummation of the transactions contemplated hereby and thereby will not (i) materially
violate, or result in the breach, acceleration or termination of, or the
creation in any third party of the right to accelerate, terminate, modify or
cancel, any indenture, contract, settlement, mortgage or other agreement,
obligation or liability to which it is a party or by which it is bound, except
for such violations, breaches, accelerations, terminations, modifications
cancellations or rights that would not reasonably be expected to have a
materially adverse effect on its business, properties, operations, or the
results thereof, or financial condition; (ii) conflict with, violate or
result in a breach of any provision of Buyer’s charter documents, or (iii) conflict
with or violate in any material respect any Applicable Law binding on Buyer,
other than such conflicts or violations that would not reasonably be expected
to have a material adverse effect on its business, properties, operations, or
financial condition.

 

4.3
Access to Funds.

 

Buyer, together with the
Principals, has sufficient unrestricted funds available to it to purchase the
Acquired Assets pursuant to this Agreement and to otherwise satisfy its
obligations under this Agreement and the other agreements contemplated hereby.

 

ARTICLE 5
- ADDITIONAL AGREEMENTS

 

5.1      Conduct Of Business Pending the Closing.

 

Prior to the Closing, and
except as provided in Section 5.16 of this Agreement, Seller covenants as
follows, unless Buyer shall otherwise consent in writing (which consent shall
not be unreasonably withheld or delayed) and except as otherwise contemplated
by this Agreement:

 

(a)       Seller
and its Affiliates shall market and sell the Products in the Territory only in
the ordinary course of business;

 

(b)       Except
as may be required by any Legal Requirement, Seller and its Affiliates shall
not, and Seller shall cause its Affiliates not to, do any of the following:

 

(1)       except
for actions in the ordinary course of business and any transfer of Acquired
Assets among Seller and/or its Affiliates as may be necessary to prepare for
the Closing, pledge, dispose of, or take any action that results in the
Encumbrance of any of the Acquired Assets other than a Permitted Encumbrance;

 

(2)       authorize,
recommend or propose to enter into any material contract, agreement, commitment
or arrangement related to the Acquired Assets which, had it been in existence
on the date hereof, would have been listed as an Assumed Contract other than an
agreement to outsource the manufacturing of the Products; and

 

(3)       Modify
or change in any material respect any Assumed Contract except as follows:

 

10

 

(i)        with
respect to agreements with distributors, except as necessary to remove any
items such as Aqua Glycolic® products, from the agreement that are
not Products as that term is defined in this Agreement;

 

(ii)       except
as necessary in the ordinary course of business; and

 

(iii)      except
as part of a transfer of the Acquired Assets among Seller and/or its Affiliates
as may be necessary to prepare for the Closing.

 

(c)       Seller
shall use commercially reasonable efforts to preserve intact the Acquired
Assets and preserve its relationships with customers, suppliers and other
Persons having business dealings with the Seller with respect to the Products
in the Territory.

 

(d)       Seller
shall use best efforts to provide to Buyer reports regarding the Products in
the Field of Use in the Territory as follows:

 

(i)        detailed
reports on sales of Products, on a weekly basis for sales in the United States
and on a monthly basis outside of the United States;

 

(ii)       reports
on accounts receivable, on a weekly basis;

 

(iii)      periodic
reports on back orders; and

 

(iv)      periodic
reports with respect to the progress of Seller’s outsourcing of the
manufacturing of the Products.

 

(e)       Seller
shall not make any representations to Joseph Lewis regarding Buyer’s employment
of him, nor shall Seller interfere with Buyer’s employment of him.

 

5.2      Additional Pre-Closing Covenants.

 

Subject to the terms and
conditions herein provided, prior to the Closing, each of the Parties shall:

 

(a)       use
commercially reasonable efforts to do, or cause to be done, all things
necessary, proper or advisable to consummate the transactions contemplated by this
Agreement and to cooperate with each other in connection with the foregoing,
including without limitation obtaining, making and causing to become effective
all Required Consents and all approvals, consents or authorizations of any
Governmental Authority required for the consummation of the transactions
contemplated by this Agreement;

 

(b)       use
all reasonable efforts to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby;

 

(c)       use
all reasonable efforts to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions

 

11

 

contemplated hereby; and

 

(d)       effect
all necessary registrations and filings and submissions of information required
or requested by Governmental Authorities with respect to the transactions
contemplated hereby.

 

5.3      Transfer of Assets

 

Buyer agrees to take all
necessary actions, at Buyer’s sole expense, to transfer the legal ownership of
the Trademark Rights and other Acquired Assets from Seller to Buyer. Seller
agrees to provide reasonable assistance to Buyer to effect such transfers, at
Buyer’s expense. Buyer shall be responsible for all shipping charges, insurance
and other costs to transport the Acquired Assets, and shall assume all risk of
loss pertaining to such Acquired Assets, on and after the Closing Date.

 

5.4      Required Consents.

 

(a)       Notwithstanding
any contrary provision herein, to the extent that the assignment of any Assumed
Contract or other Acquired Asset to Buyer hereunder shall require the consent,
approval or waiver of any Person, this Agreement shall not constitute an
agreement to assign the same if such an assignment would not be valid or would
constitute a breach thereof. Any assignment to Buyer of any such Assumed
Contract or Acquired Asset that requires the consent, approval or waiver of a
third party shall be made subject to such consent, approval or waiver being
obtained.

 

(b)       Seller
will use commercially reasonable efforts at its expense to obtain all material
required approvals and consents (or waivers thereof) to the assignment of the
Assumed Contracts specifically designated on Schedule 5.4(b) (“Required Consents”). Each party shall
cooperate with the other and take all reasonable steps to obtain any and all
material and necessary Required Consents before Closing. Seller, however, does
not represent or warrant that it will be able to obtain all necessary Required
Consents. In the event that a material and necessary Required Consent has not
been obtained, both parties agree that they will negotiate in good faith with
one another in an effort to reach an appropriate accommodation with one another
so that, if possible, the transaction may close without the consent. To the
extent that Buyer is provided with the benefits of any Assumed Contract, Buyer
shall assume, perform, pay and discharge all debts, obligations and liabilities
of the Seller and its Affiliates with respect to such Assumed Contract to the
same extent it would have had the Assumed Contract been capable of being
assigned hereunder.

 

5.5      Regulatory Permits.

 

As soon as practicable
after the Closing, at the reasonable request of Buyer, Seller shall use
commercially reasonable efforts to assist Buyer in completing the transfer to
Buyer or its Affiliates, at Buyer’s sole expense, of the Regulatory Permits.

 

12

 

5.6      Expenses.

 

Except as otherwise
provided herein, whether or not the transactions contemplated hereby are
consummated, all costs, expenses and disbursements incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
Party incurring such costs and expenses. Buyer agrees to pay any filing fees
required under the HSR Act.

 

5.7      Public Announcements.

 

Prior to the Closing,
Seller and Buyer shall consult with each other before issuing any public
announcement or press release, or otherwise making any public statement with
respect to this Agreement, or the subject matter hereof, and prior to the
Closing, neither of them shall issue or make any such public statement prior to
obtaining the other Party’s approval, which approval shall not be unreasonably
withheld or delayed. No such approval shall be necessary to the extent
disclosure may be required by applicable law, or the rules or regulations
of any stock exchange. However, the Party preparing to make such disclosure
shall provide the other Party with reasonable prior notice of the timing and
content of such disclosure. The Parties will use reasonable efforts to
coordinate the initial public statement, if any, relating to this Agreement so
that such public statement by each Party is made contemporaneously.

 

5.8      Insurance.

 

Seller shall maintain, at
its own expense, insurance covering Seller’s liability hereunder with respect
to the Products, premises, completed operations and broad form contractual
liability in an amount of not less than $2,000,000 per claim for bodily injury
and property damage and an aggregate maximum for all claims of not less than
$30,000,000. Buyer shall maintain, at its own expense, insurance covering Buyer’s
liability hereunder with respect to the Products, premises, completed
operations and broad form contractual liability in an amount of not less than
$1,000,000 per claim for bodily injury and property damage and an aggregate
maximum for all claims of not less than $5,000,000. Seller may request that
Buyer raise these limits as its business matures, and Buyer will use
commercially reasonable efforts to satisfy Seller’s request. A certificate of
insurance listing the other Party as an additional insured and evidencing such
coverage will be provided to the other Party, upon reasonable request.

 

5.9      Limitation to Territory and the Field of Use.

 

Buyer and its Affiliates
shall not at any time after the Closing use Acquired Assets or rights under the
Sublicense Agreement outside the Territory or outside the scope of the Field of
Use, nor shall it sell products incorporating any of the Acquired Assets or
rights under the Sublicense Agreement to any Person outside the Territory or
outside of the scope of the Field of Use, including, without limitation, any
Person (other than Seller or an Affiliate of Seller) which Buyer or any of its
Affiliates knows or has reason to know will sell such products outside the
Territory or outside the scope of the Field of Use. By way of example, Buyer
shall not sell any of the Products to Physicians in the United States, since
such purchasers are not within Buyer’s Field of Use for the United States.
Likewise, Seller agrees not to market or sell the M.D. Forte® line
in the Territory and in the Field of Use or to any Person who Seller knows or
has reason to know will sell such products in the Territory in the Field of
Use. Seller shall have no right to distribute the M.D. Formulations®
line.

 

13

 

5.10    Further Assurances.

 

From time to time, at
either Party’s request, whether at or after the Closing Date, the other Party
shall, and shall cause its Affiliates to, execute and deliver such other
documents and instruments, cooperate and assist in providing information and
take such other actions as the first Party may reasonably request to effectuate
and perfect the transactions contemplated by this Agreement, including without
limitation as may be necessary to assign, convey and transfer to Buyer the
Acquired Assets, as contemplated by this Agreement. Buyer warrants and
covenants that it will use its best efforts to comply with any conditions
precedent to obtaining funds sufficient to pay the Purchase Price.

 

5.11    Litigation Support

 

In the event that, and
for so long as, Buyer or Seller, on the one hand, actively is contesting or defending
against any charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand in connection with any transaction contemplated
under this Agreement, or any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transaction on or prior to the Closing Date involving the Acquired Assets as
held or used by Seller, then the other Party, on the other hand, will
reasonably: (i) cooperate with the contesting or defending Party and its
counsel in the contest or defense, (ii) make available its personnel, and (iii) provide
such testimony and access to its books and records as shall be reasonably
requested in connection with the contest or defense, provided that (except in
the event and to the extent that the contesting or defending party is entitled
to indemnification therefor under Article 8 below) the contesting or
defending Party shall reimburse the other Party for all its reasonable
out-of-pocket costs incurred in providing such cooperation and access.

 

5.12    Sales and Transfer Taxes.

 

Seller shall pay promptly
when due, all transfer taxes, sales and use taxes, value added taxes, stamp
taxes and all other manner of taxes arising out of the transactions
contemplated by this Agreement (other than Buyer’s income tax associated with
the transactions contemplated by this Agreement).

 

5.13    Labeling; Use of Allergan’s Name.

 

(a)       Limited License. Seller on behalf of
itself and its Affiliates hereby grants to Buyer effective immediately after
the Closing, the royalty-free nontransferable right and non-exclusive license
to use for a reasonable time (not to exceed twelve (12) months after the
Closing Date) the corporate names, service mark or logo of Seller or any
Affiliate of Seller (the “Marks”)
in the same manner as they are presently used on all labeling for the Products
in the Territory, in the ordinary course of the business. This limited license
shall apply only to the Inventory transferred pursuant to this Agreement and only
to the extent that such Inventory contains such Marks when transferred by
Seller to Buyer. Buyer agrees that the nature and quality of any Products sold
under such Marks shall conform substantially to the quality of the Products as
currently sold by Seller. If Seller at any time during Buyer’s use of such
materials reasonably determines that the requirements of the previous sentence
have not been complied with in any material respect, Seller shall have the
right to terminate the right and license granted under this

 

14

 

Section 5.13 by
giving written notice of such breach to Buyer and Buyer shall have the
opportunity for 30 days to cure such breach. In addition, Buyer shall indemnify
and hold Seller harmless for any damages to Seller arising from the right and
license granted hereunder.

 

(b)       Labeling. Following the Closing, Buyer
will use commercially reasonable efforts to develop and have approved, if
necessary, its own labeling so as to eliminate its use of the Marks, to change
any of Seller’s or its Affiliates’ code or numbers used in connection with the
Product’s labeling to an appropriate Buyer’s code or number, and to remove such
Seller’s codes and numbers from all Product labeling as promptly as possible
and in any event within twelve (12) months.

 

5.14    Retained Rights.

 

Notwithstanding any
contrary provision contained in this, or in any agreement, certificate,
document or instrument contemplated hereby, Seller shall retain all rights to
make, have made, use and export products, including without limitation the
Products, solely for sale both outside the Territory and outside the Field of
Use.

 

5.15    Confidential Information.

 

Prior to the Closing,
Buyer shall, and shall cause each of their Affiliates and the representatives
of each of them (collectively, the “Buyer
Recipients”), to keep confidential, and not use or disclose to
others, any proprietary information of or obtained from Seller, any of its
Affiliates or any of the representatives of any of them, to the extent that
such proprietary information is not or does not become readily available to the
public other than as a result of disclosure by Seller or its Affiliates or the
representatives of any of them or is not required to be disclosed by applicable
law or court orders; provided that, Buyer’s representatives may include any
financial institutions that participate, or which have been solicited to
participate, in the financing of the transactions contemplated by this
Agreement. Promptly after the Closing or in the event of the termination of
this Agreement without a Closing, Buyer shall, and shall cause each of the
other Buyer Recipients to, promptly return to Seller all, and not retain any
copies of, such written, recorded or encoded proprietary information. Buyer
shall be responsible for any breach of this Section 5.15 by any of the
Buyer Recipients and agrees, at its sole expense, to take all reasonable
measures (including, without limitation, court proceedings) to restrain the
Buyer Recipients from prohibited or unauthorized disclosure or use of such
proprietary information.

 

5.16    Inventory Purchase.

 

As soon as practicable
(but no later than June 2, 1999, Seller shall deliver to Buyer its
production schedule covering inventory of Products scheduled for delivery
on or after June 9, 1999. Buyer will promptly thereafter notify Seller of
the inventory scheduled for delivery on or after June 9, 1999 that it
wishes to purchase. Buyer agrees to pay for any purchases of Products under
this Section 5.16 (not as part of the Purchase Price) within 30 days of
receiving an invoice from Seller. The price for such inventory shall be Seller’s
1999 standard cost of goods (using generally accepted accounting principles
consistently applied) or invoice price to Allergan, as applicable, plus 10%.
Any inventory of Products manufactured by Seller on or after June 9, 1999 and any work in progress (defined as
product in production, excluding raw material that have not

 

15

 

been mixed or assembled)
on the Closing Date shall not be deemed “Inventory” under this Agreement unless
done so by Seller in Seller’s sole discretion. Seller will be free to cease
production of inventory not purchased by Buyer under this Section 5.16,
and Buyer hereby acknowledges and agrees that Seller will not be in violation
of any covenants pertaining to the operation of the business before the Closing
contained in this Agreement by reason of such cessation of production.

 

5.17    Right of First Offer.

 

In the event that Seller decides to divest of the
M.D. Forte® product line within five years after the Closing, Seller
agrees first to negotiate in good faith for a reasonable time not to exceed 30
days with Buyer to sell the line to Buyer, if mutually acceptable terms can be
reached, before selling the line to another party.

 

5.18    Returns.

 

Seller agrees to accept
returns of damaged or defective Products directly from its customers (and not
from Buyer) for a period of 45 days after the Closing Date in its discretion
consistent with Seller’s normal levels of returns. Thereafter, Seller will not
accept any returns of Products sold prior to the Closing Date.

 

5.19    Development Agreement Negotiation.

 

Buyer and Seller hereby
agree to continue to negotiate in good faith prior to the Closing the contents
of the Exhibits to the Development Agreement (consistent with Seller’s current
development specifications for Pipeline Products) and Section 1.7 of the
Development Agreement.

 

ARTICLE 6
- THE CLOSING

 

6.1      Closing.

 

Subject to satisfaction
of all conditions, the Closing shall take place at Allergan, Inc., 2525
Dupont Drive, Irvine, California 92612, on June 30, 1999 (the “Closing Date”), or at such other place or
at such other time as Seller and Buyer may mutually agree in writing. For
purposes of this Agreement, the Closing, the sale, conveyance, transfer,
assignment and delivery of the Acquired Assets, the effectiveness of the
agreements, certificates, documents and instruments delivered in accordance
with this Agreement, and the consummation of the transactions contemplated
hereby shall be treated as if it occurred at 12:01 a.m. on the Closing
Date (the “Effective Time”).

 

6.2      Conditions To Obligation of Each Party to Close.

 

The obligation of each
Party to effect the transactions contemplated by this Agreement is subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions:

 

(a)       all
applicable requirements of the HSR Act, and any similar foreign law or
regulations, applicable to the transactions contemplated by this Agreement
shall have been complied with, all governmental and other consents and
approvals, if any, necessary to permit the

 

16

 

consummation of the
transactions contemplated by this Agreement shall have been obtained and any
waiting period (and any extension thereof) applicable to the consummation of
the Agreement under the HSR Act, any similar foreign law or regulations, or any
other Applicable Laws shall have expired or been terminated;

 

(b)       no
preliminary or permanent injunction or other order, decree or ruling issued by
a court of competent jurisdiction or by a Governmental Authority, nor any
statute, rule, regulation or executive order promulgated or enacted by any
Governmental Authority, shall be in effect that would restrain or otherwise
prevent or delay the consummation of the transactions contemplated by the
Agreement;

 

(c)       there
shall be no action or proceeding pending before any court or other Governmental
Authority that seeks to (1) invalidate or set aside, in whole or in part,
this Agreement or any of the other agreements contemplated hereby, (2) restrain,
prohibit, invalidate or set aside, in whole or in part, the consummation of the
transactions contemplated hereby or thereby, or (3) obtain substantial
damages in connection therewith; and

 

(d) All Required
Consents necessary to consummate the transaction or assign the Assumed
Contracts shall have been obtained.

 

6.3      Conditions to the Obligation of Seller to Close.

 

The obligation of Seller
to effect the transactions contemplated by this Agreement is subject to the
fulfillment at or prior to the Closing Date of each of the following
conditions, provided that fulfillment of any such condition or any part thereof
may be waived or delayed by Seller:

 

(a)       Buyer
shall have performed and complied in all material respects with each
obligation, covenant and agreement to be performed and complied with by it
hereunder at or prior to the Closing Date;

 

(b)       the
representations and warranties of Buyer contained in this Agreement, or under
any other agreement or certificate contemplated by this Agreement, shall be
true and correct in all material respects when made and in addition shall be
true and correct in all material respects at and as of the Closing Date, with
the same force and effect as though made at such time, except as otherwise
contemplated by this Agreement or consented to in writing by Seller; and

 

(c)       Buyer
shall have furnished to Seller, at or prior to the Closing Date, and against
the deliveries referred to in Section 7.2, each delivery referred to in Section 7.1.

 

6.4      Conditions to the Obligation of Buyer to Close.

 

The obligation of Buyer
to effect the transactions contemplated by this Agreement is subject to the
fulfillment at or prior to the Closing Date of each of the following
conditions, provided that fulfillment of any such condition or part thereof may
be waived or delayed by Buyer:

 

17

 

(a)       Seller
and its Affiliates shall have performed and complied in all material respects
with each obligation, covenant and agreement to be performed and complied with
by them hereunder, or under any other agreement contemplated by this Agreement,
at or prior to the Closing;

 

(b)       the
representations and warranties of Seller in this Agreement, or under any other
agreement or certificate contemplated by this Agreement, shall be true and
correct in all material respects when made and in addition shall be true and
correct in all material respects at and as of the Closing Date, with the same
force and effect as though made at such time, except as otherwise contemplated
by this Agreement or consented to in writing by Buyer;

 

(c)       Seller
shall have furnished to Buyer at or prior to the Closing, and against the
deliveries referred to in Section 7.1, each delivery referred to in Section 7.2;
and

 

(d)       each
of the Required Consents shall have been obtained and shall be in full force
and effect.

 

ARTICLE 7
- DELIVERIES AT CLOSING

 

7.1      Deliveries by Buyer.

 

At or prior to the
Closing Date, Buyer shall deliver, or cause to be delivered, to Seller the
following:

 

(a)       the
amount of the Purchase Price, under and in accordance with the terms of
Sections 2.2 and 2.3;

 

(b)       a
certificate, signed by an authorized officer of Buyer, certifying as of the
Closing Date compliance with the conditions set forth in Section 6.3(b) hereof,
and any other certificates to evidence compliance with the conditions set forth
in Section 6.3 as may be reasonably requested by the Seller;

 

(c)       a
certificate, signed by an authorized officer of Buyer, certifying as of the
Closing Date the incumbency of each officer of such Person executing this
Agreement or any other agreement, certificate, document or instrument delivered
at the Closing;

 

(d)       copies
of corporate resolutions of Buyer, certified by an appropriate officer of Buyer
as being true, complete and in effect on the Closing Date, authorizing the
execution and delivery by Buyer of this Agreement and the other agreements,
certificates, documents and instruments contemplated hereby, the performance by
it of its obligations hereunder and thereunder and the consummation by it of
the transactions contemplated hereby and thereby;

 

(e)       the
Sublicense Agreement, the Development Agreement (as finally negotiated pursuant
to Section 5.19 of this Agreement), the Supply Agreement and the other
agreements, documents and instruments referred to in Section 2.3, each
duly executed by Buyer; and

 

18

 

(f)        Buyer’s
resale certificate

 

7.2      Deliveries by Seller.

 

At or prior to the
Closing Date, Seller shall deliver, or cause to be delivered, to Buyer the
following:

 

(a)       a
certificate, signed by an authorized officer of Seller, certifying as of the
Closing Date compliance with the conditions set forth in Section 6.4(b) hereof,
and any other certificates to evidence compliance with the conditions set forth
in Section 6.4 as may be reasonably requested by Buyer;

 

(b)       a
certificate, signed by an authorized officer of Seller, certifying the
incumbency of each officer of the Seller executing this Agreement or any other
agreements, certificates, documents or instruments delivered at the Closing;

 

(c)       the
Sublicense Agreement, the Development Agreement (as finally negotiated pursuant
to Section 5.19 of this Agreement), the Supply Agreement and the other
agreements, certificates, documents or instruments referred to in Section 2.3,
each duly executed by Seller; and

 

(d)       copies
of corporate resolutions of Seller, certified by an appropriate officer of
Seller as being true, complete and in effect on the Closing Date, authorizing
the execution and delivery by Seller of this Agreement and the other
agreements, certificates, documents and instruments contemplated hereby, the performance
by it of its obligations hereunder and thereunder and the consummation by it of
the transactions contemplated hereby and thereby.

 

ARTICLE 8
– SURVIVAL; INDEMNIFICATION

 

8.1      Indemnification by Seller.

 

From and after the
Effective Time, Seller shall indemnify, defend and hold harmless Buyer, its
Affiliates, and the officers, directors, employees, stockholders and partners
of each, from and against any and all claims, losses, damages, liabilities,
expenses and costs (including, without limitation reasonable attorneys’ fees
and expenses but excluding in all cases consequential damages) of any kind (“Damages”) caused thereto arising out of or
relating to any of the following:

 

(a)       The
material breach of any representation or warranty of Seller contained in this
Agreement;

 

(b)       The
material breach of any covenant or agreement of Seller contained in this
Agreement;

 

(c)       Any
brokerage fee, finder’s fee or other similar fee or commission due to any
person with respect to the transactions contemplated by this Agreement that
Seller has committed to pay; and

 

19

 

(d)       Any
liability (other than the Assumed Liabilities) to which Buyer or any of its
Affiliates, officers, directors, employees, stockholders or partners may become
subject and that arise solely from (i) any Product sold by Seller prior to
the Effective Time, (ii) the operation of Seller’s research, development,
manufacturing, marketing or sales of Products in the Territory and in the Field
of Use prior to the Effective Time or (iii) any failure to comply with any
material Legal Requirement imposed solely on Seller in connection with the
transactions contemplated under this Agreement.

 

All claims under this Section 8.1
shall be made at the time and in the manner provided for in this Article 8.

 

8.2      Indemnification by Buyer.

 

From and after the
Effective Time, Buyer shall indemnify, defend and hold harmless Seller, its
Affiliates and the officers, directors, employees, stockholders and partners of
each from and against any and all Damages caused thereto arising out of or
relating to any of the following:

 

(a)       The
material breach of any representation or warranty of Buyer contained in this
Agreement;

 

(b)       The
material breach of any covenant or agreement of Buyer contained in this
Agreement;

 

(c)       Any
Assumed Liability, including any failure by Buyer or its Affiliate to pay or
satisfy any such Assumed Liability;

 

(d)       Any
brokerage fee, finder’s fee or other similar fee or commission due to any
person with respect to the transactions contemplated by this Agreement that
Buyer has committed to pay; and

 

(e)       Any
debt, liability, obligation or contract of any kind arising from Buyer’s or its
Affiliates’ research, development, manufacture, registration, marketing, distribution,
advertising, promotion or sale of the Products after the Effective Time, any
act or omission of Buyer or its Affiliates occurring in respect of the
Products, Acquired Assets or the obligations under the Sublicense Agreement or
any failure to comply with any material Legal Requirement imposed solely on
Buyer in connection with the transactions contemplated by this Agreement.

 

All claims under this Section 8.2
shall be made at the time and in the manner provided for in this Article 8.

 

8.3      Indemnification Procedure.

 

(a)       The
Indemnified Party shall notify the Indemnifying Party within a reasonable
period of time after becoming aware of, and shall provide to the Indemnifying
Party as soon as practicable thereafter, all information and documentation necessary
to support and verify, any

 

20

 

Damages that the
Indemnified Party shall have determined have given rise to, or could reasonably
be expected to give rise to, a claim for indemnification hereunder, provided,
however, that the right of the Indemnified Party to indemnification shall be
reduced in the event of its failure to give timely notice only to the extent
the Indemnifying Party is prejudiced thereby. The Indemnifying Party shall be
given reasonable access to all books and records in the possession or under the
control of the Indemnified Party which the Indemnifying Party reasonably
determines to be related to such claim.

 

(b)       Any
liability for indemnification under this Article 8 shall be paid by the
Indemnifying Party within fifteen (15) business days of a request therefor in
immediately available funds in United States dollars after such liability shall
have been finally determined. The liability for Damages hereunder shall be
deemed to be “finally determined” for purposes of this Article 8 when the
parties to such action have so determined by mutual agreement or, if disputed,
when a final non-appealable order of a Governmental Authority having competent
jurisdiction shall have been entered.

 

8.4      Matters Involving Third Parties.

 

(a)       If
any third party shall commence an action or proceeding against any Indemnified
Party with respect to any matter that may give rise to a claim for
indemnification against any Indemnifying Party under Sections 8.1 or 8.2 hereof
(a “Third Party Claim”), the
Indemnified Party shall notify the Indemnifying Party thereof in writing as
soon as practicable, but in no event more than ten (10) days after the
Indemnified Party shall have been served, provided, however, that the right of
the Indemnified Party to indemnification shall be reduced in the event of its
failure to give timely notice only to the extent the Indemnifying Party is
prejudiced thereby.

 

(b)       The
Indemnifying Party shall have the right to defend the Indemnified Party against
the Third Party Claim with counsel and other representatives of its choice so
long as (i) the Indemnifying Party shall notify the Indemnified Party in
writing (within the fifteen (15) day period after its receipt of notice of the
Third Party Claim) and (ii) the Indemnifying Party diligently conducts the
defense of the Third Party Claim. Otherwise, the Indemnified Party may defend
against the Third Party Claim preserving its rights to indemnification
hereunder including without limitation for the cost of such defense.

 

(c)       So
long as the Indemnifying Party is conducting the defense of the Third Party
Claim in accordance with Section 8.4(b) above, (i) the
Indemnified Party may retain separate co-counsel, at its sole cost and expense,
and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party shall not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party, (iii) the Indemnified Party shall fully
cooperate with the Indemnifying Party in the investigation and defense of any
such Third Party Claim, including without limitation, providing required
information and documents and access to all employees of the Indemnified Party
with knowledge of issues relevant to the claim or litigation (any such
activities required to discharge this obligation to cooperate shall be incurred
at the sole expense of the Indemnified Party) and (iv) the Indemnifying
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld or delayed, unless such settlement includes as

 

21

 

a term thereof a general
release of the Indemnified Party from such Third Party Claim. Notwithstanding
any other provision of this Section 8.4, if an Indemnified Party withholds
its consent to a settlement or elects to continue the defense of any claim,
where but for such action the Indemnifying Party could have settled such claim
solely for the payment of money by the Indemnifying Party as specified in the
written request for consent to the settlement delivered to the Indemnifying Party,
the Indemnifying Party shall be required to indemnify the Indemnified Party
only up to a maximum of the bona fide settlement offer for which the
Indemnifying Party could have settled such claim.

 

8.5      Minimum Indemnification Claim.

 

Neither Seller nor Buyer
shall have any liability for indemnification under Section 8.1(a) or
8.2(a), respectively, for breaches of such Party’s representations and
warranties until the aggregate amount of Damages based on, arising out of,
resulting from or relating to such breaches exceeds $100,000, whereupon the
Indemnified Party may claim indemnification only for the Damages in excess of
such amount.

 

8.6      Maximum Indemnification Claim.

 

Each of the Sellers and
Buyer’s aggregate liability for indemnification under Section 8.1(a) or
8.2(a), respectively, for breaches of representations and warranties shall
under no circumstances exceed an amount equal to $500,000.

 

8.7      Mitigation of Damages.

 

If any event shall occur
which would otherwise entitle a Party to assert a claim for indemnification
under Sections 8.1 or 8.2 hereof, no Damages shall be deemed to have been
sustained by such Indemnified Party to the extent of any net proceeds received
by such Indemnified Party or its Affiliates from any insurance policy with
respect thereto.

 

8.8      Bulk Sales Law.

 

Buyer hereby waives
compliance by Seller with the provisions of any applicable bulk sales or bulk
transfer law of any jurisdiction.

 

8.9      Survival.

 

The covenants,
agreements, representations and warranties of the Parties contained in this
Agreement shall survive the execution and delivery of this Agreement, any due
diligence investigation made by any party in respect of the transactions
contemplated hereby and the Closing as follows: (a) the covenants and agreements
contained herein shall survive until performed or for such shorter period as
provided herein with respect thereto; and (b) the representations and
warranties contained in Articles 3 and 4 of this Agreement shall survive until
the close of business on the 365th calendar day after the Closing Date. No
action or proceeding for indemnification pursuant to this Article 8 may be
brought after the applicable expiration date, provided that, if prior to such
date one Party hereto has notified another party hereto in writing of a claim
for indemnity hereunder, such claim shall continue to be subject to
indemnification in accordance herewith.

 

22

 

ARTICLE 9
- GENERAL PROVISIONS

 

9.1      Termination of Agreement.

 

This Agreement may be
terminated as follows:

 

(a)       Buyer
and Seller may terminate this Agreement by mutual written consent at any time
prior to the Closing.

 

(b)       Either
Seller or Buyer may terminate this Agreement (by giving written notice of its
intention to terminate and stating in detail the grounds therefor) at any time
prior to the Closing in the event such other Party is in material breach of any
representation, warranty, covenant or agreement contained in this Agreement,
which shall not have been waived by the non-breaching party and which is not
cured as set forth in this Section 9.1(b). Any Party receiving such notice
shall have thirty (30) days from the receipt thereof to cure the breach, at
which time this Agreement shall terminate if the breach has not been cured,
unless the non-breaching Party, in its sole discretion, extends the time
available for cure of the breach.

 

(c)       Either
Seller or Buyer may terminate this Agreement, upon written notice, if the
Closing shall not have occurred on or before September 1, 1999 for any
reason other than the failure or refusal of the Party seeking to terminate to
perform any of its obligations hereunder.

 

(d)       Either
Seller or Buyer may terminate this Agreement, upon written notice, if any
Governmental Authority having competent jurisdiction shall have issued an
order, decree or ruling, or taken any other action, restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement, or the
other agreements provided for herein, and such order, decree, ruling or other
action shall have become final and non-appealable.

 

9.2      Effect of Termination.

 

In the event of the
termination of this Agreement pursuant to Section 9.1 hereof, such
termination shall be the sole remedy, and, except with respect to Section 5.6,
5.7, 5.15, 9.3, 9.4 hereof, (a) this Agreement shall forthwith become void
and (b) there shall be no liability on the part of Seller, Buyer or any of
their respective Affiliates; provided, however, any breaching Party shall be
fully liable for any and all Damages sustained or incurred by the other Party
hereto, as a result of or arising from such breach and such other Party shall
be entitled to seek any remedies available to it at law or in equity.

 

9.3      Failure to Close; Confidentiality.

 

If this Agreement is
terminated prior to the Closing, Buyer shall return to Seller all documents and
other information, including without limitation all originals and copies
thereof, theretofore delivered to Buyer or its Affiliates by or on behalf of
Seller or its Affiliates. In such event, neither Buyer nor its Affiliates shall
retain copies of any such documents or other information disclosed by or on
behalf of Seller or its Affiliates, and shall not thereafter disclose or use
for any purpose any information conveyed to Buyer or its Affiliates in
connection with the

 

23

 

transaction contemplated
hereby or concerning Seller or its Affiliates, except for disclosures or uses
under the circumstances described in Section 5.15.

 

9.4      Specific Performance; Injunctive Relief.

 

Each of the Parties
acknowledges, understands and agrees that any breach or threatened breach by
it, any of its Affiliates or any of the representatives of any of them (as
applicable) of Sections 5.9,5.15 and 9.3 hereof will cause irreparable injury
to the other party and that money damages will not provide an adequate remedy
therefor. Accordingly, in the event of any such breach or threatened breach,
the non-breaching party shall have the right and remedy (in addition to any
other rights or remedies available at law or in equity) to have the provisions
of such Sections specifically enforced by, and to seek injunctive relief and
other equitable remedies in, any court having competent jurisdiction.

 

9.5      Notices.

 

All notices hereunder
shall be sent in writing and prepaid, either by first class mail, return
receipt requested, express courier, facsimile, or messenger, as follows, unless
otherwise notified in writing:

 

	
  If to Buyer or any
  Principal:

  	
   

  	
  MDF Acquisition Corp.

  c/o Jesse Hansen & Co.

  222 Sutter Street

  San Francisco, California 94108-4445 

  Attn: President

  Fax: (415) 274-4567

  
	
   

  
	
  with a copy to:

  	
   

  	
  Cooley Godward LLP

  One Maritime Plaza, 20th Floor

  San Francisco, California 94111

  Attn: Kenneth Guernsey, Esq.

  Fax: (415) 951-3699

  
	
   

  
	
  If to Seller:

  	
   

  	
  ALLERGAN, INC.

  2525 Dupont Drive

  Irvine, California 92612, U.S.A.

  Attn: General Counsel

  Fax: (714) 246-4774

  

 

Any notice sent by mail
shall be deemed given five (5) days after the deposit thereof. Any notice
sent by facsimile shall be deemed given when sent (with receipt confirmed). Any
notice sent by express courier, or messenger shall be deemed given when
actually received.

 

9.6      Assignability, Successor and Assigns.

 

Neither Party shall be
entitled to assign its rights or obligations under this Agreement without the
other Party’s written consent, provided, however, that either Party (after
providing

 

24

 

written notice thereof to
the other Party) may assign all or part of its rights and obligations hereunder
to any of its Affiliates without the other Party’s consent, provided, further,
however, that in the event of any such assignment to an Affiliate, the assignor
shall remain fully liable for the fulfillment of all of its obligations
hereunder. This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors and permitted assigns, and, to
the extent any such successor or assign is not bound by operation of law, each
Party shall cause such successor or assign to expressly agree in writing to be
bound by this Agreement.

 

9.7      Severing Clause.

 

If any portion of this Agreement is held
unenforceable, invalid or illegal by a court of competent jurisdiction, such
portion shall be deemed to be of no force and effect and the Agreement shall be
construed as if such portion had not been included herein.

 

9.8      No Third Party Beneficiaries.

 

No provision of this
Agreement is intended or shall be deemed to be for the benefit of, or to confer
any rights, legal or equitable, in any Person or entity other than the express
Parties to this Agreement and their respective successors and permitted
assigns.

 

9.9      Modification; Waiver.

 

This Agreement cannot be
amended, changed, modified or supplemented orally, and no amendment, change,
modification or supplement of this Agreement shall be recognized nor have any
effect, unless the writing in which it is set forth is signed by Buyer and
Seller, nor shall any waiver of any of the provisions of this Agreement be
effective unless in writing and signed by the Party to be charged therewith.
The failure of either Party to enforce, at any time, or for any period of time,
any provision hereof or the failure of either Party to exercise any option
herein shall not be construed as a waiver of such provision or option and shall
in no way affect that Party’s right to enforce such provision or exercise such
option. No waiver of any provision hereof shall be deemed to be, or shall
constitute, a waiver of any other provision, or with respect to any succeeding
breach of the same provision.

 

9.10    Applicable Law.

 

This Agreement shall be
deemed to have been entered into within and shall be governed, construed and
enforced in accordance with the laws of the State of California, without regard
to the choice of laws principles thereof.

 

9.11    Effect of Schedules.

 

The Schedules hereto
relate to certain matters concerning the disclosures required and the
transactions contemplated by this Agreement. The inclusion of or reference to
matters in a Schedule does not constitute an admission of what is material
or the materiality of such matter. Disclosure on any Schedule in respect
of any representation or warranty shall not constitute disclosure for purposes
of all other representations or warranties in the absence of an explicit
cross-reference to such other Schedule.

 

25

 

9.12    Counterparts.

 

This Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, and all of which, taken together, shall be deemed one and the same
document.

 

9.13    Headings.

 

The captions and headings
contained in this Agreement preceding the text of the articles, sections,
subsections and paragraphs hereof, and in the Schedules hereto, are inserted
solely for convenience and ease of reference and shall not constitute any part
of this Agreement, or have any effect on its interpretation or construction.

 

9.14    Articles, Sections and Subsections.

 

Unless otherwise
specified, references in this Agreement to any article shall include all
sections, subsections, and paragraphs in such article; references in this
Agreement to any section shall include all subsections and paragraphs in
such sections; and references in this Agreement to any subsection shall
include all paragraphs in such subsection.

 

9.15    Ambiguities.

 

Ambiguities and
uncertainties in this Agreement, if any, shall not be interpreted against
either Party, irrespective of which Party may be deemed to have caused the
ambiguity or uncertainty to exist.

 

9.16    Entire Agreement.

 

This Agreement, the
Sublicense Agreement, the Development Agreement and the Supply Agreement
contain the sole and entire agreement and understanding of the Parties hereto
and their respective Affiliates and representatives related to the subject
matter hereof and supersede all oral or written agreements concerning the
subject matter made prior to the date of this Agreement. There are no
agreements, covenants or undertakings with respect to the subject matter of
this Agreement or the other agreements, documents, certificates or instruments
referred to in this Section 9.16 other than those expressly set forth or
referred to herein or therein and no representations or warranties of any kind
or nature whatsoever, express or implied, are made or shall be deemed to be
made herein by the Parties hereto except those expressly made in this Agreement
and such other agreements, documents, certificates and instruments.

 

26

 

IN WITNESS WHEREOF, the
Parties have caused this Agreement to be executed by the respective duly
authorized officers as of the date first above written.

 

	
  MDF ACQUISITION CORP.

  	
  ALLERGAN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John Hansen

  	
   

  	
  By:

  	
  /s/ David E I Pyott

  
	
  Name:

  	
  John Hansen

  	
   

  	
  Name:

  	
  David E I Pyott

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
  President &
  CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ALLERGAN SALES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Francis R.
  Tunney, Jr.

  
	
   

  	
  Name:

  	
  Francis R.
  Tunney, Jr.

  
	
   

  	
  Title:

  	
  Secretary

  

 

 

The Principals, jointly
and severally, hereby unconditionally guarantee to Seller the full performance
by Buyer of the obligations and agreements on the part of Buyer under Sections
2.2(a), 2.3, 5.6, 5.16, 7.1 and 8.2 of this Agreement (the “Guaranty”). In no
event shall the Principals be liable for more than $3,500,000 In the aggregate
under the Guaranty. Each Principal further represents and warrants that (a) it
has the requisite corporate power and authority to make and perform this
Guaranty, (b) the execution and delivery of this Guaranty have been duly
authorized by all necessary corporate action on the part of the Principal, and (c) this
Guaranty has been duly executed and delivered by the Principal and constitutes
a legal, valid and binding obligation of the Principal.

 

	
  JESSE HANSEN &
  CO.

  	
  DOCTORS FORMULA PTY
  LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John Hansen

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
  John Hansen

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
   

  

 

 

CONFIDENTIAL
DRAFT

 

For
Discussion Only

 

EXHIBIT A

 

Development
Agreement

 

 

DEVELOPMENT
AGREEMENT

 

THIS
DEVELOPMENT AGREEMENT (the “Agreement”) is entered into effective as of June    ,
1999 (the “Effective Date”), by and between ALLERGAN,
INC., a Delaware corporation (“Allergan”), and MDF
ACQUISITION CORP., a Delaware corporation (“Buyer”).

 

RECITALS

 

WHEREAS,
Buyer and Allergan have entered into that Purchase and Sale Agreement dated May          ,
1999 (the “Purchase Agreement”) pursuant to which Buyer
is purchasing some of the assets and assuming certain of the liabilities
associated with Allergan’s M.D. Formulations® line of skin care products (the “Formulations
Line”) and M.D. Forte® line of skin care products (the “Forte
line”).

 

WHEREAS,
a condition precedent to the consummation of the transactions described in the
Purchase Agreement is the execution by both parties of this Agreement.
Capitalized terms used herein but not defined herein shall have the meanings
assigned to them in the Purchase Agreement.

 

AGREEMENT

 

In consideration of the
premises, and other good and valuable consideration, receipt of which is hereby
acknowledged by the parties, the parties agree as follows:

 

1.        PRODUCTS.

 

1.1      Pipeline Products.

 

(a)       Identity. Forte Line products under
development prior to the Effective Date that are being transferred to Buyer are
listed on Exhibit A attached
hereto (the “Transferred Forte Pipeline Products”). Forte Line products under development
prior to the Effective Date that are being retained by Allergan are listed on Exhibit B attached hereto (the “Retained
Forte Pipeline Products”). Formulations
Line products under development prior to the Effective Date that are being
transferred to Buyer are listed on Exhibit C
attached hereto (the “Transferred Formulations
Pipeline Products”). Products
or technologies under development prior to the Effective Date that will relate
to both the Forte Line and the Formulations Line are listed on Exhibit D attached hereto (the “Crossover
Pipeline Products”) (the
Transferred Forte Pipeline Products, the Retained Forte Pipeline Products, the
Transferred Formulations Pipeline Products and the Crossover Pipeline Products
are hereinafter referred to collectively as the “Pipeline Product”). The applicable design specifications of
the Pipeline Products are listed on Exhibits
A, B, C and D (the “Pipeline
Specifications”).

 

(b)       Continued Development. From the Effective
Date until the Termination Date (as defined below) (the “Development Period”), Buyer shall use commercially reasonable
efforts to develop the Pipeline Products substantially in accordance with the
Pipeline Specifications. The parties shall agree in writing on a completion
date (a “Completion Date”) for each Pipeline Product and a development budget for each
such Pipeline Product. Such

 

 

development budget shall
include a schedule for payment of Allergan’s share of Buyer’s costs, as
set forth in Section 1.1(c), below, and shall provide for a hold back of ***
of the budgeted costs until development of said Pipeline Product is completed
to Allergan’s reasonable satisfaction. Allergan understands and acknowledges
that the development of any particular Pipeline Product in accordance with the
Pipeline Specifications by the Completion Date may not be feasible and that
Buyer may change such Pipeline Specifications or Completion Date with Allergan’s
written consent, which shall not be unreasonably withheld. Buyer will not be in
breach of its obligations hereunder if its reasonable commercial efforts are
not sufficient to successfully complete the development of any particular
Pipeline Product. Allergan agrees to use reasonable commercial efforts to
assist Buyer in the continued development of Pipeline Products, including but
not limited to, making its marketing staff reasonably available to Buyer for up
to one day during any calendar month during the Development Period.

 

(c)       Costs. Allergan shall pay *** of Buyer’s
Costs in developing the
Transferred Forte Pipeline Products and *** of Buyer’s Costs in developing the Retained Forte Pipeline Products.
Allergan shall pay *** of Buyer’s Costs allocated to developing any of
the Crossover Pipeline Products into a Forte Line product and Buyer shall pay ***
of the Buyer’s costs allocated to
developing said Forte Line product into a Formulations Line product. During the
first twelve (12) months of the Development Period, within five days after the
end of each month, Buyer shall deliver to Allergan a written breakdown of its
Costs for such month and Allergan shall promptly reimburse such Costs within
thirty (30) days after receipt of such breakdown. Thereafter, within ten days
after the end of each calendar quarter during the Development Period, Buyer
shall deliver to Allergan a written breakdown of its Costs for such quarter and
Allergan shall promptly reimburse such Costs within thirty (30) days after
receipt of such breakdown. As used herein, “Costs” shall include, but not be limited to: direct or indirect research
and development costs, administrative costs, and overhead costs and expenses,
including the fees and expenses of vendors, experts and independent
consultants, incurred by Buyer to develop Pipeline Products.

 

(d)       Ownership. Each party shall own the rights,
title, and interest in the following products as follows:

 

1.         Transferred
Forte Pipeline Products:

 

(i)        Buyer
shall own all rights, title and interest in and limited to its Field of Use and
Territory; it being understood that all such products shall be marketed only as
Forte Line Products;

 

(ii)       Allergan
shall own all rights, title and interest in the products both outside of Buyer’s
Field of Use and outside the Territory.

 

***PORTIONS OF THIS PAGE
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

2

 

2.         Retained
Forte Pipeline Products:

 

(i)        Buyer
shall own no rights, title or interest in any of these products;

 

(ii)       Allergan
shall own all rights, title and interest in the products, both inside and
outside of Buyer’s Field of Use and Territory; it being understood, however,
that these products shall not be marketed as Formulations Line Products.

 

3.         Transferred
Formulations Pipeline Products:

 

(i)        Allergan
shall own no rights, title or interest in any of these products;

 

(ii)       Buyer
shall own all rights, title and interest in these products in Buyer’s Field of
Use and Territory; it being understood that all such products shall be marketed
only as Formulations Line Products.

 

4.         Crossover
Pipeline Products:

 

(i)        Buyer
shall own all rights, title and interest in its Field of Use and Territory;

 

(ii)       Allergan
shall own all rights, title and interest both outside Buyer’s Field of Use and
outside the Territory.

 

(e)       Change in Specifications. After the
acceptance of a Pipeline Product by Allergan pursuant to Section 1.3
hereof, the parties may mutually agree to change the Pipeline Specifications;
provided, however, that any Pipeline Product whose Pipeline Specification is so
changed shall continue to be a Pipeline Product and shall not become an
Additional Product (as defined below) by virtue of such change.

 

1.2      Additional Products.

 

(a)       Development; Terms. During the Development
Period, the parties may agree on additional formulations of products under the
Forte Line (the “Additional Products”) (Pipeline Products and Additional
Products may be hereinafter collectively referred to as the “Products”). In the event
that the parties agree upon the specifications (“Additional Product Specifications”), costs,
dates of partial or total completion and other terms and conditions of an
Additional Product, they shall memorialize such understanding by completing and
executing a Project Description in the form attached as Exhibit E (a “Project Description”), the terms of which shall be incorporated
into and made a part of this Agreement. Buyer shall use commercially reasonable
efforts to develop the Additional Product referenced in a Project Description.
Allergan understands and acknowledges that the development of any particular
Additional Product in accordance with the agreed-upon terms and Additional
Product

 

3

 

Specifications in the
Project Description may not be feasible and that Buyer may change such terms
and Additional Product. Specifications with Allergan’s written consent, which
shall not be unreasonably withheld. Buyer will not be in breach of its
obligations hereunder if its reasonable commercial efforts are not sufficient
to successfully complete the development of any particular Additional Product
Allergan agrees to use reasonable commercial efforts to assist Buyer in the
continued development of Additional Products.

 

(b)       Additional Products Ownership. The parties
agree that each party is the sole and exclusive owner of all right, title and
interest in any Additional Product proposed by such party, provided, however,
that Allergan hereby grants and assigns to Buyer an irrevocable license to any
technology invented by Buyer during the course of the development work for
Allergan under this Agreement, whether patentable or not, that is necessary or
useful to the manufacture or distribution of the Products. Buyer hereby grants
to Allergan an exclusive royalty-free right and license to distribute and sell
any Additional Product owned by Buyer and accepted pursuant to Section 1.3
hereof in the United States, and Allergan hereby grants to Buyer an exclusive
royalty-free right and license to distribute and sell any Additional Product
owned by Allergan and accepted pursuant to Section 1.3 hereof in Buyer’s
Field of Use and Territory. Notwithstanding the above. Buyer shall not develop
any Additional Product as a Formulations Line product.

 

1.3      Acceptance. No later than one hundred twenty
(120) days prior to a Completion Date, Buyer shall deliver to Allergan a
sufficient number of samples of the Product to enable Allergan to Allergan to
evaluate such Product for substantial conformance with the Pipeline
Specifications or the Additional Product Specifications, as appropriate.
Allergan shall conduct such evaluation and within thirty (30) days of delivery
of each Product (the “Acceptance Test Period”) Allergan will notify Buyer in writing
whether it accepts or rejects that Product If Allergan rejects the Product, it
shall give Buyer written notice of the deficiencies therein. Buyer shall have
sixty (60) days from such notice to remedy such deficiencies and resubmit the
Product to Allergan for an additional thirty (30) day period (the “Retest
Period”).If Allergan determines during the Retest
Period that such deficiencies have not been remedied, Allergan may at its
option either (i) declare that such deficiencies continue to exist and repeat
the procedures set forth in this Section 1.3 or (ii) terminate this
Agreement as it relates to said rejected Product and Buyer will, thereafter,
upon Allergan’s request, transfer all rights to said rejected Product to
Allergan . Upon Allergan’s notice to Buyer that it has accepted the Product,
Buyer shall promptly provide to Allergan ten (10) samples of such Product
and the final formulation of such Product Allergan shall bear all of its costs
and expenses incurred in testing and accepting a Product pursuant to this Section 1.3.

 

1.4      Limitations On Use. The parties agree that
each shall use the Products and the Confidential Information (as defined below)
of the other party solely for the purposes specified in this Agreement and for
no other purpose. Each party’s permitted use of the Products shall be in
compliance with all applicable laws and regulations.

 

1.5      Exclusivity. Allergan hereby agrees that from
the Effective Date until the Termination Date, except for Products licensed to
Allergan by Buyer under Section 1.2 (b), Allergan shall not enter into any
negotiations or agreements with any third party relating to the development or
commercialization of any of the Products owned by Buyer.

 

4

 

1.6      Marketing Support. During the Development
Period, subject to the limitations described below. Buyer shall make Joseph
Lewis and/or other employee(s) of Buyer reasonably acceptable to Allergan,
available to Allergan to provide Allergan with marketing support for the Forte
Line in the United States. In order to obtain such support, Allergan must
deliver a notice in writing (a “Notice”) to Buyer at least 2 weeks in advance of
the first date that Allergan desires such staff specifying the number of staff
members desired and the hours to be worked by each staff member per day. Buyer’s
staff members shall be available up to a maximum of thirty (30) aggregate
business days in any consecutive twelve (12) month period, and up to five (5) consecutive
business days in any consecutive twelve (12) month period. For the purposes
herein, one business day consists of eight consecutive hours with a one-hour
lunch break and shall be any day other than a Saturday or Sunday on which
national banks in San Francisco, California are open for business. Buyer may
decline to make its staff available in the amount(s) and at the times specified
in any Notice if Buyer reasonably determines that the operation of its business
would be materially impaired as a result. Promptly after receipt of a Notice,
Buyer shall notify Allergan whether Buyer can make its staff available as
requested in such Notice. The daily fee to be paid by Allergan to Buyer for the
use of such staff shall be *** per day per staffperson. During the Development
Period, on the first day of each month; Allergan shall pay Buyer a
nonrefundable retainer of *** which shall be applied, to such daily fees.
Allergan shall pay all travel costs incurred by such staff in traveling to
Allergan’s office(s) and Buyer shall continue to pay the salary and other
benefits of such staff during any period that such staff works for Allergan.
Buyer hereby agrees to assign to Allergan all right, title and interest in and
to any work product created by its staff members, or to which such staff
members contribute, pursuant to this Agreement, including all copyrights,
trademarks and other intellectual property rights contained therein. The
relationship of Buyer’s staff members with Allergan is that of an independent
contractor, and nothing in this Agreement is intended to, or should be
construed to, create a partnership, agency, joint venture or employment
relationship. Such staff members will not be entitled to any of the benefits
which Allergan may make available to its employees, including, but not limited to,
group health or life insurance, profit-sharing or retirement benefits.

 

1.7      Regulatory Support. During the Development
Period, Buyer shall make its staff reasonably available, up to a cumulative
maximum of approximately *** aggregate business days (defined as set forth in Section 1.6)
in any consecutive twelve (12) month period, and up to five (5) consecutive
business days (defined as set forth in Section 1.6) in any consecutive
twelve (12) month period, to prepare any required filings to be submitted to any
industry regulatory group or governmental agency in connection with the
marketing or sale by Allergan of the Products. Buyer shall be solely
responsible for such filings. During the Development period, on the first day
of each month, Allergan shall pay Buyer a nonrefundable retainer of *** per
month for such services. Buyer shall have no obligation to make its staff
available to Allergan for regulatory support purposes in excess of the amount
listed above; provided, however, that in the event Buyer shall agree to do so
at Allergan’s request, the parties shall agree on the fee to be paid by
Allergan to Buyer for such use of Buyer’s staff.

 

2.        CONFIDENTIALITY.

 

2.1      Generally. Subject to the limitations set
forth in this Section 2.1 all information disclosed to the other party and
identified orally or in writing by the disclosing party

 

***PORTIONS OF THIS PAGE
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

5

 

as confidential shall be
deemed “Confidential Information” of the disclosing party. In particular,
Confidential Information shall be deemed to include, but not be limited to, the
Products and any documentation relating thereto, any patent application or
drawing or potential patent claim the subject matter of which is derived from
information disclosed hereunder, any trade secret, information, invention,
idea, samples, process, method, procedures, formulations, packaging designs and
materials, test data relating to any research project, work in process, future
development, engineering, manufacturing, regulatory, marketing, servicing,
financing, or personnel matter relating to the disclosing party, its present or
future products, sales, suppliers, clients, customers, employees, investors or
business, whether in oral, written, graphic or electronic form. The term “Confidential
Information” shall not be deemed to include information which (a) at the
time of disclosure by the disclosing party, or afterwards becomes, through no
act or failure to act on the part of the receiving party, generally known or
available; (b) is known by the receiving party at the time of receiving
such information, as evidenced by its records except where the same was
previously disclosed by the disclosing party to the receiving party under the
terms of a confidentiality agreement; (c) is hereafter furnished to the
receiving party by a third party, as a matter of right and without restriction
on disclosure; (d) is independently developed by the receiving party
without use of Confidential Information of the other party; (e) is the
subject of a written permission to disclose provided by the disclosing party; (f) is
required to be disclosed by law; or (g) is required to be disclosed to
establish rights or enforce obligations under this Agreement, but only to the
extent such disclosure is necessary.

 

2.2      Use and Nondisclosure. During the term of
this Agreement and for a period of five (5) years after termination hereof
(ten (10) years with respect to information pertaining to manufacturing
processes and know-how), each party shall maintain all Confidential Information
in trust and confidence and shall not disclose any Confidential Information to
any third party (other than as provided in Section 2.3 hereof) or use any
Confidential Information for any unauthorized purpose. Each party may use such
Confidential Information only to the extent required to accomplish the purposes
of this Agreement. Confidential Information shall not be used for any purpose
or in any manner that would constitute a violation of any laws or regulations,
including without limitation the export control laws of the United States.

 

2.3      Employees. The parties shall advise their
employees who might have access to Confidential Information of the confidential
nature thereof and agree that their employees and agents shall be bound by the
terms of this Agreement. No Confidential Information shall be disclosed to any
employee who does not have a need for such information. Each party may disclose
Confidential Information to its Affiliates to the extent required to accomplish
the purposes of this Agreement. As used herein, “Affiliate” means
with respect to each party, any corporation or other business entity which (a) directly
or indirectly owns, is owned by or is under common ownership with a party to
this Agreement to the extent of at least fifty percent (50%) of the equity (or
such lesser percentage which is the maximum allowed to be owned by a foreign
organization in a particular jurisdiction) having the power to vote or direct
the affairs of such entity, or (b) directly or indirectly controls, is
controlled by or is under common control with such party. As used herein, the
term “control” means possession of the power to direct, or cause the direction
of the management and policies of a corporation or other entity whether through
the ownership of voting securities, by contract or otherwise.

 

6

 

3.        INDEMNITY; WARRANTIES.

 

3.1      Indemnity. Each party (“indemnitor”) hereby
agrees to indemnify, and hold the other party (“indemnitee”) harmless from and
against any claims, suits and proceedings, and all damages, losses, costs,
recoveries and expenses, including reasonable legal expenses and costs
(including attorneys’ fees), which indemnitee may incur, arising out of any
third party claim of property damages or personal injury or death arising from
the Products or in connection with the infringement or alleged infringement of
any patent, copyright, trade secret or other proprietary rights of a third
party arising in connection from the development of any Product.
Notwithstanding the above, indemnitor’s obligation to indemnify and hold
indemnitee harmless shall not extend to claims resulting from the negligence or
wilful misconduct of indemnitee and is conditioned upon indemnitor receiving
prompt written notice and cooperation in the defense of any such claim by
indemnitee.

 

3.2      Limitation on Warranties. BUYER MAKES NO
WARRANTIES UNDER THIS AGREEMENT, EXPRESSED OR IMPLIED, RELATING TO THE
PRODUCTS, INCLUDING BUT NOT LIMITED TO WARRANTIES OR MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE PROVIDED HOWEVER BUYER WARRANTS THAT ANY PRODUCT,
DEVELOPED BY BUYER IN ACCORDANCE WITH SECTION 1.1(b), SHALL BE SAFE WHEN
USED FOR ITS INTENDED PURPOSE.

 

3.3      Waiver of Consequential Damages. IN NO EVENT
WILL EITHER PARTY BE LIABLE TO THE OTHER OR TO ANY THIRD PARTY FOR ANY LOST
PROFITS, LOST SAVINGS, OR OTHER INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES
OR FOR ANY CLAIM, WHETHER IN AN ACTION IN STATUTE, CONTRACT OR TORT, ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE USE OF THE LICENSES GRANTED
HEREUNDER, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

4.        TERM; TERMINATION.

 

4.1      Term. Unless earlier terminated pursuant to Section 4.2
hereof, this Agreement shall continue until the date that is four (4) years
and six (6) months after the Effective Date (the “Extension Termination Date”); provided, however, this Agreement shall
continue only until the date that is two (2) years and six (6) months
after the Effective Date (the “Initial Termination Date”) if either party gives written notice to
the other party at least ninety (90) days prior to the Initial Termination Date
that this Agreement shall terminate on the Initial Termination Date. The date
upon which this Agreement is to terminate pursuant to the foregoing sentence is
referred to herein as the “Termination Date”.

 

4.2      Termination for Breach. Either party shall
have the right to terminate this Agreement in the event that the other party: (a) becomes
bankrupt or insolvent, files for protection from creditors, suffers a receiver
to be appointed or makes an assignment for the benefit of creditors; or (b) fails
to comply with any of the material provisions of this Agreement, and such
condition is not remedied within [thirty (30)] days after written notice
thereof has been given by the non-breaching party.

 

7

 

4.3      Consequences of Termination. If this
Agreement is terminated pursuant to Section 4.2 hereof, then: (a) each
party shall return to the other all materials and specifications relating to
products owned by such other party; (b) Buyer shall cease the development
and manufacture of Products owned by Allergan; and (c) the other
respective rights and obligations of the parties under this Agreement will
terminate.

 

4.4      Survival. Sections 1.1(d), 1.2(b), 1.4, 2, 3
and 4 hereof shall survive termination of this Agreement.

 

5.        MISCELLANEOUS.

 

5.1      Governing Law. This Agreement shall be
governed in all respects by the laws of the State of California as such laws
are applied to agreements between California residents entered into and
performed entirely in California.

 

5.2      Independent Contractors. The parties shall
perform their obligations under this Agreement as independent contractors and
nothing contained in this Agreement shall be construed to be inconsistent with
such relationship or status. This Agreement shall not constitute, create or in
any way be interpreted as a joint venture or partnership of any kind.

 

5.3      Publicity. Any public disclosure of this
Agreement or of the activities or rights hereunder, including but not limited
to press releases, shall be reviewed and consented to by each party prior to
such disclosure; provided, however, that the foregoing shall not apply to make
such disclosures (a) as may be required by law (including securities
laws), provided that the party subject to such law shall seek confidential
treatment of key commercial and scientific terms to the extent such treatment
is available under law; (b) made in connection with an assertion of its
rights under this Agreement; (c) made under a binder of confidentiality to
any person or entity who may be interested in investing in or acquiring all or
substantially all of the assets or securities of such party, or (d) made
to its financial advisors provided that such party has used its best efforts in
good faith to obtain a binder of confidentiality. Any consent required
hereunder shall not be untimely or unreasonably withheld by either party.

 

5.4      Successors and Assigns. Except as otherwise
expressly provided herein, the provisions hereof shall inure to the benefit of,
and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.

 

5.5      Entire Agreement. This Agreement, together
with any Exhibits hereto, constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein.

 

5.6      Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

 

5.7      Amendment and Waiver. This Agreement may be
amended or modified only upon the written consent of both parties hereto. The
rights of any party hereto under this Agreement may be waived only by such
party.

 

8

 

5.8      Delays or Omissions. It is agreed that no
delay or omission to exercise any right, power or remedy accruing to any party,
upon any breach, default or noncompliance by another party under this Agreement
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence therein,
or of or in any similar breach, default or noncompliance thereafter occurring.
It is further agreed that any waiver, permit, consent or approval of any kind
or character on Buyer’s part of any breach, default or noncompliance under this
Agreement or any waiver on such party’s part of any provisions or conditions of
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies under this Agreement by
law, or otherwise afforded to any party, shall be cumulative and not
alternative.

 

5.9      Notices. All notices required or permitted
hereunder shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed
telex or facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (c) five (5) days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the parties hereto
at the addresses set forth on the signature page hereof or at such other
address as any party hereto may designate by ten (10) days advance written
notice to the other party hereto.

 

5.10    Expenses. Subject to Section 1.1(c),
above, each party shall pay all costs and expenses that it incurs with respect
to the negotiation, execution, delivery and performance of this Agreement.

 

5.11    Attorneys’ Fees. In the event that any suit or
action is instituted to enforce any provision in this Agreement, the prevailing
party in such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing party under
or with respect to this Agreement, including without limitation, such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.

 

5.12    Titles and Subtitles. The titles of the
sections and subsections of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement.

 

5.13    Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.

 

9

 

IN
WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.

 

	
   

  	
  “Allergan”

  
	
   

  	
   

  
	
   

  	
  ALLERGAN,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
           [Print
  Name and Title]

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  2525 Dupont Drive

  
	
   

  	
  Irvine, CA 92612

  
	
   

  	
  Attention: General
  Counsel

  
	
   

  	
  Telecopier: (714) 246-4774

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “Buyer”

  
	
   

  	
   

  	
   

  
	
   

  	
  MDF ACQUISITION
  CORP.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
       [Print
  Name and Title]

  	
   

  
	
   

  	
   

  
	
   

  	
  Address: 

  
	
   

  	
   

  
	
   

  	
  222 Sutter Street

  
	
   

  	
  San Francisco, CA 9410-4445

  
	
   

  	
  Attention: John Hansen

  
	
   

  	
  Telecopier: (415) 274-4567

  
					

 

10

 

EXHIBIT A

 

TRANSFERRED
FORTE PIPELINE PRODUCTS

 

***

 

 

***PORTIONS OF THIS PAGE
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

12

 

EXHIBIT B

 

RETAINED
FORTE PIPELINE PRODUCTS

 

 

13

 

EXHIBIT C

 

TRANSFERRED
FORMULATIONS PIPELINE PRODUCTS

 

***

 

 

***PORTIONS OF THIS PAGE
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

14

 

EXHIBIT D

 

CROSSOVER
PIPELINE PRODUCTS

 

***

 

 

***PORTIONS OF THIS PAGE
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

15

 

EXHIBIT E

Form of
Project Description

 

	
  Description of
  Additional Project:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Specifications:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Completion Date:

  	
   

  
	
   

  	
   

  
	
  (or)

  	
   

  	
   

  
	
   

  	
   

  
	
  Development Milestones:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Development Fees:

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Cost Per Unit:

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  AGREED AND
  ACKNOWLEDGED:

  	
   

  	
   

  
				

 

	
  ALLERGAN,
  INC.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Print Name and
  Title]

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MDF
  ACQUISITION CORP.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [Print Name and
  Title]

  	
   

  	
   

  	
   

  	
   

  

 

16

 

CONFIDENTIAL
DRAFT

 

For
Discussion Only

 

EXHIBIT B

 

Sublicense
Agreement

 

 

SUBLICENSE
AGREEMENT

 

This Sublicense Agreement
is entered into this                 day
of                ,
1999 (the “Effective Date”) by and between ALLERGAN, INC., a Delaware
corporation (“ALLERGAN”), and MDF ACQUISITION CORP., a Delaware corporation (“SUBLICENSEE”).

 

RECITALS

 

WHEREAS, ALLERGAN is a
non-exclusive licensee under a certain License Agreement dated July 1,
1995 between Harold Pharmacal, Inc. and Tristrata Technology, Inc. by
virtue of a prior acquisition of Harold Pharmacal, Inc. by Allergan
attached hereto as Appendix I (hereafter “Prior License Agreement”); and

 

WHEREAS, SUBLICENSEE
desires to obtain a sublicense under the Prior License Agreement for the
Products (as hereinafter defined) in the Territory (as hereinafter defined) and
the Field of Use (as hereinafter defined) and ALLERGAN is willing to grant such
sublicense subject to consent of Tristrata Technology, Inc. and
SUBLICENSEE’S undertaking to be bound by all of the applicable terms of
provisions of the Prior License Agreement.

 

NOW THEREFORE, in
consideration of the foregoing and the covenants and conditions set forth
below, ALLERGAN and SUBLICENSEE hereby agree as follows:

 

1.        Definitions

 

1.1       The
definitions provided in Article 2 of the Prior License Agreement shall be
the same as used in this Sublicense Agreement when applied to the SUBLICENSEE
in place of the term “LICENSEE” used in the Prior License Agreement. Unless
otherwise defined, capitalized terms used in this Sublicense Agreement shall
have the meanings given to such terms in the Prior License Agreement.

 

1.2       “Field
of Use” means the research, development, manufacture, marketing, and sale of
alpha hydroxy acid-based skin care products, (1) to skin care
aestheticians worldwide and (2) to Physicians (as that term is defined in
the concurrently executed Purchase and Sale Agreement) outside of the United
States and its territories and possessions (the “United States”) but expressly
excluding the manufacturing, marketing, selling or distribution of such
products to Physicians in the United States.

 

1.3.      “Products”
means aesthetic skin care products marketed as M.D. Formulations® and M.D.
Forte®.

 

1

 

1.4       “Territory”
means with respect to the M.D. Formulations® product line, worldwide and, with
respect to the M.D. Forte® product line, worldwide with the exception of the
United States

 

2.        Grant

 

2.1       Subject
to the terms and conditions of the Prior License Agreement and this Sublicense
Agreement, ALLERGAN grants to SUBLICENSEE and Affiliates of SUBLICENSEE under
the Licensed Patent Rights, a non-exclusive license to make, have made, use,
sell and distribute the Products in the Territory in the Field of Use. ALLERGAN
agrees not to grant to any party other than SUBLICENSEE or its Affiliates any
license under the Licensed Patent Rights to make, have made, use, sell and
distribute the Products in the Territory in the Field of Use.

 

2.2       SUBLICENSEE
acknowledges that it will have no right to use the trademark “M.D. Forte”
outside of the Territory.

 

3.        Payments,
Royalties and Reports

 

3.1       In
consideration of the sublicense granted herein, SUBLICENSEE shall pay to
ALLERGAN the royalties payable by “LICENSEE” set forth in Article 4.01 of
the Prior License Agreement.

 

3.2       SUBLICENSEE
further agrees to pay 45% of the minimum royalties provided in Article 4.03
of the Prior License Agreement.

 

3.3       The
remaining terms of Article 4 of the Prior License Agreement shall apply
except that SUBLICENSEE shall deliver to ALLERGAN the required records and
payments within thirty (30) days after the close of each calendar quarter.

 

4.        Representation
and Warranties; Limitations

 

4.1       The
parties agree that the terms of Article 5 of the Prior License Agreement
with respect to “Licensor” shall apply to ALLERGAN, except that Section 5.01
is subject to the consent of Tristrata Technology, Inc.

 

5.        Transferability

 

5.1       The
parties agree that the terms of Article 6 of the Prior License Agreement
in respect to “LICENSOR” shall apply to ALLERGAN and with respect to “LICENSEE”
shall apply to SUBLICENSEE, except that in addition, any permitted assignment
by SUBLICENSEE shall require the prior written consent of Tristrata Technology, Inc.

 

2

 

6.        Notices

 

The parties agree to the
terms of Article 13 of the Prior License Agreement; those with respect to “LICENSEE”
shall apply to:

 

	
   

  	
  MDF ACQUISITION CORP.

  
	
   

  	
  c/o Jesse Hansen &
  Co.

  
	
   

  	
  222 Sutter Street

  
	
   

  	
  San Francisco, CA 94108-4445

  
	
   

  	
  Attn: President

  

 

and with respect to “LICENSOR”
shall apply to:

 

	
   

  	
  Allergan, Inc. 

  
	
   

  	
  2525 Dupont Drive

  
	
   

  	
  Irvine, California
  92612

  
	
   

  	
  Attn: General Counsel

  

 

7.         Other

 

The parties agree the
terms of Articles 1, 6, 8, 9, 10, 11.01, 11.03 and 15 with respect to “LICENSOR”
shall apply to ALLERGAN and with respect to “LICENSEE” shall apply to
SUBLICENSE, except that ALLERGAN shall have no obligation to enforce the Patent
Rights other than to request the same be enforced by Tristrata Technology, Inc.

 

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

 

 

	
  ALLERGAN, INC.

  	
  MDF ACQUISITION CORP.

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
									

 

3

 

EXHIBIT I

 

LICENSE
AGREEMENT

 

THIS AGREEMENT, entered
into and effective as of the 1st day of July, 1995 (the “Effective Date”) by
and between TRISTRATA TECHNOLOGY, INC., a Delaware corporation having its
principal place of business at 1105 North Market Street, Suite 1300, P.O. Box
8985, Wilmington, Delaware 19899 (hereinafter referred to as “LICENSOR”) and
Herald Pharmacal, Inc. a North Carolina corporation having a principal
place of business at 6503 Warwick Road, Richmond, Virginia 23225, (hereinafter
referred to as “LICENSEE”);

 

RECITALS

 

WHEREAS, LICENSEE in the
course of its business sells cosmetic and skin care products and is interested
in obtaining from LICENSOR a license to make, have made, use, distribute and/or
sell Licensed Products under the Licensed Patent Rights (as hereinafter
defined); and

 

WHEREAS, LICENSOR owns or
has the right to grant licenses under the Licensed patent Rights (as
hereinafter defined) for use in connection with the Licensed Products (as
hereinafter defined, subject to the pre-existing exclusive rights of Avon
Products, Inc. and certain of its affiliated companies (“Avon”) pursuant
to the attached portions of a License Agreement, effective April 1, 1994
between LICENSOR and Avon (the “Avon License Agreement”)); and

 

WHEREAS, LICENSEE has
independently examined those portions of the licensed Patent Rights (as
hereinafter defined) consisting of the prosecution histories of the issued
patents listed on Schedule A hereto and, to the best of LICENSEE’S
knowledge and belief, the Licensed Patent Rights are valid and enforceable; and

 

WHEREAS, subject to, and
upon, all of the terms and conditions of this Agreement, LICENSOR is willing to
grant to LICENSEE a non-exclusive license to make, have made, use and sell the
Licensed Products (as hereinafter defined);

 

 

NOW, THEREFORE, in
consideration of the foregoing premises and of the mutual covenants, promises
and agreements set forth herein, LICENSOR and LICENSEE hereby mutually agree as
follows:

 

ARTICLE I – GENERAL

 

1.01          Subject
to all of the terms and conditions hereunder, the terms of this Agreement
supersede and cancel the prior license agreement between Herald Pharmacal, Inc.
and Drs. Eugene J. Van Scott
and Ruey J. Yu entered into April 1, 1988.

 

1.02          All
capitalized terms used in this Agreement (other than the names of parties and Article headings)
shall have the meanings established for such terms herein.

 

1.03          LICENSEE
acknowledges that LICENSEE has been advised by LICENSOR of the rights granted
by LICENSOR pursuant to the Avon License Agreement, as set forth in the pages of
the Avon License Agreement attached hereto, and that, notwithstanding anything
to the contrary in this Agreement, LICENSEE’S rights hereunder are subject to
such rights of Avon.

 

1.04          LICENSEE
has independently examined those portions of the Licensed patent Rights (as
defined in Section 2.02), consisting of the prosecution histories of the
issued patents listed on Schedule A hereto and, to the best of LICENSEE’S
knowledge and belief, the Licensed Patent Rights are valid and enforceable, and
LICENSEE is desirous of obtaining a license from LICENSOR under said Licensed
Patent Rights upon all of the terms and conditions set forth in this Agreement.

 

ARTICLE II
– DEFINITIONS

 

2.01          “Excluded
Channel of Trade” shall mean the mail order, multi-level and direct
door-to-door markets. Notwithstanding the Excluded Channel of Trade herein,
LICENSEE may process orders made by customers of LICENSEE as a result of 800
telephone, toll-free telephone or telephone orders, provided that LICENSEE and
its Affiliates shall not employ television, including without

 

2

 

limitation, television
infomercials, to advertise any 800 telephone, toll-free telephone or any
telephone numbers to take, process or receive sales orders.

 

2.02          “Licensed
Patent Rights” shall mean, subject to the specific exclusions set forth in
Sections 1.03 and 2.03, those portions of the United States patents and United
States patent applications set forth in Schedule A hereto and all issued divisions,
continuations, continuations-in-part, reissues, reexaminations and extensions
thereof: (a) covering only cosmetic and dermatologic preparations
containing glycolic acid and/or its salts for: (1) the treatment of human
skin wrinkles and/or fine lines on the human skin; (2) the treatment of
dry skin; (3) as a skin cleanser; (4) as a hair conditioner; (5) as
a shampoo; (b) covering only cosmetic and dermatologic preparations
containing glycolic acid and/or its salts, in combination with salicylic acid
for the treatment of acne; and (c) covering only cosmetic and dermatologic
preparations containing glycolic acid and/or its salts in combination with two
percent (2%) or less of hydroquinone for the treatment of pigmented spots on
human skin.

 

2.03          Notwithstanding
anything herein to the contrary, “Licensed Patent Rights” shall not include any
rights to a patent or patent application on an invention unless such rights
relate to:

 

(a)   glycolic acid
and/or its salts; and

 

(b)   a method for using
glycolic acid and/or its salts or compositions containing glycolic acid and/or
its salts, for: (1) the treatment of human skin wrinkles or fine lines on
the human skin by topically applying compositions containing glycolic acid or a
salt thereof to human skin; (2) the treatment of dry skin; (3) as a
skin cleanser; (4) as a hair conditioner; and (5) as a shampoo;

 

(c)   a method for using
glycolic acid and/or its salts, in combination with salicylic acid for the
treatment of acne; or

 

3

 

(d)   a method for using
glycolic acid and/or its salts, in combination with two percent (2%) or less of
hydroguinone for the treatment of pigmented spots on human skin.

 

2.04          “Licensed
Products” shall include any cosmetic and/or dermatologic preparation covered by
the Licensed Patent Rights (a) containing glycolic acid and/or its salts: (1) for
the treatment of human skin wrinkles and/or fine lines on the human skin; (2) the
treatment of dry skin; (3) as a skin cleanser; (4) as a hair
conditioner; (5) as a shampoo; or (b) cosmetic and dermatologic
preparations containing glycolic acid and/or its salts, in combination with
salicylic acid for the treatment of acne; or (c) cosmetic and dermatologic
preparations containing glycolic acid and/or its salts in combination with two
percent (2%) or less of hydroguinone for the treatment of pigmented spots on
human skin.

 

2.05          “Territory”
shall mean the United States, its possessions and territories and the
Commonwealth of Puerto Rico.

 

2.06          An
“Affiliate” of LICENSEE shall mean (a) subject to the provisions of Section 3.04
below, any wholly owned entities of LICENSEE listed on Schedule B hereto,
as said Schedule B shall from time to time be updated promptly by
LICENSEE; and (b) subject to the provisions of Section 6.02 hereof,
any person, corporation, partnership or other entity which directly or
indirectly controls, is controlled by, or in under common control with
LICENSEE. Affiliates of LICENSEE shall be subject to all of the provisions of
this Agreement.

 

2.07          An
“Affiliate” of LICENSOR shall mean any person, corporation, partnership or
other entity which directly or indirectly controls, is controlled by, or is
under common control With, LICENSOR.

 

ARTICLE III
– LICENSE GRANT

 

3.01          Subject
to all of the terms and provisions of this Agreement, LICENSOR grants to
LICENSEE and Affiliates of

 

4

 

LICENSEE (as defined in Section 2.06)
under the Licensed Patent Rights a non-exclusive license to make, have made,
use, sell, and distribute in the Territory Licensed Products except through the
Excluded Channel of Trade. Notwithstanding any provisions herein to the
contrary, no rights are granted hereunder by LICENSOR to LICENSEE or any
Affiliate of LICENSEE to make, have made, use or sell any Licensed Products
outside the Territory (as defined in Section 2.05). LICENSEE hereby
covenants and agrees that it will not, directly, indirectly or by the use of
others, make, have made, use, sell or distribute Licensed Products outside the
Territory.

 

3.02          Notwithstanding any provision herein to
the contrary, no right is granted or otherwise conveyed by this license
agreement to any entity other than LICENSEE and, to the extent provided in Schedule B
to this Agreement as said Schedule B may be updated from time to time, the
Affiliates of LICENSEE, to make, have made, use, sell or otherwise dispose of
Licensed Products, except for resale or use by customers of LICENSEE and its
Affiliates.

 

3.03          Licensed
Products of LICENSEE and its Affiliates are currently sold and/or distributed
in the Territory under the brand names and/or trademarks (the “Licensee Marks”)
listed on Schedule C hereto. Schedule C hereto will be promptly
updated by LICENSEE should LICENSEE, make, have made, use, distribute or sell
Licensed Products other than under the Licensee Marks listed on Schedule C.

 

3.04          As
a condition to receiving the license under the Licensed Patent Rights
hereunder; each Affiliate of LICENSEE must first execute and deliver to
LICENSOR a written instrument in the form provided in Exhibit A hereto
pursuant to which such Affiliate of LICENSEE agrees with LICENSOR to be bound
by all of the terms and provisions of this Agreement applicable to LICENSEE.
LICENSEE hereby unconditionally guarantees the compliance and performance by
each Affiliate of LICENSEE with and of all of the provisions of this Agreement,
including, without limitation, the payments of all amounts due to LICENSOR
pursuant to any of the

 

5

 

provisions of this
Agreement.

 

3.05          The term of this Agreement and of the
license granted hereunder shall commence as of the Effective Date and shall
expire or terminate upon the expiration of the last to expire of the Licensed
Patent Rights or upon the earlier termination of this Agreement pursuant to any
of the provisions of Article VII of this Agreement.

 

3.06          Subject
to Section 8.03 hereof, LICENSOR specifically reserves the right to, and
to grant licenses to others to, make, have made, use, sell or otherwise dispose
of Licensed Products within or without the Territory on such terms as LICENSOR
may deem appropriate.

 

3.07          During
the term of this Agreement, LICENSEE and its Affiliates shall not be obligated
to pay more than one royalty with respect to the same unit of Licensed Product
regardless of the number of claims of the Licensed Patent Rights covering said
Licensed Product. However, no license, express or implied, is granted hereunder
to any other patent rights or under any other patents or technology owned,
used, or otherwise controlled by LICENSOR or any Affiliate of LICENSOR, other
than under the Licensed Patent Rights.

 

ARTICLE IV
– PAYMENTS, ROYALTIES AND REPORTS

 

4.01          In
consideration for the licenses granted to LICENSEE hereunder, LICENSEE and
permitted Affiliates of LICENSEE shall pay to LICENSOR in the manner set forth
below, payable quarterly, royalties on the annual Net Sales of Licensed
Products made during such quarter by LICENSEE or Affiliates according to the
following schedule:

 

(a)   ***
of Net Sales between *** and *** plus;

 

(b)   ***
of Net Sales between *** and *** plus;

 

***PORTIONS OF THIS PAGE
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

6

 

(c)   ***
of Net Sales between *** and ***; and

 

(d)   ***
of Net Sales in excess ***.

 

4.02          LICENSOR
and LICENSEE agree that the methodology used to calculate the payments and
royalties set forth herein is fair, reasonable and the most administratively
convenient way to make the calculations.

 

4.03          Notwithstanding
the schedule set forth in Section 4.01 above, in consideration of the
license granted to LICENSEE hereunder, LICENSEE will pay to LICENSOR a minimum
annual royalty of ***, to be paid in equal amounts on a quarterly basis, on January 1,
April 1, July 1 and October 1 of each calendar year, commencing
on July l, 1995. The minimum annual royalty payment shall increase to ***
in the second year of this Agreement and shall increase *** each year over the
preceding year’s minimum annual royalty payment during the term of this
Agreement, until such time as the minimum annual payment reaches ***. Upon
reaching ***, the minimum annual payment shall remain at that amount for each
subsequent year during the term of this Agreement. Such minimum annual royalty
payments are creditable against the royalty from LICENSEE’S sale of Licensed
Products for the same years.

 

4.04          For
purposes of this Agreement, “Net Sales” shall mean the gross amounts received
by LICENSEE or an Affiliate of LICENSEE from or on account of the sale of
Licensed Products to independent third parties, less the aggregate of the
following amounts: (i) discounts, including cash discounts, or rebates
actually allowed or granted, and (ii) credits or allowances actually
granted by LICENSEE or an Affiliate of LICENSEE upon claims or returns. All
royalties due to LICENSOR under this

 

7

 

agreement shall be based
upon the sales price of the Licensed Products sold hereunder to an unaffiliated
third-party. Sales are considered made for the purposes of this Agreement when
invoiced by LICENSEE or an Affiliate of LICENSEE.

 

4.05          During
the term of this Agreement as specified in Section 3.05, LICENSEE shall,
and shall cause its Affiliates to, maintain complete and accurate records of
all sales of Licensed Products and all payments due to LICENSOR hereunder.
LICENSEE shall deliver to LICENSOR within sixty (60) days after the close of
each calendar quarter, a true and accurate written report, certified as true
and correct by an officer of LICENSEE, setting forth the gross dollar amounts
received by LICENSEE and Affiliates of LICENSEE for the sales of Licensed
Products; the calculation of Net Sales (including a separate statement of the
amounts deducted pursuant to clauses (i) and (ii) of Section 4.04
to determine Net Sales); and the computation of the royalties to be paid to
LICENSOR by LICENSEE and Affiliates of LICENSEE for such period. Each such
report shall segregate the gross and net dollar sales amounts separately for
LICENSEE and each Affiliate of LICENSEE.

 

4.06          Simultaneously
with providing the report required in Section 4.05, LICENSEE shall pay to
LICENSOR in United States Dollars the entire amount of royalties due to
LICENSOR for the calendar quarter on account of which such report is made and
submitted.

 

4.07          LICENSOR
shall have the right, at its own expense, to request an audit of any quarterly
period ending not more than three (3) years prior to the date of such
request, and to appoint an independent accountant to perform such audit. The
independent accountant appointed by LICENSOR shall have access to the business
records of LICENSEE and Affiliates of LICENSEE which are necessary or
appropriate to verify the royalties payable to LICENSOR pursuant to this
Agreement. The independent accountant shall keep confidential information
received from LICENSEE or its Affiliates, except for information necessary for
disclosure to LICENSOR to report on the accuracy of LICENSEE’s reports. In the

 

8

 

event that a deficiency
of four percent (4%) or more is discovered between the actual royalty payment
due to LICENSOR and the amount of the royalty payment specified in the written
report submitted by LICENSEE to LICENSOR pursuant to Section 4.05,
LICENSEE shall bear the costs of the audit conducted by LICENSOR.

 

4.08          No
amounts due hereunder shall be withheld by LICENSEE or Affiliates of LICENSEE,
whether due to a claim of set-off or any other claim by LICENSEE of any amount
due to LICENSEE from LICENSOR, except for a specific amount withheld by
LICENSEE or an Affiliate due to a claimed breach of a specific provisions of
this Agreement. Any withholding of any such specific amounts by LICENSEE or an
Affiliate shall require a notice from LICENSEE, in advance of the date the
amount would otherwise be due, stating: (a) the amount withheld; (b) a
specific statement of the breach(es) of this Agreement claimed by LICENSEE or
an Affiliate; and (c) the specific provisions(s) of this Agreement for
which the breach(es) is/are claimed.

 

ARTICLE V
– REPRESENTATIONS AND WARRANTIES; LIMITATIONS

 

5.01          LICENSOR
represents that it has the full authority to grant to LICENSEE the rights with
respect to the Licensed Patent Rights in accordance with the provisions of this
Agreement.

 

5.02          LICENSOR
MAKES NO REPRESENTATIONS TO LICENSEE, EXTENDS NO WARRANTIES OF ANY NATURE,
WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND HEREBY
DISCLAIMS ANY AND ALL WARRANTIES, AND LICENSOR ASSUMES NO LIABILITIES OR
RESPONSIBILITIES OF ANY NATURE WHATSOEVER WITH RESPECT TO THE MANUFACTURE,
DISTRIBUTION, SALE, USE OR OTHER DISPOSITION BY LICENSEE OR ANY AFFILIATE OF
LICENSEE, OR ANY VENDEE OR OTHER TRANSFEREE OR USER OF ANY OF THE LICENSED
PRODUCTS OR OTHER PRODUCTS WHICH INCORPORATE, OR ARE FORMULATED OR MANUFACTURED
BY USE 0F, ANY OF THE LICENSED PATENT RIGHTS OR ANY OTHER INFORMATION FURNISHED
BY OR IN CONNECTION WITH THIS AGREEMENT.

 

9

 

5.03          LICENSOR
MAKES HO REPRESENTATION OR WARRANTY AND IN NO EVENT SHALL LICENSOR OR ANY
AFFILIATE OF LICENSOR BE LIABLE OR RESPONSIBLE TO LICENSEE FOR ANY INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES.

 

5.04          Without
limiting the disclaimers set forth in Sections 5.02 and 5.03, nothing in this
Agreement shall be construed as:

 

(a)       a warranty or
representation by LICENSOR as to the validity or scope of any patent included
within the Licensed Patent Rights

 

(b)      a warranty or
representation by LICENSOR that anything made, used or sold or otherwise
disposed of by LICENSEE under this Agreement is or will be free from
infringement of patents of third persons;

 

(c)       a requirement
or obligation that LICENSOR furnish to LICENSEE any technical or manufacturing
information concerning Licensed Products, or any of the substance of pending
patent applications other than those included in the Licensed patent Rights;

 

(d)      a grant by
LICENSOR of any right to use in advertising, publicity, or otherwise a
trademark, trade name or image and likeness of LICENSOR or its Affiliates, or
any name or likeness of their respective employees, officers, or the inventors
of any of the patents or patent applications included within the Licensed
Patent Rights;

 

(e)       a
representation or warranty by LICENSOR as to the usefulness, fitness,
merchantability or suitability of any product to be manufactured sold or
otherwise distributed by LICENSEE or any Affiliate of LICENSEE.

 

ARTICLE VI
– TRANSFRABILITY OF RIGHTS AND OBLIGATIONS

 

6.01          This
Agreement shall be binding upon any successor or assign of LICENSOR. LICENSOR
may assign any of its

 

10

 

rights and obligations
hereunder, in whole or in part, without the prior written consent of LICENSEE.

 

6.02          LICENSEE
may not assign its rights and obligations under this Agreement to a third-party
without the prior approval of LICENSOR, which approval shall be requested by
LICENSEE in the manner provided in Section 13.01 hereof. In any event,
assignment of LICENSEE’S rights and obligations hereunder is effective only
upon a writing executed by LICENSEE’S permitted assignee in accordance with Section 3.04
hereof. LICENSOR shall respond to LICENSEE'S written request for approval of
assignment of this Agreement within thirty (30) days of receipt of LICENSEE’S
request for approval. In the event LICENSOR does not respond to such request
within such thirty (30) day period, LICENSOR will be deemed to have consented
to the assignment requested in LICENSEE’S notice provided the assignee executes
the writing in accordance with Section 3.04 hereof. LICENSOR’S consent to
an assignment under this Section 6.02 will not be unreasonably withheld,
however LICENSOR may reasonably withhold its consent only if it reasonably
believes that the proposed assignee does not possess sufficient financial or
legal ability to perform any of the terms of this Agreement, is lacking in any
other such capacity necessary to perform the terms of this Agreement, or is
engaged after any notice from LICENSOR in activities that infringe any patent
rights of LICENSOR. Any attempt to transfer, assign or sublicense not in
accordance with the terms of this Agreement shall be void.

 

6.03          The
provisions of this Agreement shall be binding upon and inure to the benefit of
all successors and permitted assigns of the parties hereto.

 

ARTICLE VII
– TERMINATION FOR BREACH

 

7.01          Prior
to the expiration of the term of this Agreement, LICENSOR may, at its option,
terminate this Agreement and the license granted hereunder if LICENSEE or an
Affiliate fails to pay within thirty (30) days of the date of receipt of notice
from LICENSOR of a failure to pay any amount required to be paid

 

11

 

hereunder, where LICENSEE’S
failure to pay is the first such failure in a calendar year. For any additional
failure(s) to pay in any calendar year after the first failure to pay, LICENSOR
may, at its option, terminate this Agreement and the license granted hereunder
if LICENSEE or an Affiliate fails to pay within fifteen (15) days of the date
of receipt of notice from LICENSOR of such failure to pay any amount required
to be paid hereunder. For a breach of any other provision of this Agreement
other than for failure to pay amounts due hereunder, unless the breach is not
capable of being cured, LICENSEE shall have sixty (60) days from receipt of
notice from LICENSOR to cure such other breach and thereby avoid termination
under this Section. If the breach is not capable of being cured, any overdue
amount is not paid with interest at the rate of one percent (1%) per month
during the period for which such amount is overdue to the date paid, or such
other breach is not cured within sixty (60) days, then this Agreement and all
licenses granted hereby will terminate immediately and automatically without
any further notice or action on the part of LICENSOR. In the event that the
interest rate specified in this Section exceeds the maximum rate of
interest permitted by applicable law, such rate shall in such instance be
reduced to the maximum permitted rate.

 

7.02          In
the event that LICENSEE or any permitted assignee of LICENSEE shall become
insolvent, be declared bankrupt, voluntarily file or have filed against it a
petition for bankruptcy or reorganization, unless such petition is dismissed
within sixty (60) days of filing, enter into an arrangement for the benefit of
creditors, enter into a procedure of winding up to dissolution or should a
trustee or receiver be appointed for its respective business assets or
operations, LICENSOR may immediately terminate this Agreement and the license
granted hereby, effective upon written notice to LICENSEE.

 

7.03          LICENSEE
may terminate this Agreement at any time upon six (6) months prior written
notice to LICENSOR, provided that upon the effective date of such termination
LICENSEE shall

 

12

 

make no further sales of
products that infringe the Licensed Patent Rights.

 

7.04          Under
no circumstances (including, without limitation, a termination for any reason
whatsoever) shall LICENSOR be obligated to refund any payments theretofore made
by LICENSEE hereunder, unless it is established to the reasonable satisfaction
of LICENSOR that the payment was erroneously made at the time of payment.

 

7.05          Except
as otherwise specifically provided herein, expiration or termination of this
Agreement and of the license granted hereby for any reason shall be without
prejudice to:

 

(a)   the
right of LICENSOR to receive all payments accrued and unpaid as of the
effective date of such termination or to receive any payments or other amounts
which may accrue after the date of termination; and

 

(b)   any
other rights, remedies or obligations which LICENSOR may then or thereafter
have under this Agreement or otherwise.

 

7.06          Except
for a termination as provided in Section 7.03, upon the termination (but
not expiration) of this Agreement, LICENSEE and its Affiliates shall cease all
use of the Licensed Patent Rights. Notwithstanding the foregoing, LICENSEE and
its Affiliates shall for a period of ninety (90) days following the effective
date of termination be entitled to distribute and sell within the Territory
through their regular channels of distribution any stocks of completed Licensed
Products then in their possession, subject to the payment of royalties and
other provisions of Section 4 of
this Agreement.

 

7.07          The
provisions of sections 7.03 through this Section 7.07 shall survive
termination or expiration of this Agreement.

 

13

 

ARTICLE VIII
– THIRD-PARTY INFRINGEMENT

 

8.01          LICENSOR
shall have the sole right, but not the obligation, to institute and control the
prosecution of a suit or to take any other action for infringement of any of
the Licensed Patent Rights. LICENSEE agrees to take no action with respect to
any third-party infringement of Licensed Patent Rights unless expressly authorized
to do so in writing by LICENSOR. LICENSEE agrees to, and to cause each of the
Affiliates of LICENSEE, to provide reasonable cooperation to cooperate with
LICENSOR in connection with a suit or other action for infringement of the
Licensed Patent Rights upon LICENSOR’s request. LICENSOR will provide
reasonable compensation to LICENSEE and its Affiliates for expenses incurred in
connection with such cooperation. Any recovery or settlement obtained as a
result of such suit or other action shall be retained by LICENSOR for its own
use and benefit, and LICENSEE shall have no rights whatsoever in any such
recovery or settlement.

 

8.02          Neither LICENSEE nor any Affiliate shall
foster or encourage any infringement of the Licensed Patent Rights by any
third-party. If LICENSEE and/or any of its Affiliates shall engage in such
conduct, LICENSOR shall have the right to deem such conduct a material breach
of this Agreement, which breach shall be a basis of termination of this
Agreement and of the license granted herein, pursuant to Section 7.01 of
this Agreement.

 

8.03          LICENSOR
will use reasonable efforts to enforce the Licensed Patent Rights hereunder
against infringement by third-parties in such manner as LICENSOR deems necessary
and appropriate in light of all the circumstances. LICENSOR also agrees to use
reasonable efforts to license the Licensed Patent Rights hereunder to
third-parties on reasonable royalty terms. Notwithstanding anything in this Section 8.03
to the contrary, LICENSOR reserves the right to license the Licensed Patent
Rights to others on terms it reasonably deems to be commercially reasonable and
nothing contained herein shall be construed as an obligation on the part of
LICENSOR to take any particular actions respecting third-party

 

14

 

infringement and nothing
contained herein shall be construed as an obligation on the part of LICENSOR to
license the Licensed Patent Rights to third-parties on any particular terms or
conditions.

 

ARTICLE IX
– NOTIFICATION OF INQUIRY FROM

THIRD-PARTIES CONCERNING LICENSED PATENT RIGHTS

 

9.01          Except
as provided in Section 12.02, LICENSEE agrees to, and to cause Affiliates
of LICENSEE to, respond to any request for disclosure or information concerning
the Licensed Patent Rights hereunder only by notifying LICENSOR promptly of the
request for disclosure and the identity of the person or entity making such
request for disclosure so that LICENSOR can respond to the request.

 

ARTICLE X
– INTEGRATION; AMENDMENT

 

10.01        This
Agreement represents the entire understanding between the parties, and
supersedes all prior or contemporaneous discussions, proposals, negotiations,
understandings and other agreements, express or implied, between LICENSOR and
LICENSEE with respect to the subject matter of this Agreement, and there are no
representations, promises, conditions, provisions or terms, whether written or
oral, with respect thereto, other than those specifically set forth in this
Agreement.

 

10.02        No
provision in this Agreement may be amended, altered, modified, discharged or
terminated, except by a writing signed by a duly authorized representative of
LICENSOR and LICENSEE.

 

ARTICLE XI – INDEMNIFICATION

 

11.01        LICENSEE
and Affiliates of LICENSEE operating under this Agreement pursuant to Section 3.04
hereof shall jointly and severally defend, indemnify and hold harmless LICENSOR
and the Affiliates of LICENSOR, and the officers, agents and employees of
LICENSOR and its Affiliates, and the inventors (collectively the “Indemnified
Parties”) from and against any and all liabilities,

 

15

 

damages, losses, claims,
suits, proceedings, demands, recovery, costs and expenses (including, without
limitation, the fees and expenses of counsel, litigation expenses, and court
costs) which arise out of or relate to, or are alleged to arise out of or
relate to: any personal injury, death or property damage which arise out of or
relate to or are alleged to arise out of or relate to the manufacture,
distribution, sale or use of products manufactured, sold or otherwise
distributed by LICENSEE or any Affiliate of LICENSEE.

 

11.02        During
the term of this Agreement and for such later term extending beyond the term of
this Agreement as LICENSEE or any Affiliate of LICENSEE may be selling Licensed
Products and for a period of two (2) years after the expiration of the
shelf-life of the last of the Licensed Products sold by LICENSEE or any
Affiliate of LICENSEE, LICENSEE shall maintain: (1) all insurance and/or
bonds required by law; and (2) comprehensive general liability insurance,
including product liability insurance, subject to the availability of such
product liability insurance at commercially reasonable rates, written on an
occurrence basis at the levels currently maintained by Herald *** base policy
and *** excess coverage) for bodily injury, including death and property
damage. Such amounts shall be subject to reasonable increases upon the fifth
and tenth anniversaries of the date hereof to account for inflation and other
relevant factors, subject to the availability of such insurance at commercially
reasonable rates. Subject to the availability at commercially reasonable rates,
the insurance coverage required by this Section 11.02 shall be provided
with respect to all claims for damages to person or property arising out of the
manufacture, formulation, processing, fabrication, sale or use of any of the
Licensed Products, regardless of when such claims are made or when the
underlying damages or injuries occur or manifest themselves. Subject to the
availability at commercially reasonable rates, the policies of insurance shall:
(a) include an endorsement naming LICENSOR and its Affiliates and their
respective

 

***PORTIONS OF THIS PAGE
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

16

 

officers, employees and
agents as additional named insureds; and (b) provide that notice be given
to LICENSOR not less than thirty (30) days prior to any cancellation or
material change in any of such policies.

 

11.03        The
indemnity and insurance obligations of LICENSEE and the Affiliates of LICENSEE
under this Agreement shall survive the termination or expiration of this
Agreement and of the licenses granted pursuant to this Agreement in order to
indemnify and hold harmless the Indemnified Parties (as defined in Section 11.01)
with respect to any claims for which the Indemnified Parties are entitled to
indemnification, irrespective of whether any such claim arose prior or
subsequent to the effective date of termination or expiration.

 

ARTICLE XII
– PRESS RELEASES AND PUBLICITY

 

12.01        Neither
LICENSOR nor LICENSEE shall issue a press release or public announcement
disclosing the terms of this Agreement without the prior specific written
consent of the other party. LICENSOR and LICENSEE may disclose the fact that
this Agreement has been executed and entered into without disclosing the amount
of the payments hereunder or any of the other terms of this Agreement.

 

12.02        Notwithstanding
Section 12.01, LICENSOR or LICENSEE may disclose the terms of this
Agreement in response to: (a) an order from a court or governmental agency;
(b) in response to a request by a party in litigation, provided an
appropriate protective order has been entered; (c) in response to a
request to LICENSOR from a licensee or prospective licensee or a request to
LICENSEE from a bona fide party considering purchasing substantially all of the
assets of LICENSEE or considering some other form of acquisition transaction or
financing, provided that an appropriate non-disclosure agreement has been
executed; or (d) if such disclosure is necessary to comply with any other
laws or regulations applicable to LICENSOR or LICENSEE.

 

17

 

ARTICLE XIII
– NOTICES

 

13.01        It
will be a sufficient giving of any notice, request, report, statement,
disclosure, or other communication hereunder, to LICENSOR or to LICENSEE, if
the party giving it deposits a copy thereof in a post office in a registered or
certified envelope, postage prepaid, or with overnight courier, prepaid,
receipt requested, addressed to the other party at its address set forth below
or at any other address the other party may hereafter designate in writing in
accordance with the provisions hereof. Unless otherwise specified in this
Agreement or otherwise designated in writing, payments to be made pursuant to any
of the provisions of this Agreement will be transmitted to the address to which
notice is to be given hereunder, or wired to the bank account of LICENSOR as
requested by LICENSOR. The respective addresses for the parties are:

 

	
  If
  to LICENSEE:

  	
   

  	
  Herald Pharmacal, Inc.

  
	
   

  	
   

  	
  6503 Warwick Road 

  
	
   

  	
   

  	
  Richmond, VA 23225

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Mr. Todd Bakewell,

  
	
   

  	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
  If
  to LICENSOR:

  	
   

  	
  TRISTRATA TECHNOLOGY
  INCORPORATED

  
	
   

  	
   

  	
  1105 North Market
  Street 

  
	
   

  	
   

  	
  Suite 1300, P.O. Box
  8985

  
	
   

  	
   

  	
  Wilmington, Delaware
  99899

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  President

  

 

Notice to LICENSEE shall
be deemed notice to each Affiliate of LICENSEE for all purposes, and LICENSOR
shall not be required to give any separate notice to any Affiliate of LICENSEE.

 

ARTICLE XIV
– APPLICABLE LAW AND JURISDICTION

 

14.01        All
matters affecting the interpretation validity, and performance of this
Agreement shall be governed by the laws of the State of Delaware without regard
to its conflict of 

 

18

 

law principles.

 

14.02        The
United States District Court for the District of Delaware, if a basis for
Federal court jurisdiction is present, and otherwise a state court of the State
of Delaware, shall have exclusive jurisdiction and venue over any dispute
arising under or relating to this Agreement, and LICENSEE and the Affiliates of
LICENSEE consent to the jurisdiction and venue of such courts. Each of LICENSOR
and LICENSEE and Affiliates of LICENSEE submits to the personal jurisdiction in
the State of Delaware in any action or proceeding arising under or relating to
this Agreement and hereby agrees not to assert by way of pleading, motion or
otherwise in any such suit, action or proceeding, that such party is not
personally subject to the jurisdiction of any such court and such action or
proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement may not be enforced in or by such court. In
furtherance of such submission to jurisdiction, each of LICENSOR and LICENSEE
and Affiliates of LICENSEE hereby agrees that, without in any manner limiting
or restricting other methods of obtaining personal jurisdiction over such
party, personal jurisdiction over LICENSOR or LICENSEE in any action or
proceeding arising out of or relating to this Agreement may be obtained over
such party within or without the jurisdiction of any court located in the State
of Delaware (including a United States Federal District Court in such state)
and that any process, notice of motion, or other application to any court in
connection with any such action or proceeding may be served upon such party by
registered or certified mail to, or by personal service upon such party at the
last address of such party as specified in, or in accordance with the
provisions of, Article XIII of this Agreement.

 

Each of the Affiliates of
LICENSEE and LICENSOR shall be bound by the provisions of this Section 14.02.

 

14.03        In
any action commenced to enforce this Agreement or as a result of a breach of
this Agreement, the prevailing party in such action shall be entitled to
recover the

 

19

 

costs of such action,
including attorneys’ fees, incurred as a result of the action to enforce and/or
remedy the breach of this Agreement.

 

ARTICLE XV
– MISCELLANEOUS

 

15.01        (a)   If
any provision of this Agreement or the application of any provision of this
agreement to any person or under any circumstance shall be held to be invalid,
unenforceable or in conflict with the law of any jurisdiction, the validity and
enforceability of the remaining provisions and the application thereof to any
another person or under any other circumstance shall not be affected by such
holding.

 

(b)   Any
provision of this Agreement which is held to be invalid or unenforceable by a
court of competent jurisdiction in any jurisdiction shall, as to such
jurisdiction, be ineffective only to the extent of such invalidity or
unenforceability.

 

15.02        The
waiver by either party, whether express or implied, of any provision of this
Agreement, or of any breach or default by the other party shall not be
construed to be a continuing waiver of such provision or of any succeeding
breach or default, or a waiver of any other provision of this Agreement.

 

15.03        Nothing
contained in this Agreement shall be construed to constitute or imply a joint
venture, partnership, or principal-agent relationship between LICENSOR and
LICENSEE. Neither party by virtue of this Agreement shall have any right, power
or authority to act or create any obligation, express or implied, on behalf of
the other party. Neither LICENSEE, nor any Affiliate of LICENSEE, nor any of
the employees of LICENSEE or of any Affiliate of LICENSEE shall in any manner
be deemed an employee or an agent of LICENSOR for any purpose whatsoever.

 

15.04        The
provisions of this Agreement are solely for the benefit of LICENSOR and
LICENSEE, their authorized Affiliates, and their permitted successors and
assigns (as defined herein), and no such provision shall be construed or applied
to confer any

 

20

 

rights or benefits on any
other person.

 

15.05        This
Agreement may be simultaneously executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same
instrument. Both parties hereto may sign the same counterpart or each party
hereto may sign a separate counterpart of this Agreement.

 

15.06        Article,
section and paragraph headings in this Agreement are for reference
purposes only and shall not in any way affect the construction or
interpretation of any provision of this Agreement.

 

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

 

 

	
  LICENSOR 

  	
  LICENSEE

  
	
  TRISTRATA TECHNOLOGY,
  INC.

  	
  HERALD PHARMACAL, INC.

  
	
   

  	
   

  
	
  By

  	
  /s/ [ILLEGIBLE]

  	
   

  	
  By

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
  Title

  	
  VP - FINANCE

  	
   

  	
  Title

  	
  Exec. Vice Pres.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
  /s/ [ILLEGIBLE]

  	
   

  	
  Attest:

  	
  /s/ [ILLEGIBLE]

  	
   

  
										

 

21

 

EXHIBIT A

 

The undersigned agrees to
be bound by all of the provisions of the License Agreement between Herald
Pharmacal and TriStrata Technology, Inc. dated July 1, 1995.

 

 

CONFIDENTIAL
DRAFT

 

For
Discussion Only

 

EXHIBIT C

 

Supply
Agreement

 

 

FORM OF

 

SUPPLY
AGREEMENT

 

dated
as of              
        , 1999

 

between

 

ALLERGAN
SALES, INC.

 

and

 

MDF
ACQUISITION CORP.

 

 

SUPPLY
AGREEMENT

 

THIS SUPPLY AGREEMENT
(this “Supply Agreement”), is
entered into as of                  
         , 1999 by and between
Allergan Sales, Inc., a California corporation (“Allergan”), and MDF Acquisition Corp., a Delaware corporation
(the “Buyer”).

 

RECITALS

 

A.       Allergan, Inc.
and its subsidiaries have entered into a Purchase and Sale Agreement, with
Buyer, dated May       , 1999, pursuant to
which Buyer acquired the rights to certain skin care products and other assets
associated therewith.

 

B.        In
the Purchase and Sale Agreement the parties agreed to enter into this Supply
Agreement, pursuant to which Allergan will supply, and Buyer will purchase,
certain finished products more particularly described in Exhibit “A”
attached hereto (the “Products”).

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the covenants contained herein, the above recitals and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

 

1.
DEFINITIONS

 

1.1. “Effective Date” means                             ,
1999.

 

1.2.     “Packaging and Labeling Specifications”
means Allergan’s written specifications for packaging and labeling the Products
in effect on the Effective Date.

 

1.3.     “Product Specifications” means the
specifications set forth in Exhibit “B”, which may be amended from
time to time by written agreement of the parties.

 

1.4.     “Products” has the meaning given to it in
Recital A above; however, the parties may agree to add other products to this
Supply Agreement by way of a mutually executed written amendment to Exhibit “A”.

 

1.5.     “Specifications” means the Product
Specifications together with the Packaging and Labeling Specifications.

 

1

 

1.6.     “Supply
Period” means the period beginning on the Effective Date and ending
on the earlier to occur of December 31,1999 or 180 days after the
Effective Date or, if this Supply Agreement is terminated earlier in accordance
with its terms, then on the date on which the termination is effective.

 

2.
MANUFACTURE AND SALE OF PRODUCT

 

2.1.     Sale and Purchase. Allergan shall
manufacture and sell to the Buyer and the Buyer shall purchase exclusively from
Allergan all Products that the Buyer requires during the Supply Period.
Allergan may satisfy its obligation to manufacture any Product hereunder by
causing such Product to be manufactured by any of its affiliates or third party
subcontractors at any facility, provided that the Product is manufactured in
conformance with Allergan’s other obligations hereunder. Notwithstanding the
foregoing, Allergan and the Buyer acknowledge that it is Allergan’s intent to
transition all of the Products to a third party manufacturer prior to the end
of the Supply Period. As Products are transitioned, the Buyer may purchase such
Products directly from the third party manufacturer and will use commercially
reasonable efforts to do so. Once a Product is transitioned to the third party
manufacturer, Allergan cannot guarantee that all orders for that Product will
be filled.

 

2.2.     Performance Standards. Allergan shall
manufacture the Products or cause the Products to be manufactured in accordance
with the Specifications. Any change to the Specifications may be made only with
the mutual written consent of both parties. Buyer may not revise the Packaging
and Labeling Specifications on Products manufactured by Allergan to reflect the
change from Allergan labels to Buyer labels. Only changes to the Packaging and
Labeling Specifications that are required by applicable law shall be
considered. The party requesting a change in Specifications shall bear the full
cost of any change (including the cost of any obsolete inventory or raw
materials that result therefrom, and the cost of its destruction). Buyer shall
be solely responsible for ensuring the accuracy of all information contained on
all labeling for the Products and for compliance of all such labels with applicable
law. Should Buyer desire or be required to make any change in labeling, Buyer
shall be solely responsible for the updating of all artwork and text associated
with such change and providing it in camera-ready form to Allergan.

 

3.
ORDERS / SHIPMENT

 

3.1.     Purchase Orders. The Buyer shall order
Products by purchase orders. The minimum lead time required for delivery of
Products manufactured by Allergan is set forth in Exhibit “A”
attached hereto. Allergan shall make each shipment of Products in the quantity
and on the shipment date specified for it on the Buyer’s purchase order, via
the mode(s) of transportation and to the party and

 

2

 

destination specified on
such purchase order. In each case, shipment shall be F.C.A. Allergan point of
shipment. Delivery by Allergan to a common carrier or licensed trucker, as
selected by the Buyer, shall, at that point, constitute delivery to the Buyer,
title shall pass to the Buyer, and all risk of loss, carrier costs, delays or
damage in transit from that point shall be borne by the Buyer. Allergan shall
invoice the Buyer for all of the Buyer’s purchases of Products at the time of
their shipment.

 

3.2.     Forecasts. Within 10 days of the
Effective Date, the Buyer shall provide Allergan with a 3-month forecast of its
estimated orders for all Products (“Forecast”).
The Forecast is a non-binding estimate and shall not obligate the Buyer to
purchase the volume of Products set forth in it, except that the forecast for
the first two months of this Agreement shall be deemed to be a binding order.

 

3.3.     Acceptance of Orders. Each order by the
Buyer shall be subject to acceptance by Allergan, in whole or in part. Allergan
reserves the right to refuse any orders placed by the Buyer, in whole or in
part, if Allergan’s supply of raw material for Products ordered is
insufficient; if the Buyer fails to fulfill any obligations under this Supply
Agreement; if any dispute arises under this Supply Agreement; if the Buyer’s
financial condition, in the sole opinion of Allergan, becomes impaired; if this
Supply Agreement has expired or if notice of termination of this Supply
Agreement has been given. Allergan also reserves the right to refuse any orders
in excess of *** forecasted orders for the period. The Buyer’s orders shall be
subject to all terms and conditions appearing on Allergan’s standard invoice
form, provided such terms and conditions are in accordance with U.S. laws and
regulations and do not conflict with this Supply Agreement. If such a conflict
should arise, the terms of this Supply Agreement shall control. The Buyer’s
orders shall also be subject to any and all laws, executive orders,
proclamations and regulations of the United States of America, with respect to
the sale of the Products, the exportation or shipment for exportation of any
merchandise or the transaction of business with foreign countries.

 

4.
PRICE / TERMS OF PAYMENT

 

4.1.     Price. The price for each of the
Products shall be *** (using U.S. generally accepted accounting principles
applied on a consistent basis) ***. If Allergan transitions any Products to a
third party supplier during the Supply Period, the price of such Products shall
be ***. In the event that any excise tax or similar tax or duty is imposed on
the sale of the Products by Allergan to Buyer, the Product prices will be
automatically increased by the amount of such tax or duty.

 

***PORTIONS OF THIS PAGE
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

3

 

4.2.     Payment. All invoices to be delivered
under this Supply Agreement shall be paid by the Buyer to Allergan within 30
days of the date of the invoice. Balances more than 30 days past due shall be
subject to a service charge of *** per annum, but in no event shall such charge
exceed the maximum rate permitted by law. The Buyer shall complete and deliver
to Allergan a sales tax resale certificate prior to the Buyer’s initial purchase
of the Products hereunder.

 

5.
TERM & TERMINATION

 

5.1.     Term. This Supply Agreement shall
become effective on the Effective Date and continue until the end of the Supply
Period, unless earlier terminated by mutual agreement or as otherwise provided
in this Supply Agreement.

 

5.2.     Termination for Cause. This Supply
Agreement may be terminated immediately by either party for cause by giving
written notice to the other upon the occurrence of any of the following events:

 

(a)       If
the other breaches any material provision of this Supply Agreement and fails to
substantially cure such breach within 30 days after receipt of written notice
describing the breach;

 

(b)       If
the other becomes insolvent or seeks protection under any bankruptcy,
receivership, trust deed, creditors arrangement, composition or comparable
proceeding, or if any such proceeding is instituted against the other (which is
not dismissed within 90 days);

 

(c)       If
the other ceases to do business, or otherwise terminates its business
operations;

 

(d)       If
the other fails to promptly secure or renew any license, registration, permit,
authorization or approval for the conduct of its business in any manner
contemplated by this Supply Agreement or if any such license, registration,
permit, authorization or approval is revoked or suspended and not reinstated
within 10 days; or

 

(e)       If
the enactment of any law, decree, or regulation by a governmental unit renders
it impracticable or impossible for the other party to perform its obligations
hereunder.

 

5.3.     Survival. Expiration or prior
termination of this Supply Agreement, for any reason, shall not release either
party from liability which at said time it has already incurred to the other
party, nor affect in any way the survival of any rights, duties or obligations
of either party which are expressly stated elsewhere in this Supply Agreement
to survive said expiration or prior termination.

 

***PORTIONS OF THIS PAGE
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

4

 

Nothing in the
immediately preceding sentence shall affect or be construed or operate as a
waiver of the right of the party aggrieved by any breach of this Supply Agreement
to be compensated for any injury or damage resulting therefrom which is
incurred before or after such expiration or termination.

 

5.4.     No Liability Arising From or Incident to
Termination. Neither party shall incur any liability whatsoever for any
damage, loss or expenses of any kind suffered or incurred by the other (or for
any compensation to the other) arising from or incident to any termination of
this Supply Agreement by such party which complies with the terms of this
Supply Agreement whether or not such party is aware of any such damage, loss or
expenses. Termination of this Supply Agreement, for whatever reason, shall not
affect the obligation of any party to make any payments for which that party
may be liable prior to such termination.

 

6.
WARRANTIES

 

6.1.     Product Warranty / Disclaimer of Warranties.
Allergan warrants that all Products supplied under this Supply Agreement shall,
when they leave Allergan’s possession and control, conform with the
Specifications. THIS  WARRANTY IS THE ONLY WARRANTY MADE BY ALLERGAN.
ALLERGAN MAKES NO OTHER EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, AND FURTHER
EXPRESSLY DISCLAIMS THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY
OF FITNESS FOR A PARTICULAR PURPOSE. Allergan further disclaims
any liability with respect to Products that have been subject to misuse,
negligence or accident other than by Allergan or its agents and Products that
have been incorrectly stored or have exceeded stated expirations. ALLERGAN HAS NOT AUTHORIZED ANYONE TO MAKE ANY
REPRESENTATION OR WARRANTY OTHER THAN AS PROVIDED ABOVE.

 

6.2.     Return of Defective Products. The Buyer
may reject, within 15 days of actual receipt, any or all of a shipment of
Products that fails to satisfy any warranty in this Supply Agreement. The Buyer’s
exclusive remedy against Allergan for breach of warranty shall be the return
and replacement, at Allergan’s expense, of all Products deemed by the parties
to be in breach of warranty under this Supply Agreement. Replacement shall be
made within 90 days after Allergan’s actual receipt of such defective Products
from the Buyer. ALLERGAN SHALL NOT, IN ANY
EVENT, BE LIABLE TO THE BUYER FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES INCURRED UNDER ANY LEGAL OR EQUITABLE THEORY WITH RESPECT TO
THE MANUFACTURE, PROMOTION, USE, SALE AND/OR DISTRIBUTION OF THE PRODUCTS.

 

5

 

7.
COMPLAINTS AND RECALLS

 

7.1.     Product Complaints/Reports. The Buyer,
at the Buyer’s expense, shall be responsible for handling all complaints related
to the Products manufactured hereunder, including the expense of any related
investigation and product testing. If Allergan receives any information
regarding real or potential adverse reactions or defects of the Products or any
information that might otherwise constitute a complaint about the Products,
Allergan shall promptly provide to the Buyer all information that it has
concerning the same. The Buyer shall have responsibility to comply with all
federal, state and local laws and their foreign counterparts regarding the
reporting of such reports and complaints. The Buyer shall promptly provide
Allergan with all information it receives concerning any adverse experience or
complaint. Each party shall reasonably cooperate with the other in sharing any
information that may constitute an adverse experience or complaint related to
Product and shall designate a representative responsible for the exchange of
such information and all other information required to be shared under this
Supply Agreement.

 

7.2.     Recalls. The Buyer shall have the
right, at the Buyer’s expense, to reasonably declare any recall of, or field
corrective action to, any Products manufactured by Allergan for the Buyer after
consultation with Allergan.

 

8.
CONFIDENTIALITY

 

The parties acknowledge
that it may be necessary or desirable, before or during the performance of this
Supply Agreement, to exchange information in order to facilitate the
manufacture and supply of Products as contemplated hereby. Allergan possesses
proprietary and trade secret information, including, but not limited to, its
manufacturing capabilities, methods and processes and financial information
related thereto, and the Buyer possesses proprietary and trade secret
information, including, but not limited to, the Products, the Product
Specifications and marketing and financial information related thereto. Each
party desires to preserve the confidential nature of such information and
agrees as follows. “Confidential Information” of a disclosing party shall be
clearly marked “confidential” at the time of disclosure, or indicated as such
orally or in a written memorandum delivered to the receiving party within 30
days following the date of disclosure. A party receiving Confidential
Information from a disclosing party shall not use the Confidential Information
except in furtherance of this Supply Agreement and shall not disclose
Confidential Information to any third party other than to a receiving party’s
employees and agents who agree to be bound by an obligation to keep such Confidential
Information secret and who have a need to know such information in order to
further the purposes of this Supply Agreement. This obligation shall survive
the termination of this Supply Agreement, and shall remain binding on the
parties hereto for a period of five

 

6

 

years following the date
of such disclosure. This Supply Agreement imposes no obligation on a receiving
party with regard to that portion of the Confidential Information which a
receiving party can demonstrate by written records was known to it prior to the
Effective Date of this Supply Agreement; or which is now generally known to the
public, or becomes generally known in the future other than by breach of this
Supply Agreement by a receiving party; or which is lawfully disclosed to a
receiving party by a third party who is not obligated to the disclosing party
to retain such information in confidence; or which is required to be produced
pursuant to a legal proceeding, provided the receiving party gives the
disclosing party prompt prior written notice of such requirement. Disclosure of
Confidential Information under this Supply Agreement will create no license,
right, interest or ownership in any such information in a receiving party.

 

9.
GENERAL PROVISIONS

 

9.1.     Integration / Modification. This Supply
Agreement is both a final expression of the parties’ Supply Agreement and a
complete and exclusive statement with respect to all of its terms. The Exhibits
referred to in this Supply Agreement are incorporated herein and made a part of
this Supply Agreement by this reference. This Supply Agreement supersedes all
prior and contemporaneous agreements (other than any confidential disclosure
agreement entered into between the parties) and communications, whether oral,
written or otherwise, concerning any and all matters contained herein. No trade
customs, courses of dealing or courses of performance by the parties shall be
relevant to modify, supplement or explain any term(s) used in this Supply Agreement.
This Supply Agreement may not be modified or supplemented by any purchase
order, change order, acknowledgment, order acceptance, standard terms of sale,
invoice or the like. This Supply Agreement may only be modified or supplemented
in a writing expressly stated for such purpose and signed by all the parties to
this Supply Agreement.

 

9.2.     Relationship Between the Parties. The
parties have no ownership interest in the other and their relationship, as
established by this Supply Agreement, is solely that of buyer and seller. This
Supply Agreement does not create any partnership, joint venture or similar
business relationship between the parties. Neither party is a legal
representative of the other party, and neither party can assume or create any obligation,
representation, warranty or guarantee, express or implied, on behalf of the
other party for any purpose whatsoever.

 

9.3.     Non-Waiver. The failure of a party to
insist upon strict performance of any provision of this Supply Agreement or to
exercise any right arising out of this Supply Agreement shall neither impair
that provision or right nor constitute a

 

7

 

waiver of that provision
or right, in whole or in part, in that instance or in any other instance.

 

9.4.     Assignment. This Supply Agreement is
binding upon and inures to the benefit of the parties to it, and to their
successors and assigns. No party may assign or delegate any or all of its
rights or obligations under this Supply Agreement without the prior written
consent of every other party to this Supply Agreement. Any assignment or
delegation, or attempt at the same, made in the absence of such prior written
consent shall be void and without effect. Allergan may, however, without notice
or consent and at its sole discretion, assign any or all of its rights and
obligations under this Supply Agreement to an affiliate of Allergan or to a
third party in connection with the disposition of the business to which this
Supply Agreement relates.

 

9.5.     No Third Party Beneficiaries. This
Supply Agreement is neither expressly nor impliedly made for the benefit of any
party other than those executing it.

 

9.6.     Severability. If, for any reason, any
part of this Supply Agreement is adjudicated invalid, unenforceable or illegal
by a court of competent jurisdiction, such adjudication shall not affect or
impair, in whole or in part, the validity, enforceability or legality of any
remaining portions of this Supply Agreement. All remaining portions shall
remain in full force and effect as if the original Supply Agreement had been
executed without the invalidated, unenforceable or illegal part.

 

9.7.     Notices. Any notice to be given under
this Supply Agreement must be in writing and delivered either in person, by any
method of mail (postage prepaid) requiring return receipt, or by overnight
courier, to the party to be notified at its address(es) given below, or at any
address such party has previously designated by prior written notice to the
other. Notice shall be presumptively deemed to be sufficiently given for all
purposes upon the earlier of: (a) the date of actual receipt; (b) if
mailed, three calendar days after the date of postmark; or (c) if
delivered by overnight courier, the next business day the overnight courier
regularly makes deliveries.

 

If to the Buyer or the
Buyer’s guarantors, notices must be addressed to:

 

	
   

  	
  MDF
  Acquisition Corp.

  
	
   

  	
  C/o
  Jesse Hansen & Co.

  
	
   

  	
  222
  Sutter Street

  
	
   

  	
  San
  Francisco, CA 94108-4445

  
	
   

  	
  Attention:
  President

  

 

8

If to Allergan. notices
must be addressed to:

 

	
   

  	
  Allergan
  Sales, Inc. 

  
	
   

  	
  2525
  Dupont Drive 

  
	
   

  	
  Irvine,
  California 92612 U.S.A.

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
  Allergan, Inc.
  

  
	
   

  	
  2525
  Dupont Drive 

  
	
   

  	
  Irvine,
  California 92612 U.S.A. 

  
	
   

  	
  Attention:
  General Counsel

  
					

 

9.8.     Force Majeure. Except for the
obligation to make payment when due, each party shall be excused from liability
for the failure or delay in performance of any obligation under this Supply
Agreement by reason of any event beyond such party’s reasonable control
including but not limited to Acts of God, fire, flood, explosion, earthquake,
or other natural forces, war, civil unrest, accident, destruction or other
casualty, any act, inaction or delay of any government or government agency,
any lack or failure of transportation facilities, any lack or failure of supply
of raw materials, any strike or labor disturbance, or any other event similar
to those enumerated above. Such excuse from liability shall be effective only
to the extent and duration of the event(s) causing the failure or delay in
performance and provided that the party has not caused such event(s) to occur.
Notice of a party’s failure or delay in performance due to force majeure must
be given to the other party within three calendar days after its occurrence.
All delivery dates under this Supply Agreement that have been affected by force
majeure shall be tolled for the duration of such force majeure. In no event
shall any party be required to prevent or settle any labor disturbance or
dispute.

 

9.9.     Arbitration. Unless resolved by the
parties within 60 days, any controversy or claim (whether such claim sounds in
contract, tort, or otherwise) arising out of or relating to this Supply
Agreement, or the breach thereof, shall be settled by final and binding
arbitration before an arbitrator at JAMS/Endispute, located in Orange County,
California, and such arbitration shall be conducted pursuant to then current rules for
arbitration of commercial disputes at JAMS/Endispute. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. In no event shall the arbitrator have any right or power to award
punitive or exemplary damages.

 

9.10.   Indemnification. Each party (the “Indemnitor”) shall indemnify the other
(the “Indemnitee”) for any and all
Liability or Loss it incurs from any and all claims, suits, demands or
proceedings (collectively referred to as “Claims”)

 

9

 

brought against it by
unrelated third parties for personal injury, death, or damage to real or
personal property arising out of the Indemnitor’s negligence, willful
misconduct or breach of warranty under this Supply Agreement. For purposes of
indemnification under this section, “Liability” or “Loss” shall include, but shall not
be limited to, all defense costs, settlement costs, court costs, damages,
interests, penalties, judgments, expenses, and reasonable fees of attorneys and
professionals. The parties agree that the Indemnitee shall only be entitled to
such indemnification if: (a) the Indemnitee had, at its own expense,
promptly given the Indemnitor written notice of such Claims upon their filing
or creation; and (b) the Indemnitor had been granted the right to take
control of the settlement and defense of such Claims with counsel reasonably
acceptable to the Indemnitee in exchange for the Indemnitor’s written agreement
to accept the defense and all liability for the claim without reservation. The
Indemnitee shall at all times reasonably cooperate in the settlement and
defense of all Claims and shall make available all records, materials and other
relevant matter reasonably requested by the Indemnitor in connection with such
Claims. No party shall have the right to settle any Claims in a manner that
materially diminishes the rights or interests of the other without that party’s
prior written consent, which shall not be unreasonably withheld or delayed. The
Indemnitor shall not be liable for any settlement made without its prior
written consent. These indemnification obligations shall survive the expiration
or termination of this Supply Agreement.

 

9.11.   Legal Fees. If any party to this Supply
Agreement resorts to any legal action or arbitration in connection with this
Supply Agreement, the prevailing party shall be entitled to recover reasonable
fees of attorneys and other professionals in addition to all court costs and
arbitrator’s fees which that party may incur as a result.

 

9.12.   Governing Law.
Notwithstanding its place of execution or performance, this Supply Agreement
shall be governed by and construed in accordance with the laws of the State of
California, irrespective of its laws regarding choice or conflict of laws.

 

9.13.  Interpretation

 

(a)       Captions & Headings. The
captions and headings of clauses contained in this Supply Agreement preceding
the text of the articles, sections, subsections and paragraphs hereof are
inserted solely for convenience and ease of reference only and shall not
constitute any part of this Supply Agreement, or have any effect on its
interpretation or construction.

 

10

 

(b)       Singular & Plural. All
references in this Supply Agreement to the singular shall include the plural
where applicable, and all references to gender shall include both genders and
the neuter.

 

(c)       Articles, Sections & Subsections.
Unless otherwise specified, references in this Supply Agreement to any article shall
include all sections, subsections, and paragraphs in such article; references
in this Supply Agreement to any section shall include all subsections and
paragraphs in such sections; and references in this Supply Agreement to any subsection shall
include all paragraphs in such subsection.

 

(d)       Days.
All references to days in this Supply Agreement shall mean calendar days,
unless otherwise specified.

 

(e)       Ambiguities. Ambiguities and
uncertainties in this Supply Agreement, if any, shall not be interpreted
against either party, irrespective of which party may be deemed to have caused
the ambiguity or uncertainty to exist.

 

10.14.  Counterparts. This
Supply Agreement may be executed in one or more counterparts, each of which
shall be deemed an original document, and all of which, together with this
writing, shall be deemed one instrument.

 

10.15.  Further Assurances.
Each party to this Supply Agreement shall, at its own expense, furnish,
execute, and deliver all documents and take all actions as may reasonably be
required to effect the terms and purposes of this Supply Agreement.

 

11

 

IN WITNESS WHEREOF, the
Parties, intending to be bound hereby, have executed this Supply Agreement as
of the date first written above.

 

 

	
   

  	
  ALLERGAN  

  
	
   

  	
   

  
	
   

  	
  Allergan Sales, Inc.,

  
	
   

  	
  a California
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

 

	
   

  	
  THE
  BUYER

  
	
   

  	
   

  
	
   

  	
  MDF Acquisition Corp.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

12

 

The
following entities, jointly and severally, hereby unconditionally guarantee to
Allergan the full performance by Buyer of the obligations and agreements on the
part of Buyer under Sections 4.2 and 9.10 of this Agreement (the “Guaranty”).
Each entity signing this Guaranty further represents and warrants that (a) it
has the requisite corporate power and authority to make and perform this
Guaranty, (b) the execution and delivery of this Guaranty have been duly
authorized by all necessary corporate action on the part of the entity, and (c) this
Guaranty has been duly executed and delivered by the entity and constitutes a
legal, valid and binding obligation of the entity.

 

 

	
  JESSE HANSEN &
  CO., 

  	
  DOCTORS FORMULA PTY
  LTD., 

  
	
   

  	
   

  
	
  a California
  corporation

  	
  an Australia
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  

 

 

13EXHIBIT 4.2

                       COUNTERPART SUBSCRIPTION AGREEMENT
                       ----------------------------------

                             AssureTec Holdings Inc.
                             a Delaware corporation

                             Debenture and Warrants

1. SUBSCRIPTION

     (a) The undersigned (the "Subscriber") hereby irrevocably subscribes to
purchase a $_____________ debenture ("Debenture"), with one Warrant for each $3
advanced (the "Warrants") attached, of AssureTec Holdings Inc., a Delaware
corporation (the "Company"). For purposes of this Agreement, the Debenture, the
Warrants and any and all shares of Company Common Stock acquired by exercise of
the Warrants are collectively referred to as the "Securities". Upon execution of
this Agreement, a duly authorized officer of the Company shall execute the form
of Debenture, Note and Warrant attached hereto as Exhibits A & B in order to
issue the Securities to the Subscriber upon receipt of the purchase price. Each
participant is a part of syndication to place up to $3,000,000 in total
Debentures that contain Warrants to acquire up to 1,000,000 shares in the
Company at the rate of one share for each $3 in Debenture face value.

     (b) The Subscriber and the Company each hereby adopts, accepts, and agrees
to be bound by all the terms and provisions of this Subscription Agreement (this
"Agreement") and to perform all obligations herein imposed upon the Company or
the Subscriber with respect to the Securities.

2. COMPANY REPRESENTATIONS AND WARRANTIES

The Company hereby represents and warrants to the Subscriber as follows:

     (a) The Company is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware. The Company is entitled
to own its property of a material nature and to carry on its business of a
material nature as and in places where such property is now owned or operated
and such business is conducted.

     (b) There is no action or proceeding pending or, to the Company's best
knowledge, threatened, brought by or before any federal or state agency having
jurisdiction over the operations of the Company that threatens in any material
respect the continued operation of the Company or any material part of the
Company's business now conducted by it.

     (c) The Company, by appropriate and required corporate action, has duly
authorized the execution of this Agreement and the issuance and delivery of the
Debenture and Warrants and upon exercise by the Subscriber, the Shares. The
Shares, if and when issued in accordance with this Agreement and the Warrant,
will not be subject to preemptive or other rights of any Company stockholders
and will be validly issued, fully paid and nonassessable.

<PAGE>

     (d) The Company's Certificate of Incorporation has sufficient authorized
capital stock for the issuance of the Shares. Performance of this Agreement and
compliance with the provisions hereof will not violate any provision of any
applicable law or of the Certificate of Incorporation or Bylaws of the Company,
and will not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon, any of the
properties or assets of a material nature of the Company pursuant to the terms
of any indenture, mortgage, deed of trust or other agreement or instrument
binding upon the Company, other than such breaches, defaults or liens that would
not have a material adverse effect on the Company.

     (e) Company shall "piggyback register" all shares that may be issued to
Investor under the terms of the Warrant in the any registration statement filed
with the SEC subsequent to an IPO under the terms of the Debenture pursuant to
which the warrant is being granted subject to approval of the managing
underwriter of any such registration.

3. SUBSCRIBER REPRESENTATIONS AND WARRANTIES

The Subscriber hereby represents and warrants to the Company as follows:

     (a) The Subscriber is purchasing the Debenture Convertible to Shares, and
will be purchasing additional Shares, if the Subscriber exercises any of the
Warrants, for the Subscriber's own account, for investment purposes only, and
not for the account of any other person or entity, and not with a view to
distribute, assign or resell the Securities to others or to fractionalize the
Securities in whole or in part within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), and any applicable state or other securities
laws ("State Acts"). The Subscriber will not sell, hypothecate or otherwise
transfer the Securities unless permitted under this Agreement and such
Securities are registered under the Securities Act and State Acts, or an
exemption from registration is available.

     (b) The Subscriber confirms that the Company has provided all due diligence
materials requested by the Subscriber to the Subscriber, directly and
indirectly, and a reasonable amount of time to review that information has
transpired.

     (c) The Company has provided the Subscriber an opportunity to ask questions
and receive answers concerning the terms and conditions of this Agreement and to
obtain any information that the Company possesses or can acquire without
unreasonable effort or expense that the Subscriber has requested.

     (d) The Subscriber has conducted the Subscriber's own due diligence in
making a decision to purchase the Securities. In evaluating the suitability of
an investment in the Company, the Subscriber has not relied upon any
representations or other information (whether oral or written) from the Company
or any other person or entity acting as an agent for the Company in connection
with the offering of the Securities.

                                       2
<PAGE>

     (e) The Subscriber has carefully considered the suitability of an
investment in the Company for the Subscriber's particular tax and financial
situation and, to the extent Subscriber believed such discussion necessary, has
discussed such suitability with the Subscriber's professional legal, tax and
financial advisers. As a result of such consideration and discussion, the
Subscriber has determined that the Securities will be a suitable investment for
the Subscriber. With respect to tax and other economic considerations involved
in this investment, the Subscriber is not and will not be relying on the Company
or any other person or entity acting as an agent for the Company in connection
with an investment in the Company.

     (f) As of the date hereof, the Subscriber has no need for liquidity with
respect to the Subscriber's investment in the Securities to satisfy any existing
or contemplated need, undertaking or indebtedness. The Subscriber is able to
bear the economic risk of the Subscriber's investment in the Securities for an
indefinite period and, at the present time, could afford a complete loss of such
investment.

     (g) By reason of the Subscriber's knowledge and belief in business and
financial matters, the Subscriber has the capacity to protect the Subscriber's
own interest in investments of a nature similar to the Securities.

     (h) The Subscriber recognizes that the Company has no financial or
operating history and that all investments in the Company involve substantial
risks. The Subscriber is aware that an investment in the Securities is
speculative and involves a high degree of risk of loss by the Subscriber.

     (i) The Subscriber is aware that the Company, in issuing the Securities
pursuant to Section 4(2) of the Securities Act and Regulation D promulgated
thereunder, without complying with the registration provisions of the Securities
Act and applicable state securities laws, is relying upon, among other things,
the representations and warranties of the Subscriber contained herein. The
Subscriber acknowledges that neither the Debenture Convertible to Shares,
Warrants, or any Shares acquired by means of converting the Warrant(s), will be
registered securities under the Securities Act or State Acts and cannot be sold,
assigned, transferred or otherwise disposed of unless subsequently registered
under the Securities Act and State Acts or an exemption from such registration
is available. The Subscriber further recognizes that the Company is under no
obligation to register the Securities or to assist the Subscriber in complying
with any exemption from registration.

     (j) The Subscriber understands that none of the Securities are listed on an
exchange, that no trading or other market currently exists for the Securities,
and that the Securities may never be listed on an exchange and no market may
ever exist for the Securities.

     (k) None of the Securities have been offered to the Subscriber by means of
(i) any advertisement, article, notice or other communication published in any
newspaper, magazine or similar medium or broadcast over television or radio,
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising, or (iii) any other form of general
solicitation or advertising.

                                       3
<PAGE>

     (l) The Subscriber understands that any and all Shares distributed to
Subscriber as security under the terms of the Debenture will be imprinted
initially with a legend in the form of Exhibit C attached hereto.

     (m) Investor Qualification. Subscriber hereby represents to the Company
that it has accurately answered the following questions and the accompanying
Investor Questionnaire. Subscriber confirms that it is:

          (i) |_| a corporation, business trust, or partnership not formed for
          the specific purpose of acquiring the securities offered, with total
          assets in excess of $5,000,000.

          (ii) |_| any trust, with total assets in excess of $5,000,000, not
          formed for the specific purpose of acquiring the securities offered,
          whose purchase is directed by a sophisticated person who has such
          knowledge and experience in financial and business matters that he is
          capable of evaluating the merits and risks of the prospective
          investment.

          (iii) |_| a an individual, who

               |_| is a director, executive officer or general partner of the
               issuer of the securities being offered or sold or a director,
               executive officer or general partner of a general partner of that
               issuer.

               |_| has an individual net worth, or joint net worth with that
               person's spouse, at the time of his purchase exceeding
               $1,000,000.

               |_| had an individual income in excess of $200,000 in each of the
               two most recent years or joint income with that person's spouse
               in excess of $300,000 in each of those years and has a reasonable
               expectation of reaching the same income level in the current
               year.

               |_| none of the above.

          (iv) |_| an entity each equity owner of which is an entity described
          in a - b above or is an individual who could check one (1) of the
          first three (3) boxes under subparagraph (iii) above.

4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES

The representations, warranties, covenants, agreements and acknowledgements of
the Company and the Subscriber in this Agreement shall be true and correct as of
the date hereof and as of the date the Company executes the Warrant, and shall
survive for a period of five years following the acceptance of this Agreement by
the Company.

                                       4
<PAGE>

5. SUBSCRIBER UNDERSTANDINGS

The Subscriber understands, acknowledges and agrees with the Company as follows:

     (a) No federal or state agency has made any finding or determination as to
the fairness of this offering for investment, nor any recommendation or
endorsement of the Securities. Any representation to the contrary is unlawful..

     (b) None of the Securities have been registered or qualified under the
Securities Act or any state securities statute, and the Securities may never be
so registered or qualified. The Company is under no obligation to register or
qualify the Securities on behalf of the Subscriber other than those set forth in
the Debenture, or to assist the Subscriber in complying with any exemption from
registration.

     (c) There can be no assurance that the Subscriber will be able to sell or
dispose of the Securities. Moreover, no assignment, sale, transfer, exchange or
other disposition of the Securities may be made other than in accordance with
this Agreement.

     (d) Any and all assumptions, budgets and forecasts provided to the
Subscriber have been included therein for purposes of illustration only, and no
assurance is or can be given that actual results will correspond with the
results contemplated by the various assumptions set forth therein.

6. MISCELLANEOUS

     (a) Neither this Agreement nor any provisions hereof shall be waived,
modified, changed, discharged, terminated, revoked or canceled except by an
instrument in writing signed by the party against whom any waiver, modification,
change, discharge, termination, revocation, or cancellation is sought.

     (b) Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered or sent
by certified mail, return receipt requested, addressed to the other party at the
address of such party as set forth on the signature pages hereto, or to such
other address furnished by notice given in accordance with this Section.

     (c) Failure of the Company to exercise any right or remedy under this
Agreement or any other agreement between the Company and the Subscriber, or
otherwise, or delay by the Company in exercising such right or remedy, will not
operate as a waiver thereof. No waiver by the Company will be effective unless
and until it is in writing and signed by an authorized officer of the Company.

     (d) This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Delaware, as such laws are
applied by Delaware courts to agreements entered into and to be performed in
Delaware by and between residents of Delaware, and shall be binding upon the
Subscriber, the Subscriber's heirs, estate, legal representatives, successor and

                                       5
<PAGE>

assigns and shall inure to the benefit of the Company and its successors and
assigns. In the event that any provision or portion thereon or sentence or
portion thereof of this Agreement is ultimately found to be invalid or
unenforceable under any applicable statute or rule of law, then such provision
or sentence or portion thereof shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any provision hereof or sentence or portion thereof which may
prove invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provision hereof.

     (e) The parties hereto, and their respective successors and assigns, hereby
consent and subject themselves to the jurisdiction of the State or Federal
courts of the state of Delaware.

     (f) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and may be amended only with
the written consent of the Company and the Subscriber.

IN WITNESS WHEREOF, the Subscriber has executed this Counterpart Subscription
Agreement representing $______________ in Debenture amount representing one
Warrant for each $3 advanced, such as of the ____ day of _______________, 200_.

X________________________________

SUBSCRIPTION ACCEPTED

                                           AssureTec Holdings Inc.
Date:    _________________, 200__

                                           __________________________
                                           R. Bruce Reeves, CEO

                                           AssureTec Holdings Inc.
                                           200 Perimeter Road
                                           Manchester, NH 03104

                                        6
<PAGE>

                                    EXHIBIT A

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

                             ASSURETEC HOLDINGS INC.

                              COUNTERPART DEBENTURE

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

                  Issuer:           ASSURETEC HOLDINGS INC.

Securities:         $3,000,000 in Debentures and Warrants to purchase 1,000,000
                    shares of AssureTec common stock at a price of $3 per share
                    for a period of two years from the date of this Debenture or
                    aggregated counterparts thereof or one year from the
                    effective date of an IPO whichever occurs earlier.

Closing Date:       The date this Debenture is signed.

Promise to Pay:     AssureTec Holdings Inc., a corporation duly organized and
                    existing under the laws of the State of Delaware will, in
                    accordance with the terms of this Debenture, promises to pay
                    to the Investor or the Investor's successors, assigns or
                    legal representatives, the sum of $________________ with
                    interest thereon until the principal and interest shall have
                    been fully paid at the rate of 12% per annum. Interest shall
                    be payable upon repayment of this Debenture. Debenture shall
                    due on or before six (6) months from the date hereof except
                    that the Company can extend for an additional three (3)
                    months by increasing the number of shares under the Warrant
                    attached hereto by 50%.

Funds
Disbursement:       $3,000,000 or portions thereof immediately released, upon
                    Closing Date, to Company by check or wire transfer.

<PAGE>

Right of
prepayment:         The Company shall have the right to prepay any or
                    all-outstanding Debenture balance at any time. The balance
                    shall be the face amount repaid plus accrued interest.

Warrants:           The Investor shall receive a warrant to acquire 1,000,000
                    shares of Common stock at the rate of one share for each $3
                    in Debenture face amount. The warrant will be exercisable on
                    a cash basis for a period of two years from the date of this
                    Debenture or aggregated counterparts thereof or one year
                    from the effective date of an IPO whichever occurs earlier
                    and will have "piggy-back" registration rights and from the
                    Closing Date. Exercise Price of such warrants shall be equal
                    to $6 per Common Stock share.

Share Issuance:     At all times, the Company shall keep available Common Stock
                    duly authorized for issuance against the Convertible. If at
                    any time, the Company does not have available an amount of
                    authorized and non-issued Common Stock necessary to satisfy
                    full Conversion of the then outstanding amount of the
                    Convertible, the Company shall call and hold a special
                    meeting within 30 days of such occurrence, for the sole
                    purpose of increasing the number of shares of Common Stock
                    authorized. Management of the Company shall recommend to
                    shareholders to vote in favor of increasing the number of
                    Common Stock authorized. Management shall also vote all of
                    its shares in favor of increasing the number of Common Stock
                    authorized.

Legal Fees:         The Company and Investor will each be responsible for and
                    pay their respective legal expenses.

Choice of Law:      This Debenture shall be enforced, governed and construed in
                    all respects in accordance with the laws of the State of
                    Delaware.

Date of Debenture   _____________________________, 200_

                                        8
<PAGE>

Company:                                  AssureTec Holdings Inc.

                                          By:______________________________
                                          Name: R. Bruce Reeves
                                          Its:  Chief Executive Officer

Investor:                                 By:
                                          Its:

                                          By:_______________________________
                                          Name:
                                          Title:

                                        9
<PAGE>

                                    EXHIBIT B

         Counterpart Warrant for up to 1,000,000 Shares of Common Stock

THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAW. NEITHER THIS WARRANT, THE COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT, NOR ANY PORTION THEREOF OR INTEREST THEREIN MAY BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER THEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY
SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY).

Right to Purchase

Up to 1,000,000 Shares

                                        1
<PAGE>

           WARRANT TO PURCHASE up to 1,000,000 SHARES OF COMMON STOCK
                           OF ASSURETEC HOLDINGS INC.

     This is to Certify that, for value received, ___________________ (the
"Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from AssureTec Holdings Inc., a Delaware corporation (the "Company"), at any
time on or after date hereof, for a period of two years from the date of this
Debenture or aggregated counterparts thereof or one year from the effective date
of an IPO whichever occurs earlier, up to Six hundred sixty six thousand six
hundred sixty six (1,000,000) shares of the Common Stock, US$.001 par value, of
the Company (the "Common Stock") at a purchase price per share equal to US$6 at
the rate of one share for each three dollars ($3) of original Debenture balance,
subject to adjustment as to the number of shares and purchase price as
hereinafter set forth. The shares of the Company's Common Stock issuable upon
the exercise of this Warrant are called herein the "Warrant Stock." The price
per share of the Warrant Stock as adjusted from time to time as hereinafter set
forth is sometimes referred to as the "Exercise Price." The Holder hereof may
exercise this Warrant as to all or any portion of the shares of the Warrant
Stock which such Holder shall have the right to acquire hereunder. This Warrant
is the Warrant referred to in that certain Subscription Agreement of even date
herewith (the "Subscription Agreement") between the Company and the Holder.

     (a) Exercise of Warrant. This Warrant may be exercised by presentation and
surrender hereof to the Company with the Exercise Notice attached hereto as
Annex A. The Warrant shall be deemed to have been exercised when (i) the Company
has received a completed Exercise Notice, and (ii) the Company has received
payment in the amount of the applicable Exercise Price, notwithstanding that
certificates representing such shares of Common Stock shall not then be actually
delivered to the Holder. If the stock transfer books of the Company shall be
closed on the date of receipt of the Exercise Notice and the Exercise Price as
aforesaid, the Holder shall be deemed to be the holder of such shares of Common
Stock on the next succeeding day on which the stock transfer books of the
Company shall be opened. If this Warrant should be exercised in part only, the
Company shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the right of the Holder to purchase the balance
of the shares purchasable hereunder. In the event this Warrant shall not be
exercised within a period of two years from the date of this Debenture or
aggregated counterparts thereof or one year from the effective date of an IPO
whichever occurs earlier, this Warrant shall become void and all rights
hereunder shall cease.

                                       2
<PAGE>

          (1) Method of Payment. Holder may pay the applicable Exercise Price by
cash, check or cash equivalent.

          (2) Expenses of Issuance. The Company shall issue the Shares upon
exercise of this Warrant without charge to Holder for any issuance tax or other
cost incurred by the Company in connection with such exercise and the related
issuance of the Shares. Each of the Shares shall, upon payment of the Exercise
Price therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.

          (3) Withholding Taxes. Holder shall satisfy any federal, state, local
or foreign withholding tax obligations arising from the exercise of the Warrant
or the subsequent disposition of the Shares.

     (b) Reservation of Shares; Stock Fully Paid. The Company agrees that at all
times there shall be authorized and reserved for issuance upon exercise of this
Warrant such number of shares of its Common Stock as shall be required for
issuance or delivery upon exercise of this Warrant. All shares that may be
issued upon exercise hereof, will upon issuance, be validly issued, fully paid
and non-assessable.

     (c) Fractional Shares. This Warrant shall be exercisable in such manner as
not to require the issuance of fractional shares or scrip representing
fractional shares. If, as a result of adjustment in the Exercise Price or the
number of shares of Common Stock to be received upon exercise of this Warrant
fractional shares would be issuable, no such fractional shares shall be issued.
In lieu thereof the Company shall pay the Holder an amount in cash equal to such
fraction multiplied by the current market value of such fractional share. The
current value shall be an amount, not less than twice book value, determined in
such reasonable manner as may be prescribed by the Board of Directors of the
Company, such determination to be final and binding on the Holder.

                                        3
<PAGE>

     (d) Exchange or Assignment of Warrant. Holder may not, directly or
indirectly, voluntarily or involuntarily, sell, assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of, voluntarily or involuntarily,
directly or indirectly (each, a "Transfer") this Warrant, except that Holder may
transfer the Warrant to Holder's spouse and direct descendants of Holder, and
the heirs, executors, administrators, testamentary trustees, legatees or
beneficiaries of Holder's estate upon death (each, a "Permitted Transferee");
provided, however, that (x) any such Permitted Transferee shall have agreed in
writing to be bound by the terms of this Agreement with respect to the Shares
and (y) any transfer to a Permitted Transferee shall not be in violation of
applicable federal or state securities laws.

     (e) Rights of the Holder; Limitation on Liability. The Holder shall not,
prior to exercise of this Warrant, by virtue hereof, be entitled to any rights
of a shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant. No provision hereof, in
absence of an affirmative action by the Holder to purchase the Warrant Stock,
and no enumeration herein of rights or privileges by the Holder, shall give rise
to any liability of the Holder for the Exercise Price of the Warrant Stock.

     (f) Adjustment of Exercise Rights. The Exercise Price or the number of
shares of Common Stock to be received upon the exercise of this Warrant, or both
shall be subject to adjustment from time to time as follows:

          (l) Dividends. In case any additional shares of Common Stock or any
obligation or stock convertible into or exchangeable for shares of Common Stock
(such convertible or exchangeable obligations or stock being hereinafter called

                                       4
<PAGE>

"Convertible Securities") shall be issued as a dividend on any class of stock of
the Company, such shares or Convertible Securities shall be deemed to have been
issued without consideration, on the day next succeeding the date for the
determination of stockholders' entitled to such dividend; and any issuance of
any such additional shares of Common Stock as a dividend on Common Stock shall
be treated as a subdivision as a whole of the number of shares of Common Stock
then outstanding into a greater number of shares, and the Exercise Price shall
be adjusted under Subsection (2) of this Section (f) and not under this
Subsection (l). If at any time the Company shall declare a cash dividend on its
Common Stock and shall, contemporaneously therewith, give to the holders of
Common Stock the option to purchase additional Common Stock at a price which
shall net the Company in the aggregate substantially the amount, or less than
the amount, of such cash dividend, the aggregate number of shares of Common
Stock actually issued and issuable pursuant to the exercise of such option shall
be deemed to have been issued as a stock dividend on the date of the expiration
of such option.

Anything herein to the contrary notwithstanding, the Company shall not be
required to make any adjustment in the Exercise Price in the case of the
issuance at any time or from time to time of any shares of Common Stock pursuant
to any exercise of this Warrant.

          (2) Effect of "Split-ups" and "Split-down" and Certain Dividends. In
case at any time or from time to time the Company shall subdivide as a whole, by
reclassification, by the issuance of a stock dividend on the Common Stock
payable in Common Stock, or otherwise, the number of shares of Common Stock then
outstanding into a greater number of shares of Common Stock, with or without par
value, the Exercise Price then in effect shall be reduced proportionately, and
the number of shares of Warrant Stock then exercisable hereunder shall be
increased proportionately. In case at any time or from time to time the Company
shall consolidate as a whole, by reclassification or otherwise, the number of
shares of Common Stock then outstanding into a lesser number of shares of Common
Stock, with or without par value, the Exercise Price then in effect shall be
increased proportionately and the number of shares of Warrant Stock then
exercisable hereunder shall be decreased proportionately.

                                       5
<PAGE>

          (3) Statement of Adjusted Exercise Price. Whenever the Exercise Price
is adjusted pursuant to any of the foregoing provisions of this Section (f), the
Company shall forthwith prepare a written statement signed by the President or
the Treasurer of the Company, setting forth the adjusted Exercise Price and any
adjustment in the number of shares purchasable hereunder, determined as provided
in this Section (f), and in reasonable detail the facts requiring such
adjustment. Such statement shall be filed among the permanent records of the
Company, shall be furnished to the Holder of each Warrant upon request, and
shall be open to inspection by the Holders of the Warrants during normal
business hours.

          (4) Effect of Merger or Consolidation. In case the Company shall enter
into any consolidation with or merger into any other corporation wherein the
Company is not the surviving corporation, or sell or convey its property as an
entirety or substantially as an entirety and in connection with such
consolidation, merger, sale or conveyance shares of stock or other securities
shall be issuable or deliverable in exchange for the Common Stock of the
Company, the Holder of any Warrant shall thereafter be entitled to purchase
pursuant to such Warrant (in lieu of the number of shares of Common Stock which
such Holder would have been entitled to purchase immediately prior to such
consolidation, merger, sale or conveyance) the shares of stock or other
securities to which such number of shares of Common Stock would have been
entitled at the time of such consolidation, merger sale or conveyance, at an
aggregate Exercise Price equal to that which would have been payable if such
number of shares of Common Stock had been purchased immediately prior thereto.
In case of any such consolidation, merger, sale or conveyance, appropriate
provision (as determined by resolution of the Board of Directors of the Company
with the approval of the Holder) shall be made with respect to the rights and
interests thereafter of the Holders of Warrants, to the end that all the
provisions of the Warrants (including adjustment provisions) shall thereafter be
applicable, as nearly as reasonably practicable, in relation to such stock or
other securities.

                                       6
<PAGE>

          (5) Reorganization and Reclassification. In case of any capital
reorganization or any reclassification of the capital stock of the Company
(except as provided in Subsection (2) of this Section (f)); the Holder of any
Warrant shall thereafter be entitled to purchase pursuant to such Warrant (in
lieu of the number of shares of Common Stock which such Holder would have been
entitled to purchase immediately prior to such reorganization or
reclassification) the shares of stock of any class or classes or other
securities or property to which the holder of such number of shares of Common
Stock would have been entitled at the time of such reorganization or
reclassification, at an aggregate Exercise Price equal to that which would have
been payable if such number of shares of Common Stock had been purchased
immediately prior to such reorganization or reclassification, appropriate
provision (as determined by resolution of the Board of Directors of the Company
with the approval of the Holder) shall be made with respect to the rights and
interest thereafter of the Warrants (including adjustment provisions) shall
thereafter be applicable, as nearly as reasonably practicable, in relation to
such stock or other securities or property.

          (6) Distributions. In case the Company shall make any distribution of
its assets to holders of its Common Stock as a liquidation or partial
liquidation dividend or by way of return of capital, or other than as a dividend
payable out of earnings or any surplus legally available for dividends under the
laws of the State of Delaware, then the Holder of this Warrant who thereafter
exercises the same as herein provided after the date of record for the
determination of those holders of Common Stock entitled to such distribution of
assets, shall be entitled to receive for the purchase price of the shares of
Common Stock stated in this Warrant, in addition to the Shares of Common Stock,
the amount of such assets (or at the option of the Company, a sum equal to the
value thereof at the time of such distribution to holders of Common Stock, as
such value is determined by the Board of Directors of the Company in good
faith), which would have been payable to such Holder had he been the holder of
record of such shares of Common Stock on the record date for the determination
of those entitled to such distribution.

                                       7
<PAGE>

          (7) Dissolution or Liquidation. In case the Company shall liquidate or
wind up its affairs, the Holder of this Warrant shall be entitled, upon the
exercise thereof, to receive, in lieu of the shares of Common Stock of the
Company which it would have been entitled to receive, the same kind and amount
of assets as would have been issued, distributed or paid to it upon any such
dissolution, liquidation or winding up with respect to such shares of Common
Stock of the Company, had it been the holder of record of such shares of Common
Stock on the record date for the determination of those entitled to receive any
such liquidating distribution; provided, however, that all rights under this
Warrant shall terminate on a date fixed by the Company, such date to be not
earlier than the date of commencement of proceedings for dissolution,
liquidation or winding up and not later than 30 days after such commencement
date, unless the Holder shall have, prior to such termination date, exercised
this Warrant. Notice of such termination of rights under this Warrant shall be
given to the last registered Holder hereof, as the same shall appear on the
books of the Company, by mail at least 30 days prior to such termination date.
In the event of such notice the Holder may exercise this Warrant prior to the
fifth anniversary hereof.

     (g) Limitations on Transfer of Warrant Stock. The Common Stock issuable
pursuant hereto has not been registered under the Act. Accordingly, by
acceptance hereof the Holder agrees that:

          (l) It will acquire the Common Stock issuable pursuant hereto to be
held as an investment and that it will not attempt to sell, distribute or
dispose of the same except pursuant to this agreement and:

          (a)       pursuant to a registration statement filed and rendered
                    effective under the Act; or

          (b)       pursuant to a specific exemption from registration under the
                    Act.

                                       8
<PAGE>

          (2) There shall appear on the certificate or certificates evidencing
any Common Stock issued pursuant hereto a legend as follows:

          THIS SECURITY HAS NOT BEEN REGISTERED PURSUANT TO THE
          SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW. NEITHER
          THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY
          BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE
          DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID ACT AND
          ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION
          FROM SUCH REGISTRATION IS AVAILABLE AND THE CORPORATION
          SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF,
          EVIDENCE OF SUCH EXEMPTION REASONABLY SATISFACTORY TO THE
          CORPORATION (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN
          OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).

     (h) Company shall cover all shares which may be issued to Investor under
the terms of this Warrant in the Registration Statement filed with the SEC under
the terms of the Debenture pursuant to which this warrant is being granted.

     (i) Notices. All notices, payments, requests and demands and other
communications required or permitted under this Warrant shall be deemed to have
been duly given, delivered and made if in writing and if served either by
personal delivery to the party for whom it is intended or by being deposited,
postage prepaid, certified or registered mail return receipt requested to the
address shown below or such other address as may be designated in writing
hereafter by such party:

          If to the Company:

                       AssureTec Holdings Inc.

                       200 Perimeter Road

                       Manchester, NH 03103

                                       9
<PAGE>

          If to the Holder:

          With a copy to:

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

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

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

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

     (i) Governing Law. This Warrant shall be construed and enforced in
accordance with and governed by the laws of Delaware.

     (j) Controversy. In the event of any controversy, claim or dispute between
the parties hereto, arising out of or relating to this Warrant, the prevailing
party shall be entitled to recover from the non-prevailing party reasonable
expenses, attorneys' fees, and costs.

                                       10
<PAGE>

     (k) Further Assurances. The parties agree to execute, acknowledge and
deliver any and all such other documents and to take any and all such of the
action as may, in the reasonable opinion of either of the parties hereto be
necessary or convenient to efficiently carry out any or all of the purposes of
this Warrant.

     (l) Severability. Each and all provisions of this Warrant deemed to be
prohibited by law or otherwise held invalid shall be ineffective only to the
extent of such prohibition or invalidity and shall not invalidate or otherwise
render ineffective any or all of the remaining provisions of this Warrant.

     (m) Parties in Interest. Assignment. The Company may assign any and all of
its rights under this Agreement to its successors, and this Agreement shall
inure to the benefit of, and be binding on, the successors of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement shall
be binding upon the Holder and his heirs, executors, administrators, successors
and assigns.

     (n) Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supercedes in its
entirety all prior undertakings and agreements of the Company and the Holder
with respect to the subject matter hereof, and may not be modified adversely to
the Holder interest except by means of a writing signed by the Company and the
Holder.

                  [Remainder of Page Intentionally Left Blank]

                                       11
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this instrument to be signed by
its Chief Financial Officer, and attested by its President as of the ____ day of
_____________________________, 2006.

ATTEST:                                      ASSURETEC HOLDINGS INC.

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

R. Bruce Reeves                              Gary Olin

President & CEO                              Secretary Treasurer

                                       12
<PAGE>

                                                                         ANNEX A
                                                                         -------

                                 EXERCISE NOTICE
                                 ---------------

To:      Assuretec Systems Inc.

Dated:

          The undersigned, pursuant to the provisions set forth in the Stock
Warrant Agreement dated effective as of ______________, 200_ (the "Agreement"),
hereby exercises his right to purchase __________ of the Shares at the Exercise
Price of $6 as provided in the Agreement, and makes payment herewith in full
therefor, either in the form of cash, check or cash equivalent at the price per
share provided in the Agreement.

                                         Signature _____________________

                                       13

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