Document:

Exhibit
10.1

 

 

 

ASSET PURCHASE AGREEMENT

by and among

K-V PHARMACEUTICAL COMPANY

and

VIVUS, INC.

dated as of March  30, 2007

 

 

TABLE OF
CONTENTS

	
      
	
       
	
       
	
       
	
      Page

	
       
	
       
	
       

	
      ARTICLE I. DEFINITIONS
	
       
	
      1

	
       
	
       
	
       

	
      Section
      1.1
	
       
	
      Defined Terms
	
       
	
      1

	
      Section
      1.2
	
       
	
      Construction of Certain Terms and
      Phrases
	
       
	
      14

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE II. PURCHASE AND SALE OF ASSETS;
      GRANT OF LICENSES;
SUBLICENSE AGREEMENT 
	
       
	
      14 

	
       
	
       
	
       

	
      Section
      2.1
	
       
	
      Purchase and Sale of Assets at the
      Closing
	
       
	
      14

	
      Section
      2.2
	
       
	
      Excluded Assets
	
       
	
      16

	
      Section
      2.3
	
       
	
      Retention of Assets
	
       
	
      17

	
      Section
      2.4
	
       
	
      Assignability and Consents.
	
       
	
      17

	
      Section
      2.5
	
       
	
      License to Seller Multi-Application
      Technology
	
       
	
      17

	
      Section
      2.6
	
       
	
      Licenses to Improvements. Effective as of
      the Closing:
	
       
	
      18

	
      Section
      2.7
	
       
	
      Sublicense Agreement
	
       
	
      18

	
      Section
      2.8
	
       
	
      Clinical Results Option
	
       
	
      18

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE III. ASSUMPTION OF
      LIABILITIES
	
       
	
      19

	
       
	
       
	
       

	
      Section
      3.1
	
       
	
      Assumption of Liabilities.
	
       
	
      19

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE IV. PURCHASE PRICE AND
      PAYMENT
	
       
	
      21

	
       
	
       
	
       

	
      Section
      4.1
	
       
	
      Purchase Price
	
       
	
      21

	
      Section
      4.2
	
       
	
      Milestone Payments
	
       
	
      21

	
      Section
      4.3
	
       
	
      Allocation of Purchase Price
	
       
	
      23

	
      Section
      4.4
	
       
	
      Sales, Use and Other Taxes
	
       
	
      24

	
      Section
      4.5
	
       
	
      Tax Withholding
	
       
	
      24

	
      Section
      4.6
	
       
	
      Risk of Loss
	
       
	
      24

	
      Section
      4.7
	
       
	
      Subsidiaries
	
       
	
      24

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE V. CLOSING
	
       
	
      25

	
       
	
       
	
       

	
      Section
      5.1
	
       
	
      Time and Place
	
       
	
      25

	
      Section
      5.2
	
       
	
      Deliveries at Closing
	
       
	
      25

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE VI. REPRESENTATIONS AND WARRANTIES
      OF THE SELLER
	
       
	
      26

	
       
	
       
	
       

	
      Section
      6.1
	
       
	
      Organization, Etc
	
       
	
      26

	
      Section
      6.2
	
       
	
      Authority of the Seller
	
       
	
      27

	
      Section
      6.3
	
       
	
      Consents and Approvals
	
       
	
      27

	
      Section
      6.4
	
       
	
      Non-Contravention
	
       
	
      28

	
      Section
      6.5
	
       
	
      Contracts
	
       
	
      28

	
      Section
      6.6
	
       
	
      Intellectual Property Rights
	
       
	
      28

 

i

 

	
      Section
      6.7
	
       
	
      Litigation
	
       
	
      30

	
      Section
      6.8
	
       
	
      Permits; Compliance with Law
	
       
	
      31

	
      Section
      6.9
	
       
	
      Evamist Inventory
	
       
	
      33

	
      Section
      6.10
	
       
	
      Suppliers
	
       
	
      33

	
      Section
      6.11
	
       
	
      [Intentionally Deleted.]
	
       
	
      33

	
      Section
      6.12
	
       
	
      Environmental Matters
	
       
	
      33

	
      Section
      6.13
	
       
	
      Absence of Certain Changes or
      Events
	
       
	
      34

	
      Section
      6.14
	
       
	
      Title to Assets; Sufficiency of
      Assets
	
       
	
      35

	
      Section
      6.15
	
       
	
      Disclosure
	
       
	
      36

	
      Section
      6.16
	
       
	
      Taxes.
	
       
	
      36

	
      Section
      6.17
	
       
	
      Brokers
	
       
	
      37

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE VII. REPRESENTATIONS AND WARRANTIES
      OF THE ACQUIROR
	
       
	
      37

	
       
	
       
	
       

	
      Section
      7.1
	
       
	
      Corporate Organization
	
       
	
      37

	
      Section
      7.2
	
       
	
      Authority of the Acquiror
	
       
	
      37

	
      Section
      7.3
	
       
	
      Non-Contravention
	
       
	
      38

	
      Section
      7.4
	
       
	
      Litigation
	
       
	
      38

	
      Section
      7.5
	
       
	
      Brokers
	
       
	
      38

	
      Section
      7.6
	
       
	
      Financing
	
       
	
      39

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE VIII. COVENANTS OF THE
      PARTIES
	
       
	
      39

	
       
	
       
	
       

	
      Section
      8.1
	
       
	
      Operation of the Evamist
    Business
	
       
	
      39

	
      Section
      8.2
	
       
	
      Reasonable Efforts
	
       
	
      41

	
      Section
      8.3
	
       
	
      Access; Confidentiality
	
       
	
      43

	
      Section
      8.4
	
       
	
      Public Announcements;
      Confidentiality
	
       
	
      46

	
      Section
      8.5
	
       
	
      Regulatory Matters
	
       
	
      46

	
      Section
      8.6
	
       
	
      Bulk Transfer Laws
	
       
	
      49

	
      Section
      8.7
	
       
	
      Covenant Not to Compete
	
       
	
      49

	
      Section
      8.8
	
       
	
      Further Assurances
	
       
	
      50

	
      Section
      8.9
	
       
	
      Cooperation Regarding Financial Statements;
      Taxes, Etc
	
       
	
      50

	
      Section
      8.10
	
       
	
      No Solicitation
	
       
	
      51

	
      Section
      8.11
	
       
	
      Insurance
	
       
	
      52

	
      Section
      8.12
	
       
	
      Tax Matters
	
       
	
      52

	
      Section
      8.13
	
       
	
      Financial Resources
	
       
	
      54

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE IX. CONDITIONS TO THE OBLIGATIONS OF
      THE SELLER FOR THE CLOSING
	
       
	
      54

	
       
	
       
	
       

	
      Section
      9.1
	
       
	
      Representations, Warranties and
      Covenants
	
       
	
      54

	
      Section
      9.2
	
       
	
      No Actions or Proceedings
	
       
	
      54

	
      Section
      9.3
	
       
	
      No Material Adverse Effects
	
       
	
      54

	
      Section
      9.4
	
       
	
      No Proceedings
	
       
	
      54

	
      Section
      9.5
	
       
	
      Deliveries
	
       
	
      55

 

ii

 

	
      ARTICLE
      X. CONDITIONS TO THE OBLIGATIONS OF THE ACQUIROR FOR THE
CLOSING
	
       
	
      55

	
       
	
       
	
       

	
      Section
      10.1
	
       
	
      Representations, Warranties and
      Covenants
	
       
	
      55

	
      Section
      10.2
	
       
	
      No Actions or Proceedings
	
       
	
      55

	
      Section
      10.3
	
       
	
      Consents
	
       
	
      55

	
      Section
      10.4
	
       
	
      No Material Adverse Effects
	
       
	
      55

	
      Section
      10.5
	
       
	
      Deliveries
	
       
	
      55

	
      Section
      10.6
	
       
	
      Proceedings
	
       
	
      56

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE XI.
INDEMNIFICATION
	
       
	
      56

	
       
	
       
	
       

	
      Section
      11.1
	
       
	
      Survival of Representations, Warranties,
      Covenants, Etc
	
       
	
      56

	
      Section
      11.2
	
       
	
      Indemnification
	
       
	
      56

	
      Section
      11.3
	
       
	
      Limitations
	
       
	
      60

	
      Section
      11.4
	
       
	
      Exclusive Remedy
	
       
	
      61

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE XII. TERMINATION
	
       
	
      61

	
       
	
       
	
       

	
      Section
      12.1
	
       
	
      Methods of Termination
	
       
	
      61

	
      Section
      12.2
	
       
	
      Procedure upon Termination
	
       
	
      62

	
       
	
       
	
       
	
       
	
       

	
      ARTICLE XIII.
MISCELLANEOUS
	
       
	
      63

	
       
	
       
	
       

	
      Section
      13.1
	
       
	
      Notices
	
       
	
      63

	
      Section
      13.2
	
       
	
      Entire Agreement
	
       
	
      64

	
      Section
      13.3
	
       
	
      Waiver
	
       
	
      64

	
      Section
      13.4
	
       
	
      Amendment
	
       
	
      64

	
      Section
      13.5
	
       
	
      Third Party Beneficiaries
	
       
	
      64

	
      Section
      13.6
	
       
	
      Assignment; Binding Effect
	
       
	
      64

	
      Section
      13.7
	
       
	
      Headings
	
       
	
      65

	
      Section
      13.8
	
       
	
      Severability
	
       
	
      65

	
      Section
      13.9
	
       
	
      Governing Law
	
       
	
      65

	
      Section
      13.10
	
       
	
      Expenses
	
       
	
      65

	
      Section
      13.11
	
       
	
      Counterparts
	
       
	
      65

	
       
	
       
	
       
	
       
	
       

	
       
	
       
	
       
	
       
	
       

	
      Exhibit A– Form of Sublicense
      Agreement
	
       
	
       

	
      Exhibit B– Form of Transition Services
      Agreement
	
       
	
       

						

 

iii

ASSET PURCHASE
AGREEMENT

This Asset Purchase Agreement (this “Agreement”) is made and entered into as of
March 30, 2007, by and among K-V Pharmaceutical Company, a Delaware corporation
(the “Acquiror”), and Vivus, Inc., a
Delaware corporation (the “Seller”).

RECITALS

WHEREAS, Seller is engaged in researching,
developing, marketing, and selling certain biopharmaceutical products, including
Evamist;

WHEREAS, Seller will, by the terms of this
Agreement, transfer or license to Acquiror Seller’s tangible and intangible
assets and rights used by Seller in the conduct of the Evamist Business and
necessary for Acquiror to conduct the Evamist Business following the Closing;
and

WHEREAS, Acquiror has agreed to assume the Assumed
Liabilities on the terms and subject to the conditions set forth
herein.

AGREEMENT

NOW, THEREFORE, in consideration of the premises,
covenants, representations and warranties contained herein, and other good and
valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

ARTICLE I.

DEFINITIONS

Section 1.1            
Defined Terms.  As used in this Agreement, the following
defined terms shall have the meanings specified below:

“Accountants” means KPMG International;
provided, however, that if KPMG International refuses such
retention, Seller and Acquiror shall jointly select another independent
accounting firm of recognized national standing; provided,
further, that in the event that the Acquiror and the Seller are unable to
agree on such an accounting firm within ten (10) Business Days, then the
accounting firm shall be selected by lottery.

“Acquiror”
has the meaning set forth in the preamble to this Agreement.

“Acquiror Material
Adverse Effect” means any state of facts, change, development, event,
occurrence, effect or condition that, individually or in the aggregate, has had
or would be reasonably expected to have a material adverse effect on the
business, assets (including intangible assets), results of operations,
liabilities (contingent or otherwise) or conditions (financial or otherwise) of
the Acquiror, except that any such state of facts, change, development, event,
occurrence, effect or condition resulting from or arising out of or in
connection with any of the following, either alone or in combination, shall not
be taken into

consideration for purposes of determining whether
an Acquiror Material Adverse Effect has occurred or arisen:  (a) the
announcement of this Agreement or the pendency of the transactions contemplated
hereby, (b) the performance by the Acquiror of its obligations under this
Agreement, (c) general economic conditions in any country where the Acquiror’s
business is conducted to the extent that they do not disproportionately affect
the Acquiror relative to other industry participants, (d) general conditions in
any industry in which the Acquiror’s business is conducted to the extent that
they do not disproportionately affect the Acquiror relative to other industry
participants, (e) changes or conditions in economic, regulatory, political or
capital markets conditions generally to the extent that they do not
disproportionately affect the Acquiror relative to other industry participants,
(f) any natural disaster or any acts of terrorism, sabotage, military action or
war (whether or not declared) or any escalation or worsening thereof, (g) the
Acquiror’s failure to meet any financial projections in and of itself (it being
understood that the facts or occurrences giving rise or contributing to such
failure may be deemed to constitute, or be taken into account in determining
whether there has been or will be, an Acquiror Material Adverse Effect) or (h)
changes in Law or GAAP.

“Acrux
License” means the Estradiol Development and Commercialization
Agreement, dated February 12, 2004, by and among Fempharm Pty Ltd., Vivus, Inc.
and Acrux DDS Pty Ltd., as amended.

“Acrux License
Assignment Consent” means the written consent of Fempharm Pty Ltd. to
the assignment and transfer of the Acrux License to the Acquiror as an Assumed
Contract pursuant to Section 2.1(a).

“Action or
Proceeding” means any action, suit, claim, proceeding, arbitration,
dispute, Order, inquiry, hearing, assessment with respect to fines or penalties
or litigation (whether civil, criminal, administrative or investigative)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental or Regulatory Authority.

“Adverse
Determination” has the meaning set forth in Section
12.1(i).

“Affiliate” means, with respect to any Person,
any other Person which Controls, is Controlled by or is under common Control
with such Person.

“Agreement” has the meaning set forth in the
preamble hereto.

“Androgen”
has the meaning set forth in Section 2.5.

“Applicable
Period” has the meaning set forth in Section 8.7.

“Assumed
Contracts” means the Evamist Contracts set forth on
Schedule 1.1(a)(1).  Notwithstanding the foregoing, the Assumed Contracts shall not
include the Acrux License in the event that the Sublicense Agreement is required
to be executed and delivered by the parties at the Closing pursuant to
Section 2.7.

“Assumed
Liabilities” has the meaning set forth in
Section 3.1(a).

2

“Bill of
Sale” means the Bill of Sale conveying the Purchased Assets from the
Seller to the Acquiror, in a form to be mutually agreed upon by the parties
prior to the Closing.

“Books and
Records” means all books, records, files, documents, data, information
and correspondence, including, without limitation, all records with respect to
supply sources; all pre-clinical, clinical and process development data and
reports relating to research or development of products or of any materials used
in the research, development, manufacture, marketing or sale of products,
including all raw data relating to clinical trials of products, all case report
forms relating thereto and all statistical programs developed (or modified in a
manner material to the use or function thereof) to analyze clinical data; all
market research data, market intelligence reports, statistical programs (if any)
used for marketing and sales research; promotional, advertising and marketing
materials, sales forecasting models, medical education materials, sales training
materials, web site content and advertising and display materials; all records,
including vendor and supplier lists, manufacturing records, sampling records,
standard operating procedures and batch records, related to the manufacturing
process; all data contained in laboratory notebooks relating to products or
relating to their biological, physiological, mechanical or formula properties;
all adverse experience reports and files related thereto (including source
documentation) and all periodic adverse experience reports and all data
contained in electronic data bases relating to periodic adverse experience
reports; all analytical and quality control data; and all correspondence,
minutes or other communications with the FDA owned or held by Seller or any of
its Subsidiaries as of the Closing Date.

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

“Charter
Documents” has the meaning set forth in
Section 6.1.

“Clinical Results
Option” has the meaning set forth in Section 2.8.

“Closing”
has the meaning set forth in Section 5.1.

“Closing
Date” has the meaning set forth in Section 5.1.

“Code”
means the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.

“Competing
Product” has the meaning set forth in
Section 8.7.

“Confidentiality
Agreement” means the Confidentiality Agreement, dated as June 2, 2006,
by and between Seller and Acquiror.

“Contracts” means any and all written or
legally binding oral commitments, contracts, purchase orders, sales orders,
leases, subleases, licenses, easements, commitments, arrangements, undertakings,
evidence of indebtedness, security or pledge agreements or other
agreements.

“Control”
means:

3

(a)          ownership
(directly or indirectly) of at least fifty percent (50%) of the shares or stock
entitled to vote for the election of directors in the case of a company or
corporation; or

(b)        
the ability otherwise to direct and control (whether directly or
indirectly through one or more intermediaries) the actions of a Person.

“Corporate
Name” means “VIVUS, Inc.” and any and all derivatives
thereof.

“Damages”
has the meaning set forth in Section 11.2(a).

“Data
Package” has the meaning set forth in
Section 2.8.

“Default”
means (i) a breach, default or violation, (ii) the occurrence of an event that
with or without the passage of time or the giving of notice, or both, would
constitute a breach, default or violation or cause an Encumbrance to arise, or
(iii) with respect to any Contract, the occurrence of an event that with or
without the passage of time or the giving of Notice, or both, would constitute a
change of control or give rise to a right of termination, modification,
renegotiation, acceleration, cancellation, or a right to receive Damages or a
payment of penalties.

“Designated
Acquiror Subsidiary” shall have the meaning set forth in
Section 4.7.

“DPT
Laboratories” means the facilities of DPT Laboratories, Ltd. located at
307 E. Josephine Street, San Antonio 78215.

“Encumbrance” means any claim, mortgage,
pledge, assessment, security interest, option, deed of trust, lease, lien, levy,
license, restriction on transferability, defect in title, charge or other
encumbrance of any kind, whether voluntarily incurred or arising by operation of
Law or any conditional sale or title retention agreement or other agreement to
give any of the foregoing in the future.

“Environmental
Laws” means any federal, state, local or non-U.S. Law and any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent decree, judgment, stipulation, injunction, permit,
authorization, policy, opinion, or agency requirement, in each case having the
force and effect of Law, relating to the pollution, protection, investigation
or restoration of the environment or health
and safety as affected by the environment or natural resources, including those
relating to the use, handling, presence, transportation, treatment, storage,
disposal, release, threatened release or discharge of Hazardous Materials or
noise, odor, wetlands, pollution or contamination.

“ERISA
Affiliate” means any entity which is (or at any relevant time was) a
member of a “controlled group of corporations” with, under “common control”
with, or a member of an “affiliated service group” with, Seller, as defined in
Section 414(b), (c), (m) or (o) of the Code, or under “common control” with
Seller, within the meaning of Section 4001(b)(1) of the Employee Retirement
Income Security Act of 1974, as amended.

4

“Estradiol” means the compound with the
chemical structure shown in Schedule 1.1(b).

“Estrogen”
means (i) any of the [***], [***] with [***] activity that are used for [***]
for the treatment of [***], or any derivative of [***], including the [***] that
are approved by the FDA in any form ([***]) for [***] or the treatment of [***]
or (ii) any generic compound that is a [***].

“Evamist”
means that pharmaceutical product consisting of an MDTS containing Estradiol, or
any other Estrogen that is added to the Field (as defined under the Acrux
License).

“Evamist Books and
Records” means all of the Books and Records related to the Evamist
Business owned by the Seller, but excluding the Excluded Books and Records, and,
in the case of any of the Books and Records also relating to other businesses or
assets of the Seller or its Subsidiaries, the Seller shall have the right to
redact the same with respect to such other businesses and assets.

“Evamist
Business” means the research, development, regulatory approval,
manufacture, distribution, marketing, sale and promotion of Evamist in the
Evamist Territory.  For clarity, the Evamist Business shall exclude
research, development or manufacturing (including process development)
activities related generally to platforms (including MDTS) or other technologies
not specific to Evamist.

“Evamist
Contracts” means all (i) Contracts pursuant to which Seller or its
Subsidiaries purchases any materials from any third party for use solely in
connection with the manufacture of Evamist, all of which Contracts in effect on
the date hereof are set forth on Schedule 1.1(a)(2),
(ii) Contracts relating solely to any pre-clinical or clinical trial
involving Evamist, all of which Contracts in effect on the date hereof are set
forth on Schedule 1.1(a)(2), (iii) Contracts constituting material
transfer agreements solely involving the transfer of Evamist, all of which
Contracts in effect on the date hereof are set forth on
Schedule 1.1(a)(2), (iv) Contracts relating solely to the marketing
of Evamist or educational matters relating to the Evamist Business, all of which
Contracts in effect on the date hereof are set forth on
Schedule 1.1(a)(2), (v) Contracts relating solely to the supply or
manufacture of Evamist, all of which Contracts in effect on the date hereof are
set forth on Schedule 1.1(a)(2), (vi) Contracts constituting
confidentiality agreements involving solely Evamist or the Evamist Business, all
of which Contracts in effect on the date hereof are set forth on
Schedule 1.1(a)(2), (vii) Contracts involving any royalty,
licensing, partnering or similar arrangement solely involving Evamist or the
Evamist Business, all of which Contracts in effect on the date hereof are set
forth on Schedule 1.1(a)(2), (viii) Contracts pursuant to which any
services are provided to Seller or its Subsidiaries with respect solely to
Evamist or the Evamist Business, including consultation agreements, all of which
Contracts in effect on the date hereof are set forth on
Schedule 1.1(a)(2), (ix) Contracts pursuant to which any third
party collaborates with Seller or its Subsidiaries in the performance of
research or development solely of Evamist or the Evamist Business, all of which
Contracts in effect on the date hereof are set forth on
Schedule 1.1(a)(2),

*** Certain information on this page has been
omitted and filed separately with the Commission.  Confidential treatment
has been requested with respect to the omitted portions.

5

and (x) Contracts entered into by Seller or its
Subsidiaries from the date hereof to the Closing Date to the extent relating
solely to Evamist, the Purchased Assets or the Evamist Business.

“Evamist
Copyrights” means all copyrights, whether registered or unregistered,
and applications, if any, owned or used under license by the Seller or any of
its Subsidiaries exclusively related, or necessary and primarily related, to the
Evamist Business, including without limitation those copyrights set forth on
Schedule 1.1(c).

“Evamist FDA
Submissions” means, collectively, the Evamist IND and Evamist
NDA.

“Evamist
Governmental Permits” means all governmental permits, licenses,
registrations, NDAs, approvals and other governmental authorizations related
solely to the operation of the Evamist Business that are held in the name of
Seller or any of its Subsidiaries, and any applications therefor and all files
related thereto.

“Evamist
IND” means the IND for Evamist set forth on Schedule 1.1(d) as
filed as of the date of this Agreement, and all documents, data, analyses, and
files related thereto, in each case as may be updated in accordance with this
Agreement.

“Evamist
Intellectual Property” means (i) the Evamist Copyrights, (ii) the
Evamist Patent Rights, (iii) the Evamist Know-How, (iv) the Seller
Multi-Application Technology, (v) the Evamist Trademarks and (vi) any Software
that is embedded in hardware included in the Purchased Assets.

“Evamist
Inventory” means all inventories of Evamist in existence as of the
Closing Date, together with all bulk active pharmaceutical ingredient, other raw
materials, components, parts, work in process and packaging materials owned by
Seller or any of its Subsidiaries as of the Closing Date for use solely in the
operation of the Evamist Business.  For clarity, Evamist Inventory shall
exclude raw materials, components, parts, work in process and packaging
materials not specific to Evamist.

“Evamist
Know-How” means any and all Evamist Manufacturing Know-How and other
product specifications, processes, product designs, plans, trade secrets, ideas,
concepts, inventions, manufacturing, formulations, engineering and other manuals
and drawings, standard operating procedures, formulae, flow diagrams, chemical,
pharmacological, toxicological, pharmaceutical, physical, analytical, safety,
quality assurance, quality control and clinical data, technical information,
research records, and all other confidential or proprietary technical and
business information that is currently owned or used under license by the Seller
or any of its Subsidiaries and used exclusively in the Evamist Business as of
the Closing Date.  For the sake of clarity, none of the foregoing
information shall be included in Evamist Know-How to the extent that such
information is covered by any claim of any Evamist Patent.  Notwithstanding
the foregoing, Evamist Know-How shall exclude the Seller Multi-Application
Technology.

“Evamist
Manufacturing Know-How” means any information relating to the
manufacture of Evamist owned or used under license by the Seller or its
Subsidiaries, including without limitation the identity, amounts and assurance
quality of ingredients, the manufacturing processes and controls,
specifications, technology, inventions, assays, quality control and
testing

6

procedures, know-how and trade secrets used
exclusively to manufacture, formulate, test and package Evamist for use, sale,
marketing and distribution in the Evamist Territory as of the Closing
Date.  For the sake of clarity, none of the foregoing information shall be
included in Evamist Manufacturing Know-How to the extent that such information
is covered by any claim of any Evamist Patent Rights.

“Evamist
NDA” means the NDA for Evamist set forth on Schedule 1.1(d) as
filed as of the date of this Agreement, and all documents, data, analyses, and
files related thereto, in each case as may be updated in accordance with this
Agreement.

“Evamist NDA
Approval” means approval of the Evamist NDA by the FDA allowing for the
initiation of marketing and sale of Evamist in the United States for the
treatment of vasomotor or any other similar symptoms associated with
menopause.

“Evamist NDA
Approval Date” means the date upon which the FDA issues to Seller
written notice of the Evamist NDA Approval.

“Evamist Patent
Rights” means, to the extent owned or used under license by the Seller
or any of its Subsidiaries, including those Patent Rights listed on
Schedule 1.1(e), together with all registrations, applications and
renewals thereof, and any other Patents Rights that are owned or used under
license by the Seller or any of its Subsidiaries and that would be infringed by
the manufacture, sale, offer to sell or importation of Evamist in the Evamist
Territory.

“Evamist Product
Improvement” means (to the extent applicable), to the extent owned by
Seller or any of its Subsidiaries, any:  (i) line extension of
Evamist; (ii) new indication of Evamist; (iii) composition of matter
or article of manufacture consisting essentially of an Estrogen for dermal
delivery, with or without a device suitable for dermal delivery of Estrogen;
(iv) pharmaceutical combination containing an Estrogen for dermal delivery
and another active ingredient; (v) new formulations comprising an Estrogen
for dermal deliver; and/or (vi)  compositions of matter or articles of
manufacture constituting any of the foregoing or components thereof.

“Evamist Product
Registrations” means (i) the exemptions, approvals or registrations
which have been received by Seller or any of its Subsidiaries as of the date of
this Agreement, or which are received by Seller or any of its Subsidiaries after
the date of this Agreement but before the Closing Date, for the manufacturing,
testing, investigation, sale, use, distribution and/or marketing of Evamist
(including any NDAs or INDs), and (ii) all dossiers, reports, data and other
written materials filed as part of or referenced in any applications for such
approvals or registrations, or maintained by Seller or any of its Subsidiaries
and relating to such approvals or registrations, in each case related
exclusively to Evamist and to the extent owned by Seller or any of its
Subsidiaries as of the Closing Date.

“Evamist Purchased
Intellectual Property” means (i) the Evamist Copyrights, (ii) the
Evamist Patent Rights, (iii) the Evamist Know-How and (iv) the Evamist
Trademarks, in each case owned by the Seller or any of its
Subsidiaries.

“Evamist
Territory” means the United States, and its territories and
protectorates.

7

“Evamist
Trademarks” means all trademarks, trade names, trade dress, service
marks, logos and slogans, in each case whether registered or unregistered, and
all internet domain names, owned by the Seller or any of its Subsidiaries and
used exclusively in the conduct of the Evamist Business and in any sales,
promotional, marketing or advertising materials for Evamist in the Evamist
Territory, and together with all registrations, applications and renewals
thereof and the goodwill associated therewith, including without limitation
those set forth on Schedule 1.1(f); provided, however, that
Evamist Trademarks shall not include the Corporate Name of the Seller or its
Subsidiaries.

“Excluded
Assets” has the meaning set forth in Section 2.2.

“Excluded Books
and Records” means all Books and Records related to human resources and
any other employee related files and records.

“Excluded
Liabilities” has the meaning set forth in
Section 3.1(b).

“Excluded Tax
Liability” has the meaning set forth in
Section 3.1(b)(ii).

“Facility
Inspection Deadline” has the meaning set forth in Section
12.1(i).

“FDA”
means the United States Food and Drug Administration or any successor
thereto.

“FDA Act”
means the U.S. Food, Drug and Cosmetic Act of 1938, as it may be superseded or
amended from time to time.

“FDA Milestone
Payment” has the meaning set forth in
Section 4.2(a).

“FDA Transfer
Letter” has the meaning set forth in
Section 8.2(e)

“Financial
Information” has the meaning set forth in
Section 6.11.

“First Commercial
Sale” means the first commercial sale of Evamist for use in the Evamist
Territory (other than for evaluation, research, testing or clinical trial
purposes), which occurs after the Evamist NDA Approval Date, by the Acquiror or
its Affiliates or sublicensees to an independent non-Affiliate third party in
exchange for cash or some equivalent to which value can be assigned.

“GAAP”
means United States generally accepted accounting principles.

“Governmental or
Regulatory Authority” means any court, tribunal, arbitrator, authority,
agency, commission, department, ministry, official or other instrumentality of
the United States or other country, or any supra-national organization, or any
foreign or domestic, state, county, city or other political
subdivision.

“Hazardous
Materials” means (A) any petroleum, petroleum products, byproducts or
breakdown products, radioactive materials, asbestos-containing materials
or

8

polychlorinated biphenyls or (B) any chemical,
material or other substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any Environmental Law.

“HSR Act”
means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
together with any rules or regulations promulgated thereunder.

“IND”
means (i) an Investigational New Drug Application, as defined in the FDA
Act and the regulations promulgated thereunder, which is required to be filed
with the FDA before beginning clinical testing of a product in human subjects,
or any successor application or procedure, (ii) all supplements and amendments
that may be filed with respect to the foregoing and (iii) all international
equivalents of the foregoing.

“Indemnification
Claim Notice” has the meaning set forth in
Section 11.2(c).

“Improvement” means (i) any improvement or
modification to the design, materials, manufacturing and/or assembly of the
metered dose transdermal spray application device reduced to practice by or on
behalf of either party during the two (2) year period after the Closing Date
and/or (ii) all ideas, concepts, inventions and the like created by either party
pursuant to the services to be performed pursuant to the Transition Service
Agreement.

“Indemnified
Party” has the meaning set forth in
Section 11.2(c).

“Indemnitees” has the meaning set forth in
Section 11.2(c).

“Know-How”
means any proprietary or nonproprietary information directly related to the
manufacture, preparation, development (both research and clinical), or
commercialization of a product, including, without limitation, product
specifications, processes, product designs, plans, trade secrets, ideas,
concepts, inventions, formulae, chemical, pharmacological, toxicological,
pharmaceutical, physical, analytical, stability, safety, quality assurance,
quality control and clinical information, technical information, research
information, and all other confidential or proprietary technical and business
information, whether or not embodied in any documentation or other tangible
materials, but in no event shall the definition of “Know-How” include
information properly in the public domain as of the Closing Date.

“Knowledge” with respect to (i) the Seller
means the knowledge of officers or directors of the Seller, following reasonable
inquiry, with responsibility for, or supervision of, the relevant matters, and
(ii) the Acquiror means the knowledge of the officers, directors or senior
managers, following reasonable inquiry, of the Acquiror with responsibility for
supervision of the relevant matters.

“Law”
means any federal, state, local or foreign law, statute, code or ordinance, or
any rule or regulation promulgated by any Governmental or Regulatory
Authority.

“Liability” means any direct or indirect
liability, obligation, claim, deficiency, guarantee or commitment of any kind or
nature (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, or due or to
become due), including any liability for Taxes.

9

“Liability
Cap” means $1,250,000 unless and until the Seller receives payment of
the FDA Milestone Payment pursuant to Section 4.2(a), and thereafter
shall be $18,750,000.

“Liability
Threshold” has the meaning set forth in
Section 11.3(a).

“MDTS”
means the metered dose transdermal spray system as described in Schedule
1.1(g), and all improvements, derivatives and modifications of such system
developed by or under authority of Seller, or Acrux DDS Pty. Ltd. or its
Affiliate.

“Net
Sales” shall mean, with respect to a fiscal year, the total gross
invoices for Evamist sold by Acquiror and its Affiliates to independent, third
party customers in the Evamist Territory, less (a) customary trade,
quantity and/or cash discounts taken, (b) accrued rebates, adjustments and
allowances, including those amounts credited by reason of rejections, return of
goods, and any retroactive price reductions relating to Evamist, (c) amounts
accrued resulting from mandated rebate programs of the government of the Evamist
Territory (or any agency thereof), including but not limited to Medicaid and
other federal, state or local rebates, (d) accrued third party rebates and
chargebacks, or similar items, related to the sale of Evamist, (e) customs
duties and sales or similar taxes, if any, directly related to the sale of
Evamist, (f) amounts paid by Acquiror to its customers for defective Evamist
returned to Acquiror from its customers, (g) shipping and freight costs and (h)
any reasonable and customary provision for uncollectible accounts with respect
to sales of Evamist per se, to the extent such reserve is determined in
accordance with GAAP, consistently applied across all product lines of the
Person making the sales, provided in the case of (e) and (g) such amounts are
included within the gross invoiced amounts and separately itemized.

“NDA”
means (i) a New Drug Application for any product, as appropriate, requesting
permission to place a drug on the market in accordance with 21 C.F.R. Part 314,
and all supplements or amendments filed pursuant to the requirements of the FDA,
including all documents, data and other information concerning a product which
are reasonably necessary for FDA approval to market a product in the United
States and (ii) all international equivalents of the foregoing.

“Non-Assignable
Asset” has the meaning set forth in
Section 2.4(a).

“No-Shop
Period” has the meaning set forth in Section 8.10(a).

“Notice”
with respect to a party means notice actually received by an officer, director
or senior manager of the Seller, in the case of the Seller, or of the Acquiror,
in the case of the Acquiror, in each case with responsibility in the relevant
area, or delivered in accordance with the terms of the document, Law or Order
pursuant to which such notice was given.

“Order”
means any writ, judgment, decree, injunction or similar order, including consent
orders, of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).

“Ordinary Course
of Business” means an action or activity that is consistent in nature,
scope and magnitude with the past practices of the Seller and its Subsidiaries
with respect to the Evamist Business.

10

“Other
Bid” has the meaning set forth in Section 8.10.

“Patent Assignment
Agreement” means the Patent Assignment Agreement to be dated as of the
Closing Date by and between the Acquiror and Seller, in a form to be mutually
agreed upon by the parties prior to the Closing.

“Patent
Rights” means any patent application (including any provisionals,
divisionals, continuations, continuations-in-part (to the extent claiming
subject matter invented on or before the Closing Date) and substitutions
thereof), patents issuing from or granted upon such patent application
(including patents of addition (to the extent claiming subject matter invented
on or before the Closing Date) and substitutions thereof), reissues, extensions,
reexaminations, renewal applications, supplemental patent certificates or any
confirmation patent or registration patent) and all foreign counterparts of any
of the foregoing.

“Person”
means any natural person, corporation, general partnership, limited partnership,
limited liability company, proprietorship, joint venture, other business
organization, trust, entity, union, association or Governmental or Regulatory
Authority.

“Post-Closing Tax
Period” means any Tax period beginning after the Closing Date and
the portion of any Straddle Period beginning after the Closing Date.

“Pre-Closing Tax
Period” means any Tax period ending on or before the Closing Date
and the portion of any Straddle Period ending on the Closing Date.

“Properties” has the meaning set forth in
Section 6.12.

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

“Purchased
Assets” has the meaning set forth in Section 2.1.

“Registered
Evamist Intellectual Property” means all Evamist Intellectual Property
that has been registered, filed, certified or otherwise perfected or recorded
with or by any Governmental or Regulatory Authority.

“[***] Facilities” means the facilities of
[***].

“Related
Agreements” means the Trademark Assignment Agreement, Patent Assignment
Agreement, Bill of Sale, Transition Services Agreement, Sublicense Agreement
(only if the Sublicense Agreement is required to be executed and delivered
pursuant to Section 2.7) and duly executed and attested assignments of
transfer, or such other instruments of conveyance as may be required by Law,
sufficient to permit the proper recordation of transfer of title ownership in
all Registered Evamist Intellectual Property owned by the Seller from the Seller
or its Subsidiaries to Acquiror in accordance with this Agreement.

“Required
Permits” shall have the meaning set forth in Section
6.8(a).

*** Certain information on this page has been
omitted and filed separately with the Commission.  Confidential treatment
has been requested with respect to the omitted portions.

11

“Restricted
Estrogens” means any of:  Estradiol, 17-beta estradiol, 17-alpha
estradiol, ethinyl estradiol or tibolone.

“Seller”
has the meaning set forth in the preamble to this Agreement.

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

“Seller Governmental
Consents” has the meaning set forth in
Section 6.3(a).

“Seller
Material Adverse Effect” means any state
of facts, change, development, event, occurrence, effect or condition that,
individually or in the aggregate, (i) is materially adverse to the Purchased
Assets or (ii) materially impairs or delays the ability of Seller to perform its
obligation hereunder, except that any such state of facts, change, development,
event, occurrence, effect or condition resulting from or arising out of or in
connection with any of the following, either alone or in combination, shall not
be taken into consideration for purposes of determining whether a Seller
Material Adverse Effect has occurred or arisen:  (a) the announcement of
this Agreement or the pendency of the transactions contemplated hereby, (b) the
performance by the Seller of its obligations under this Agreement, (c) general
economic conditions in any country where the Evamist Business is conducted to
the extent that they do not disproportionately affect the Seller relative to
other industry participants, (d) general conditions in any industry in which the
Evamist Business is conducted to the extent that they do not disproportionately
affect the Seller relative to other industry participants, (e) changes or
conditions in economic, regulatory, political or capital markets conditions
generally to the extent that they do not disproportionately affect the Seller
relative to other industry participants, (f) any natural disaster or any acts of
terrorism, sabotage, military action or war (whether or not declared) or any
escalation or worsening thereof, (g) the Seller’s failure to meet any financial
projections in and of itself (it being understood that the facts or occurrences
giving rise or contributing to such failure may be deemed to constitute, or be
taken into account in determining, whether there has been or will be a Seller
Material Adverse Effect) or (h) changes in Law or GAAP.

“Seller
Multi-Application Technology” means [***] that is currently owned by the
Seller or any of its Subsidiaries and used in both the [***] and [***] as of the
Closing Date, which are summarized on [***].

“Seller Third Party
Consents” has the meaning set forth in
Section 6.3(b).

“Software”
means (to the extent applicable) computer programs, including any and all
software implementations of algorithms, models and methodologies whether in
source code or object code form, databases and compilations, including any and
all data and collections of data, and all documentation, including user manuals
and training materials, related to any of

*** Certain information on this page has been
omitted and filed separately with the Commission.  Confidential treatment
has been requested with respect to the omitted portions.

12

the foregoing; provided, however,
that “Software” shall not include
software that is readily purchasable or licensable and which has not been
modified in a manner material to the use or function thereof (other than through
user preferences).

“Straddle Period” means any Tax period
beginning on or before and ending after the Closing Date.

“Sublicense
Agreement” means the Sublicense Agreement, substantially in the form
attached hereto as Exhibit A, to be effective as of the Closing Date,
only if applicable pursuant to Section 2.7, by and between Seller and
Acquiror, whereby Seller agrees to grant to Acquiror an exclusive sublicense
under the Licensed Intellectual Property (as defined in the Acrux License)
solely to exploit, import, export, make, have made, develop, use, market, offer
for sale and sell Evamist in the Field (as defined in the Acrux License) and
subject to the other terms and conditions set forth therein.

“Subsidiary” of a Person means any entity
Controlled by that Person.

“Superior
Bid” means any unsolicited bona fide written offer made by a third party
to consummate a proposal for a sale, spin-off or other disposition or similar
transaction involving the Evamist Business and all or substantially all of the
Purchased Assets on terms that the board of directors of the Seller determines
in good faith, after consultation with its outside counsel and financial
advisor, and after taking into account the purchase price and other terms and
conditions of such proposal, the legal and regulatory aspects of such proposal
and the Person making such proposal, (i) to be more favorable to the Seller’s
stockholders than the transactions contemplated by this Agreement and (ii) is
likely to be consummated on its terms in a timely manner.

“Survival
Period” shall have the meaning set forth in
Section 11.1.

“Taxes”
means all of the following in connection with the operations of the Evamist
Business or the transactions contemplated hereby:  (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use,
value added, ad valorem, transfer, franchise, profits, license, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, capital tax, customs duty or other tax, governmental fee or other
like assessment imposed by any governmental, regulatory or administrative entity
or agency responsible for the imposition of any such tax (domestic or foreign)
including any interest, penalty or addition thereon, whether disputed or not;
(ii) any Liability for the payment of any amounts of the type described in (i)
as a result of being a member of any affiliated, consolidated, combined, unitary
or other group for any Taxable period; and (iii) any Liability for the payment
of any amounts of the type described in (i) or (ii) as a result of any express
or implied obligation to indemnify any other Person.

“Tax
Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

“Termination
Date” has the meaning set forth in
Section 12.1(b).

13

“Third Party
Claim” has the meaning set forth in
Section 11.2(d).

“Trademark
Assignment Agreement” means the Trademark Assignment Agreement to be
dated as of the Closing Date by and between the Acquiror and Seller, in a form
to be mutually agreed upon by the parties prior to the Closing.

“Transfer
Taxes” has the meaning set forth in Section 4.4.

“Transition
Services Agreement” means the Transition Services Agreement to be dated
as of the Closing Date by and between Seller and Acquiror, substantially in the
form attached hereto as Exhibit B, whereby Seller agrees to provide
assistance to Acquiror in matters related to the Evamist Product Registrations
and Evamist Business, including but not limited to making specified individuals
identified in such agreement available to Acquiror for purposes of providing
such assistance.

“Treasury
Regulations” means the Treasury Regulations promulgated under the
Code.

Section 1.2            
Construction of Certain Terms and Phrases.  Unless the
context of this Agreement otherwise requires:  (i) words of any gender
include each other gender; (ii) words using the singular or plural number also
include the plural or singular number, respectively; (iii) the terms “hereof,”
“herein,” “hereby” and derivative or similar words refer to this entire
Agreement; (iv) the terms “Article” or “Section” refer to the specified
Article or Section of this Agreement; (v) the term “or” has, except
where otherwise indicated, the inclusive meaning represented by the phrase
“and/or”; and (vi) the term “including” means “including without
limitation.”  Whenever this Agreement refers to a number of days, such
number shall refer to calendar days unless Business Days are specified.

ARTICLE II.

PURCHASE AND SALE OF ASSETS; GRANT OF LICENSES;
SUBLICENSE AGREEMENT

Section 2.1            
Purchase and Sale of Assets at the Closing.  Upon the terms
and subject to the conditions set forth in this Agreement, at the Closing,
Seller shall, on behalf of itself and its Subsidiaries, sell, convey, assign,
transfer and deliver to the Acquiror, and the Acquiror shall purchase and
acquire from Seller, all of Seller’s right, title and interest in and to the
following assets, free and clear of all Encumbrances (collectively, the “Purchased Assets”):

(a)                     
the Assumed Contracts;

(b)                    
all Evamist Books and Records;

14

(c)             
all Evamist Inventory, excluding such Evamist Inventory Acquiror elects
to exclude as designated in writing by Acquiror prior to the Closing Date;

(d)            
all Evamist Purchased Intellectual Property;

(e)             
all Evamist Product Registrations, excluding the Evamist FDA Submissions
(subject to Section 8.5);

(f)               
all Evamist Governmental Permits, to the extent legally transferable
(excluding the Evamist FDA Submissions, subject to Section 8.5);

(g)            
the Evamist FDA Submissions upon transfer pursuant to Section
8.5;

(h)            
any other assets related primarily to the research (including all
pre-clinical and clinical studies), development, manufacture, formulation, use,
distribution, marketing, sale and promotion of Evamist, provided,
however, that:

(i)            
using the [***], the Acquiror, after the Closing, itself or through a
contract manufacturer, shall use commercially reasonable efforts to, and subject
to the terms of the manufacturing and supply contract to be entered into by and
between the Acquiror and [***], manufacture or cause to be manufactured, on
behalf of and for delivery to the Seller up to 150,000 transdermal spray
housings by January 1, 2008 and up to 150,000 transdermal spray housings by
April 1, 2008, in each case subject to the Seller providing Acquiror a written
purchase order for such quantities at least 120 calendar days in advance of the
delivery date therefor and agreement to reimburse Acquiror for its actual cost
therefor; provided, however, the Acquiror shall not be required to take
any action under this Section 2.1(h)(i) that would interfere with, or be
detrimental to, the Evamist Business as conducted by the Acquiror following the
Closing, as determined by the Acquiror in good faith; and

(ii)          with
respect to the [***] and [***] located at [***], the Acquiror, for a period of
120 calendar days after the Closing, shall use commercially reasonable efforts
to make such equipment available at its then current location for reasonable use
on behalf of the Seller in connection with the manufacturing of its testosterone
metered dose transdermal spray product, and the parties shall cooperate with
respect to the scheduling of such use such that the Seller shall have reasonable
access to such equipment as determined by the parties; provided, however,
the Acquiror shall not be required to take any action under this Section
2.1(h)(ii) that would interfere with, or be detrimental to, the Evamist
Business as conducted by the Acquiror following the Closing, as determined by
the Acquiror in good faith; provided, further, the Seller shall use
commercially reasonable efforts following the Closing to either purchase a [***]
and [***] or find an alternative arrangement with a third party for use of such
[***] and [***]; provided, further, that the Seller shall reimburse the
Acquiror for any costs incurred by the Acquiror as a result of this Section
2.1(h)(ii).

*** Certain information on this page has been omitted and filed
separately with the Commission.  Confidential treatment has been requested
with respect to the omitted portions.

15

In addition, for clarity,
the parties agree and acknowledge that, with the exception of the foregoing
[***] and [***], the Purchased Assets shall exclude any assets used by the
Seller solely in connection with its [***]; and

(i)                
all rights, claims and credits, including all guarantees, warranties,
indemnities and similar rights in favor of Seller or any of its Affiliates or
any of their respective employees to the extent relating to any Purchased Asset
or any Assumed Liability.

Section 2.2                             
Excluded Assets.  Notwithstanding anything to the contrary
set forth in this Agreement, the Seller shall have no obligation to sell,
convey, transfer, assign or otherwise deliver unto the Acquiror pursuant to this
Agreement, and the Acquiror shall have no obligation to purchase or otherwise
accept from the Seller pursuant to this Agreement, any of the right, title or
interest of the Seller in or to any of the assets of the Seller other than the
Purchased Assets (collectively, the “Excluded
Assets”).  Without limiting the generality of the foregoing, the
Excluded Assets shall expressly include (and, therefore, the Purchased Assets
shall specifically exclude) the following:

(a)             
the Corporate Name;

(b)            
all human resource and other employee related files and records;

(c)             
all Books and Records, other than the Evamist Books and Records;

(d)            
subject to Section 8.11, any insurance policies of Seller or its
Subsidiaries or rights thereunder or proceeds thereof;

(e)             
the Evamist FDA Submissions (subject to Section 8.5);

(f)               
the Seller Multi-Application Technology;

(g)            
the right to a refund requested from the FDA for any or all of the
Evamist NDA filing fee;

(h)            
all right, title and interest of the Seller in and to any real property,
whether owned or leased by the Seller;

(i)                
all cash, cash equivalents, marketable securities and similar cash items
of the Seller, whether or not arising from the Evamist Business;

(j)                
all refunds and rights to refunds related to Taxes; and

(k)             
all claims, actions, deposits, prepayments, refunds, causes of action,
rights of recovery, rights of set off and rights of recoupment of any kind or
nature (including any such item relating to Taxes) relating to the Excluded
Assets.

*** Certain information on this page has been omitted and filed
separately with the Commission.  Confidential treatment has been requested
with respect to the omitted portions.

16

Section 2.3                             
Retention of Assets.  Notwithstanding anything to the
contrary contained in this Agreement and without limiting Section 2.8,
the Seller may retain, at its expense, one archival copy of all Assumed
Contracts, Evamist Books and Records and other documents or materials conveyed
hereunder, in each case, which the Seller in good faith determines it is
reasonably likely to need access to in connection with performing its rights and
obligations under this Agreement.  Without limiting Section 2.8,
access to such information shall be restricted to the Seller’s legal counsel and
such employees of the Seller who have a “need to know” such information in
connection therewith. Upon the final performance of its rights and obligations
hereunder, Seller shall (i) if such materials relate solely to the Evamist
Business, destroy or deliver to the Acquiror such materials, and (ii) if such
materials relate to both the Evamist Business and any other business of Seller,
redact, to the extent practicable, any portion of such materials that contain
information relating solely to the Evamist Business, provided, however,
if the Clinical Results Option is exercised, the Data Package will be excluded
in the case of (i) and (ii) above.

Section 2.4                             
Assignability and Consents.

(a)             
Notwithstanding anything to the contrary contained in this Agreement, if
the sale, conveyance, assignment, transfer or delivery or attempted sale,
conveyance, assignment, transfer or delivery to the Acquiror of any Purchased
Asset is (i) prohibited by any applicable Law or (ii) would require any
authorizations, approvals, consents or waivers from a third Person and such
authorizations, approvals, consents or waivers shall not have been obtained
prior to the Closing Date (each, a “Non-Assignable Asset”), in either case, the
Closing shall proceed (subject to the parties rights under
Article IX and X, as applicable),  but the Closing shall
not constitute the sale, conveyance, assignment, transfer or delivery of such
Non-Assignable Asset, and this Agreement shall not constitute a sale,
conveyance, assignment, transfer or delivery of such Non-Assignable Asset unless
and until such authorization, approval, consent or waiver is obtained. 
After the Closing, the Seller shall continue to use commercially reasonable
efforts to obtain any Seller Third Party Consent.

(b)            
Once authorization, approval or waiver of or consent for the sale,
conveyance, assignment, transfer or delivery of any such Non-Assignable Asset
not sold, conveyed, assigned, transferred or delivered at the Closing is
obtained, the Seller shall convey, assign, transfer and deliver such
Non-Assignable Asset to the Acquiror at no additional cost to the
Acquiror.  Notwithstanding anything to the contrary contained in this
Agreement, the Acquiror shall not assume any Liabilities with respect to a
Non-Assignable Asset until it has been assigned to the Acquiror.

Section 2.5                             
License to Seller Multi-Application Technology.  Effective as
of the Closing, the Seller hereby grants, on behalf of itself and its
Subsidiaries, to the Acquiror a fully paid, royalty free license in perpetuity
under the Seller Multi-Application Technology solely to exploit, import, export,
make, have made, develop, use, market, offer for sale and sell products (other
than a product for transdermal delivery of any Androgen), which license shall
be

17

exclusive as to Evamist and non-exclusive as to any other product. For
purposes of the foregoing and Section 2.6 below, “Androgen” means any of the following: 
testosterone, androstenediol, androstenedione, dehydroepiandrosterone,
dihydrotestosterone, tibolone or any selective androgen receptor
modulator.

Section 2.6                             
Licenses to Improvements.  Effective as of the Closing:

(a)             
the Seller hereby grants to the Acquiror a worldwide, fully paid, royalty
free, non-exclusive license in perpetuity under Improvements owned or controlled
by the Seller to exploit, import, export, make, have made, develop, use, market,
offer for sale and sell products other than a product for transdermal delivery
of any Androgen; and

(b)            
the Acquiror hereby grants to the Seller a worldwide, fully paid, royalty
free, non-exclusive license in perpetuity under Improvements owned or controlled
by the Acquiror to exploit, import, export, make, have made, develop, use,
market, offer for sale and sell products other than Competing Products.

Section 2.7                             
Sublicense Agreement.  In the event that the Acrux License
Assignment Consent has not been obtained as of the Closing, the Seller shall
grant to the Acquiror an exclusive sublicense under the Licensed Intellectual
Property (as defined in the Acrux License) pursuant to, and upon the terms and
subject to the conditions set forth in, the Sublicense Agreement, effective as
of the Closing.

Section 2.8                             
Clinical Results Option.  Notwithstanding anything to the
contrary set forth in this Agreement, in the event that the Acquiror so elects
by giving written notice thereof to the Seller prior to the Closing (the “Clinical Results Option”), the Seller shall
have the right to retain a copy of all pre-clinical and clinical trial data
results obtained in the course of the development of Evamist and all Evamist
Product Registrations (collectively, the “Data
Package”), which Seller shall have the right to sell and transfer to a
third party for such third party’s use, modification, reference and disclosure
solely in connection with such third party seeking regulatory approval to market
and commercialize one or more pharmaceutical products consisting of MDTS
containing Estradiol or any other Estrogen, which product is controlled or
developed by or on behalf of such third party, in the European Union (the “Approved Uses”); provided, however, any
such sale and transfer of the Data Package shall (i) be subject to standard and
customary confidentiality obligations that limit the use thereof to the Approved
Uses and to Persons subject to similar confidentiality obligations, except in
the case of disclosure to Governmental or Regulatory Authorities which
disclosure would as a matter of Law be maintained as confidential, and (ii)
provide that the third party purchaser of such Data Package may not license,
sell, dispose or otherwise transfer the Data Package to any other Person without
the prior written consent of Acquiror (such consent not to be unreasonably
withheld conditioned or delayed), except to the extent reasonably necessary to
enable the Approved Uses (provided such usage does not involve a further
transfer of ownership of the Data Package) and in all events subject to the
confidentiality obligations described in clause (i) above.  For clarity,
Seller shall have the right to retain any and all consideration obtained from
such sale and transfer of the Data Package.

18

ARTICLE III.

ASSUMPTION OF LIABILITIES

Section 3.1                             
Assumption of Liabilities.

(a)             
Upon the terms and subject to the conditions set forth in this Agreement,
as of the Closing Date, the Acquiror agrees to assume, satisfy, perform, pay and
discharge each of the following Liabilities (the “Assumed Liabilities”):

(i)            
all Liabilities of Seller or any of its Subsidiaries under the Assumed
Contracts (in the case of an Assumed Contract requiring third party consent to
assignment, where such consent has been obtained), but only to the extent such
Liabilities arise from any event, circumstance or condition occurring after the
Closing;

(ii)          all
Liabilities with respect to the Evamist Governmental Permits that are Purchased
Assets to the extent relating to the operation or conduct of the Evamist
Business by or on the behalf of the Acquiror from and after the Closing,
excluding the Evamist NDA;

(iii)       all
Liabilities for Taxes arising out of or relating to, directly or indirectly, the
Purchased Assets (including Evamist) or the ownership, sale or lease of any of
the Purchased Assets attributable to the Post-Closing Tax Period, other than the
Excluded Tax Liabilities;

(iv)      the
Liability for fifty percent (50%) of the payment due to Fempharm Pty Ltd.
pursuant to Section 3.2(b) of the Acrux License; and

(v)        
all Liabilities after the Closing Date arising out of or related to the
Acquiror’s ownership of the Purchased Assets and operation and conduct of the
Evamist Business by or for the benefit of the Acquiror.

(b)            
Notwithstanding anything contained in this Agreement to the contrary,
from and after the Closing Date, the Seller shall retain all of the following
Liabilities (“Excluded
Liabilities”):

(i)            
all accounts payable and other similar Liabilities of the Seller and its
Subsidiaries, excluding fifty percent (50%) of the payment due to Fempharm Pty
Ltd. pursuant to Section 3.2(b) of the Acrux License;

(ii)          any
Liability incurred by the Seller in accordance with Section 8.5 in
obtaining Evamist NDA Approval;

(iii)       any
Liability of Seller or any of its Subsidiaries, or any member of any
consolidated, affiliated, combined or unitary group of corporations of which
Seller or any of its Subsidiaries is or has been a member,

 

 

19

for Taxes and any
liabilities for Taxes attributable to the Purchased Assets for any Pre-Closing
Tax Period (“Excluded Tax
Liability”);

(iv)      all
Liabilities of the Seller and its Subsidiaries arising out of any product
liability, patent infringement, breach of warranty or similar claim for injury
to person or property or any other claim related to the Purchased Assets or the
Evamist Business arising prior to the Closing (including all proceedings
relating to any such Liabilities);

(v)        
all Liabilities of the Seller and its Subsidiaries arising out of
government seizures, field corrections, withdrawals or recalls of Evamist
manufactured, transferred or sold prior to the Closing, which are claimed prior
to, on or after the Closing Date;

(vi)      all
Liabilities of the Seller and its Subsidiaries with respect to any litigation or
other claims related to the Evamist Business or Purchased Assets to the extent
arising from any event, circumstance or condition occurring or alleged to have
occurred prior to the Closing;

(vii)                                                  
any Liability of the Seller related to any product or service of the
Seller or any of its Subsidiaries other than Evamist or the operation or conduct
by the Seller or any of its Subsidiaries of any business other than the Evamist
Business;

(viii)                                               
any Liability or obligation of Seller or any of its Subsidiaries (A)
arising out of any actual or alleged breach by Seller or any of its Subsidiaries
of, or nonperformance by Seller or any of its Subsidiaries under, any Assumed
Contract prior to the Closing or (B) accruing under any Assumed Contract prior
to the Closing;

(ix)       
any Liability of the Seller to the extent arising out of (i) any
suit, action or proceeding pending or, to the Knowledge of the Seller,
threatened as of the Closing, with respect to claims which arise from facts,
events or circumstances occurring prior to the Closing, or (ii) any actual
or alleged violation by the Seller or any of its Affiliates of any Law
applicable to the Seller or any of its Affiliates;

(x)           any
Liability of the Seller that relates to any Excluded Asset;

(xi)       
any Liability of Seller or any of its Subsidiaries or ERISA Affiliates
under or relating to (A) any employee benefit plan, or relating to wages,
bonuses, payroll, vacation, sick leave, workers’ compensation, unemployment
benefits, pension benefits, employee stock option or profit-sharing plans,
health care plans or benefits, phantom stock, deferred compensation or other
similar plan or arrangement, or any other employee plans or benefits of any
kind, in each case, which Seller or any Subsidiary or ERISA Affiliate has
entered into, maintains or administers or has maintained or

20

administered, to which
Seller or any Subsidiary or ERISA Affiliate contributes or has contributed or is
or has been required to contribute, or under or with respect to which Seller or
any ERISA Affiliate has or may have any Liability and (B) any actual or alleged
violation by the Seller or any of its Affiliates of any equal employment or
employment discrimination laws;

(xii)                                                    
any Liability under Environmental Laws arising out of or relating to the
operation or conduct of the Evamist Business or the use or ownership of the
Purchased Assets in the Evamist Territory, in each case, before the
Closing;

(xiii) 
                                               
any Liability of the Seller to any of its Affiliates; and

(xiv)                                                
any other Liability of Seller or any of its Subsidiaries or Affiliates
that is not specifically listed as an Assumed Liability under
Section 3.1(a) (including any Liability to the extent resulting from
the ownership, use, operation or maintenance of the Purchased Assets by or on
behalf of Seller prior to the Closing, or the operation or conduct of the
Evamist Business by or on behalf of the Seller prior to the Closing).

ARTICLE IV.

PURCHASE PRICE AND PAYMENT

Section 4.1                             
Purchase Price.  As consideration for the Purchased Assets,
the grant of the license under the Seller Multi-Application Technology pursuant
to Section 2.5 and, as applicable, the grant of the sublicense pursuant
to the Sublicense Agreement, at the Closing, the Acquiror shall:

(a)             
assume the Assumed Liabilities; and

(b)            
pay to Seller an aggregate amount equal to the sum of $10,000,000 (the
“Purchase Price”).

The Purchase Price shall be payable in cash by
wire transfer of immediately available funds to an account designated by Seller
to Acquiror in writing at least two (2) Business Days prior to
Closing.

Section 4.2                             
Milestone Payments.

(a)             
Upon such date that the Evamist NDA Approval is granted by the FDA and
the Evamist FDA Submissions and all rights associated therewith are transferred
to Acquiror pursuant to Section 8.5, Acquiror shall pay to Seller, within
five (5) Business Days thereafter, $140,000,000 in cash (the “FDA Milestone Payment”).

21

(b)            
In the event that Net Sales of Evamist equal or exceed $100,000,000 in
any fiscal year of the Acquiror, Acquiror shall pay to Seller, within ten (10)
Business Days after the completion of the audit of the consolidated financial
statements of Acquiror as of and for such fiscal year, but in no event later
than sixty (60) days after the end of such fiscal year, $10,000,000 in cash. For
the avoidance of doubt, the amount required to be paid pursuant to this
Section 4.2(b) (if required to be paid) shall only be paid once and, for
clarity, not with respect to every fiscal year that annual Net Sales of Evamist
equal or exceed $100,000,000.

(c)             
In the event that Net Sales of Evamist equal or exceed $200,000,000 in
any fiscal year of the Acquiror, Acquiror shall pay to Seller, within ten (10)
Business Days after the completion of the audit of the consolidated financial
statements of Acquiror as of and for such fiscal year, but in no event later
than sixty (60) days after the end of such fiscal year, either (i) $20,000,000
in cash or (ii) if the Acquiror has given written notice to the Seller prior to
the Closing of its election to exercise the Clinical Results Option, $10,000,000
in cash.  For the avoidance of doubt, the amount required to be paid
pursuant to this Section 4.2(c) (if required to be paid) shall only be
paid once and, for clarity, not with respect to every fiscal year that Net Sales
of Evamist equal or exceed $200,000,000.  In addition, for the avoidance of
doubt, the amounts required to be paid pursuant to Sections 4.2(b) and
(c), respectively, may be paid with respect to the same fiscal year in the
event that Net Sales of Evamist equal or exceed both $100,000,000 and
$200,000,000 for the first time in such fiscal year.

(d)            
All payments paid to the Seller pursuant to this Section 4.2,
shall be by wire transfer of immediately available funds to an account
designated by the Seller at least two (2) Business Days prior to the date on
which such payment is required to be paid.

(e)             
Within five (5) Business Days after the completion of the audit of the
consolidated financial statements of Acquiror as of and for such fiscal year,
until such time as the Seller has received the applicable milestone payment
pursuant to Section 4.2(c), the Acquiror shall provide the Seller with a
report, certified by the Acquiror’s Chief Financial Officer, setting forth the
Net Sales (including an itemized list of the deductions from the total gross
invoices used in calculating such Net Sales) of Evamist during such fiscal year
for each country within the Evamist Territory and the amount, if any, due
pursuant to Section 4.2(b) and/or 4.2(c) with respect to such
fiscal year.  The Acquiror shall keep complete and accurate records in
sufficient detail to make the reports required hereunder, to confirm its
compliance with the provisions of this Section 4.2, to properly reflect
all Net Sales of Evamist and to verify the determination of all amounts payable
hereunder.

(f)               
Upon the written request of the Seller, the Acquiror shall permit an
independent certified public accounting firm of recognized national standing
in

22

the United States
designated by the Seller and reasonably acceptable to the Acquiror to have
access during normal business hours to such of the records of the Acquiror as
may be reasonably necessary to verify the accuracy of any Net Sales reported and
amounts payable under Section 4.2(b) and (c) of this Agreement.
 Each party shall submit such information in its possession or control to
the accounting firm reasonably necessary for verification of Net Sales. Any such
verification shall be carried out under customary conditions of
confidentiality.  If the accounting firm determines that additional amounts
were payable, the Acquiror shall have ten (10) Business Days from the delivery
of such accounting firm’s written report to submit additional information to the
accounting firm, and the accounting firm will take such additional information
under consideration for a period not to exceed ten (10) Business Days.
Thereafter, if the accounting firm finally determines that Acquiror owes any
additional amounts to Seller, such amount shall be paid within ten (10) Business
Days of such determination, plus interest on such amount (from the date such
amount was originally due under this Agreement) at the six month LIBOR rate as
reported by the East Coast Edition of the Wall Street Journal on the date such
payment is due.  The fees charged by such accounting firm shall be paid by
the Seller, provided, however, that if the audit discloses that
additional amounts were owed to the Seller, then the Acquiror shall reimburse
the Seller for the fees and expenses charged by such accounting
firm.

Section 4.3                             
Allocation of Purchase Price.  The Purchase Price shall be
allocated among the Purchased Assets, the grant of the license under the Seller
Multi-Application Technology pursuant to Section 2.5 and, as applicable,
the grant of the sublicense pursuant to the Sublicense Agreement in accordance
with Section 1060 of the Code and the Treasury Regulations promulgated
thereunder, and the Acquiror and the Seller agree to (a) be bound by the
allocation, (b) act in accordance with the allocation in the preparation of
financial statements and filing of all Tax Returns (including, without
limitation, filing Internal Revenue Service Form 8594 with their United States
federal income Tax Return for the taxable year that includes the date of the
Closing) and in the course of any Tax audit, Tax review or Tax litigation
relating thereto, and (c) take no position and cause their Affiliates to
take no position inconsistent with the allocation for income Tax purposes,
including United States federal and state income Tax and foreign income Tax,
unless otherwise required pursuant to a “determination” within the meaning of
Section 1313(a) of the Code.  The Acquiror shall initially determine and
send written Notice to the Seller of the allocation of the Purchase Price within
thirty (30) days after the Closing Date.  The Seller will be deemed to have
accepted such allocation unless it provides written Notice of disagreement to
the Acquiror within ten (10) days after the receipt of the Seller’s Notice of
allocation.  If the Seller provides such Notice of disagreement to the
Acquiror, the parties shall proceed in good faith to determine the allocation in
dispute.  If, within ten (10) days after the Acquiror receive the Seller’s
Notice of disagreement, the parties have not reached agreement, the Accountants
shall be engaged to determine the final allocation in dispute.  The Seller
and the Acquiror shall share equally the fees of such Accountants.  Not
later than thirty (30) days prior to the filing of their respective Internal
Revenue Service Forms 8594 relating to this transaction, each party shall
deliver to the other party a copy of its Internal Revenue Service Form 8594.

23

Section 4.4                             
Sales, Use and Other Taxes.  All transfer, documentary,
sales, use, valued-added, gross receipts, stamp, registration or other similar
transfer taxes incurred in connection with the transfer and sale of the
Purchased Assets as contemplated by the terms of this Agreement, including all
recording or filing fees, notarial fees and other similar costs of Closing, that
may be imposed, payable, collectible or incurred (“Transfer Taxes”) shall be timely paid by
Seller.  The parties hereto shall reasonably cooperate, to the extent
reasonably requested and permitted by applicable law, in minimizing any such
Transfer Taxes.  The party required by law will file all necessary Tax
Returns and other documentation with respect to any such Transfer Taxes within
the time prescribed by applicable law, and the other party will join in the
execution of any such Tax Returns and other documentation.  All costs
incurred in the filing of such Tax Returns will be paid by Seller. The Seller
shall provide Acquiror with evidence satisfactory to Acquiror that such transfer
Taxes have been timely paid by the Seller.

Section 4.5                             
Tax Withholding.  All payments made by Acquiror to Seller
pursuant to this Agreement shall be made free and clear of any withholding,
deduction or offset.

Section 4.6                             
Risk of Loss.  Until the Closing, the Seller shall bear the
risk of any loss or damage to the Purchased Assets from fire, casualty or any
other occurrence.  Following the Closing, Acquiror shall bear the risk of
any loss or damage to the Purchased Assets from fire, casualty or any other
occurrence.

Section 4.7                             
Subsidiaries.  Acquiror shall, upon ten (10) Business Days
prior written notice to Seller, have the right to designate one or more of its
wholly-owned direct or indirect Subsidiaries (each, a “Designated Acquiror Subsidiary”) to purchase
all or any of the Purchased Assets or assume all or any of the Assumed
Liabilities so long as Acquiror shall remain liable for all of its liabilities
and obligations hereunder and under the Related Agreements; provided,
however, that Acquiror shall not be permitted to make such a designation if
such designation would, or would reasonably be expected to, (i) result in any
material costs, or any material liabilities, to the Seller or its Subsidiaries
(including but not limited to any liability for Taxes, regardless of materiality
and whether withheld at the source or otherwise), (ii) materially delay or
prevent the consummation of the transactions contemplated hereby, (iii)
materially adversely affect the obtaining of consents and approvals in
connection with the transactions contemplated hereby (or require that material
consents and approvals be resolicited) or (iv) otherwise cause the conditions to
Closing set forth in Articles IX and X hereof to not be
satisfied.

24

ARTICLE V.

CLOSING

Section 5.1                             
Time and Place.  Unless this Agreement is earlier terminated
pursuant to Article XII, the closing of the transactions
contemplated by this Agreement, including the purchase and sale of the Purchased
Assets and the assumption of the Assumed Liabilities (the “Closing”), shall take place as promptly as
practicable, but in no event later than five (5) Business Days following
satisfaction or waiver of the conditions set forth in Articles IX
and X, at 9:00 a.m., Pacific Standard time, at the offices of Latham
& Watkins LLP, 650 Town Center Drive 20th Floor, Costa Mesa, California 92626, unless another time
or place shall be agreed to by the parties (the “Closing Date”).

Section 5.2                             
Deliveries at Closing.

(a)             
Closing Deliveries by the Seller.  At the Closing, the Seller
shall deliver or cause to be delivered to the Acquiror:

(i)            
an original of each of the Trademark Assignment Agreement, the Patent
Assignment Agreement, the Bill of Sale, the Transition Services Agreement and
the Sublicense Agreement (only if the Sublicense Agreement is required to be
executed and delivered pursuant to Section 2.7), executed by the Seller,
and copies of all documents required to be delivered by the Seller pursuant to
the Related Agreements;

(ii)          an
unredacted, fully executed copy of each of the Assumed Contracts;

(iii)      
assignment and assumption agreements and/or subcontracts, as applicable,
in form and substance reasonably acceptable to the Seller and the Acquiror,
assigning to the Acquiror all rights of the Seller in and to the Assumed
Contracts;

(iv)      written
evidence of the receipt of all Seller Governmental Consents set forth on
Schedule 6.3(a) of the Seller Disclosure Schedule and Seller
Third Party Consents set forth on Schedule 6.3(b) of the Seller
Disclosure Schedule;

(v)        
written evidence (including duly executed UCC-3 forms, as applicable)
that all liens and encumbrances related to the Purchased Assets, if any, have
been released;

(vi)      all forms,
certificates and other documents referred to in Section 8.12(d); and

(vii)        
the certificates and other matters described in
Article X.

25

(b)            
Closing Deliveries by the Acquiror.  At the Closing, the
Acquiror will deliver or cause to be delivered to the Seller:

(i)  the
Purchase Price in immediately available funds by wire transfer to an account or
accounts that shall have been designated by the Seller not less than two (2)
Business Days prior to the Closing Date;

(ii)          an original
of each of the Trademark Assignment Agreement, the Patent Assignment Agreement,
the Bill of Sale, the Transition Services Agreement and the Sublicense Agreement
(only if the Sublicense Agreement is required to be executed and delivered
pursuant to Section 2.7), executed by the Acquiror, and copies of all
documents required to be delivered by the Acquiror pursuant to the Related
Agreements;

(iii)       such
instruments of assumption and other instruments or documents, in form and
substance reasonably acceptable to the Seller and the Acquiror, as may be
necessary to effect the Acquiror’s assumption of the Assumed Liabilities and the
Assumed Contracts; and

(iv)      the
certificates and other matters described in Article IX.

(c)             
Further Deliveries of the Seller.  At or promptly following
the Closing, but in no event later than thirty (30) days thereafter, the Seller
shall deliver or cause to be delivered to Acquiror the following:  (i)
Evamist Governmental Consents, (ii) the Evamist Books and Records and (iii) any
other Purchased Asset which was not delivered to Acquiror on the Closing
Date.

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES OF THE
SELLER

Except as set forth in the disclosure schedule
supplied by the Seller to the Acquiror and dated as of the date hereof (the
“Seller Disclosure Schedule”), which
Seller Disclosure Schedule identifies the Section (or, if applicable,
subsection) to which such exception relates (provided, however, that such
disclosure shall also apply to particular matters represented or warranted in
other Sections and subsections to the extent that it is readily apparent from
the text of such disclosure), the Seller represents and warrants to the Acquiror
as follows:

Section 6.1                             
Organization, Etc.  The Seller is duly incorporated, validly
existing and, where applicable, in good standing under the laws of Delaware and
has all requisite power and authority to own its assets, including the Purchased
Assets, and carry on the Evamist Business as currently conducted by it. 
The Seller is duly authorized to conduct its business and is in good standing in
each jurisdiction where such qualification is required to own the Purchased
Assets or conduct the Evamist Business as they are now being conducted, except
where the failure to be so qualified or in good standing would not be reasonably
expected to have a Seller Material Adverse Effect.  The certificate of
incorporation, bylaws or other similar governing instruments and organizational
documents (the “Charter Documents”) of
the Seller that have been delivered to the Acquiror on or prior to the date
hereof are effective under applicable Laws

26

and are current, correct and complete.  No
Affiliates of the Seller are presently or have in the past been engaged in the
development, manufacture, marketing or sale of Evamist or the operation or
conduct of the Evamist Business.

Section 6.2                             
Authority of the Seller.  The Seller has all necessary
corporate power and authority and has taken all actions necessary to enter into
this Agreement, to execute and deliver the Related Agreements to which it is or
will be a party and carry out the transactions contemplated hereby and by the
Related Agreements to which it is or will be a party.  The board of
directors of the Seller has taken all action required by Law and the Charter
Documents of the Seller and otherwise to be taken by it to duly authorize (i)
the execution and delivery of this Agreement and the Related Agreements to which
it is or will be a party and (ii) the consummation of the transactions
contemplated hereby and by the Related Agreements to which it is or will be a
party.  No other corporate proceedings on the part of the Seller are
necessary to authorize this Agreement and the Related Agreements and the
transactions contemplated hereby and thereby.  This Agreement has been duly
and validly executed and delivered by the Seller and, when executed and
delivered by the Acquiror, will constitute a legal, valid and binding obligation
of the Seller, enforceable against it in accordance with its terms.  When
executed and delivered by the Seller, each Related Agreement will constitute a
legal, valid and binding obligation of the Seller enforceable against it in
accordance with its terms.  Notwithstanding the matters set forth in this
Section 6.2, the enforceability of this Agreement and the Related
Agreements may be limited by principles of public policy and the rules of law
governing specific performance, injunctive relief or other equitable
remedies.

Section 6.3                             
Consents and Approvals.

(a)             
Schedule 6.3(a) of the Seller Disclosure Schedule sets
forth a complete and accurate list (the “Seller
Governmental Consents”) of all consents, waivers, approvals, Orders,
permits or authorizations of, or registrations, notifications, declarations,
payments or filings with, any Governmental or Regulatory Authority that are
required by or with respect to the Seller in connection with the execution and
delivery of this Agreement and the Related Agreements by the Seller or the
performance of its obligations hereunder and thereunder.

(b)            
Schedule 6.3(b) of the Seller Disclosure Schedule sets
forth a complete and accurate list (the “Seller
Third Party Consents”) of all material consents, waivers, approvals, or
authorizations of, or notices to, any third party (other than a Governmental or
Regulatory Authority) that are required by or with respect to the Seller in
connection with the execution and delivery of this Agreement and the Related
Agreements by the Seller or the performance of its obligations hereunder and
thereunder.

27

Section 6.4                             
Non-Contravention.  The execution and delivery by the Seller
of this Agreement and the Related Agreements does not, and the performance by
Seller of its respective obligations under this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not:

(a)             
conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the Charter Documents of the Seller;

(b)            
assuming the receipt of all consents, waivers, approvals, Orders, permits
or authorizations of Governmental and Regulatory Authorities, and the
termination or expiration of any waiting periods thereunder (set forth in
Schedule 6.4(b) of the Seller Disclosure Schedule) required to be
obtained by the Seller and the making of all registrations, notifications,
declarations or filings with Governmental and Regulatory Authorities, and the
termination or expiration of any waiting periods thereunder (set forth in
Schedule 6.4(b) of the Seller Disclosure Schedule) required to be
made by or with respect to the Seller, conflict with or result in a violation or
breach of any term or provision of any Law applicable to the Seller, the Evamist
Business or the Purchased Assets; or

(c)             
conflict with or result in (i) a Default under, (ii) the loss of any
benefit under or (iii) the creation of any Encumbrance on any of the Purchased
Assets (including any Assumed Contract).

Section 6.5                             
Contracts.

(a)             
All Contracts meeting the definition of “Evamist Contracts” are listed on
Schedule 1.1(a)(2). The Assumed Contracts are valid, binding and in full
force and effect.  Except as set forth on Schedule 6.5(a) of
the Seller Disclosure Schedule, the Seller and, to the Knowledge of the Seller,
any other party thereunder, has performed all obligations required to be
performed by such party under the Assumed Contracts and is not in material
breach or default under any Assumed Contract and, to the Knowledge of the
Seller, no other party to any Assumed Contract is (with or without the lapse of
time or the giving of notice, or both) in material breach or default
thereunder.  The Seller has not received any notice of the intention of any
party to terminate any Assumed Contract.  Complete and correct copies of
all Assumed Contracts and amendments thereto have been made available to
Acquiror.

(b)            
No Contracts other than the Evamist Contracts and the rights of Seller
under the Related Agreements are necessary for the conduct of the Evamist
Business.

Section 6.6                             
Intellectual Property Rights.

(a)             
Schedule 6.6(a) of the Seller Disclosure Schedule lists
all Registered Evamist Intellectual Property that is owned by or licensed to the
Seller.

28

(b)            
To the Knowledge of the Seller, the operation of the Evamist Business, as
has been and is now being conducted, does not presently infringe or constitute a
misappropriation of any registered or unregistered patents, trademarks,
copyrights, trade secrets or other proprietary rights of any Person, and the
currently contemplated operation of the Evamist Business will not infringe or
constitute a misappropriation thereof, and neither the Seller, nor any
Subsidiary thereof, has received any written notice from any Person, or has
Knowledge of, any actual or threatened claim or assertion to the contrary or of
any facts or alleged facts which are likely to serve as the basis for any such
claim or assertion.

(c)             
Any registration, maintenance and renewal fees due in connection with the
Registered Evamist Intellectual Property have been paid in a timely manner and
all necessary documents and certificates in connection with the Registered
Evamist Intellectual Property have, for the purposes of maintaining such
Registered Evamist Intellectual Property, been filed in a timely manner with the
relevant Governmental or Regulatory Authorities, provided, however, that
the foregoing representation and warranty is made only to the Knowledge of the
Seller with respect to Registered Evamist Intellectual Property licensed to the
Seller.

(d)            
The Evamist Intellectual Property set forth on
Schedule 6.6(a) of the Seller Disclosure Schedule is free and
clear of all Encumbrances and no Person other than the Seller and its
Subsidiaries, including any current or former employee or consultant of the
Seller and its Subsidiaries, has any proprietary, commercial or other interest
in any of the Evamist Intellectual Property, provided, however, that the
foregoing representation and warranty is made only to the Knowledge of the
Seller with respect to Evamist Intellectual Property licensed to the
Seller.  There are no existing agreements, options, commitments, or rights
with, of or to any Person to acquire or obtain any rights to, any of the Evamist
Intellectual Property set forth on Schedule 6.6(a) of the Seller
Disclosure Schedule, provided, however, that the foregoing representation
and warranty is made only to the Knowledge of the Seller with respect to Evamist
Intellectual Property licensed to the Seller.

(e)             
The Seller or its Subsidiaries have the unrestricted right to assign,
transfer and/or grant to the Acquiror all rights in the Evamist Intellectual
Property that are being assigned, transferred and/or granted to the Acquiror
under this Agreement and the Related Agreements, in each case free of any rights
or claims of any Person and without payment of any royalties, license fees or
other amounts to any Person.

(f)               
To the Knowledge of the Seller, there is no unauthorized use or
infringement of any of the Evamist Patent Rights by any Person.

(g)            
There are no Actions or Proceedings (including any inventorship
challenges) pending or, to the Knowledge of the Seller, threatened with
respect

29

to any of the Evamist
Intellectual Property nor have any such Actions or Proceedings been brought
during the past three (3) years.

(h)            
Solely as it relates to Evamist, the Seller has not entered into any
Contract (i) granting any Person the right to bring infringement actions with
respect to, or otherwise to enforce rights with respect to, any of the Evamist
Intellectual Property, or (ii) expressly agreeing to indemnify any Person
against any charge of infringement of any of the Evamist Intellectual
Property.

(i)                
The Seller has not entered into any Contract granting any Person the
right to control the prosecution of any of the Evamist Patent Rights.

(j)                
None of the Evamist Trademarks are or have been the subject of any
opposition, cancellation, abandonment or similar proceeding, and neither the
Seller, nor any of its Subsidiaries, has received any written notice from any
Person, or has Knowledge, of any actual or threatened claim or assertion to the
contrary, or of any facts or alleged facts which are likely to serve as a basis
for any such claim or assertion.

(k)             
To the Knowledge of the Seller, there are no trademarks or trademark
registrations or applications of any Person that are interfering or potentially
interfering with the Evamist Trademarks set forth on Schedule 1.1(g) or
any other material Evamist Trademarks.

(l)                
To the Knowledge of the Seller, there is no unauthorized use or
infringement of the Evamist Copyrights set forth on Schedule 1.1(c).

(m)          
Except as set forth on Schedule 6.6(m) of the Seller Disclosure
Schedule, the Seller has not granted any licenses under or to any of the Evamist
Intellectual Property or entered into any distribution or marketing arrangements
with respect to any Evamist Intellectual Property or Evamist.

Section 6.7                             
Litigation.  Schedule 6.7 of the Seller
Disclosure Schedule sets forth a list as of the date hereof of each pending
or, to the Knowledge of the Seller, threatened suit, claim, action, proceeding
or investigation, arising out of the conduct of the Evamist Business or against
or affecting any Purchased Assets.  Except as set forth in
Schedule 6.7 of the Seller Disclosure Schedule, none of the suits,
claims, actions, proceedings or investigations listed in
Schedule 6.7 of the Seller Disclosure Schedule as to which there is
at least a reasonable possibility of adverse determination would have, if so
determined, individually or in the aggregate, a Seller Material Adverse
Effect.  Except as set forth in Schedule 6.7 of the Seller
Disclosure Schedule, to the Knowledge of the Seller, there are no unasserted
claims of the type that would be required to be disclosed in
Schedule 6.7 of the Seller Disclosure Schedule if counsel for
the claimant had contacted the Seller that if asserted would have at least a
reasonable possibility of an adverse determination.  To the Knowledge of
the Seller, except as set forth in Schedule 6.7 of the Seller
Disclosure Schedule, neither the Seller nor any of its Affiliates are a party or
subject to or in Default under any Order applicable to the conduct of the
Evamist Business or any Purchased Assets or Assumed Liability, and there are no
outstanding Orders of

30

any Governmental or Regulatory Authority that
apply to the Purchased Assets that restricts the ownership, disposition or use
of the Purchased Assets by the Seller or the conduct of the Evamist Business by
the Seller, in each case, in any material respect.  Except as set forth in
Schedule 6.7 of the Seller Disclosure Schedule, there is not any
suit, claim, action, proceeding or investigation by the Seller pending, or which
the Seller intends to initiate, against any other Person arising out of the
conduct of the Evamist Business.  Except as set forth in
Schedule 6.7 of the Seller Disclosure Schedule, to the Knowledge of
the Seller, there is no pending or threatened investigation of, or affecting the
conduct of the Evamist Business or any Purchased Assets or Assumed
Liability.

Section 6.8                             
Permits; Compliance with Law.

(a)             
Schedule 6.8 of the Seller Disclosure Schedule sets forth a true
and complete list of all material authorizations, licenses, permits,
certificates, approvals, exemptions, consents, confirmations, orders,
registrations, product registrations, concessions, franchises, waivers and
clearances of an Governmental or Regulatory Authority (including all
authorizations under the FDA Act, the Public Health Services Act, the Controlled
Substances Act and the regulations of the FDA and the United States Drug
Enforcement Agency promulgated thereunder) necessary for the Seller to use,
test, manufacture, distribute, own, lease and operate the Purchased Assets and
to carry on the Evamist Business as it is being conducted as of the date hereof
(the “Required Permits”), and the Seller
is in possession of all Required Permits and all Required Permits are valid and
in full force and effect.

(b)            
The Evamist Business has been and is conducted by the Seller and its
Subsidiaries in material compliance with all Required Permits and applicable Law
by which any Purchased Asset is bound.

(c)             
No Governmental or Regulatory Authority has notified the Seller or any of
its Subsidiaries that the Evamist Business or the Purchased Assets were or are
in violation of any Law or Required Permit or the subject of any investigation
in any jurisdiction where the Evamist Business is conducted; and, to the
Knowledge of the Seller, there are no grounds for the same.

(d)            
No Governmental or Regulatory Authority has notified the Seller or any of
its Subsidiaries of any facts or circumstances which would lead to any
suspension, loss of or material modification to any Required Permit or refusal
by a Governmental or Regulatory Authority to renew or accept for filing any
Required Permit on terms less advantageous, individually or in the aggregate, to
the Seller and its Subsidiaries than the terms of those Required Permits
currently in force and, to the Knowledge of the Seller, there are no facts or
circumstances providing grounds for the same.

(e)             
(i)  All applications, submissions, information, claims,
reports and statistics, and other data and conclusions derived therefrom,
utilized as the basis for or submitted in connection with any and all requests
for a Required Permit

31

of the FDA or other
Governmental or Regulatory Authority relating to the Purchased Assets, when
submitted to the FDA or other Governmental or Regulatory Authority were true,
complete and correct in all material respects as of the date of submission and
any legally necessary or required updates, changes, corrections or modifications
to such applications, submissions, information, claims, reports or statistics
have been submitted to FDA and other Governmental or Regulatory
Authority.

(ii)          All
pre-clinical and clinical trials conducted by or under the authority of the
Seller with regard to the Purchased Assets were and are being conducted in
material compliance with experimental protocols, procedures and controls
pursuant to accepted professional scientific standards and all applicable Laws
promulgated by the FDA relating thereto, including without limitation the FDA
Act and its applicable implementing regulations at 21 C.F.R. Parts 50, 54, 56
and 312, as amended.

(iii)       There
are no investigations, audits, actions or other proceedings pending with respect
to a violation by the Seller or any of its Subsidiaries of the FDA Act or other
applicable Law that would reasonably be expected to result in administrative,
civil or criminal liability, and, to the Knowledge of the Seller, there are no
facts or circumstances existing that would reasonably be expected to serve as a
basis for such an investigation, audit, action or other proceeding, in each case
with respect to the Evamist Business.

(iv)      No
Governmental or Regulatory Authority has commenced or threatened to initiate any
action to withdraw the Evamist Product Registrations or request the recall of
Evamist, or commenced or threatened to initiate any action to enjoin production
of Evamist at any facility in the Evamist Territory, nor have the Seller or any
of its Subsidiaries received any notice to such effect and, to the Knowledge of
the Seller, there are no grounds for such action.

(v)        
None of the employees of the Seller, the Seller or any of its
Subsidiaries, or their collective officers or agents, have been disqualified or
debarred by the FDA for any purpose, or have been charged with or convicted
under United States federal Law for conduct relating to the development or
approval or otherwise relating to the regulation of any drug product under the
Generic Drug Enforcement Act of 1992, the FDA Act or any other similar Law or
have made an untrue statement of a material fact to any Governmental or
Regulatory Authority with respect to Evamist (whether in any submission to such
Governmental or Regulatory Authority or otherwise), or failed to disclose a
material fact required to be disclosed to any Governmental or Regulatory
Authority with respect to Evamist.  Neither the Seller or any of its
Subsidiaries are the subject of any pending or, to the Knowledge of the Seller,
threatened investigation in respect of the Seller of any of its Subsidiaries or
its products, by the FDA pursuant to its “Fraud, Untrue Statements of Material
Facts, Bribery,

32

and Illegal Gratuities”
Final Policy set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any
amendments thereto.

Section 6.9                             
Evamist Inventory.

(a)             
All of the Evamist Inventory (i) is free of any material defect or
deficiency and (ii) was produced or manufactured in accordance with the
specifications for Evamist as set forth in the applicable Evamist Product
Registrations and in compliance with applicable Law.  The Seller at Closing
will have good and marketable title to the Evamist Inventory free and clear of
any Encumbrances.

(b)            
The Initial Evamist Inventory Value represents the value of the Evamist
Inventory as of February 28, 2007 and was calculated from the Seller’s financial
systems, based upon the historical costs of
materials, determined in accordance with GAAP consistently applied, and
as set forth in reasonable detail on Schedule 6.9(b) of the Seller
Disclosure Schedule; provided, that for purposes of calculating the
Initial Evamist Inventory Value, the inventory of the Evamist Business shall not
include any Evamist Inventory that is damaged, defective, unusable or which
otherwise fails to meet the requirements of Section 6.9(a). 
For clarity, none of the Evamist Inventory has been cleared for commercial sale
and all human uses thereof are subject to appropriate exemptions.

Section 6.10                       
Suppliers.  The Seller has used reasonable business efforts
to maintain, and, to the Knowledge of the Seller, currently maintains, good
working relationships with all of the suppliers to the Evamist Business. 
Schedule 6.10 of the Seller Disclosure Schedule also specifies
for the year beginning January 1, 2006 to the date of this Agreement the
names of the suppliers to the Evamist Business.  None of such suppliers has
given the Seller or any of its Subsidiaries notice terminating, canceling or
threatening to terminate or cancel any Contract or relationship with the Seller
or any of its Subsidiaries relating to the Evamist Business. To the Knowledge of
Seller, such suppliers are manufacturing and otherwise operating in compliance
with applicable FDA requirements with respect to the products and materials
supplied to Seller.

Section 6.11                       
[Intentionally Deleted.]

Section 6.12                       
Environmental Matters.

Except as set forth on Section 6.12 of the
Seller Disclosure Schedule:

(a)             
the Seller and its Subsidiaries, to the extent related to any property or
facility owned, leased or operated by Seller in the conduct of the Evamist
Business (the “Properties”), have
obtained those Evamist Governmental Permits required by Environmental Law and
necessary for the conduct of the Evamist Business, and the Seller and its
Subsidiaries are in material compliance with such Evamist Governmental Permits
and other requirements of Environmental Law;

33

(b)            
the Seller and its Subsidiaries, to the extent related to the Evamist
Business or the Properties, have not received any written notice from any
Governmental Entity or any other Person or entity alleging a violation of, or
liability under, Environmental Laws related to any matter which has not been
fully resolved; and

(c)             
no notice, registration, reporting or other filing or investigation,
response or corrective action is required by the Seller or its Subsidiaries
under any Environmental Law in connection with, or as a result of, the execution
and delivery of this Agreement, or the consummation of the transactions
contemplated hereby.

Section 6.13                       
Absence of Certain Changes or Events.

(a)             
Except as set forth on Schedule 6.13(a) of the Seller
Disclosure Schedule, since December 31, 2006, there has not been a Seller
Material Adverse Effect.

(b)            
Except as set forth in Schedule 6.13(b) of the Seller
Disclosure Schedule or as otherwise expressly contemplated by this Agreement or
the Related Agreements, since December 31, 2006 to the date of this Agreement,
the Seller has conducted the Evamist Business in the Ordinary Course of
Business, and the Seller has not, with respect to the Evamist Business or any of
the Purchased Assets:

(i)            
subjected any of the Purchased Assets to any Encumbrances;

(ii)          sold,
transferred, leased, subleased, licensed or otherwise disposed of, to any third
party, any Purchased Assets or assets necessary for the conduct of the Evamist
Business;

(iii)       sold,
licensed or sublicensed or otherwise transferred any rights to any third party
under any Purchased Assets;

(iv)      entered into
any Assumed Contract or accelerated, cancelled, modified or terminated any
material Assumed Contract, other than in the Ordinary Course of Business;

(v)        
surrendered, revoked or otherwise terminated any Evamist Governmental
Permits, except in connection with any renewal or reissuance thereof;

(vi)      incurred
Assumed Liabilities, other than in the Ordinary Course of Business;

34

(vii)  
                                               
waived, released or assigned any rights, which rights, but for such
waiver, release or assignment, would have been classified as Purchased Assets,
other than in the Ordinary Course of Business;

(viii)                                               
experienced any damage, destruction or casualty loss (whether or not
covered by insurance) with respect to any Purchased Asset other than as a result
of ordinary wear and tear, where applicable;

(ix)       
delayed or postponed the payment of any Assumed Liability outside the
Ordinary Course of Business;

(x)           with
respect to the Purchased Assets or the Evamist Business, made any election or
change to any election in respect to Taxes, adopted or changed any accounting
method in respect to Taxes, entered into any Tax allocation agreement, Tax
sharing agreement, Tax indemnity agreement or closing agreement, settled or
compromised on any claim, notice, audit report or assessment in respect of
Taxes, consented to any extension or waiver of the limitation period applicable
to any claim or assessment in respect of Taxes, changed any annual Tax
accounting period, filed any amended Tax Return, or surrendered any right to
claim a Tax refund; or

(xi)       
agreed, whether in writing or otherwise, to do any of the foregoing,
except as expressly contemplated by this Agreement.

Section 6.14                       
Title to Assets; Sufficiency of Assets.

(a)             
The Seller has, and at the Closing the Seller will deliver to Acquiror,
good and valid title to or, in the case of licensed assets, a valid and binding
license to the Purchased Assets free and clear of all Encumbrances, a valid and
binding license under the Seller Multi-Application Technology pursuant to
Section 2.5 and, as applicable, a valid and binding sublicense under the
Licensed Intellectual Property (as defined in the Acrux License) pursuant to the
Sublicense Agreement.  Except as set forth on Schedule 6.14(a)
of the Seller Disclosure Schedule, no Subsidiary of the Seller owns,
beneficially or of record, or has any rights, title or interest in, to or under
any Purchased Asset or conducts any part of the Evamist Business, and there are
no employees of any Subsidiary of the Seller employed in the Evamist Business or
who perform tasks that are necessary for the proper operation of the Evamist
Business.

(b)            
The Purchased Assets (together with the rights of the Acquiror and its
Affiliates under the Related Agreements), the rights granted pursuant to Section
2.5 and, as applicable, pursuant to the Sublicense Agreement constitute all of
the assets, Contracts, Required Permits, rights and services required for the
continued operation of the Evamist Business by the Acquiror as conducted by the
Seller during the past twelve (12) months.

(c)             
Each item of equipment which is a Purchased Asset (other than equipment
set forth on Schedule 6.14(c) of the Seller Disclosure Schedule) is
in

35

good operating condition
for the purposes for which it is currently being used, subject to ordinary wear
and tear, is free from any material defect and has been maintained in all
material respects in accordance with generally accepted industry
practice.

(d)            
The Seller has not experienced any out-of-stock or back-order situation
with respect to the Evamist Business

(e)             
The Seller does not own or control any Evamist Product Improvements, and
has not granted to any third party or enabled any third party to make any
Evamist Product Improvements.

Section 6.15                       
Disclosure.  The Seller has made available to Acquiror all
information to the Knowledge of the Seller concerning the safety, efficacy, side
effects or toxicity of Evamist (in animals or humans), associated with or
derived from any pre-clinical or clinical use, studies, investigations or tests
of Evamist (in animals or humans) in all indications for Evamist that has been
submitted to the FDA or studied by the Seller, whether or not determined to be
attributed to Evamist.

Section 6.16                       
Taxes.

(a)             
Filing of Tax Returns.  To the extent relating to the
Purchased Assets or the Evamist Business, (i) the Seller has duly and timely
filed (or caused to be filed) with the appropriate taxing authorities all Tax
Returns required to be filed through the date hereof, (ii) all such Tax Returns
filed are complete and accurate in all respects and (iii) all Taxes owed by the
Seller (whether or not shown on any Tax Return) have been paid. The Seller is
not currently the beneficiary of any extension of time within which to file any
Tax Return with respect to the Purchased Assets or the Evamist Business.

(b)            
Liens.  There are no liens for Taxes (other than for current
Taxes not yet due and payable) on any of the Purchased Assets.  None of the
Purchased Assets are property that is required to be treated for Tax purposes as
being owned by any other Person.

(c)             
Audits, Investigations, Disputes or Claims.  No deficiencies
for Taxes have been claimed, proposed or assessed by any taxing or other
Governmental Authority against the Seller with respect to the Purchased Assets
or the Evamist Business, and there are no pending or, to the Knowledge of the
Seller, threatened audits, investigations, disputes or claims or other actions
for or relating to any Liability for Taxes with respect to the Purchased Assets
or the Evamist Business, and there are no matters under discussion with any
Governmental Authorities, or known to the Seller, with respect to Taxes that are
likely to result in an additional Liability for Taxes with respect to the
Purchased Assets or the Evamist Business.  The Seller has delivered or made
available to Acquiror complete and accurate copies of all examination reports
and statements of deficiencies assessed against or agreed to by the Seller
since

36

December 31, 2004 with
respect to the Purchased Assets or the Evamist Business.  With respect to
the Purchased Assets or the Evamist Business, the Seller has not waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.

(d)            
Tax Sharing Agreements.  There are no Tax-sharing agreements
or similar arrangements (including indemnity arrangements) with respect to or
involving the Purchased Assets or the Evamist Business, and after the Closing
Date, the Purchased Assets and the Evamist Business shall not be bound by any
such Tax-sharing agreements or similar arrangements or have any Liability
thereunder for amounts due in respect of periods prior to the Closing Date.

(e)             
No Withholding.  The Seller has withheld and paid all Taxes
concerning the Evamist Business required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.

Section 6.17                       
Brokers.  The Acquiror has no, and will have no, obligation
to pay any brokers (including real estate brokers), finders, investment bankers,
financial advisors or similar fees in connection with this Agreement or the
transactions contemplated hereby by reason of any action taken by or on behalf
of the Seller or any of its Subsidiaries.

ARTICLE VII.

REPRESENTATIONS AND WARRANTIES OF THE
ACQUIROR

Except as set forth in the disclosure schedule
supplied by the Acquiror to the Seller and dated as of the date hereof (the
“Acquiror Disclosure Schedule”), which
the Acquiror Disclosure Schedule identifies the Section (or, if applicable,
subsection) to which such exception relates (provided, however, that such
disclosure shall also apply to particular matters represented or warranted in
other Sections and subsections to the extent that it is readily apparent from
the text of such disclosure), the Acquiror represents and warrants to the Seller
as follows:

Section 7.1                             
Corporate Organization.  The Acquiror is duly incorporated,
validly existing and, where applicable, in good standing under the laws of
Delaware and has all requisite power and authority to own its assets and carry
the Evamist Business as contemplated by this Agreement and the Related
Agreements and is duly authorized to conduct its business and is in good
standing in each jurisdiction where such qualification is required to own the
Purchase Assets or conduct the Evamist Business as contemplated by this
Agreement and the Related Agreements, except where the failure to be so
qualified or in good standing would not be reasonably expected to have an
Acquiror Material Adverse Effect.  The Charter Documents of the Acquiror
are effective under the applicable Laws and are current, correct and
complete.

Section 7.2                             
Authority of the Acquiror.  The Acquiror has all necessary
power and authority and has taken all actions necessary to enter into this
Agreement, to carry out the transactions contemplated hereby and to conduct the
Evamist Business as contemplated by this Agreement and the Related
Agreements.  The board of directors of the Acquiror has taken all

37

action required by Law, its Charter Documents or
otherwise to be taken by it to authorize the execution and delivery by the
Acquiror of this Agreement and the Related Agreements to which the Acquiror is
or will be a party and the consummation of the transactions contemplated hereby
and thereby.  This Agreement has been duly and validly executed and
delivered by the Acquiror and, when executed and delivered by the Seller, will
constitute a legal, valid and binding obligation of the Acquiror enforceable
against it in accordance with its terms.  When executed and delivered by
the Acquiror, each Related Agreement to which the Acquiror is or will be a party
will constitute a legal, valid and binding obligation of the Acquiror
enforceable against it in accordance with its terms. Notwithstanding the matters
set forth in this Section 7.2, the enforceability of this Agreement and
the Related Agreements may be limited by principles of public policy and the
rules of law governing specific performance, injunctive relief or other
equitable remedies.

Section 7.3                             
Non-Contravention.  The execution and delivery by the
Acquiror of this Agreement and each of the Related Agreements does not, and the
performance by it of its obligations under this Agreement and each of the
Related Agreements and the consummation of the transactions contemplated hereby
and thereby will not:

(a)             
conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the Charter Documents of the Acquiror;

(b)            
assuming the receipt of all consents, waivers, approvals, Orders or
authorizations of Governmental and Regulatory Authorities required to be
obtained by the Acquiror and the making of all registrations, declarations or
filings with Governmental and Regulatory Authorities required to be made by the
Acquiror, conflict with or result in a violation or breach of any term or
provision of any Law applicable to the Acquiror; or

(c)             
conflict with or result in a Default under any Contract to which the
Acquiror is a party or by which the Acquiror or any of its assets is bound or to
conduct the Evamist Business as contemplated by this Agreement and the Related
Agreements.

Section 7.4                             
Litigation.  There are no Actions or Proceedings pending, or
to the Knowledge of the Acquiror, threatened, against or in connection with (i)
this Agreement or any Related Agreement or (ii) the transactions
contemplated by this Agreement.  The Acquiror is not subject to any Order
that could reasonably be expected to materially impair or delay the ability of
the Acquiror to perform its obligations hereunder.

Section 7.5                             
Brokers.  The Acquiror has no, and will have no, obligation
to pay any brokers, finders, investment bankers, financial advisors or similar
fees in connection with this Agreement or the transactions contemplated hereby
by reason of any action taken by or on behalf of the Acquiror.

38

Section 7.6                             
Financing.  The Acquiror has, or has available to it,
sufficient financial resources so as to enable the Acquiror to satisfy its
financial obligations under this Agreement without recourse to any outside
financing other than such outside financing as the Acquiror has already secured
access to as of the date of this Agreement.

ARTICLE VIII.

COVENANTS OF THE PARTIES

Section 8.1                             
Operation of the Evamist Business.

(a)             
Between the date of this Agreement and the Closing Date, except as
expressly permitted by this Agreement, the Seller shall conduct the Evamist
Business only in the Ordinary Course of Business in substantially the same
manner as previously conducted (including with respect to research and
development efforts, advertising, manufacturing, capital expenditures and
inventory levels) and use commercially reasonable efforts to keep intact the
Purchased Assets and the Evamist Business, and preserve the relationships of the
Evamist Business with customers, suppliers, licensors, licensees, distributors,
regulatory authorities and other Persons, in each case, who are material to the
Evamist Business.  Without limiting the generality of the foregoing, from
the date of this Agreement to the Closing, the Seller shall:

(i)            
notify the Acquiror prior to implementing material operational decisions
relating to the Evamist Business;

(ii)          keep in
full force and effect, without amendment, all material rights relating to the
Evamist Business;

(iii)       comply
in all material respects with all requirements of Law and contractual
obligations, in each case applicable to the operation of the Evamist
Business;

(iv)      maintain all
Evamist Books and Records;

(v)        
maintain the Purchased Assets in good operating order and condition,
reasonable wear and tear excepted; and

(vi)      upon any
damage, destruction or loss of any Purchased Asset, apply any and all insurance
proceeds received with respect thereto to the prompt repair, replacement and
restoration thereof to the condition of such Purchased Asset before such event
or, if required, to such other (better) condition as may be required by
applicable Law.

(b)            
Without limiting the generality of the lead-in paragraph of
Section 8.1(a), and except as set forth in
Schedule 8.1(b) or as otherwise expressly permitted by the terms of
this Agreement, from the date of this

39

Agreement to the Closing,
without the prior written consent of the Acquiror (which shall not be
unreasonably withheld), the Seller shall not:

(i)            
subject any Purchased Assets to any Encumbrances;

(ii)          sell,
transfer, lease, sublease, license or otherwise dispose of or grant any option
or rights in, to or under any Purchased Assets;

(iii)       enter
into any Contract that would have been required to be set forth on Schedule
1.1(a)(2) if such Contract had existed as of the date hereof, or terminate,
extend or amend any Assumed Contract set forth in
Schedule 1.1(a)(1);

(iv)      abandon or
terminate any clinical trials relating to Evamist (other than for safety
concerns or in accordance with the terms of existing agreements with respect to
such clinical trials) or terminate the Seller’s support of clinical trials
sponsored by clinical investigators with respect to Evamist;

(v)        
commence, sponsor or commit to participate in any clinical trials or
investigator sponsored trials with respect to Evamist or provide any clinical
grants with respect to Evamist;

(vi)      abandon any
patents or patent filings or any litigation seeking to enforce the Seller’s
interest in any Evamist Intellectual Property used in the conduct of the Evamist
Business;

(vii)                                                
take any action that would, or that could reasonably be expected to,
result in any of the conditions to the purchase and sale of the Purchased Assets
set forth in Article IX not being satisfied;

(viii)                                               
to the extent that doing so would adversely affect the Purchased Assets
or the Evamist Business, make any election or change to any election in respect
to Taxes, adopt or change any accounting method in respect to Taxes, enter into
any Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or
closing agreement, settle or compromise on any claim, notice, audit report or
assessment in respect of Taxes, consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes,
change any annual Tax accounting period, file any amended Tax Return, or
surrender any right to claim a Tax refund; or

(ix)       
agree, whether in writing or otherwise, to do any of the foregoing set
forth in clauses (i) through (viii) above.

(c)             
The Seller shall promptly advise Acquiror in writing of the occurrence of
any matter or event that is material to the business, assets, condition
(financial or otherwise), prospects or results of the operations of the Evamist
Business.

40

Section 8.2                             
Reasonable Efforts.

(a)             
Subject to Sections 8.2(b), and following the date hereof, each of
the parties hereto shall use its commercially reasonable efforts to take, or
cause to be taken, all action, or to do, or cause to be done, all things
necessary, proper or advisable under applicable Laws to consummate and make
effective the transactions contemplated by this Agreement and the Related
Agreements and to cause the conditions to the obligations of the other party
hereto to consummate the transactions contemplated hereby to be satisfied at the
Closing, including obtaining all consents and approvals of all Persons and
Governmental or Regulatory Authorities and removing any injunctions or other
Encumbrances on the Purchased Assets, impairments or delays the obtaining or
removal of which are necessary, proper or advisable to the consummation of the
transactions contemplated by this Agreement and the Related Agreements. 
The parties hereto shall cooperate with each other in connection with the taking
of all actions referenced in the preceding sentence, including providing (i)
such reasonable assistance as the other party may request in connection with its
preparation of any required filings or submissions and (ii) copies of all such
filings and submissions to the non-filing party and its advisors prior to filing
or submission and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith.  The Seller and the Acquiror
shall have the right to review in advance, and, to the extent practicable, each
shall consult the other on, all the information relating to the Seller or the
Acquiror, as the case may be, that appears in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the transactions contemplated by this Agreement (including any
filing contemplated by this Section 8.2(a)).  The Seller and the
Acquiror may, as each deems reasonably advisable and necessary, designate any
competitively sensitive information provided to the other under this section as
“outside counsel only.”  Such information shall be given only to outside
counsel of the recipient.  In addition, the Seller and the Acquiror may
redact any information from such documents shared with the other party or its
counsel that is not pertinent to the subject matter of the filing or
submission.

(b)            
The Acquiror and the Seller shall each:  (i) take all actions
necessary to make the filing required of such party or any of its Affiliates
under the HSR Act within ten (10) Business Days after the date hereof;
(ii) comply at the earliest practicable date with any request for
additional information or documentary material received by such party or any of
its Affiliates from the Federal Trade Commission or the Antitrust Division of
the Department of Justice pursuant to the HSR Act; and (iii) cooperate with
the other party in connection with any filing under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated under this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department of Justice or state
attorneys general.  Each of the Seller, on one hand, and the Acquiror, on
the other hand, shall be responsible for its own legal fees for preparing its
portion of the HSR Act

41

filings.  For the
avoidance of doubt, the Acquiror and Seller shall share equally any required
filing fees under the HSR Act.

(c)             
In furtherance and not in limitation of the other covenants of the
parties contained herein, each party shall use commercially reasonable efforts
to resolve such objections, if any, as may be asserted with respect to the
consummation of the transactions contemplated hereby under any antitrust
Law.  If any administrative, judicial or legislative Action or Proceeding
is instituted (or threatened to be instituted) challenging the sale and purchase
of any of the Purchased Assets or any other transaction as violative of any
antitrust Law, each party shall cooperate and use commercially reasonable
efforts to vigorously contest and resist any such Action or Proceeding, and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other Order that is in effect and that restricts, prevents or prohibits
consummation of the sale and purchase of the Purchased Assets or any other
transaction contemplated under this Agreement; provided, however,
that nothing in this Agreement shall require the Acquiror or its Subsidiaries to
commit to any divestitures, licenses or hold separate or similar arrangements
with respect to its assets or conduct of business arrangements, whether as a
condition to obtaining any approval from a Governmental and Regulatory Authority
or any other Person for any other reason.

(d)            
Each party shall promptly inform the other parties of any material
communication received by such party from the Federal Trade Commission or the
Antitrust Division of the Department of Justice regarding any of the
transactions contemplated under this Agreement.  Each party shall advise
the other party promptly of any understandings, undertakings or agreements that
such party proposes to make or enter into with the Federal Trade Commission or
the Antitrust Division of the Department of Justice in connection with the
transactions contemplated under this Agreement.

(e)             
The Seller shall (i) permit the Acquiror and its Subsidiaries to
correspond and meet with the FDA to discuss the acquisition by the Acquiror of
all Evamist Product Registrations and the transfer of manufacturing and
distribution of Evamist to the Acquiror, (ii) include the Acquiror in any
discussions with the FDA regarding any Evamist Product Registration, (iii) if
reasonably requested by the Acquiror, upon reasonable notice, attend meetings or
conference calls involving the Acquiror or one of its Subsidiaries and the FDA
related to any of the foregoing and (iv) cooperate with Acquiror by submitting a
transfer letter to the FDA, in a form to be mutually agreed upon by the parties
prior to the Closing (the “FDA Transfer Letter”), to have the FDA
transfer all Evamist Product Registrations to one of Acquiror’s Subsidiaries or
to Acquiror at such time as requested by the Acquiror in accordance with
Section 8.5.

(f)               
Notwithstanding anything in this Agreement to the contrary, the Acquiror
shall not be required to expend money, commence any litigation or

42

offer or grant any
accommodation (financial or otherwise) to any third party in connection with
obtaining any consent, substitution, approval or amendment required to assign or
transfer any Purchased Asset to the Acquiror.  In the event any such
consent, substitution, approval or amendment is not obtained prior to the
Closing, the Seller shall continue to use commercially reasonable efforts to
obtain such consent, waiver or approval after the Closing.

(g)            
Without limiting any other rights and obligations under this Section
8.2, following the date hereof, each of the parties hereto shall use its
commercially reasonable efforts to obtain the Acrux License Assignment Consent
prior to the Closing.  In the event that the Acrux License Assignment
Consent is not obtained prior to the Closing, each of the parties hereto shall
continue to use commercially reasonable efforts to obtain the Acrux License
Assignment Consent after the Closing.  In the event that the Acrux License
Assignment Consent is obtained after the Closing, the parties hereto agree that
the Sublicense Agreement shall terminate, and is hereby terminated, as of the
effectiveness of the Acrux License Assignment Consent.

Section 8.3                             
Access; Confidentiality.

(a)             
From the date hereof until the Closing, the Seller shall permit the
Acquiror and its representatives to have reasonable access, during regular
business hours and upon reasonable advance notice of no less than one (1)
Business Day , to all the personnel, properties, Contracts, Tax Returns, the
Evamist Books and Records, the Assumed Liabilities or the Evamist Business, and
the Seller shall furnish promptly to the Acquiror such information in the
Seller’s possession concerning the Purchased Assets, the Assumed Liabilities or
the Evamist Business as the Acquiror may reasonably request; provided,
however, that any such access shall be conducted in a manner as not to
unreasonably interfere with the operation of the Evamist Business and the Seller
shall not be required to provide any financial, operating or other information
that is not currently available through the Seller’s existing business processes
and the creation of which would be unduly burdensome on the Seller.  The
Seller may redact such portions of its books and records that do not relate to
the Purchased Assets, the Assumed Liabilities or the Evamist Business.  The
Seller shall instruct its respective employees, counsel and financial advisors
to provide reasonable cooperation to the Acquiror in its investigation of the
Evamist Business.

(b)            
The Seller shall implement procedures to keep confidential, and cause its
Affiliates and its and their officers, directors, employees, representatives and
advisors to keep confidential, all information relating to the Purchased Assets,
Assumed Liabilities and Evamist Business, except as required by Law and except
for information which is or becomes generally available to the public other than
as a result of a disclosure by the Seller or its Affiliates and its and their
officers, directors, employees, representatives or agents.  The Seller
shall not disseminate any such information other than to

43

those employees of the
Seller who have a business need to access such information (i) in connection
with the preparation of the Seller’s accounting records, (ii) in connection with
the preparation of any Tax Returns or with any Tax audits, (iii) in connection
with any suit, claim, action, proceeding or investigation relating to the
Purchased Assets, the Assumed Liabilities or the Evamist Business or (iv) in
connection with the operation of the Evamist Business in the Ordinary Course of
Business prior to the Closing.  Effective upon Closing, upon written
request of the Acquiror, from time to time, the Seller shall (at the Acquiror’s
sole cost and expense) use reasonable efforts to enforce the Seller’s rights
with respect to the use and maintenance of confidential
information relating to the Evamist Business under all confidentiality
agreements between the Seller and any other potential acquiror of the Evamist
Business that were entered into in contemplation of the sale of the Evamist
Business.  The Seller shall not waive or release its rights under such
confidentiality agreements with respect to the use and maintenance of such
confidential information with respect to the Evamist Business.

(c)                     
Information within the Purchased Assets disclosed to the Acquiror
pursuant to this Agreement (including in the Seller Disclosure Schedule and the
other Schedules delivered pursuant to this Agreement) shall be held as
Confidential Information (as defined in the Confidentiality Agreement) and shall
be subject to the Confidentiality Agreement to the extent such information is
Confidential Information as of the date hereof.

(d)                    
The parties hereto, or any of their respective Affiliates or any of their
respective officers or directors, shall cooperate as may be reasonably required
in connection with the investigation and defense of any suit, action, claim,
proceeding or investigation, in each case that is adverse to a third party,
relating to the Purchased Assets, the Assumed Liabilities or the Evamist
Business; provided, however, that the requesting party shall
reimburse the non-requesting party promptly for all reasonable out-of-pocket
costs and expenses incurred in connection with any such requests, including
reasonable legal fees and costs.

(e)                     
Following the Closing, for so long as such information is retained by the
Seller (which shall be for a period of at least three (3) years), the Seller
shall permit the Acquiror and its authorized representatives to have reasonable
access and duplicating rights during normal business hours, upon reasonable
prior notice, to the Seller and its books, records and personnel to the extent
relating to the Purchased Assets, the Assumed Liabilities or the Evamist
Business, to the extent such access may reasonably be required: 
(i) in connection with the preparation of the Acquiror’s accounting records
or with any audits thereof, (ii) in connection with any suit, claim,
action, proceeding or investigation relating to the Purchased Assets, the
Assumed Liabilities or the Evamist Business (other than such a suit, claim,
action, proceeding or investigation that is adverse to the Seller) or
(iii) in connection with any required regulatory filing relating to the
Purchased Assets, the Assumed

44

Liabilities or the Evamist
Business; provided that the Acquiror shall reimburse the Seller promptly
for all reasonable and necessary out-of-pocket costs and expenses incurred by
the Seller in connection with any such request.  Notwithstanding the
foregoing, the Seller need not disclose to the Acquiror any information:
(i) relating to pricing or other matters that are highly sensitive if (I)
providing such portions of documents or information, in the good faith opinion
of the Seller’s counsel, would reasonably be expected to result in antitrust
difficulties for the Seller and (II) the Seller designates such information as
“outside counsel and retained experts only” and discloses such information to
Acquiror’s outside counsel and retained experts; or (ii) which the Seller is
prohibited from disclosing by applicable Law.  If any material is withheld
by the Seller pursuant to the immediately preceding sentence, the Seller shall
inform the Acquiror as to the general nature of what is being withheld. 
The Seller may redact such portions of such books and records that do not relate
to the Purchased Assets, the Assumed Liabilities or the Evamist
Business.

(f)                       
Following the Closing, for so long as such information is retained by
Acquiror (which shall be for a period of at least three (3) years), the Acquiror
shall permit the Seller and its authorized representatives to have reasonable
access and duplicating rights during normal business hours, upon reasonable
prior notice, to the Acquiror and the Books and Records included in the
Purchased Assets and the employees of the Acquiror or its Subsidiaries, to the
extent that such access may reasonably be required: (i) in connection with the
preparation of the Seller’s accounting records or with any audits thereof, (ii)
in connection with any suit, claim, action, proceeding or investigation relating
to the Purchased Assets, the Assumed Liabilities or the Evamist Business (other
than such a suit, claim, action, proceeding or investigation that is adverse to
the Acquiror) or (iii) in connection with any required regulatory filing
relating to the Purchased Assets, the Assumed Liabilities or the Evamist
Business; provided that the Seller shall reimburse the Acquiror promptly for all
reasonable and necessary out-of-pocket costs and expenses incurred by the
Acquiror in connection with any such request, including reasonable attorney fees
and costs.  Notwithstanding the foregoing, the Acquiror need not disclose
to the Seller any information: (A) relating to pricing or other matters that are
highly sensitive if (I) providing such portions of documents or information, in
the opinion of the Acquiror’s counsel, might reasonably result in antitrust
difficulties for the Acquiror and (II) the Acquiror designates such information
as “outside counsel and retained experts only” and discloses such information to
the Seller’s outside counsel and retained experts or (B) which the Acquiror is
prohibited from disclosing by applicable Law.  If any material is withheld
by the Acquiror pursuant to the immediately preceding sentence, the Acquiror
shall inform the Seller as to the general nature of what is being withheld. The
Acquiror may redact such portions of such Books and Records that do not relate
to the Purchased Assets, the Assumed Liabilities or the Evamist Business.

45

Section 8.4                                     
Public Announcements; Confidentiality.  Except as otherwise
required by applicable Law or applicable stock exchange requirements, prior to
the Closing, neither the Acquiror nor the Seller shall, and each of them shall
cause their respective Affili­ates, representatives and agents not to, issue
or cause the publication of any press release or public announcement with
respect to the transactions contemplated by this Agreement without the express
prior written approval of the other party, which approval shall not be
unreasonably withheld or delayed; provided, that each of the Seller and
the Acquiror may make any public statement in response to questions by the
press, analysts, investors or those attending industry conferences or financial
analyst calls, or issue press releases, so long as any such public statement or
press release is not inconsistent with prior public disclosures, press releases
or public statements approved by the other party pursuant to this Section
8.4 and which do not reveal non-public information about the other
party.  The parties hereto agree to issue separate individual press
releases, each in a form approved by the other party, to announce the execution
of this Agreement and the payment of the FDA Milestone Payment pursuant to
Section 4.2(a).

Section 8.5                                     
Regulatory Matters.

(a)                     
Prosecution of Evamist NDA.   Until the Evamist NDA
Approval Date, the Seller shall control the prosecution of the Evamist NDA
before the FDA, subject to the terms and conditions of this Section
8.5.  Unless and until the Evamist FDA Submissions are assigned to the
Acquiror pursuant to Section 8.5(b), the Seller shall use efforts
(consistent with the past practices of the Seller with respect to the Evamist
NDA and other NDAs of the Seller), at its expense, to obtain Evamist NDA
Approval as soon as practicable.  In connection therewith, the Seller shall
continue to be the party of record with respect to the Evamist NDA and,
following the Closing, shall keep the Acquiror fully informed with respect to
the prosecution of the Evamist NDA and (i) promptly provide to the Acquiror or
its designee any correspondence from the FDA with respect thereto and (ii) no
later than ten (10) Business Days prior to the submission thereof provide to the
Acquiror or its designee any proposed correspondence to the FDA with respect
thereto, including copies of any and all underlying data to accompany any such
correspondence.  Following the Closing, the Seller shall consider in good
faith any comments of the Acquiror or its designee with respect to such
correspondence and include any reasonable comments proposed by the
Acquiror.  Following the Closing, the Seller shall also notify the Acquiror
of any meetings with the FDA with respect to the Evamist NDA, and the Acquiror
or its designee shall have the right to participate in such meetings and any
internal pre-meetings with respect thereto.  The Acquiror agrees and
acknowledges that, following the Closing until the Evamist NDA Approval Date,
the Seller shall have the right to use any and all Purchased Assets solely and
to the extent necessary for carrying out the Seller’s right hereunder to
prosecute the Evamist NDA and obtain the Evamist NDA Approval.  Without
limiting any other obligation of the Acquiror under this Agreement, the Acquiror
shall cooperate with the Seller in the Seller’s efforts to obtain Evamist NDA
Approval, including providing to the Seller all relevant data, information and
material reasonably requested by the Seller which the Seller shall not disclose
to any third Person or use except solely and to the

46

extent necessary for
prosecuting the Evamist NDA and obtaining the Evamist NDA Approval.

(b)                    
Optional Assignment of Evamist FDA Submissions Prior to Evamist NDA Approval.  In the
event that the Seller fails to use efforts (consistent with the past practices
of the Seller with respect to the Evamist NDA and other NDAs of the Seller), to
obtain Evamist NDA Approval as soon as practicable, and the Acquiror provides at
least ten (10) Business Days’ prior written notice thereof to the Seller, the
Seller shall promptly assign to the Acquiror the Evamist FDA Submissions and all
related files, which assignment shall be effected by the Seller submitting the FDA Transfer Letter to the
FDA.  The Seller shall cooperate with Acquiror in obtaining the assignment
and shall take all actions reasonably requested by Acquiror necessary, proper or
advisable to effectuate the assignment. Thereafter, the Acquiror shall (i) be
the party of record with respect to the Evamist NDA and (ii) use efforts
(consistent with the past practices of the Acquiror with respect to other NDAs
of the Acquiror), at its expense, to obtain Evamist NDA Approval as soon as
practicable and (iii) provide to the Seller or the third party purchaser of the
Data Package, as applicable, such information as is necessary for implementing
Section 2.8.  In connection therewith, the Seller shall reasonably
cooperate with the Acquiror in accordance with the Transition Services Agreement
and the Acquiror shall keep the Seller reasonably informed with respect to the
prosecution of the Evamist NDA and consider in good faith the Seller’s comments
with respect thereto and include any reasonable comments proposed by the Seller.
Without limiting any other obligation of the Seller under this Agreement, the
Seller shall cooperate with the Acquiror in the Acquiror’s efforts to obtain
Evamist NDA Approval, including providing to the Acquiror all relevant data,
information and material reasonably requested by the Acquiror which the Acquiror
shall not disclose to any third Person or use except solely and to the extent
necessary for prosecuting the Evamist NDA and obtaining the Evamist NDA
Approval. The Seller agrees and acknowledges that, following the Closing, the
Acquiror shall have reasonable access to and the right to use any and all
materials of Seller, whether or not such materials are Purchased Assets, solely
and to the extent necessary for carrying out the Acquiror’s right hereunder to
prosecute the Evamist NDA and obtain the Evamist NDA Approval in accordance with
this Section 8.5.

(c)                     
Assignment of Evamist FDA Submissions upon Evamist NDA
Approval.  Unless previously assigned to the Acquiror pursuant to
Section 8.5(b), the Seller shall transfer and assign, within five (5)
Business Days of the NDA Approval Date, to the Acquiror (A) the Evamist FDA
Submissions (including all associated rights) together with (B) all files
related thereto.  Thereafter, the Acquiror shall have all rights and
responsibilities with respect to such Evamist FDA Submissions.  The
foregoing transfer and assignment shall be effected by the Seller submitting the
FDA Transfer Letter to the FDA.

(d)                    
FDA Contacts.  From and after the transfer by the Seller to
the Acquiror of each Evamist Product Registration held by the Seller or any of
its

47

Subsidiaries pursuant to
the terms hereof, except as required by applicable Law, the Acquiror shall be
solely responsible and liable for (i) taking all actions, paying all fees and
conducting all communication with the appropriate Governmental or Regulatory
Authority required by Law in respect of such Evamist Product Registration,
including preparing and filing all reports (including adverse drug experience
reports) and responding to and answering all questions and complaints requested
by the appropriate Governmental or Regulatory Authority, (ii) taking all actions
and conducting all communication with third parties in respect of Evamist
manufactured, tested, used or distributed pursuant to such Evamist Product
Registration (whether manufactured, tested, used or distributed before or after
transfer of such Evamist Product Registration), including responding to all
complaints in respect thereof, including complaints related to tampering or
contamination, and (iii) investigating all complaints and adverse drug
experiences in respect of Evamist manufactured, tested, used or distributed
pursuant to such Evamist Product Registration (whether manufactured, tested,
used or distributed before or after transfer of such Evamist Product
Registration, as set forth in Section 8.5(e) below).  It is
understood and agreed that Seller shall be responsible for all foregoing
obligations listed in this Section 8.5(d) prior to the transfer of the
Evamist Product Registrations and shall use commercially reasonable efforts to
timely and appropriately fulfill such obligations.

(e)                     
Adverse Experience Reports.  From and after the transfer of
the Evamist FDA Submissions, the Acquiror shall be responsible for the
investigation, analysis and reporting to the FDA of any adverse experience
report or complaint in connection with the Product received by either the
Acquiror or the Seller from and after the Closing from any source (including any
patient, health care professional or other customer of the Evamist Business),
regardless of whether the Product involved in any such adverse experience report
or complaint was manufactured, tested, used or distributed by the Seller or
Acquiror.  Any adverse experience report or complaint received by the
Seller relating to the Product after the Closing shall be reported by the Seller
to Acquiror, within a sufficient time period to allow the Acquiror to comply
with its obligations to the FDA, after receipt of such adverse experience report
or complaint by the Seller.  The Seller shall cooperate with the Acquiror
in connection with the investigation and analysis of all adverse experience
reports or complaints that relate to the period before the date of the
assignment of the Evamist FDA Submissions.  It is understood and agreed
that the Seller shall be responsible for all foregoing obligations listed in
this Section 8.5(e) prior to the

48

transfer of the Evamist
FDA Submissions and shall use commercially reasonable efforts to timely and
appropriately fulfill such obligations.

Section 8.6                                     
Bulk Transfer Laws.  The Acquiror hereby waives compliance by
the Seller and its Subsidiaries with the provisions of any so-called “bulk
transfer law” of any jurisdiction in connection with the sale of the Purchased
Assets to the Acquiror.

Section 8.7                                     
Covenant Not to Compete.

(a)                                 
The Seller understands that Acquiror shall be entitled to protect and
preserve the going concern value of the Evamist Business following the Closing
to the extent permitted by Law and that the Acquiror would not have entered into
this Agreement absent the provisions of this Section 8.7 and, therefore,
for the period from the date hereof until [***] ([***]) [***] following the
First Commercial Sale by or under authority of the Acquiror of Evamist in the
Evamist Territory (the “Applicable
Period”), the Seller and its Subsidiaries shall not, directly or
indirectly, market, promote, sell or import any Competing Products for use in
the Evamist Territory.  As used herein, “Competing Product” means any product that is
[***] and is marketed, promoted, or sold (i) for the [***], or any other [***]
delivered by such product, or (ii) for the [***] of any [***] delivered by such
product, in each case to [***], excluding from the foregoing products of the
Seller or its Subsidiaries involving application of an [***], provided that such
direct [***] that would be effective for treating [***].  For clarity,
[***] is not a Competing Product.  The Seller and its Subsidiaries shall
not provide funding during the Applicable Period to third parties for the
specific purpose of, or grant a license or other authorization to any third
party for, marketing, selling, promoting or importing any Competing Product for
use in the Evamist Territory.

(b)                    
If a court determines that the foregoing restrictions are too broad or
otherwise unreasonable under applicable Law, including with respect to time or
space, the court is hereby requested and authorized by the parties to revise the
foregoing restriction to include the maximum restrictions allowable under
applicable Law. Each of the parties acknowledges, however, that this
Section 8.7 has been negotiated by the parties and that the Evamist
Territory

*** Certain information on this page has been omitted and filed
separately with the Commission.  Confidential treatment has been requested
with respect to the omitted portions.

49

and the Applicable Period
are reasonable in light of the circumstances pertaining to the
parties.

(c)                     
Notwithstanding any other provision of this Agreement, it is understood
and agreed that the remedy of indemnity payments pursuant to
Article XI and other remedies at law would be inadequate in the case
of any breach of the covenants contained in Section 8.7, and,
accordingly, the Acquiror shall be enti­tled to equitable relief, including
the remedy of specific performance, with respect to any breach or attempted
breach of such covenants.

(d)                    
For the avoidance of doubt, if any Person acquires Control of the Seller,
whether by stock purchase, merger or other transaction, no provision of this
Section 8.7 shall apply to such acquiror or its Affiliates so long
as no assets of the Seller are used to further the marketing, sale or promotion
of a Competing Product by such acquiror, or any of its Affiliates.

Section 8.8                                     
Further Assurances.

(a)                     
On and after the Closing Date, the Seller shall from time to time, at the
reasonable request of the Acquiror, execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, such further conveyances, notices
and assumptions and such other instruments, and take such other actions as the
Acquiror may reasonably request, in order to more effectively consummate the
transactions contemplated hereby and to transfer fully to the Acquiror good and
marketable title to the Purchased Assets and all of the titles, rights,
interests, remedies, powers and privileges intended to be conveyed under this
Agreement and the Related Agreements (including assistance in the collection or
reduction to possession of any of the Purchased Assets).

(b)                    
On and after the Closing Date, the Acquiror shall from time to time, at
the reasonable request of the Seller, take such actions as the Seller may
reasonably request, in order to more effectively consummate the transactions
contemplated hereby, including the Acquiror’s assumption of the Assumed
Liabilities and to conduct the Evamist Business as contemplated by this
Agreement and the Related Agreements.

Section 8.9                                     
Cooperation Regarding Financial Statements; Taxes, Etc.  In
the event that the Acquiror is required to include any audited financial
statements with respect to the Evamist Business in any filing to be made by the
Acquiror under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, with respect to or as a result of the
transactions contemplated by this Agreement, the Seller shall, at the Acquiror’s
sole cost and expense, (i) use commercially reasonable efforts to provide
the Acquiror with the financial statements and other information and documents
pertaining to the Evamist Business that the Acquiror will be required by
applicable rules and regulations of the Securities and Exchange Commission to
include in its filings and (ii) use commercially reasonable efforts to
cause the accountants for the Seller to promptly deliver such information and
provide access to files and work papers in connection therewith as the Acquiror
may reasonably request.  For the avoidance

50

of doubt, the Acquiror acknowledges that the
Seller has not prepared any separate financial statements specific to the
Evamist Business and is not obligated by any provision of this Agreement to
prepare or deliver any such separate financial statements specific to the
Evamist Business.

Section 8.10                               
No Solicitation.

(a)                     
From the date of this Agreement to the earliest to occur of (i) the
Closing, (ii) the termination of this Agreement or (iii) 11:59 p.m. (EST) on the
sixtieth (60th) day following the date of this Agreement (the “No-Shop Period”), the Seller shall not, and
shall cause its Subsidiaries and its and its Subsidiaries’ officers, directors,
advisors and representatives not to, directly or indirectly, (I) solicit,
initiate or encourage any Other Bid (as defined below), (II) enter into any
agreement with respect to any Other Bid or (III) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Other Bid.  In the event that the Seller (or any of its
Subsidiaries) receives any Other Bid, the Seller shall promptly advise the
Acquiror of such proposal.  As used in this Section 8.10,
“Other Bid” means any proposal for a
sale, spin-off or other disposition or similar transaction involving the Evamist
Business or any of the Purchased Assets, other than the transactions
contemplated by this Agreement.

(b)                    
Notwithstanding the foregoing or anything in this Agreement to the
contrary, if the Seller receives an unsolicited Superior Bid after the
expiration of the No Shop Period under circumstances that do not arise out of a
breach of the terms of Section 8.10(a), and such Superior Bid has not
been withdrawn, nothing in this Agreement shall prevent the board of directors
of the Seller or any committee thereof from participating in any discussions or
negotiations regarding or furnishing to any person any information with respect
to such Superior Bid pursuant to a confidentiality agreement which contains
terms that are no less restrictive than those contained in the Confidentiality
Agreement; provided that all such information had been or is provided on prior
or concurrent basis to Acquiror.

(c)                     
The Seller shall promptly (and in any event within forty-eight (48)
hours) notify Acquiror of any Other Bid, any material modifications thereto or
any request for non-public information relating to the Evamist Business or for
access to the properties, books or records of the Seller by any third party that
has made an Other Bid. The Seller shall provide notice orally and in writing and
shall identify the third party making and the material terms and conditions of,
any such Other Bid. The Seller shall keep Acquiror informed on a reasonably
current basis of the status and details (including any material changes to the
Other Bid) of any such Other Bid or request and shall provide the Acquiror with
the written materials related to the Other Bid.

51

Section 8.11                               
Insurance.  In the event that prior to the Closing Date any
Purchased Asset suffers any damage, destruction or other loss as a result of a
casualty event, the Seller shall, after the Closing Date, (i) promptly pay to
the Acquiror all insurance proceeds received by the Seller with respect to such
damage, destruction or other loss, less any proceeds applied to the physical
restoration of such asset, and (ii) assign to the Acquiror all rights of the
Seller against third parties (other than against its insurance carriers) with
respect to any causes of action, whether or not litigation has commenced as of
the Closing Date, in connection with such damage, destruction or other loss;
provided, however, that the proceeds of such insurance shall be
subject to (and recovery thereon shall be reduced by the amount of) any
applicable deductibles and co-payment provisions or any payment or reimbursement
obligations of the Seller in respect thereof; provided, further,
that the Seller shall not be required to pay any insurance proceeds under any
insurance policy which constitutes “self-insurance.”

Section 8.12                               
Tax Matters.

(a)                     
Books & Records; Cooperation.  The Acquiror, on one hand,
and the Seller, on the other hand, agree to furnish or cause to be furnished to
the other, upon request, as promptly as practicable, such information and
assistance relating to the Purchased Assets, including, without limitation,
access to books and records, as is reasonably necessary for the filing of all
Tax Returns by the Acquiror or the Seller, the making of any election relating
to Taxes, the preparation for any audit by any taxing authority, and the
prosecution or defense of any claim, suit or proceeding relating to any
Taxes.  Each of the Acquiror, on one hand, and the Seller, on the other
hand, shall retain all books and records with respect to Taxes pertaining to the
Purchased Assets, for a period of at least six (6) years following the Closing
Date.  At the end of such period, each party shall provide the other with
at least ten (10) days prior written notice before transferring, destroying or
discarding any such books and records, during which period the party receiving
such notice can elect to take possession, at its own expense, of such books and
records.  The Acquiror, on one hand, and the Seller, on the other hand,
shall cooperate fully with the other in the conduct of any audit, litigation or
other proceeding relating to Taxes involving the Purchased Assets.  The
Acquiror, on one hand, and the Seller, on the other hand, further agree, upon
request, to use their commercially reasonable efforts to obtain any certificate
or other document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).

(b)                    
Allocation of Taxes.  Except as otherwise provided in
Section 4.4 hereof relating to Transfer Taxes, the Seller shall be
responsible for and shall promptly pay when due all Taxes levied with respect to
the Purchased Assets attributable to the Pre-Closing Tax Period.  All Taxes
levied with respect to the Purchased Assets for any Straddle Period shall be
apportioned between the Pre-Closing Tax Period and the Post-Closing Tax Period,
as follows:

52

(i)            
in the case of any Taxes other than Taxes based upon or related to income
or receipts, the portion allocable to the Pre-Closing Tax Period shall be deemed
to be the amount of such Tax for the entire Straddle Period multiplied by a
fraction the numerator of which is the number of days in the Tax period ending
on the Closing Date and the denominator of which is the number of days in the
entire Straddle Period, and

(ii)          in the case
of any Tax based upon or related to income or receipts, the portion allocable to
the Pre-Closing Tax Period shall be deemed equal to the amount which would be
payable if the relevant Straddle Period ended on the Closing Date.

Upon receipt of any bill for such Taxes relating
to the Purchased Assets, the Acquiror, on one hand, and the Seller, on the other
hand, shall present a statement to the other setting forth the amount of
reimbursement to which each is entitled under this Section 8.12 together
with such supporting evidence as is reasonably necessary to calculate the
proration amount.  The proration amount shall be paid by the party owing it
to the other within ten (10) days after delivery of such statement.  In the
event that the Acquiror or the Seller shall make any payment for which it is
entitled to reimbursement under this Section 8.12, the applicable party
shall make such reimbursement promptly but in no event later than ten (10) days
after the presentation of a statement setting forth the amount of reimbursement
to which the presenting party is entitled along with such supporting evidence as
is reasonably necessary to calculate the amount of reimbursement.

(c)                     
Notices.  The Seller shall promptly notify the Acquiror in
writing upon its receipt of notice of any pending or threatened federal, state,
local or foreign Tax audits or assessments relating to the income, properties or
operations of Seller that reasonably may be expected to relate to the Purchased
Assets. 

(d)                    
Withholding.  At the Closing, the Seller shall deliver to
Acquiror all necessary forms and certificates complying with applicable law,
duly executed and acknowledged, certifying that the transactions contemplated
hereby are exempt from withholding under Section 1445 of the Code.

(e)                                 
Characterization of Payments.  Any payments made to any
Indemnified Party pursuant to this Agreement shall constitute an adjustment of
the consideration paid for the Purchased Assets for Tax purposes and shall be
treated as such by the Acquiror and the Seller on their Tax Returns to the
extent permitted by Law.

53

Section 8.13                               
Financial Resources.  The Acquiror shall maintain financial
resources consisting of cash, cash equivalents and/or available credit
facilities sufficient to enable the Acquiror to satisfy its financial
obligations under this Agreement as and when such financial obligations become
due and payable pursuant to this Agreement.

ARTICLE IX.

Conditions to the Obligations of THE
SELLER FOR
THE CLOSING

The obligation of the Seller to effect the Closing
is subject to the satisfaction (or waiver by the Seller), at or before the
Closing, of each of the following conditions:

Section 9.1                                     
Representations, Warranties and Covenants.  The
representations and warranties of the Acquiror contained in Article VII
of this Agreement (other than the representations and warranties of the Acquiror
made with reference to a specified date (such as the date hereof), which shall
be true and correct as of such date) that are qualified by materiality shall be
true and correct in all respects and, to the extent not so qualified, shall be
true and correct in all material respects, at and as of the Closing Date as if
made at and as of such time.  The Acquiror shall have performed in all
material respects all agreements and covenants required by this Agreement or any
Related Agreements to be performed by it prior to or on the Closing Date. 
The Seller shall have received a certificate as to satisfaction of the
conditions set forth in this Section 9.1 dated as of the Closing Date and
executed by a duly authorized officer of the Acquiror.

Section 9.2                                     
No Actions or Proceedings.  No Orders prohibiting the
transactions contemplated hereby shall have been instituted and not settled or
otherwise terminated.  No Law shall have been enacted, entered, promulgated
or enforced by any Governmental or Regulatory Authority that is in effect and
has the effect of making the purchase and sale of the Purchased Assets illegal
or otherwise prohibiting the consummation of such purchase and sale.  The
waiting period (including any extensions thereof) applica­ble to the
consummation of the transactions contemplated by this Agreement required
pursuant to the HSR Act shall have expired or been terminated.

Section 9.3                                     
No Material Adverse Effects.  No Acquiror Material Adverse
Effect shall have occurred and the be continuing.

Section 9.4                                     
No Proceedings.  There shall not be pending any Action or
Proceeding seeking (i) to prohibit or restrain the transactions contemplated by
this Agreement or (ii) seeking to impose or confirm limitations on the Acquiror
or any of its Subsidiaries to effectively exercise full ownership of the Evamist
Business or the Purchased Assets after the Closing and to conduct the Evamist
Business as contemplated in the Agreement and the Related Agreements.

54

Section 9.5                                     
Deliveries.  The Acquiror shall have delivered or caused to
be delivered to the Seller each of the documents, materials or funds as
specified in Section 5.2(b).

ARTICLE X.

CONDITIONS TO THE OBLIGATIONS OF THE ACQUIROR FOR
THE CLOSING

The obligation of the Acquiror to effect the
Closing is subject to the satisfaction (or waiver by the Acquiror), at or before
the Closing, of each of the following conditions:

Section 10.1                               
Representations, Warranties and Covenants.  The
representations and warranties of the Seller contained in Article VI of
this Agreement (other than the representations and warranties of the Seller made
with reference to a specified date (such as the date hereof), which shall be
true and correct as of such date) that are qualified by materiality shall be
true and correct in all respects and, to the extent not so qualified, shall be
true and correct in all material respects, at and as of the Closing Date as if
made at and as of such time.  The Seller shall have performed in all
material respects all agreements and covenants required by this Agreement or any
Related Agreement to be performed by it prior to or on the Closing Date. 
The Acquiror shall have received a certificate as to satisfaction of the
conditions set forth in this Section 10.1 dated as of the Closing Date
and executed by a duly authorized officer of the Seller.

Section 10.2                               
No Actions or Proceedings.  No Orders prohibiting the
transactions contemplated hereby shall have been instituted and not settled or
otherwise terminated.  No Law shall have been enacted, entered, promulgated
or enforced by any Governmental or Regulatory Authority that is in effect and
has the effect of making the purchase and sale of the Purchased Assets illegal
or otherwise prohibiting the consummation of such purchase and sale.  The
waiting period (including any extensions thereof) applica­ble to the
consummation of the transactions contemplated by this Agreement required
pursuant to the HSR Act shall have expired or been terminated.

Section 10.3                               
Consents.

(a)                     
All Seller Governmental Consents set forth on Schedule 6.3(a)
of the Seller Disclosure Schedule shall have been obtained or made.

(b)                    
The Acquiror shall have received all Seller Third Party Consents and all
Required Permits necessary to effect the transactions contemplated by this
Agreement and the Related Agreements (which shall include the consents and
permits set forth on Schedules 6.3(b) and 6.8 of the Seller
Disclosure Schedule, excluding the Evamist FDA Submissions).

Section 10.4                               
No Material Adverse Effects.  No Seller Material Adverse
Effect shall have occurred and be continuing.

Section 10.5                               
Deliveries.  The Seller shall have delivered or caused to be
delivered to the Acquiror each of the documents specified in Section
5.2(a).

55

Section 10.6                               
Proceedings.  There shall not be pending any action,
litigation or proceeding by any Governmental or Regulatory Authority seeking to
(i) prohibit or restrain the transactions contemplated by this Agreement or (ii)
seeking to impose or confirm limitations on the ability of Acquiror or any of
its Subsidiaries to effectively exercise full rights of ownership of the Evamist
Business or the Purchased Assets after the Closing.

ARTICLE XI.

INDEMNIFICATION

Section 11.1                               
Survival of Representations, Warranties, Covenants, Etc.  The
representations and warranties of the parties contained in
Articles VI and VII hereof and in the Related Agreements (if
any) shall survive the Closing until the second anniversary of the Closing Date;
provided, however, that the representations and warranties of the Seller
in Sections 6.2, 6.14(a) and 6.16 hereof shall survive the
Closing until sixty (60) days following the expiration of the applicable statute
of limitations (with extensions, if any) with respect to the matters addressed
in such sections. The period of time a representation or warranty survives the
Closing pursuant to the preceding sentence shall be the “Survival Period” with respect to such
representation or warranty.  The covenants and agreements of the parties
hereto contained herein shall survive in accordance with their respective
terms.  So long as an Indemnified Party gives an Indemnification Claim
Notice for such claim on or before the expiration of the applicable Survival
Period, such Indemnified Party shall be entitled to pursue its rights to
indemnification under Sections 11.2(a) or (b) hereof, as
applicable.  In the event notice of any claim for indemnification under
Section 11.2(a) or (b) hereof shall have been given within
the applicable Survival Period and such claim has not been finally resolved by
the expiration of such Survival Period, the representations and warranties that
are the subject of such claim shall survive the end of the Survival Period of
such representations or warranties until such claim is finally resolved, but
such representations and warranties shall only survive with respect to such
asserted claim.

Section 11.2                               
Indemnification.

(a)                     
By the Seller.  Subject to Sections 11.1 and
11.3, from and after the Closing, the Seller shall indemnify, reimburse,
defend and hold harmless the Acquiror, its Affiliates and their respective
officers, directors, employees, agents, successors and assigns from and against
any and all costs, losses, Liabilities, damages, including fines, penalties,
interest, judgments, lawsuits, deficiencies, claims, expenses (including
reasonable fees and disbursements of attorneys and other professionals,
including third party consultants) (collectively, “Damages”) incurred in connection with, arising
out of, resulting from or incident to (i) any breach of, or inaccuracy in, any
representation or warranty of the Seller set forth in this Agreement, any
Related Agreement or any certificate of the Seller delivered to Acquiror at the
Closing, without giving effect to any “materiality” or “Seller Material Adverse
Effect” or Knowledge qualifier therein, (ii) the failure to perform any
covenant or agreement of the Seller set forth in this Agreement or in any of the
Related Agreements, (iii) any Excluded Asset, (iv) any Excluded Liability and
(v) the Seller’s breach of the

56

terms and conditions of
the Acrux License, whether or not such breach is based on facts or circumstances
in existence as of the date hereof.

(b)                    
By the Acquiror.  Subject to Sections 11.1 and
11.3, from and after the Closing, the Acquiror shall indemnify, defend
and hold harmless the Seller, its Affiliates and their respective officers,
directors, employees, agents, successors and assigns from and against any and
all Damages incurred in connection with, arising out of, resulting from or
incident to (i) any breach of any representation or warranty of the Acquiror set
forth in this Agreement, any Related Agreement or any certificate of the
Acquiror delivered to the Seller at Closing, without giving effect to any
“materiality” or “Acquiror Material Adverse Effect” or Knowledge qualifier
therein, (ii) the failure to perform any covenant or agreement of the
Acquiror set forth in this Agreement or in any of the Related Agreements, or
(iii) any Assumed Liabilities.

(c)                     
Procedure for Claims.  The Indemnified Party shall give the
indemnifying party prompt written notice (an “Indemnification Claim Notice”) of any Damages
or discovery of fact upon which such Indemnified Party intends to base a request
for indemnification under Section 11.2(a) or
Section 11.2(b).  Failure to give any such Indemnification
Claim Notice shall not constitute a waiver of any right to indemnification or
reduce in any way the indemnification available hereunder, except to the extent
the indemnifying party demonstrates that such failure to notify directly
increases the amount to be indemnified hereunder.  Each Indemnification
Claim Notice must contain a description of the claim and the nature and amount
of such Damages (to the extent that the nature and amount of such Damages are
known at such time).  The Indemnified Party shall furnish promptly to the
indemnifying party copies of all papers and official documents received in
respect of any Damages.  All indemnification claims in respect of a party,
its Affiliates or their respective directors, officers, employees and agents
(collectively, the “Indemnitees” and
each an “Indemnitee”) shall be made
solely by such party to this Agreement (the “Indemnified Party”).

(d)                    
Third Party Claims.  The obligations of an indemnifying party
under this Section 11.2(d) with respect to Damages arising from
claims of any third party that are subject to indemnification as provided for in
Section 11.2(a) or Section 11.2(b) (a “Third Party Claim”) shall be governed by and
be contingent upon the following additional terms and conditions:

(i)            
At its option, the indemnifying party may assume the defense of any Third
Party Claim by giving written Notice to the Indemnified Party within ten (10)
days after the indemnifying party’s receipt of an Indemnification Claim
Notice.  The assumption of the defense of a Third Party Claim by the
indemnifying party shall be construed as an acknowledgment that the indemnifying
party is liable to indemnify any Indemnitee in respect of the Third Party
Claim.  Upon assuming the defense of a Third Party Claim, the indemnifying
party may appoint as lead counsel in the defense of the Third

57

Party Claim any legal
counsel selected by the indemnifying party; provided, however,
that such counsel is reasonably acceptable to the Indemnified Party,
provided, further, that in the event that (i) a conflict of
interest arises between the indemnifying party and the Indemnified Party such
that such legal counsel cannot represent both the indemnifying party and the
Indemnified Party or (ii) the Indemnitee has been advised in writing by counsel
that there may be one or more legal defenses available to the Indemnitee Party
that are different from or in addition to that of the indemnifying party, the
Indemnitee may retain its own legal counsel at the expense of the indemnifying
party and the indemnifying party and its counsel shall cooperate with the
Indemnified Party and its counsel, as may be reasonably requested.  Except
as set forth above, should the indemnifying party assume the defense of a Third
Party Claim, the indemnifying party shall not be liable to the Indemnified Party
or any other Indemnitee for any legal expenses subsequently incurred by such
Indemnified Party or other Indemnitee in connection with the analysis, defense
or settlement of the Third Party Claim.

(ii)          Without
limiting Section 11.2(d)(i), any Indemnitee shall be entitled to
participate in, but not control, the defense of such Third Party Claim and to
employ counsel of its choice for such purpose; provided, however,
that such employment shall be at the Indemnitee’s sole cost and expense, except
as described in Section 11.2(d)(i), unless (A) the employment thereof has
been specifically authorized by the indemnifying party in writing, or (B) the
indemnifying party has failed to assume the defense and employ counsel in
accordance with Section 11.2(d)(i) (in which case the Indemnified
Party shall control the defense).

(iii)       With
respect to any Damages relating solely to the payment of money damages in
connection with a Third Party Claim and that will not result in the Indemnitee’s
or the Indemnified Party’s becoming subject to injunctive or other relief for
other than money damages, and as to which the indemnifying party shall have
acknowledged in writing the obligation to indemnify the Indemnitee hereunder,
the indemnifying party shall have the sole right to consent to the entry of any
judgment, enter into any settlement or otherwise dispose of such Damages, on
such terms as the indemnifying party, in its sole discretion, shall deem
appropriate, provided that, as a result of or in connection with any such
settlement each Indemnitee or Indemnified Party shall receive a full release
with respect to such claim.  The indemnifying party shall not be liable for
any settlement or other disposition of Damages by an Indemnitee or Indemnified
Party that is reached without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld.  If the indemnifying
party chooses to defend or prosecute any Third Party Claim, no Indemnitee or
Indemnified Party shall admit any liability with respect to, or settle,
compromise or discharge, any Third Party Claim without the prior written consent
of the indemnifying party, which consent shall not be unreasonably
withheld.

58

(iv)     
Notwithstanding the foregoing, the indemnifying party shall not be
entitled to assume the defense of any Third Party Claim (and shall be liable for
the reasonable fees and expenses of counsel incurred by the Indemnified Party in
defending such Third Party Claim) if the Third Party Claim seeks an order,
injunction or other equitable relief or relief for other than money damages
against the Indemnified Party that the Indemnified Party reasonably determines
cannot be separated from any related claim for money damages.  If such
equitable relief or other relief portion of the Third Party Claim can be so
separated from that for money damages, the indemnifying party shall be entitled
to assume the defense of the portion relating to money damages.

(v)        
Regardless of whether the indemnifying party chooses to defend or
prosecute any Third Party Claim, the Indemnified Party and the indemnifying
party shall, and shall cause each other Indemnitee or Affiliate of the
indemnifying party, as applicable, to, cooperate in the defense or prosecution
thereof and shall furnish such records, information and testimony, provide such
witnesses and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested in connection therewith.  Such
cooperation shall include access during normal business hours afforded to the
indemnifying party or Indemnified Party, as applicable, to, and reasonable
retention by each such Person of, records and information that are reasonably
relevant to such Third Party Claim, and making each such Person and other
employees and agents available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder, and
the indemnifying party shall reimburse each such Person for all its reasonable
out-of-pocket expenses in connection therewith.

(e)                     
Other Claims.  In the event any Indemnified Party has a claim
against any indemnifying party under Section 11.2(a) or
11.2(b) that does not involve a Third Party Claim being asserted against
or sought to be collected from such Indemnified Party, the Indemnified Party
shall deliver an Indemnification Claim Notice regarding such claim with
reasonable promptness to the indemnifying party.  The failure by any
Indemnified Party so to notify the indemnifying party shall not relieve the
indemnifying party from any liability that it may have to such Indemnified Party
under Section 11.2(a) or 11.2(b), except to the extent that
the indemnifying party demonstrates that such failure to notify directly
increased the amount to be indemnified hereunder.  If the indemnifying
party does not notify the Indemnified Party within ten (10) calendar days
following its receipt of such notice that the indemnifying party disputes its
liability to the Indemnified Party under Section 11.2(a) or
11.2(b), such claim specified by the Indemnified Party in such notice
shall be conclusively deemed a Liability of the indemnifying party under
Section 11.2(a) or 11.2(b) and the indemnifying party shall
pay the amount of such Liability to the Indemnified Party on demand or, in the
case of any notice in which the amount of the claim (or any portion thereof) is
estimated, on such later date

59

when the amount of such
claim (or such portion thereof) becomes finally determined.

(f)                       
Effect of Investigation or Knowledge.  Any claim by the
Acquiror or its Affiliates or any of their respective directors, officers,
employees or agents for indemnification shall not be adversely affected by any
investigation by or opportunity to investigate afforded to the Acquiror, nor
shall such a claim be adversely affected by the Acquiror’s Knowledge on or
before the Closing Date of any breach of the type specified in this
Section 11.2 or of any state of facts that may give rise to such a
breach.  The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not adversely affect the right to indemnification,
payment of Damages or other remedy based on such representations, warranties,
covenants or obligations.

Section 11.3                               
Limitations.

(a)                     
In no event shall the Seller or the Acquiror be liable for any Damages
pursuant to Section 11.2(a) or 11.2(b), as applicable, unless
and until the aggregate amount of all such Damages exceeds $100,000 (the “Liability Threshold”), in which case the
Seller or the Acquiror, as applicable, shall be liable for all such Damages in
excess of the Liability Threshold, and then not for any Damages in excess of the
then applicable Liability Cap for all claims made under such
Section 11.2(a) or 11.2(b), as applicable, in the aggregate;
provided, however, that:  (A) for purposes of claims made by
the Acquiror under Sections 11.2(a)(iii), 11.2(a)(iv) or
11.2(a)(v), the Seller shall be liable for all Damages suffered by the
Acquiror without regard to the Liability Threshold or Liability Cap; (B) for
purposes of claims made by the Seller under Section 11.2(b)(iii), the
Acquiror shall be liable for all Damages suffered by the Seller without regard
to the Liability Threshold or Liability Cap; and (C) for purposes of claims made
by a party due to the other party’s fraud or willful misconduct, such party
shall be liable for all Damages suffered by the other party without regard to
the Liability Threshold or Liability Cap.

(b)                    
Each party agrees that it shall, and shall cause the applicable
Indemnitees to, use its or their commercially reasonable efforts to secure
payment from insurance policies available and in existence that provide coverage
with respect to any Damages to be indemnified.  The amount of any Damages
recoverable by a party under Section 11.2 shall be reduced by the
amount of any insurance proceeds actually paid to the Indemnified Party or the
Indemnitee, as applicable, relating to such claim.

(c)                     
THE INDEMNIFICATION OBLIGATIONS OF THE PARTIES HERETO SHALL NOT EXTEND TO
PUNITIVE DAMAGES OR TO ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT
DAMAGES, INCLUDING BUSINESS INTERRUPTION, LOSS OF FUTURE REVENUE,

60

DIMINUTION IN VALUE,
PROFITS OR INCOME, OR LOSS OF BUSINESS REPUTATION OR OPPORTUNITY.

Section 11.4                               
Exclusive Remedy.  Except in the event of fraud or willful
misconduct, the sole and exclusive remedy of each party with respect to any and
all claims for any breach of any representation, warranty, covenant or other
claim arising out of or relating to this Agreement, whether arising in contract,
tort or otherwise, shall be the indemnification provisions of this Article XI,
provided, however, that the provisions of this Article XI shall not
restrict the right of any party to seek specific performance or other equitable
remedies in connection with any breach of any of the covenants contained in this
Agreement or any of the Related Agreements.

ARTICLE XII.

TERMINATION

Section 12.1                               
Methods of Termination.  Prior to the Closing, this Agreement
may be terminated at any time:

(a)                     
by mutual written agreement of the Seller and the Acquiror;

(b)                    
by either the Seller or the Acquiror if the Closing shall not have
occurred by June 1, 2007; provided, however, that the right to terminate
the Agreement pursuant to this Section 12.1(b) shall not be
available to a party if such party’s failure to perform in all material respects
any of their material obligations under this Agreement or any Related Agreement
results in the failure of the Closing to occur by such time;

(c)                     
by either the Seller or the Acquiror, if there shall be in effect any Law
that prohibits the Closing or if the Closing would violate any non-appealable
Order, issued by a competent Governmental Entity, that permanently restrains,
enjoins or prohibits the consummation of the transactions contemplated by this
Agreement;

(d)                    
by either the Seller or the Acquiror, if the other party has breached any
material representation, warranty, covenant or agreement hereunder, such breach
has not been waived by the non-breaching party, and the breach has not been
cured within a period of thirty (30) days following the terminating party’s
written notice of such breach and the breaching party is diligently proceeding
to cure such breach, unless such breach is not capable of cure, in which event
the non-breaching party may terminate immediately;

(e)                     
by the Acquiror, if a Seller Material Adverse Effect shall have occurred
since the date of this Agreement;

(f)                       
by the Seller, if an Acquiror Material Adverse Effect shall have occurred
since the date of this Agreement;

61

(g)                    
by the Seller, if (i) it is not in material breach of the terms of
Section 8.10(a) or (c), (ii) the board of directors of the Seller
has authorized the Seller to enter into a definitive agreement for a transaction
that constitutes a Superior Bid, (iii) the Seller has notified the Acquiror in
writing that the Seller has received a Superior Bid and intends to enter into a
definitive agreement with respect to such Superior Bid pursuant to Section
8.10(b), (iv) five (5) Business Days have passed since the Acquiror has
received such written notice and (v) the Other Bid remains a Superior Bid after
any amendments to this Agreement; provided, however, that the Seller
shall not have the right to terminate this Agreement pursuant to this Section
12.1(g) prior to the expiration of the No-Shop Period.

(h)                                            
by the Acquiror, if prior to the Closing, the Seller has breached the
terms and conditions of the Acrux License in a manner giving rise to a right of
termination under the Acrux License by Fempharm Pty Ltd. and/or Acrux DDS Pty
Ltd., whether or not such breach is based on facts or circumstances in existence
as of the date hereof; or

(i)                                                
by Acquiror, on or before the earlier of (i) 11:59 p.m. (Eastern Daylight
Saving Time) fourteen (14) calendar days following the date hereof or (ii) 11:59
p.m. (Eastern Daylight Saving Time) on the fifth (5th)
Business Day following the date of Acquiror’s inspection of the facilities of
[***], located at [***] (the “Facility Inspection Deadline”), if Acquiror
determines in good faith that [***] is unable to manufacture quantities of
the pump component for Evamist meeting the specifications therefor (as set forth
in the Evamist NDA) to support the launch of Evamist or provide continuity of
commercial supply as contemplated by the parties as of the date hereof (the
“Adverse Determination”); provided, however, if Acquiror makes the
Adverse Determination it shall promptly notify Seller thereof, then upon written
request of either party to the other party (i) the parties shall promptly meet
(whether in person or teleconference) and discuss in good faith possible
resolutions to the Adverse Determination over a period of seven (7) calendar
days and (ii) Acquiror’s ability to terminate this Agreement pursuant to this
Section 12.1(i) shall be extended by a period of seven (7) calendar days
following the Facility Inspection Deadline.

Section 12.2                               
Procedure upon Termination.  In the event of termination of
this Agreement under Section 12.1, written Notice thereof shall
forthwith be given to the other party, and the transactions contemplated by this
Agreement shall be terminated and abandoned, without further action by the
parties hereto.  If this Agreement is terminated as provided herein:

(a)                     
each party, if requested, will redeliver all documents, work papers and
other material of the other party and its Affiliates relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same; and

*** Certain information on
this page has been omitted and filed separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

62

(b)                    
no party hereto and none of their respective directors, officers,
stockholders, Affiliates or Controlling Persons shall have any further liability
or obligation to any other party to this Agreement, other than Section
12.2 and Article XIII; provided, however, that nothing
in this Section 12.2(b) shall prejudice any rights, claims, or
causes of action that may have accrued hereunder or with respect hereto prior to
the date of such termination, including for breach of this Agreement (whether
based upon the termination or otherwise).

ARTICLE XIII.

MISCELLANEOUS

Section 13.1                               
Notices.  All Notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission with
answer back confirmation or mailed (postage prepaid by certified or registered
mail, return receipt requested) or by nationally recognized overnight courier
that maintains records of delivery to the parties at the following addresses or
facsimile numbers:

If to the Acquiror to:

K-V Pharmaceutical
Company

2503 S. Hanley Road
St.
Louis, Missouri 63144

Facsimile:  (314)
645-4705

Attention:  Vice
President, Business Development

    General
Counsel

With copies to:

Latham & Watkins
LLP

650 Town Center Drive,
20th Floor

Costa Mesa, California
92626-1925

Facsimile:  (714)
755-8290

Attention:  Charles
K. Ruck, Esq.

If to the Seller to:

Vivus, Inc.

112 Castro Street, Suite
200
Mountain View, California 94040
Facsimile: (650) 934-5389

Attention: Leland F.
Wilson

63

With copies to:

Wilson Sonsini Goodrich
& Rosati

650 Page Mill
Road

Palo Alto, CA
94304

Facsimile:  (650)
493-6811

Attention:  Ian B.
Edvalson, Esq.

All such Notices, requests and other
communications will (i) if delivered personally to the address as provided in
this Section 13.1, be deemed given upon receipt, (ii) if delivered
by facsimile to the facsimile number as provided in this
Section 13.1, be deemed given upon receipt by the sender of the
answer back confirmation and (ii) if delivered by mail in the manner described
above or by overnight courier to the address as provided in this
Section 13.1, be deemed given upon receipt (in each case regardless
of whether such Notice, request or other communication is received by any other
Person to whom a copy of such Notice, request or other communication is to be
delivered pursuant to this Section 13.1).  Any party from time
to time may change its address, facsimile number or other information for the
purpose of Notices to that party by giving Notice specifying such change to the
other party hereto in accordance with the terms of this
Section 13.1.

Section 13.2                               
Entire Agreement.  This Agreement (and all Exhibits and
Schedules attached hereto and all other documents delivered in connection
herewith) supersedes all prior discussions and agreements, both oral and
written, among the parties with respect to the subject matter hereof and
contains the sole and entire agreement among the parties hereto with respect to
the subject matter hereof.  Further, the parties agree and acknowledge that
the Confidentiality Agreement shall remain in effect until, but shall terminate
effective as of, the Closing.

Section 13.3                               
Waiver.  Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition.  No
waiver by any party hereto of any term or condition of this Agreement, in any
one or more instances, shall be deemed to be or construed as a waiver of the
same or any other term or condition of this Agreement on any future
occasion.  All remedies, either under this Agreement or by Law or otherwise
afforded, will be cumulative and not in the alternative.

Section 13.4                               
Amendment.  This Agreement may be amended, supplemented or
modified only by a written instrument mutually agreed upon and duly executed by
each party hereto.

Section 13.5                               
Third Party Beneficiaries.  The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns and it is not the intention of the
parties to confer third party beneficiary rights upon any other Person, except
as achieved through the indemnification clause set forth in
Section 11.2.

Section 13.6                               
Assignment; Binding Effect.  Neither this Agreement nor any
rights, interests or obligations hereunder shall be transferred, assigned or
delegated by any party

64

hereto without the prior written consent of the
other party hereto and any attempt to make any such transfer assignment or
delegation without such consent shall be null and void; provided,
however, that (i) without the consent of the Acquiror, the Seller may (in
whole or in part) transfer, assign and delegate its rights, interests and
obligations to one or more of its Affiliates (ii) without the consent of
the Seller, the Acquiror may (in whole or in part) transfer, assign and delegate
its rights, interests and obligations to any Affiliate of the Acquiror
(including pursuant to Section 4.7 hereof), and (iii) without the consent
of the Seller, the Acquiror may transfer and assign its rights to indemnity, in
whole or in part, to any purchaser of all or substantially all of the Evamist
Business; provided, further, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective successors and permitted assigns and no transfer, assignment or
delegation shall limit, affect or discharge the assignor’s obligations
hereunder.  In addition, notwithstanding the foregoing, either party hereto
may assign this Agreement, without the prior written consent of the other party
hereto, to a Person that succeeds to all or substantially all of such party’s
business or assets related to this Agreement, whether by sale, merger, operation
of law or otherwise, provided that such assignee or transferee agrees in writing
to be bound by the terms and conditions of this Agreement.

Section 13.7                               
Headings.  The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.

Section 13.8                               
Severability.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom, and (iv) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a part
of this Agreement a legal, valid and enforceable provision as similar to the
terms of such illegal, invalid or unenforceable provision as may be possible and
reasonably acceptable to the parties herein.

Section 13.9                               
Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS EXECUTED AND PERFORMED IN SUCH STATE, WITHOUT GIVING EFFECT TO
CONFLICTS OF LAWS PRINCIPLES. ALL DISPUTES UNDER, OR PERTAINING TO, THIS
AGREEMENT SHALL BE RESOLVED EXCLUSIVELY IN THE STATE OR FEDERAL COURTS OF THE
STATE OF DELAWARE.

Section 13.10                         
Expenses.  Except as otherwise provided in this Agreement,
each party hereto shall pay its own expenses and costs incidental to the
preparation of this Agreement and to the consummation of the transactions
contemplated hereby.

Section 13.11                         
Counterparts.  This Agreement may be executed in any number
of counterparts and by facsimile, each of which will be deemed an original, but
all of which

65

together will constitute one and the same
instrument.  A facsimile copy shall be a sufficient proof of signature,
without it being necessary to produce the original copy.

[SIGNATURES ON FOLLOWING PAGE]

 

66

IN WITNESS WHEREOF, this Agreement has been
executed by the parties hereto all as of the date first above
written.

	
      
	
      SELLER:

	
       
	
       
	
       

	
       
	
      Vivus, Inc.

	
       
	
      a Delaware corporation

	
       
	
       
	
       

	
       
	
       
	
       

	
       
	
      By:
	
       
	
      /s/ Leland F. Wilson
	
       

	
       
	
       
	
       
	
       

	
       
	
      Name:
	
      Leland F. Wilson 

	
       
	
       
	
       

	
       
	
      Title:  President and Chief
      Executive Officer

	
       
	
       
	
       

	
       
	
      ACQUIROR:

	
       
	
       
	
       

	
       
	
      K-V Pharmaceutical Company,

	
       
	
      a Delaware corporation

	
       
	
       
	
       

	
       
	
       
	
       

	
       
	
      By:
	
       
	
      /s/ Gerald R. Mitchell
	
       

	
       
	
       
	
       
	
       

	
       
	
      Name:
	
      Gerald R. Mitchell 

	
       
	
       
	
       

	
       
	
      Title:  Vice President and Chief
      Financial Officer

 

 

Signature Page to Asset
Purchase Agreement

EXHIBIT
A
Form of Sublicense Agreementzynex8kex101_9232008.htm

     

    
      

      

    

    

    Exhibit
10.1

     

    

     

    LOAN
AND SECURITY AGREEMENT

     

    

     

    This Loan
and Security Agreement (this “Agreement”) is executed by and
between Marquette Business Credit, Inc., d/b/a/ Marquette Healthcare Finance,
Standard Insurance Center, 900 SW Fifth Avenue, Suite 1920, Portland, Oregon
97204, (“Lender”) and
Zynex, Inc. and Zynex Medical, Inc., f/d/b/a Stroke Recovery Systems, 8022
Southpark Circle, Suite 100, Littleton, Colorado
80120   (collectively, “Borrower”), as of September
22, 2008.  Lender and Borrower hereby agree as follows:

     

    Section
1.    DEFINITIONS

     

    1.1    Definitions.  When
used in this Agreement, the capitalized terms set forth below shall have the
definitions assigned to such terms below:

     

    “ACH” means automated
clearing house.

     

    “Accounts” means all
accounts, including, without limitation, all health care receivables, all
governmental health care receivables, and health care insurance receivables, and
all other forms of obligations owing to Borrower, whether billed or unbilled,
arising out of the provision of services or the sale, lease, license, or
assignment of goods or other property, including all receivables, and all
proceeds of the foregoing.

     

    “Account Debtor” means
a Person who is obligated on an account.

     

    “Advance” means any
advance of funds by Lender to Borrower under this Agreement.

     

    “Advance Rate” means
the percentages specified in Schedule A of Eligible
Accounts and unbilled Accounts.

     

    “Advance Request”
means a written request by Borrower for an Advance signed by an Authorized
Representative in form and content specified by Lender.

     

    “Affiliate” of a
Person means another Person which, directly or indirectly, controls, is
controlled by, or is under common control with, such former Person, including
without limitation any subsidiary of Borrower.  For the purposes of
this definition, “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through ownership of voting securities or partnership or other interests, by
contract or otherwise.

     

    “Authorized
Representative” means any officer or employee of Borrower designated by
Borrower for purposes of giving and receiving notices hereunder, requesting and
repaying Loans, agreeing to rates of interest and otherwise transacting business
with Lender hereunder.

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 1 of 43

          
            

          

        

        
           

        

      

    

    

     

    “Base Rate” means the
rate per annum published from time to time by The Wall Street Journal as
the base rate for corporate loans at large commercial banks (or if more than one
such rate is published, the higher or highest of the rates so
published).  If such rate is no longer published by The Wall Street Journal, then
Lender shall, in its sole and absolute discretion, substitute the base or prime
rate for corporate loans at a large commercial bank for the base rate published
in The Wall Street
Journal.  Such rate may not necessarily be the lowest or best
rate actually charged to any customer of such commercial bank.

     

    “Benefit Plan” means a
defined benefit plan as defined in Section 3(35) of ERISA (other than a
Multiemployer Plan) in respect of which a Person or any Related Company is, or
within the immediately preceding six (6) years was, an “employer” as defined in
Section 3(5) of ERISA, including such plans as may be established after the date
hereof.

     

    “Borrowing Base”
means, as of any date, the amount determined by Lender equal to the lesser of:

     

    (a) an
amount equal to Eligible Accounts multiplied by the applicable NCV by payor
class shown on Schedule
A, multiplied by the Advance Rate for Eligible Accounts, minus the Reserve,
or

     

    (b) the
net sum of Borrower’s eight (8) weeks’ trailing collections from
Accounts.

     

    “Borrowing Base
Certificate” means a certificate in the form of Exhibit A attached
hereto.

     

    “Business Associate
Agreement” means a business associate agreement in form and content
acceptable to Lender executed by Borrower and Lender pursuant to the
requirements of HIPAA.

     

    “Capital Expenditures”
means, with respect to any Person, all expenditures made and liabilities
incurred for the acquisition of assets which are required to be capitalized in
accordance with GAAP.

     

    “Capitalized Lease”
means a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.

     

    “Capitalized Lease
Obligation” means Indebtedness represented by obligations under a
Capitalized Lease, and the amount of such Indebtedness shall be the capitalized
amount of such obligations determined in accordance with GAAP.

     

    “Capitated Contracts”
means all of Borrower’s contracts whether presently existing or hereafter
executed between Borrower and various health maintenance organizations and all
proceeds therefrom.

     

    “Capitated Contract
Rights” means all of Borrower’s rights to payment of any kind arising
from or out of Capitated Contracts or any other contracts or rights to payment
from health service contracts whether presently existing or hereafter executed
between Borrower and various health maintenance organizations.

     

    “Change of Control”
means the time at which:

     

    (a)        Any Person (other than a
Person who is or becomes a Borrower or guarantor hereunder) who on the Closing
Date does not have voting control (meaning the control of more than 50% of the
outstanding shares of voting capital stock or other voting equity interests)
subsequently obtains voting control, either directly or through proxy, of
Borrower;

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 2 of 43

          
            

          

        

        
           

        

      

    

    

     

    (b)        There
shall be consummated any consolidation or merger of Borrower pursuant to which
Borrower’s common stock (or other capital stock) would be converted into cash,
securities, or other property, other than a merger or consolidation of Borrower
(i) with or into a Person who becomes a Borrower hereunder, or (ii) in which the
holders of such common stock (or other capital stock) immediately prior to the
merger have the same proportionate ownership, directly or indirectly, of common
stock of the surviving corporation immediately after the merger as they had of
the Borrower’s common stock (or other capital stock) immediately prior to such
merger;

     

    (c)        All
or substantially all of Borrower’s assets shall be sold, leased, conveyed, or
otherwise disposed of as an entirety or substantially as an entirety to any
Person (other than a Person who is or becomes a Borrower or guarantor hereunder)
in one or a series of transactions; or

     

    (d)        Any
Person on the Closing Date that was an executive officer of Borrower becomes
inactive whether by reason of death, disability, resignation, action by the
Board of Directors or shareholders of the Borrower, or otherwise, and such
inactivity causes Lender to reasonably believe that the prospect of payment or
performance by Borrower under any of the Loan Documents or any of the Collateral
is or may become impaired.

     

    “Closing Date” means
the date on which each of the conditions set forth in Section 4.1 are
satisfied and Lender funds the initial Loan(s) hereunder.

     

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

     

    “Collateral” means and
includes all of Borrower’s now owned or hereafter acquired assets, whether
tangible or intangible, including without limitation all of Borrower’s right,
title, and interest in and to each of the following, wherever located and
whether now existing or hereafter arising or acquired, including, without
limitation, all of the following:

     

    (a)           all
Accounts;

     

    (b)           all
contract rights, including all Capitated Contract Rights and all proceeds
therefrom;

     

    (c)           all
rights to payment for services rendered or work performed, but not yet
billed;

     

    (d)           all
Patient Lists;

     

    (e)           all
inventory;

     

    (f)           all
equipment and fixtures;

     

    (g)           all
federal, state, and local tax returns;

     

    (h)           all
general intangibles, including without limitation payment intangibles and
software;

     

    (i)           all
Intellectual Property, including without limitation all of Borrower’s
Intellectual Property rights now existing or hereafter arising in Borrower’s
NeuroMove products;

    
      
        
           

        

        
          Exhibit
10.1 - Page 3 of 43

          
            

          

        

        
           

        

      

    

    

     

    (j)           all
Deposit Accounts, cash, drafts, certificates of deposit, and general and special
deposits;

     

    (k)           all
investment property and financial assets (other than margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System);

     

    (l)           all
instruments;

     

    (m)           all
chattel paper, including, without limitation, electronic chattel
paper;

     

    (n)           all
goods and all accessions thereto;

     

    (o)           all
documents;

     

    (p)           all
letter of credit rights;

     

    (q)           all
insurance and certificates of insurance pertaining to any and all items of
Collateral;

     

    (r)           all
books and records;

     

    (s)           all
files, correspondence, computer programs, tapes, disks, and related data
processing software and other media which contain information identifying or
pertaining to any of the Collateral or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof;

     

    (t)           all
cash deposited with any Affiliate of Lender;

     

    (u)           those
commercial tort claims, if any, described on Schedule 1.1
hereto;

     

    (v)           any
and all products and replacements of the foregoing; and

     

    (w)           all
cash and non-cash proceeds of the foregoing (including, but not limited to, any
claims to any items referred to in this definition and any claims against third
parties for loss of, damage to, or destruction of any or all of the Collateral
or for proceeds payable under or unearned premiums with respect to policies of
insurance) in whatever form.

     

    “Collecting Bank”
means any banking institution with which a Lockbox Account has been established
pursuant to any Lockbox Agreement.

     

    “Concentration Limit”
means the percent specified on Schedule A of total Accounts
of Borrower deemed Eligible Account other than with respect to clause (l) of the
definition of Eligible Accounts.

     

    “Control Agreement”
means an agreement that satisfies the requirements of control in favor of Lender
within the meaning of the UCC over Borrower’s Deposit Accounts, investment
property, electronic chattel paper or letter of credit rights.

     

    “Cross-Age Percentage”
shall mean the percent specified on Schedule A of the aggregate
delinquent balance of all Accounts owing by a particular insurance company that
is an Account Debtor, excepting Medicare and Anthem Blue Cross.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 4 of 43

          
            

          

        

        
           

        

      

    

    

    “Current Ratio” means
the ratio, measured at any time, of Borrower’s current assets to current
liabilities, determined in accordance with GAAP.

     

    “Cut-Off Date” means
the number of days specified on Schedule A after the date of
invoice.

     

    “Debt Service Coverage
Ratio” means the ratio determined as of the end of each fiscal quarter
for the twelve consecutive months then ending of Zynex, Inc. on a consolidated
basis: (a) EBITDA for such period to (b) the sum of total debt service on
Indebtedness during such period plus cash income taxes paid
during such period.

     

    “Default” means any of
the events specified in Section 10.1 that,
with the passage of time or giving of notice or both, would constitute an Event
of Default.

     

    “Default Rate” means
the annual rate of interest shown on Schedule A.

     

    “Deposit Account”
means any demand, Lockbox, time, savings, passbook, or similar account now or
hereafter maintained by or for the benefit of Borrower, with an organization
that is engaged in the business of banking (including, without limitation,
banks, savings banks, savings and loan asso­ciations, credit unions, and
trust companies), and all funds and amounts therein, whether or not restricted
or designated for a particular purpose, including without limitation, all
“deposit accounts” as defined in the UCC.

     

    “Dollar” and “$” means freely
transferable United States dollars.

     

    “EBITDA” means, for
any period, the sum of (a) Net Income (or Net Loss) (including gains and losses
from the sales of assets in the ordinary course of business) for such period,
(b) the interest expense for such period, (c) the provision for income
taxes allocable to such period, and (d) any depreciation or amortization
expenses incurred in determining Net Income (or Net Loss) for such period (where
the items set forth in sections (a) – (d) above are determined without
duplication and on a consolidated basis and, where applicable, in accordance
with GAAP).

     

    “Eligible Accounts”
shall mean all Accounts of Borrower which are deemed by Lender in the exercise
of its good faith credit judgment to be eligible for inclusion in the
calculation of the Borrowing Base, net of any and all interest, finance charges,
sales tax, fees, returns, discounts, claims, credits, charges, contra accounts,
exchange contracts or other allowances, offsets and rights of offset,
deductions, counterclaims, disputes, rejections, shortages, or other defenses,
and all credits owed or allowed by Borrower upon any of its Accounts and further
reduced by the aggregate amount of all reserves, limits, and deductions provided
for in this definition and elsewhere in this
Agreement.  Notwithstanding the foregoing, Eligible Accounts shall be
determined without deduction for estimated insurance company reimbursement
deductions, which are sometimes referred to in the healthcare industry as
“contractual adjustments.”  In no event shall Eligible Accounts
include the following:

     

    (a)           Accounts
which remain unpaid in whole or in part after the Cut-Off Date;

     

    (b)           Accounts
with respect to which the Account Debtor is an Affiliate of
Borrower;

     

    (c)           Accounts
due from Account Debtors that are insurance companies, other than Medicare and
Anthem Blue Cross, that exceed the Cross-Age Percentage;

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 5 of 43

          
            

          

        

        
           

        

      

    

    

     

    (d)           Accounts
with respect to which the obligation of payment by the Account Debtor is or may
be conditional for any reason whatsoever, including, without limitation,
accounts arising with respect to goods that were (i) not sold on an
absolute basis, (ii) sold on a bill-and-hold sale basis, (iii) sold on
a consignment sale basis, (iv) sold on a guaranteed sale basis,
(v) sold on a sale or return basis, or (vi) sold on the basis of any
other similar understanding;

     

    (e)           Accounts
with respect to which the Account Debtor is not a resident or citizen of, or
otherwise located in, the continental United States of America, or with respect
to which the Account Debtor is not subject to service of process in the
continental United States of America or a province of Canada, unless such
Accounts are backed in full by irrevocable letters of credit or credit insurance
in form and substance satisfactory to Lender issued or confirmed by a domestic
commercial bank acceptable to Lender and which, if a letter of credit, is in the
possession of Lender and which, if credit insurance, is payable to
Lender;

     

    (f)           Accounts
with respect to which the Account Debtor is the United States of America or any
other federal governmental body unless such Accounts are duly assigned to Lender
in compliance with all applicable governmental requirements (including, without
limitation, the Federal Assignment of Claims Act of 1940, as amended, if
applicable) or unless such Accounts are Medicare or Medicaid;

     

    (g)           Accounts
(i) with respect to which Borrower is or may be liable to the Account
Debtor for goods sold or services rendered by such Account Debtor, but only to
the extent of such liability to such Account Debtor or (ii) with respect to
which such Account Debtor disputes the amount owed but only that portion of such
Accounts which such Account Debtor disputes;

     

    (h)           Accounts
with respect to which the goods giving rise thereto have not been shipped and
delivered to and accepted as satisfactory by the applicable Account Debtor or
with respect to which the services performed giving rise thereto have not been
completed and accepted as satisfactory by the applicable Account
Debtor;

     

    (i)           Accounts
which are not invoiced within thirty (30) days after the date of service or the
date of shipment of the goods giving rise to the account;

     

    (j)           Accounts
which are not subject to a first priority perfected security interest in favor
of Lender;

     

    (k)           Accounts
where the account balance owed by an Account Debtor exceeds the Concentration
Limit;

     

    (l)           Accounts
which represent a progress billing; and

     

    (m)           Accounts
that Lender, in its good faith credit judgment, has determined to be
ineligible.

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 6 of 43

          
            

          

        

        
           

        

      

    

    

    “Environmental Laws”
means all federal, state, local, and foreign laws now or hereafter in effect
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or wastes
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, removal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all regulations, notices, or demand letters issued, entered,
promulgated, or approved thereunder.

     

    “ERISA” means the
Employee Retirement Income Security Act of 1974, as in effect from time to time,
and any successor statute, and any rule or regulation issued
thereunder.

     

    “Event of Default”
means any of the events specified in Section
10.1.

     

    “Expenses and Fees”
means all expenses and fees invoiced by Lender that arise out of or under with
this Agreement and the Loans shown on Schedule A and including,
without limitation, (i) the reasonable fees and expenses of counsel in
connection with the negotiation, preparation, execution, delivery, amendment,
enforcement, and termination of this Agreement and each of the other Loan
Documents, (ii) the out-of-pocket costs and expenses incurred in connection with
the administration and interpretation of this Agreement and the other Loan
Documents, (iii) the costs and expenses of appraisals of the Collateral, (iv)
the costs and expenses of lien searches, and of perfecting Lender’s security
interest in the Collateral, (v) all stamp, registration, recordation, and
similar taxes, fees, or charges related to the Collateral and charges of filing
financing statements and continuations and the costs and expenses of taking
other actions to perfect, protect, and continue the security interest of Lender,
(vi) costs and expenses related to the preparation, execution, and delivery of
any waiver, amendment, supplement, or consent by Lender relating to this
Agreement or any of the Loan Documents, (vii) sums paid or obligations incurred
in connection with the payment of any amount or taking any action required of
Borrower under the Loan Documents that Borrower fails to pay or take, (viii)
costs of inspections and verifications of the Collateral, including, without
limitation, the per diem per examiner amount listed on Schedule A, plus out-of-pocket
expenses for travel, lodging, and meals arising in connection with inspections
and verifications of the Collateral and Borrower’s operations and books and
records by Lender’s employees and agents, (ix) costs and expenses of forwarding
Loan proceeds, collecting checks and other items of payment, and establishing
and maintaining each account of Borrower maintained with Lender or owned by
Lender for the benefit of Borrower and each Lockbox, (x) costs and expenses of
preserving and protecting the Collateral, (xi) audit fees shown on Schedule A, (xii) costs and
expenses related to consulting with and obtaining opinions and appraisals from
one or more Persons, including personal property appraisers, accountants, and
lawyers, concerning the value of any Collateral for the Obligations or related
to the nature, scope, or value of any right or remedy of Lender hereunder or
under any of the Loan Documents, including any review of factual matters in
connection therewith, which expenses shall include the fees and disbursements of
such Persons, and (xiv) costs and expenses paid or incurred to obtain payment of
the Obligations, enforce the security interest of Lender, sell or otherwise
realize upon the Collateral, and otherwise enforce the provisions of the Loan
Documents, or to prosecute or defend any claim in any way arising out of,
related to, or connected with, this Agreement or any of the Loan Documents,
which expenses shall include the reasonable fees and disbursements of counsel
and of experts and other consultants retained by Lender, subject to the
limitations on payment to the prevailing party in litigation as specified in
Section 11.3.

     

    “Facility
Availability” means, as of any date, the difference between (i) the
Borrowing Base on such date and (ii) the outstanding principal amount of
the Loans, together with all accrued interest, fees, costs and any other amounts
then due from Borrower under this Agreement on such date.

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 7 of 43

          
            

          

        

        
           

        

      

    

    

    “Facility Limit” means
the maximum amount of Advances, as determined from time to time by Lender, to be
made under this Agreement.  The initial Facility Limit amount is
specified on Schedule
A.

     

    “Fiscal Year-End”
means Borrower’s fiscal year-end specified on Schedule
5.1

     

    “GAAP” means generally
accepted accounting principles and practices consistently applied.

     

    “Health Care Law”
means any and all federal, state, and local laws and regulations governing
(i) the manufacture, testing, distribution, possession, assembly,
repackaging, sale, administration, or dispensing of health care or medical
devices, equipment or supplies, products, biologicals, drugs, or goods, or
(ii) the rendering, provision, delivery, or supply of health care services,
or (iii) the ownership or operation of a health care facility or business,
or assets used in connection therewith, or (iv) the billing or submission
of claims, collection of accounts receivable, the handling of Protected Health
Information, and underwriting the cost of, or provision of management or
administrative services in connection with any and all of the foregoing, by
Borrower and its subsidiaries, including, but not limited to, laws and
regulations under HIPAA and the Privacy Rule, and laws and regulations relating
to practice of medicine and other health care professions, professional fee
splitting, tax-exempt organization and charitable trust law applicable to health
care organizations, certificates of need, certificates of operations and
authority, fraud and abuse, kickbacks and rebates, false claims, physician
self-referral arrangements, fraudulent billing practices, payment under the
Medicare and Medicaid programs, and the federal Food, Drug & Cosmetic
Act.

     

    “HIPAA” means the
Health Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191
and any revisions and amendments.

     

    “Indebtedness” means,
without duplication, (a) all Liabilities, (b) all obligations for
Money Borrowed or for the deferred purchase price of property or services or in
respect of reimbursement obligations under letters of credit, (c) all
obligations represented by bonds, debentures, notes, and accepted drafts that
represent extensions of credit, (d) Capitalized Lease Obligations,
(e) all obligations (including, during the noncancellable term of any lease
in the nature of a title retention agreement, all future payment obligations
under such lease discounted to their present value in accordance with GAAP)
secured by any Lien to which any property or asset owned or held by a Person is
subject, whether or not the obligation secured thereby shall have been assumed
by such Person, (f) all obligations of other Persons which such Person has
guaranteed, including, but not limited to, all obligations of such Person
consisting of recourse liability with respect to Accounts sold or otherwise
disposed of by such Person, and (g) in the case of Borrower, the
Loans.

     

    “Intellectual
Property” means, as to any Person, all of such Person’s then owned and
existing and future acquired or arising patents, patent rights, copyrights,
works which are the subject of copyrights, trademarks, service marks, trade
names, trade styles, patent, trademark and service mark applications, and all
licenses and rights related to any of the foregoing, and all rights to sue for
past, present, and future infringements of any of the foregoing.

     

    “Interest Rate” means
the Base Rate plus Margin.

     

    “Investment” means any
investment, whether by means of share purchase, loan, advance, purchase of debt
instrument, extension of credit (other than (i) accounts receivable arising
from the sale of goods or services in the ordinary course of business, and
(ii) notes, accepted in the ordinary course of business, evidencing overdue
accounts receivable arising in the ordinary course of business), capital
contribution, or otherwise, in or to any Person, the guaranty of any
Indebtedness of any Person, or the subordination of any claim against any Person
to other indebtedness of such Person.

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 8 of 43

          
            

          

        

        
           

        

      

    

    

    “Lender’s Office”
means the office of Lender designated as Lender’s address for notices in Section
11.1(b), or such
other office as Lender may designate from time to time.

     

    “Liabilities” means
all liabilities of a Person determined in accordance with GAAP.

     

    “Lien” means, with
respect to any Person, any security interest, chattel mortgage, charge,
mortgage, deed to secure debt, deed of trust, lien, pledge, Capitalized Lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind in respect of any property of such Person or upon the
income or profits therefrom.

     

    “Loan” or “Loans”
means all Advances and loans made to Borrower by Lender under this
Agreement.

     

    “Loan Documents”
means, collectively, this Agreement, each agreement or document now or hereafter
executed and delivered by any Person to evidence or secure the Obligations, and
each other instrument, agreement, and document now or hereafter executed and
delivered in connection with this Agreement or the Loans.

     

    “Lockbox” or “Lockbox
Account” means one or more lockbox accounts maintained with a bank
specified by Lender into which collections from Accounts and other Collateral,
including governmental healthcare receivables, are to be deposited and which
Lender alone has the power of withdrawal.

     

    “Lockbox Agreement”
means one or more agreements among Borrower, Lender, and a Collecting Bank
concerning the collection of payments which represent the proceeds of Accounts
or of any other Collateral.

     

    “Margin” means the
percent per annum
specified on Schedule
A and which is added to the Base Rate.

     

    “Maximum Rate” means
the maximum nonusurious interest rate, if any, that at any time, or from time to
time, may be contracted for, taken, reserved, charged, or received on the Loans
under the laws which are presently in effect of the United States and the State
of Oregon applicable to Lender and such indebtedness or, to the extent permitted
by law, under such applicable laws of the United States and the State of Oregon
(or if applicable, the laws any other state) which may hereafter be in effect
and which allow a higher maximum nonusurious interest rate than applicable laws
now allow. To the extent federal law (including, without limitation, 12 U.S.C.
Section 85, as now enacted or hereafter amended) permits Lender to contract for,
charge, or receive a higher rate of interest or permits Lender to contract for,
charge, or receive interest at a higher rate permitted by the laws of another
jurisdiction, such federal law (and, if appropriate, the law of such other
jurisdiction) will be applicable in determining the Maximum Rate, instead of the
laws of the State of Oregon.

     

    “Material Adverse
Change” means any act, omission, event, or undertaking which would,
singly or in the aggregate, have a materially adverse effect upon (a) the
business, assets, properties, liabilities, condition (financial or otherwise),
results of operations, or business prospects of Borrower or any of its
subsidiaries, (b) the ability of Borrower or any of its subsidiaries to perform
any obligations under this Agreement or any other Loan Document to which it is a
party, or (c) the legality, validity, binding effect, enforceability, or
admissibility into evidence of any Loan Document or the ability of Lender to
enforce any rights or remedies under or in connection with any Loan
Document.

     

    “Minimum Facilty
Availability” means the Facility Availability as of the Closing Date as
specified in Schedule
A.

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 9 of 43

          
            

          

        

        
           

        

      

    

    

    “Money Borrowed” means
Indebtedness (i) that is represented by notes payable, drafts accepted,
bonds, debentures, or similar instruments that represent extensions of credit,
(ii) upon which interest charges are customarily paid (other than trade
Indebtedness), (iii) that was issued or assumed as full or partial payment
for property, (iv) that is evidenced by a guarantee (but only if the
obligations guaranteed would otherwise qualify as Money Borrowed), or
(v) that constitutes a Capitalized Lease Obligation.

     

    “Multiemployer Plan”
means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which
Borrower or a Related Company is required to contribute or has contributed
within the immediately preceding six (6) years.

     

    “Net Collectible
Value” or “NCV” means the
percentage by payor class, as determined by Lender from time to time to be
applied against Eligible Accounts.  The initial NCV for each payor
class is shown on Schedule
A.

     

    “Net Income” or “Net Loss” means, with
respect to any Person, the net income or net loss of such Person for the period
in question (after provision for income taxes) determined in accordance with
GAAP, provided that the
impact of any extraordinary gains, determined in accordance with GAAP, shall be
excluded from the determination of “Net Income” and “Net Loss.”

     

    “Obligations” shall
mean (i) all Loans or Advances made by Lender to Borrower pursuant to this
Agreement or otherwise, and interest thereon, (ii) all future advances or
other value, of whatever class or for whatever purpose, at any time hereafter
made or given by Lender to Borrower, whether or not the advances or value are
given pursuant to a commitment and whether or not Borrower is indebted to Lender
at the time of such advance; (iii) any and all other debts, liabilities and
obligations of every kind and character of Borrower to Lender, whether now or
hereafter existing, and regardless of whether such present or future debts,
liabilities, or obligations are direct or indirect, primary or secondary, joint,
several, or joint and several, fixed, or contingent, and regardless of whether
such present or future debts, liabilities or obligations may, prior to their
acquisition by Lender, be or have been payable to, or be or have been in favor
of, some other Person or have been acquired by Lender in a transaction with one
other than Borrower (it being contemplated that Lender may make such
acquisitions from others), howsoever such debts, liabilities, or obligations
shall arise or be incurred or evidenced; (iv) any and all other debts,
liabilities, and obligations of every kind and character of Borrower to any
Affiliate of Lender, whether now or hereafter existing, and regardless of
whether such present or future debts, liabilities, or obligations are direct or
indirect, primary or secondary, joint, several, or joint and several, fixed, or
contingent, and regardless of whether such present or future debts, liabilities,
or obligations may, prior to their acquisition by such Affiliate, be or have
been payable to, or be or have been in favor of, some other Person or have been
acquired by such Affiliate in a transaction with one other than Borrower (it
being contemplated that Affiliates of Lender may make such acquisitions from
others), howsoever such debts, liabilities, or obligations shall arise or be
incurred or evidenced; (v) all costs, fees, and expenses payable by
Borrower to Lender or any Affiliate of Lender pursuant to any of the Loan
Documents; and (vi) any and all renewals, extensions, modifications, and
increases of the debts, liabilities, and obligations set forth above, or any
part thereof.

     

    “Obligors” means
Borrower, each guarantor of the Obligations, and all other Persons obligated to
Lender in respect of the Obligations, and “Obligor” means any of
them.

     

    “Occupancy” means the
number of Medicare/Medicaid certified beds at all of Borrower’s facilities as a
percentage of the total number of Medicare/Medicaid certified beds at all of
Borrower’s facilities.

     

    “Operating Account”
means the Deposit Account designated by Borrower for the deposit of
Advances.

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 10 of 43

          
            

          

        

        
           

        

      

    

    

    “Operating Lease”
means any lease (other than a lease constituting a Capitalized Lease) of real or
personal property determined in accordance with GAAP.

     

    “PBGC” means the
Pension Benefit Guaranty Corporation or any successor agency.

     

    “Patient Lists” means
all records, documents, lists, electronic media, or any other method of
recordation that shows in any way any Person to whom Borrower supplies medical
services, medical supplies, or medication, the name and mailing address of such
Person, a complete and accurate description of such medical services, supplies,
or medication that is supplied to such Person, the physician at whose direction
such medical services, supplies, or medication is delivered, and all other
information Borrower uses in the course of Borrower’s ordinary course of
business to supply such Person.

     

    “Permitted
Indebtedness” means the sum of (i) purchase money Indebtedness
incurred by Borrower to finance, or provide the funds for, the acquisition of
assets, which outstanding principal Indebtedness shall not exceed the amount
shown on Schedule A,
plus (ii) the
Indebtedness described on Schedule 5.1 attached
hereto and made a part hereof, and any extension, renewal or refinancing of such
Indebtedness provided that the principal amount of the Indebtedness does not
increase and the extension, renewal or refinancing has been approved by Lender
in writing, or is otherwise authorized under the Loan Documents; plus (iii) the
Obligations; plus (iv)
Subordinated Indebtedness and Indebtedness secured by Permitted Liens; plus (v) trade payables,
deferred tax liabilities, accrued expenses, and taxes (all in the ordinary
course of business and in accordance with GAAP).

     

    “Permitted Liens”
means: (a) Liens securing taxes, assessments, and other governmental
charges or levies (excluding any Lien imposed pursuant to any of the provisions
of ERISA) or the claims of materialmen, mechanics, carriers, warehousemen, or
landlords for labor, materials, supplies, or rentals incurred in the ordinary
course of business, but (i) in all cases, only if payment shall not at the
time be past due, and (ii) in the case of warehousemen or landlords
controlling locations where inventory is located, only if such liens have been
waived or subordinated to the security interest of Lender in a manner
satisfactory to Lender; (b) the Liens described on Schedule 5.1 attached
hereto and made a part hereof; (c) purchase money security interests created in
connection with Permitted Indebtedness provided that Lender has a perfected
security interest in the underlying collateral; and (d) Liens in favor of
Lender.

     

    “Person” means an
individual, corporation, limited liability company, partnership, joint venture,
association, trust, or unincorporated organization or a government or any agency
or political subdivision thereof.

     

    “Pledge Agreement”
means a pledge agreement in form and content acceptable to Lender executed by
Zynex, Inc. in favor of Lender under which Zynex, Inc. pledges and grants a
security interest in 100% of Zynex, Inc.’s right, title and interest to all of
the issued and outstanding shares of Zynex Medical, Inc.

     

    “Privacy Rule” means
45 CFR Part 160 and Part 164, Subparts A and E, which implement certain
provisions of HIPAA and any revision, amendments, or updates.

     

    “Prohibited
Distribution” by any Person means (a) the retirement, redemption,
purchase, or other acquisition for value of any capital stock or other equity
securities or partnership interests issued by such Person, (b) the
declaration or payment of any dividend or distribution on or with respect to any
such securities (excluding distributions made solely in shares of stock of the
same class) or partnership interests, (c) any loan or advance by such
Person to, or other Investment by such Person in, any other Person, and
(d) any other payment by such Person in respect of such securities or
partnership interests.

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 11 of 43

          
            

          

        

        
           

        

      

    

    

    “Prohibited Payment”
means (a) any redemption, repurchase, or prepayment or other retirement,
prior to the stated maturity thereof or prior to the due date of any regularly
scheduled installment or amortization payment with respect thereto, of any
Indebtedness of a Person (other than the Obligations and trade debt),
(b) the payment by any Person of the principal amount of or interest on any
Indebtedness (other than trade debt) owing to an Affiliate of such Person, and
(c) any payment with respect to any Subordinated Indebtedness that is made
in violation of the subordination agreement relating thereto.

     

    “Protected Health
Information” means protected health information subject to the HIPAA
Privacy Rule.

     

    “Related Company”
means, as to any Person, any (a) corporation which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as such Person, (b) partnership or other trade or business (whether
or not incorporated) under common control (within the meaning of Section 414(c)
of the Code) with such Person, or (c) member of the same affiliated service
group (within the meaning of Section 414(m) of the Code) as such Person or any
corporation described in clause (a) above or
any partnership, trade, or business described in clause (b)
above.

     

    “Requirements of Law”
means, any and all laws, regulations, codes, or ordinances applicable to any
Person, or any Person’s assets, including, without limitation, the Securities
Act, the Securities Exchange Act, Regulations T, U, and X of the Federal Reserve
Board, ERISA, the Fair Labor Standards Act, the Worker Adjustment and Retraining
Notification Act, Americans with Disabilities Act of 1990, the Social Security
Act, Environmental Laws, Health Care Law, and any certificate of occupancy,
zoning ordinance, building, environmental, or land use requirement or permit, or
any other environmental, labor, employment, occupational safety, or health law,
rule, or regulation.

     

    “Reserve” at any time
shall mean an amount from time to time established by Lender in its sole and
absolute discretion as a reserve in reduction of the Borrowing Base in respect
of contingencies or other potential factors (such as, without limitation,
rebates, sales taxes, property taxes, installation and delivery expenses, and
warranties) which could adversely affect or otherwise reduce the anticipated
amount of timely collections in payment of Eligible Accounts or the value
(whether at cost, market, or orderly liquidation value) of Eligible
Inventory.  The “Reserve,” if any from time to time, does not
represent cash funds.  The initial amount of the Reserve is shown on
Schedule A.

     

    “Schedule of Accounts”
means a detailed schedule of Accounts delivered by Borrower to Lender in a form
acceptable to Lender that shall contain account balance and aging information
listed by Account Debtor name, class and type, together with a reconciliation of
the Schedule of Accounts to the Borrowing Base Certificate for the most recent
month end, and any other information concerning Borrower’s Accounts as Lender
may request from time to time.

     

    “Shareholder’s Loans”
means the loans made by Thomas Sandgaard to Zynex, Inc. evidenced by four
promissory notes with principal balances immediately prior to the Closing Date
in the amounts shown on Schedule 5.1-A, and any
extension, renewal or refinancing of such loans provided that the principal
amount of such loans does not increase and such extension, renewal or
refinancing is approved by lender in writing.

     

    “Solvent” means, when
used in connection with any Person, that such Person has assets of a fair value
which exceeds the amount required to pay its debts (including contingent,
subordinated, unmatured, and unliquidated liabilities) as they become absolute
and matured, and that such Person is able to, and anticipates that it will be
able to, meet its debts as they mature and has adequate capital to conduct the
business in which it is or proposes to be engaged.

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 12 of 43

          
            

          

        

        
           

        

      

    

    

    “Subordinated
Indebtedness” means Indebtedness of Borrower to a third Person
(i) that has been approved in writing by Lender and (ii) that has been
subordinated to the payment of the Obligations pursuant to a written
subordination agreement executed by Lender and the holder of such Indebtedness
containing terms acceptable to Lender in its sole and absolute
discretion.

     

    “Termination Date”
means the date on which the Loan shall terminate and the entire outstanding
balance of the Loan and all Obligations shall be due and payable.  The
Termination Date is shown on Schedule A.

     

    “Termination Event”
means (a) a “Reportable Event” as defined in Section 4043 of ERISA, but
excluding any such event as to which the PBGC has by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within thirty (30)
days of the occurrence of such event, provided however, that a failure to meet
the minimum funding standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance of any such waiver
of the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code, (b) the filing of a notice of intent to
terminate a Benefit Plan or the treatment of a Benefit Plan amendment as a
termination under Section 4041 of ERISA, or (c) the institution of
proceedings to terminate a Benefit Plan by the PBGC under Section 4042 of ERISA
or the appointment of a trustee to administer any Benefit Plan.

     

    “UCC” means the
Uniform Commercial Code as in effect from time to time in the State of Oregon,
including, without limitation, any amendments thereto which are effective after
the date hereof.

     

    “Unfunded Vested
Liabilities" shall mean the amount (if any) by which (i) the actuarial
present value of accumulated benefits under a Benefit Plan which are vested
exceeds (ii) such Benefit Plan’s net assets available for benefits (all as
determined in connection with the filing of the Borrower's most recent Annual
Report on Form 5500) but only to the extent such excess would, if such Benefit
Plan were to terminate as of such date, represent a liability of the Borrower or
any ERISA Affiliate to the PBGC under Title IV of ERISA.  In each case
the foregoing determination shall be made as of the most recent date prior to
the filing of said Annual Report as of which such actuarial present value of
accumulated Plan benefits is determined.

     

    “Validity Guaranty”
means the Validity Guaranty in form and content acceptable to Lender to be
executed by Thomas Sandgaard in favor of Lender.

     

    1.2    UCC
Terms.  Terms defined in the UCC (such as, but not limited to,
accounts, chattel paper, commercial tort claims, contract rights, deposit
account, documents, equipment, financial assets, general intangibles, goods,
instruments, investment property, inventory, and proceeds), as and when used
(without being capitalized) in this Agreement or the Loan Documents, shall have
the meanings given to such terms in the UCC.

     

    1.3    Accounting Terms and
Determinations.  Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all financial
statements and all other certificates and reports as to any financial matters
required to be furnished to the Lender hereunder shall be prepared in accordance
with GAAP applied on a consistent basis.

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 13 of 43

          
            

          

        

        
           

        

      

    

    

     

    Section 2.    REVOLVING CREDIT FACILITY

     

    2.1    Loan.  Subject
to the terms and conditions of this Agreement, prior to the Termination Date
Lender will make Advances to Borrower under the Loan in an amount not to exceed
outstanding at any time the lesser of (a) the Facility Limit and
(b) the Borrowing Base.  Borrower may borrow, repay, and reborrow
the principal of the Loan in accordance with the terms of this
Agreement.

     

    2.2    Advances under the
Loan.  Borrower may request an Advance under the Loan by making
an Advance Request.  Advances made available by Lender will be
deposited by wire transfer into Borrower’s Operating
Account.  Advances will be made available by Lender no earlier than
the first business day following an Advance Request received by Lender prior to
12:00 p.m. Pacific Time and two (2) business days following  an
Advance Request received after 12:00 p.m. Pacific Time.  Any change in
Borrower’s wiring instructions shall be made in writing at least three (3)
business days prior to the date of an Advance.  Any updates to the
Collateral affecting the amount of Borrower’s Advance Request must be completed
two (2) business days prior to submission of the Advance Request.

     

    2.3    Repayment of the
Loan.  The Loan shall be repaid as follows: (a) unless
accelerated in accordance with the terms hereof, the outstanding principal
amount of, and all accrued and unpaid interest on, the Loan is due and payable,
without demand, on the Termination Date; (b) if at any time the principal
of, and interest upon, the Loan exceeds the lesser of (i) the Facility
Limit or (ii) the Borrowing Base, Borrower shall immediately repay the Loan
in the amount of such excess; and (c) Borrower hereby instructs Lender to
repay the Loan on any day in an amount equal to the amount received by Lender on
such day pursuant to Section
6.2.

     

    2.4    Disbursement of
Loans.  Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of Loans requested, or deemed to be requested, pursuant to
this Section 2
as follows:  (i) each Advance requested shall be disbursed by the
Lender in lawful money of the United States of America in immediately available
funds, (a) in the case of the initial Advance under the Loan, in accordance
with the written instructions from Borrower to Lender, and (b) in the case
of each subsequent Advance, to a Deposit Account designated in writing by
Borrower to Lender.

     

    2.5    Authorized
Representatives.  Borrower shall act hereunder through the
Authorized Representatives designated from time to time by Borrower, and all
notices and requests to be given and received by Borrower, including requests
for Loans, shall be given by and directed to such Authorized
Representatives.  Lender may rely on the authority or apparent
authority of any officer or employee of Borrower whom Lender in good faith
believes to be an Authorized Representative.

     

    Section 3.    GENERAL LOAN PROVISIONS; FEES AND
EXPENSES

     

    3.1    Interest.

     

    (a)         Loans.  Borrower
shall pay interest on the unpaid principal amount of the Obligations at a rate
per annum equal to the sum of the Base Rate plus the Margin (or, if such
amount were ever to exceed the Maximum Rate, then the Maximum Rate) payable
monthly in arrears on the first day of each calendar month and on the
Termination Date.  Any change in the rate of interest resulting from a
change in the Base Rate shall become effective on the day such change in the
Base Rate is published.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 14 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    (b)         Default Rate. From
and after the occurrence of an Event of Default, the unpaid principal amount of
all Obligations and all accrued interest thereon shall, at the option of Lender,
bear interest until paid in full (or, if earlier, until such Event of Default is
cured or waived in writing by Lender) at a rate per annum equal to the lesser of
(i) the Default Rate, or (ii) the Maximum Rate.

     

    (c)         Computation of
Interest.  Interest shall be computed on the basis of a year of
360 days and the actual number of days elapsed.

     

    3.2    Fees and
Expenses.

     

    (a)         Origination
Fee.  In consideration for Lender’s agreement to make the Loan
in accordance with the terms of this Agreement and in order to compensate Lender
in part for the costs associated with the Loan, Borrower shall pay to Lender on
the Closing Date of an origination fee in the amount shown on Schedule A.  Such
fee is in addition to the expenses that Borrower has agreed to pay elsewhere in
this Agreement.

     

    (b)         Unused Line
Fee.  Borrower shall pay to Lender an unused line fee for the
period from the date hereof through the Termination Date calculated as shown on
Schedule
A.  The parties hereto agree that such unused line fee
constitutes reasonable consideration for Lender’s taking of appropriate actions
to be able to make available to Borrower the amount of the Facility Limit for
such period.

     

    (c)         Collateral Monitoring
Fee.  Lender shall be entitled to charge Borrower, and, if so
charged, Borrower agrees to pay, a monthly collateral monitoring fee in the
amount shown on Schedule
A.  The collateral monitoring fee for each calendar month shall
be due and payable on the first day of the next calendar month, and shall be
prorated for any partial calendar month until the Termination Date.

     

    (d)         Annual Facility
Fee.  Borrower shall pay to Lender on each annual anniversary
of the Closing Date a Facility Fee in the amount shown on Schedule A.  No
Annual Facility Fee will be charged on the annual anniversary date if it is the
Termination Date.  The final Annual Facility Fee will be prorated for
a partial year.

     

    (e)         Early Termination
Fee.  See Section
3.4.

     

    (f)         Expenses and
Fees.  Borrower shall pay or reimburse all Expenses and Fees
invoiced or incurred by Lender that arise out of or under with this Agreement
and the Loans.   Borrower hereby authorizes Lender to debit
Borrower’s Loan by increasing the principal amount of the Loan, or deduct from
Borrower’s accounts maintained with any Affiliate of Lender, the amount of any
Expenses and Fees owed by Borrower when due.  At Lender’s discretion,
Lender may invoice Borrower for such Expenses and Fees and Borrower shall pay
such invoice within five (5) days after the date of the invoice.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 15 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    3.3    Manner of
Payment.

     

    (a)         Timing.  Each
payment by Borrower on account of the principal of or interest on the Loans or
of any fee or other amount payable to Lender shall be made not later than 12:00
p.m. (Pacific Time) on the applicable due date (or if such day is not a business
day, the next succeeding business day, provided that interest shall
continue to accrue until such payment is made).  All payments shall be
made to Lender at Lender’s Office or by wire transfer to an account designated
by Lender in Dollars in immediately available funds, and shall be made without
any setoff, counterclaim, or deduction whatsoever.

     

    (b)         Charging
Accounts.  Borrower hereby irrevocably authorizes Lender and
each Affiliate of Lender to charge any account of Borrower maintained with
Lender or such Affiliate with such amounts as may be necessary from time to time
to pay any Obligations which are not paid when due.

     

    (c)         Termination
Reserve.  The amount of the Termination Reserve, less any and
all fees, costs, interest, or other charges incurred by Lender in the
performance of this Agreement after Borrower’s payment of all amounts described
above, shall be returned to Borrower within thirty (30) days following such
payment.

     

    3.4    Termination of
Agreement.

     

    (a)         Required
Payments.  On the Termination Date and upon any early
termination of this Agreement, Borrower shall pay to Lender (i) the
principal of, and accrued and unpaid interest on, all Loans outstanding on such
date, (ii) all fees accrued and unpaid, (iii) any amounts payable to
Lender pursuant to the other provisions of this Agreement or any other Loan
Document, and (iv) the amount of the Termination Reserve provided in Schedule A, and (v) any and
all other Obligations then outstanding.

     

    (b)         Early
Termination.  If Borrower terminates this Agreement prior to
the Termination Date, Borrower acknowledges that such termination would result
in the loss to Lender of the benefits of this Agreement and, as a result
thereof, Borrower shall pay to Lender the termination fee in the amount shown
on Schedule
A.  Borrower shall give thirty (30) days’ written notice to
Lender of Borrower’s intention to terminate this Agreement prior to the
termination dates specified in Schedule A.

     

    

    3.5    Evidence of
Indebtedness.

     

    (a)         At
the request of Lender, the Loans shall be evidenced by one or more promissory
notes.

     

    (b)         Lender
shall maintain accounts in which it will record (i) the amount of each Loan
extended hereunder, (ii) the amount of any principal or interest due and
payable or to become due and payable from Borrower to Lender hereunder, and
(iii) the amount of any sum received by Lender hereunder from
Borrower.

     

    (c)         The
entries in the accounts maintained pursuant to subsection (b) above shall
be prima facie evidence
of the existence and amounts of the Obligations therein recorded, provided, however, that the
failure of the Lender to maintain such accounts or any error therein shall not
in any manner affect the obligation of Borrower to repay the Obligations in
accordance with their terms.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 16 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    3.6    Adjustments by
Lender.  Lender may in its discretion based on changes in
Borrower’s billings and collections of Accounts change from time to time the
NCV, Advance Rate, Cross-Age Percentage, Concentration Limit, and Reserve, and
may revise Schedule A
accordingly.

     

    3.7    Application of
Payments.  Lender may, in its discretion, apply payments as
follows:

     

    (a)         First,
to all fees and costs incurred by Lender for which Borrower is responsible to
reimburse Lender under this Agreement or any of the Loan Documents;

     

    (b)         next,
to any accrued but unpaid interest on the Loan;

     

    (c)         next,
to the outstanding principal balance due on the Loan;

     

    (d)         next,
to any other amounts due Lender under this Agreement or any other agreement
between Lender and Borrower.

     

    

    3.8Maximum
Interest.  Borrower and Lender intend to strictly comply with
any applicable usury laws.  Accordingly, in no event shall Borrower or
any Obligor be obligated to pay, or Lender have any right or privilege to
reserve, receive, or retain, any interest in excess of the Maximum
Rate.  On each day, if any, that the interest rate charged under this
Agreement (the “Stated
Rate”) exceeds the Maximum Rate, the rate at which interest shall accrue
shall automatically be fixed by operation of this sentence at the Maximum Rate
for that day, and shall remain fixed at the Maximum Rate for each day thereafter
until the total amount of interest accrued equals the total amount of interest
which would have accrued if there were no such ceiling rate as is imposed by
this sentence.  Thereafter, interest shall accrue at the Stated Rate
unless and until the Stated Rate again exceeds the Maximum Rate when the
provisions of the immediately preceding sentence shall again automatically
operate to limit the interest accrual rate.

     

    Section 4.     CONDITIONS
PRECEDENT

     

    4.1    Conditions
Precedent.  Lender shall not be obligated to make any Loan or
Advance hereunder (including the first) until all of the following have been
fully performed or satisfied to Lender’s satisfaction as determined in its sole
discretion:

     

    (a)         Borrower
has executed and delivered to Lender this Agreement and a promissory note
evidencing the Loan;

     

    (b)         Borrower
has executed and delivered to Lender the Business Associate
Agreement;

     

    (c)         Borrower
has submitted a certificate executed by the President and the Secretary of
Borrower certifying (i) the names and signatures of the officers of such
Person authorized to execute Loan Documents, (ii) the resolutions duly
adopted by the Board of Directors of such Person authorizing the execution of
this Agreement and the other Loan Documents, as appropriate, and
(iii) correctness and completeness of the copy of the bylaws of such Person
attached thereto;

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 17 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    (d)         Borrower
has submitted a certificate regarding the due formation, valid existence, and
good standing of Borrower in the state of its organization issued by the
appropriate governmental authorities in such jurisdiction and copies of its
organizational documents certified by such authorities;

     

    (e)         Borrower
has executed in favor of Lender and submitted to Lender an authorization to file
financing statements;

     

    (f)         Borrower
has provided payoff information under Schedule 4.1;

     

    (g)         Borrower
has submitted to Lender a payoff letter executed by any Person to whom Borrower
owes money and designated by Lender;

     

    (h)         Borrower
has caused to be executed a landlord’s or mortgagee’s waiver in a form
acceptable to Lender with respect to each premises where Collateral is located
(except such Collateral consisting of medical devices on lease to a patient or
in possession of a sales person in the ordinary course of Borrower’s
business);

     

    (i)         Borrower
has submitted to Lender endorsements naming Lender as an additional insured and
loss payee on all liability insurance and all property insurance policies of
Borrower;

     

    (j)         Borrower
has submitted to lender an opinion of counsel for Borrower in form and content
acceptable to Lender covering such matters as Lender may request;

     

    (k)         Borrower
has established a Lockbox Account for receipts of proceeds of Collateral, and a
Lockbox Account for the receipt of any governmental healthcare
receivables;

     

    (l)         Borrower
has submitted to Lender Lockbox Agreements in form and content acceptable to
Lender;

     

    (m)         Borrower
has prepared written notice in form and content acceptable to Lender as shown on
Exhibit D directing each
Account Debtor to send to the Lockbox address specified by Lender all
remittances with respect to all amounts payable by the Account Debtors, and
copies of such notices have been submitted to Lender;

     

    (n)         Borrower
has executed and delivered to Lender a Deposit Account Control Agreement in form
and content acceptable to Lender;

     

    (o)         after
giving effect to the first Advance of the Loan and the Reserve established by
Lender, Borrower shall have the Minimum Facility Availability of at least the
amount shown on Schedule
A, plus an amount sufficient so that no trade payables are overdue
(except those that are being contested in good faith by Borrower), plus an
amount sufficient to pay all book overdrafts;

     

    (p)         no
Default or Event of Default shall have occurred;

     

    (q)         Thomas
Sandgaard has executed and delivered to Lender a subordination agreement in form
and content acceptable to Lender;

     

    (r)         Borrower
has submitted to Lender in form and content acceptable to Lender all documents
evidencing or relating to Subordinated Indebtedness as Lender may
request;

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 18 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    (s)         Lender
shall have received background checks on Thomas Sandgaard and Fritz Allison
without derogatory information;

     

    (t)         Borrower
shall have caused a termination of all security interests and Uniform Commercial
Code filings by Silicon Valley Bank and Ascendiant Capital Group, LLC in any of
Borrower’s assets;

     

    (u)         Borrower
shall have paid within five (5) days prior to the Closing Date any taxes then
past due owing to any governmental unit (except those that are being contested
in good faith by Borrower);

     

    (v)         the
proceeds from the initial Advance shall be applied by Borrower to cause have all
trade payables (except those that are being contested in good faith by Borrower)
to be within sixty (60) days of the invoice date on all invoices payable sixty
(60) days or less on their terms;

     

    (w)         Zynex,
Inc. has submitted to Lender the executed Pledge Agreement;

     

    (x)         Zynex,
Inc. has delivered to Lender the shares of Zynex Medical, Inc. pursuant to the
Pledge Agreement;

     

    (y)         Thomas
Sandgaard shall have executed and delivered to Lender the Validity Guaranty;
and

     

    (z)         Borrower
has submitted or executed such other documents, certificates, opinions, and
information that Lender may require.

     

    4.2    Conditions to Subsequent
Advances.  The obligation of Lender to make any Advance
subsequent to the initial Advance on the Loan is subject to the following
conditions precedent:

     

    (a)         Conditions to First
Advance.  All of the conditions precedent set forth in Section 4.1 have been
satisfied.

     

    (b)         Borrowing Base
Certificate.  Lender shall have received from Borrower a
Borrowing Base Certificate acceptable to Lender executed by an Authorized
Representative prior to the date of the requested Advance.

     

    (c)         Representations and
Warranties.  The representations and warranties contained in
each of the Loan Documents shall be true in all material respects with the same
force and effect as though made on and as of such date.

     

    (d)         Defaults and Events of
Default.  No Default or Event of Default shall have occurred
and be continuing.

     

    (e)         Adverse
Change.  No Material Adverse Change (or event or condition that
could reasonably be expected to cause or have a Material Adverse Change) has
occurred since the date of the Borrower’s most recently submitted financial
statements.

     

    (f)         Legal
Restriction.  The Advance shall not be prohibited by any law or
regulation or any order of any court or governmental agency or
authority.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 19 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    (g)         No
Repudiation.  Neither Borrower nor any Obligor shall have
repudiated or made any anticipatory breach of any of its obligations under any
Loan Document.

     

    Section
5.                     REPRESENTATIONS
AND WARRANTIES OF BORROWER

     

    5.1    Representations and
Warranties.  Borrower represents and warrants to Lender as
follows:

     

    (a)         Organization; Power;
Qualification.  Borrower is duly organized, validly existing,
and in good standing under the laws of its state of organization and is
authorized to do business in each state in which the nature of its properties or
its activities requires such authorization, except where a failure to qualify as
a foreign corporation would not reasonably be expected to cause a Material
Adverse Change.

     

    (b)         Authorization;
Enforceability.  Borrower has the power and authority to, and
is duly authorized to, execute and deliver the Loan Documents to be executed by
Borrower.  All of the Loan Documents to which Borrower is a party
constitute the legal, valid, and binding obligations of Borrower, enforceable in
accordance with their terms, except as limited by bankruptcy, insolvency, or
similar laws of general application relating to the enforcement of creditors’
rights generally.

     

    (c)         Subsidiaries;
Ownership.  Except as shown on Schedule 5.1,
Borrower does not have any subsidiaries.  The outstanding stock or
membership interests of Borrower have been duly and validly issued and are fully
paid and nonassessable, and the number and owners of such shares of capital
stock or membership interests are set forth on Schedule
5.1.

     

    (d)         Conflicts.  Neither
the execution and delivery of the Loan Documents, nor consummation of any of the
transactions therein contemplated nor compliance with the terms and provisions
thereof, will contravene any provision of law or any judgment, decree, license,
order, or permit applicable to Borrower or will conflict with, or will result in
any breach of, any agreement to which Borrower is a party or by which Borrower
may be bound or subject, or violate any provision of the organizational
documents of Borrower.

     

    (e)         Consents, Governmental
Approvals, Etc.  No governmental approval nor any consent or
approval of any third Person (other than those which have been obtained prior to
the date hereof) is required in connection with the execution, delivery, and
performance by Borrower of the Loan Documents.  To the best of
Borrower’s knowledge, Borrower is in compliance with all applicable governmental
approvals and all applicable laws affecting Borrower’s business as conducted as
of the Closing Date.

     

    (f)         Borrower
Information.  Borrower has delivered to Lender a completed form
of Schedule
5.1, and all of the information contained in Schedule 5.1 is
complete, correct, accurate, and does not fail to state a material fact
necessary for Lender to complete its due diligence with respect to Borrower, and
all such information shall be complete, correct, accurate and shall not fail to
state a material fact at the time of each Advance, including the initial
Advance.

     

    (g)         Title;
Liens.  Except for items described in Schedule 5.1 and for
Permitted Liens, all of the properties and assets of Borrower are free and clear
of all Liens, and Borrower has good and marketable title to such properties and
assets.  Each Lien granted, or intended to be granted, to Lender
pursuant to the Loan Documents is a valid, enforceable, perfected, first
priority Lien and security interest.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 20 of 43

          
            

          

        

        
           

        

      

    

    

    (h)         Indebtedness and
Guaranties.  Set forth on Schedule 5.1 is a
complete and correct listing of all of Borrower’s (i) Indebtedness for
Money Borrowed, and (ii) guaranties and other contingent
obligations.

     

    (i)         Litigation, Suits, Actions,
Etc.  Except as disclosed on Schedule 5.1, no
litigation, arbitration, governmental investigation, proceeding, or inquiry is
pending or, to the knowledge of Borrower, threatened against Borrower or that
could affect any of the Collateral.

     

    (j)         Tax Returns and
Payments.  All tax returns required to be filed by Borrower in
any jurisdiction have been filed and all taxes (including property taxes) have
been paid prior to the time that such taxes could give rise to any
lien.

     

    (k)         Financial
Condition.  Borrower has delivered to Lender copies
of  Borrower’s (i) audited consolidated and consolidating balance
sheet and Borrower’s subsidiaries as of the most recent Fiscal Year-End and the
related audited consolidated and consolidating statements of income,
shareholders’ equity and cash flow, and (ii) unaudited consolidated and
consolidating balance sheet and Borrower’s subsidiaries as of the most recently
completed month and the related audited consolidated and consolidating
statements of income, shareholders’ equity and cash flow .  The
financial statements submitted shall fairly present the financial condition of
Borrower as of the respective dates and shall have been prepared in accordance
with GAAP (except, with respect to the unaudited statements, for the
presentation of footnotes and for applicable normal year-end audit
adjustments).  There is no Indebtedness of Borrower which is not
reflected in the financial statements, and no event or circumstance has occurred
since the date of the most recent financial statements in Borrower’s quarterly
report on Form 10-Q for the quarter ended June 30, 2008 which has had or could
have or result in a Material Adverse Change.

     

    (l)         ERISA.  Neither
Borrower nor any Related Company maintains or contributes to any Benefit Plan
other than those listed on Schedule
5.1.  Further, (i) no Reportable Event (as defined in
ERISA) has occurred and is continuing with respect to any Benefit Plan, and
(ii) the PBGC has not instituted proceedings to terminate any Benefit Plan.
The Borrower and each Related Company has satisfied the minimum funding
standards under ERISA with respect to its Benefit Plans and is in compliance in
all material respects with the presently applicable provisions of ERISA and the
Code, and has not incurred any liability to the PBGC or a Benefit Plan under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA.

     

    (m)         Capitalization.  Borrower’s
capital stock issued (or membership information) is correctly listed on Schedule
5.1.

     

    (n)         Defaults.  No
Default or Event of Default has occurred and is continuing.

     

    (o)         Borrowing Base
Reports.  All Accounts included in any Borrowing Base
Certificate constitute Eligible Accounts, except as disclosed in such Borrowing
Base Certificate.

     

    (p)         Payroll
Taxes.  Borrower has made all payroll tax deposits for all of
its employees on or before the date when due.

     

    (q)         Solvency.  Borrower
is Solvent.  No transfer of property is being made by Borrower and no
obligation is being incurred by Borrower in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of
Borrower.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 21 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    5.2    Survival of
Representations.  All representations and warranties by
Borrower herein shall be deemed to have been made on the date hereof and the
date of each Advance of a Loan.

     

    Section 6.    SECURITY INTEREST
AND COLLATERAL COVENANTS

     

    6.1Security
Interest.  To secure the payment and performance of the
Obligations, Borrower hereby mortgages, pledges, and assigns to Lender for
itself, and as agent for its Affiliates, all of the Collateral and grants to
Lender for itself, and as agent for its Affiliates, a security interest and Lien
in and upon all of the Collateral.

     

    6.2    Collection of
Accounts.

     

    (a)         If
Borrower receives any monies, checks, notes, drafts, and other payments relating
to or constituting proceeds of Accounts or of any other Collateral, Borrower
shall immediately deposit such items in kind in the appropriate Lockbox Account,
fully endorsed.  Borrower shall advise each Account Debtor that remits
amounts payable on the Accounts or any other Person that remits amounts to
Borrower in respect of any of the Collateral by wire transfer or ACH to make
such remittances directly to the Lockbox Account.

     

    (b)         Borrower
shall enter into Lockbox Agreements and shall cause all moneys, checks, notes,
drafts, and other payments relating to or constituting proceeds of Accounts,
including all governmental healthcare receivables, or of any other Collateral,
to be forwarded to a Lockbox Account for deposit.

     

    (c)         Deposits
in the Lockbox Accounts shall be credited, subject to final payment, to the
payment of the Obligations after receipt and deposit into the Lockbox Accounts
plus the collection clearance days shown on Schedule A.  The
delay in applying funds held in the Lockbox Accounts to the Obligations shall in
all respects be limited so that interest on the Obligations is at all times less
than interest calculated at the Maximum Rate.

     

    (d)         Any
payments which are received by Borrower (including any payment evidenced by a
promissory note or other instrument) shall be held in trust for Lender and shall
be (i) deposited in the Lockbox Accounts, or (ii) delivered to Lender, as
promptly as possible in the exact form received, together with any necessary
endorsements.

     

    6.3    Disputes, Returns and
Adjustments.

     

    (a)         Borrower
shall provide Lender with prompt written notice of amounts in excess
of  the amount shown on Schedule A that are in
dispute between any Account Debtor and Borrower after completion of the account
dispute appeal process, exclusive of the amounts of ordinary course
reimbursement deductions made by insurance companies.

     

    (b)         Borrower
shall notify Lender promptly of all returns and credits in respect of any
Account, which notice shall specify the Accounts affected and be included in the
Borrowing Base Certificate delivered to Lender.  Borrower shall notify
Lender promptly of any pending return or credit in excess of the amount
shown on Schedule A, and shall specify
the Account affected, the related Account Debtor, and the goods to be
returned.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 22 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    (c)         Borrower
may, in the ordinary course of business and prior to a Default or an Event of
Default, grant any extension of time for payment of any Account or compromise,
compound, or settle the same for less than the full amount thereof or release
wholly or partly any Person liable for the payment thereof or allow any credit
or discount whatsoever thereon, provided that (i) Borrower
shall not have taken any such action that results in the reduction of more than
the amount shown on Schedule
A with respect to any Account or more than the amount shown on Schedule A (exclusive of the
amounts of ordinary course reimbursement deductions made by insurance companies)
with respect to all Accounts of Borrower in any fiscal year and (ii) Borrower
shall promptly notify Lender (but not less often than ten (10) days after the
end of each month) of the amount of such adjustments and the Account(s) affected
thereby.

     

    6.4    Verification and
Notice.  Lender shall have the right at any time at Borrower’s
expense and in Lender’s own name, Borrower’s name, or an assumed name
(a) to verify the validity, amount, or any other matter relating to any
Accounts, and (b) upon the occurrence of an Event of Default, to notify
Account Debtors to make payment of all amounts directly to Lender and enforce
collection of any such Accounts and to adjust, settle, or compromise the amount
or payment thereof, in the same manner as Borrower.

     

    6.5   Ownership; Defense of
Title.

     

    (a)         Borrower
shall defend its title in and to the Collateral and shall defend the security
interest of Lender in the Collateral against the claims and demands of all
Persons.

     

    (b)         Borrower
shall (i) protect and preserve all properties material to its business,
including Intellectual Property, and maintain all tangible property in good and
workable condition in all material respects, with reasonable allowance for wear
and tear, and (ii) from time to time make or cause to be made all needed and
appropriate repairs, renewals, replacements, and additions to such properties
necessary for the conduct of its business.

     

    6.6    Location of Offices and
Collateral; Organizational Information.  Borrower shall not
change the location of its place of business (or, if it has more than one place
of business, its chief executive office) or the place where it keeps its books
and records relating to the Collateral or change its name, identity, corporate
structure, or jurisdiction of organization without giving Lender at least thirty
(30) days’ prior written notice thereof.  All inventory, other than
inventory in transit to any such location or in the possession of salespersons
in the ordinary course of business, shall at all times be kept by Borrower at
one or more of the locations set forth in Schedule
5.1.

     

    6.7    Records Relating to
Collateral.  Borrower shall at all times keep and maintain (i)
complete and accurate records of Accounts on a basis consistent with past
practices of Borrower, (ii) complete and accurate records of all other
Collateral, (iii) Patient Lists containing the names, addresses, and phone
numbers of Borrower’s patients or other Persons that owe Borrower money for any
goods or medical services rendered by Borrower, (iv) a list of all other Persons
that owe Borrower money, and (v) a current list of all salesmen and employees of
Borrower.  Data bases containing the foregoing shall at all times be
accessible and available to Lender.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 23 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    6.8    Inspection.  Lender
(by any of its officers, employees, or agents) shall have the right at any time
or times to (a) visit the properties of Borrower, inspect the Collateral and the
other assets of Borrower, and inspect and make extracts from the books and
records of Borrower, all during customary business hours, (b) discuss Borrower’s
business, financial condition, results of operations, and business prospects
with Borrower’s (i) principal officers, (ii) independent accountants and other
professionals providing services to Borrower, and (iii) any other Person (except
that any such discussion with any third parties shall be conducted only in
accordance with Lender’s standard operating procedures relating to the
maintenance of confidentiality of confidential information of Borrower), (c)
verify the amount, quantity, value, and condition of, or any other matter
relating to, any of the Collateral and, in this connection, review, audit, and
make extracts from all records and files related to any of the Collateral, and
(d) access and copy the records, lists, reports, and data bases referred to in
Section
6.8.  Borrower will deliver to the Lender upon request any
instrument necessary to authorize an independent accountant or other
professional to have discussions of the type outlined above with the Lender or
for the Lender to obtain records from any service bureau maintaining records on
behalf of Borrower.

     

    6.9    Maintenance.  Borrower
shall maintain all equipment of Borrower in good and working order and
condition, reasonable wear and tear excepted.

     

    6.10    Power of
Attorney.  Borrower hereby appoints Lender as its attorney,
with power (a) to endorse the name of Borrower on any checks, notes,
acceptances, money orders, drafts, or other forms of payment or security that
may come into Lender’s possession, and (b) to sign the name of Borrower on any
invoice or bill of lading relating to any Accounts, inventory, or other
Collateral.  Borrower also authorizes Lender to file financing
statements, without Borrower’s signature, covering part or all of the Collateral
in such jurisdictions as Lender shall determine to be advisable.

     

    Section 7.    AFFIRMATIVE
COVENANTS

     

    So long as this Agreement shall be in
effect or any of the Obligations shall be outstanding, Borrower covenants and
agrees as follows:

     

    7.1    Preservation of Corporate
Existence and Similar Matters.  Borrower shall preserve and
maintain its existence as a corporation or limited liability company, as the
case may be, and qualify and remain qualified as a foreign entity authorized to
do business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification or
authorization.

     

    7.2    Compliance with Requirements
of Law.  Borrower shall continuously comply with all
Requirements of Law, including without limitation all occupational health and
safety laws and Environmental Laws, except where (a) any failure to do so is not
knowing or willful, and (b) Borrower promptly remedies, cures or otherwise
brings it or its affairs into compliance after notice of
non-compliance.

     

    7.3    Conduct of
Business.  Borrower shall engage only in substantially the same
businesses conducted by Borrower on the date hereof.

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 24 of 43

          
            

          

        

        
           

        

      

    

    

     

    7.4    Payment of Taxes and
Claims.  Borrower shall pay or discharge when due (a) all
taxes, assessments, and governmental charges imposed upon it or its properties
and (b) all lawful claims which, if unpaid, might become a Lien on any
properties of Borrower, except that this Section 7.4 shall not require the
payment or discharge of any such tax, assessment, charge, levy, or claim which
is being contested in good faith by appropriate proceedings and for which
adequate reserves have been established on the appropriate books of
Borrower.

     

    7.5    Accounting Methods and
Financial Records.  Borrower shall maintain a system of
accounting, and keep such books, records and accounts (which shall be true and
complete), as may be required or as may be necessary to permit the preparation
of financial statements in accordance with GAAP consistently
applied.

     

    7.6    Use of
Proceeds.  Borrower shall (a) use the proceeds of the Loan for
the repayment of its outstanding bank debt and for working capital and general
business purposes, and (b) not use any part of such proceeds to purchase or
carry, or to reduce or retire or refinance any credit incurred to purchase or
carry, any margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) or for any other purpose which would
violate Regulation U or Regulation T or X of such Board of Governors or for any
other purpose prohibited by law or by the terms and conditions of this
Agreement.

     

    7.7    Accuracy of
Information.  All written information, reports, statements, and
other papers and data furnished to Lender shall be, at the time the same is so
furnished, complete and correct in all material respects.

     

    7.8    Revisions or Updates to
Schedules.  Should any of the information or disclosures
provided on any of the Schedules attached hereto become outdated or incorrect in
any material respect, Borrower shall provide promptly to Lender such revisions
or updates to such Schedule(s) as may be necessary or appropriate to update, or
correct and update, such Schedule(s). Notwithstanding the foregoing, the
delivery to Lender of a revised or updated schedule shall not constitute a
waiver of, or consent to, any Default or Event of Default arising as a result of
any erroneous or incorrect information provided in any Schedule previously
delivered to Lender.

     

    7.9    RISA.  Borrower
shall provide to Lender, as soon as possible and in any event within thirty (30)
days after the date that (a) any Termination Event with respect to a Benefit
Plan has occurred or will occur, (b) the aggregate present value of the Unfunded
Vested Liabilities under all Benefit Plans has increased to an amount in excess
of $0, or (c) Borrower is in “default” (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan required by reason of
its complete or partial withdrawal (as described in Section 4203 or 4205 of
ERISA) from such Multiemployer Plan, a certificate of the president or the chief
financial officer of Borrower setting forth the details of such of the events
described in clauses
(a) through (c) as applicable and
the action which is proposed to be taken with respect thereto and,
simultaneously with the filing thereof, copies of any notice or filing which may
be required by the PBGC or other agency of the United States government with
respect to such of the events described in clauses (a) through
(c) as
applicable.

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 25 of 43

          
            

          

        

        
           

        

      

    

     

    7.10    Insurance.  Borrower
shall keep or cause to be kept adequately insured by financially sound and
reputable insurers all of its property usually insured by Persons engaged in the
same or similar businesses.  Without limiting the foregoing, Borrower
shall insure the Collateral of Borrower against loss or damage by fire, theft,
burglary, pilferage, loss in transit, business interruption, and such other
hazards as usual and customary in Borrower’s industry or as Lender may specify
in amounts and under policies by insurers acceptable to Lender, and all premiums
thereon shall be paid by Borrower and copies of the policies delivered to
Lender.  If Borrower fails to do so, Lender may procure such insurance
and charge the cost to Borrower’s account.  Each policy of insurance
covering the Collateral shall provide that at least ten (10) days’ prior written
notice of cancellation or notice of lapse must be given to Lender by the
insurer.  All insurance policies required under this Section 7.10 shall
name Lender as an additional named insured and as a loss payee.  Any
proceeds of insurance referred to in this Section 7.10 which
are paid to Lender shall be, at the option of Lender in its sole and absolute
discretion, either (i) applied to rebuild, restore, or replace the damaged or
destroyed property, or (ii) applied to the payment or prepayment of the
Obligations.

     

    7.11    Payroll
Taxes.  Borrower shall at all times make all payroll tax
deposits for all of its employees on or before the date when due.

     

    7.12    Notice of Litigation, Claims
Against the Collateral, and Other Matters.  Borrower shall
promptly provide to Lender written notice of any of the following:

     

    (a)         the
commencement, to the extent Borrower is aware of the same, of all actions and
proceedings in any court against Borrower or any of the Collateral;

     

    (b)         any
Lien (other than Permitted Liens), material claim, attachment, or material legal
process asserted or levied against Borrower or any Collateral;

     

    (c)         the
commencement against any Obligor of any audit, investigation, judicial or
administrative proceeding, or any criminal or civil investigation initiated,
claim filed, or disclosure required of any Obligor by the Office of Inspector
General, the Department of Justice, Center for Medicare and Medicaid Services
(CMS) (formerly HCFA), or any other governmental authority, or any claim filed
under the False Claims Act or any other Requirement of Law;

     

    (d)         any
amendment of any of the organizational documents of Borrower, including, but not
limited to, articles of incorporation or bylaws;

     

    (e)         any
change in the business, financial condition, results of operations, or business
prospects of Borrower that would reasonably be expected to cause a Material
Adverse Change;

     

    (f)         any
change in the executive officers of Borrower;

     

    (g)         copies
of all reports and statements that Borrower sends to or receives from any
governmental authority;

     

    (h)         any
Default or Event of Default, or event that would constitute a default or event
of default by Borrower under any material agreement (other than this Agreement)
to which Borrower is a party; and

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 26 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    (i)         the
occurrence of any other event which could reasonably be expected to have a
Material Adverse Change.

     

    7.13    Notice of Healthcare
Matters.   Borrower shall promptly provide to Lender
written notice of any of the following:

     

    (a)         any
investigation or pending or threatened proceedings relating to any violation by
Borrower, any Affiliate of Borrower, or any health care facility to which
Borrower or Affiliate provides services, of any Health Care Laws (including,
without limitation, any investigation or proceeding involving violation of any
of the Medicare and/or Medicaid fraud and abuse provisions);

     

    (b)         copies
of any written recommendation from any governmental authority or other
regulatory body that Borrower, any Affiliate of Borrower, or any Obligor to
which Borrower or any Affiliate of Borrower provides services should have its
licensure or accreditation revoked, or have its eligibility to participate in
TRICARE, Medicare or Medicaid or to accept assignments or rights to
reimbursement under TRICARE, Medicaid or Medicare regulations
revoked;

     

    (c)         notice
of any claim to recover any alleged material overpayments with respect to any
receivables including, without limitation, payments received from Medicare,
Medicaid or any other government reimbursement program, or from any private
insurance carrier;

     

    (d)         notice
of termination of eligibility of Borrower or any Affiliate of Borrower to
participate in any reimbursement program of any private insurance carrier or
other Obligor applicable to it;

     

    (e)         Borrower’s
knowledge of termination of eligibility of any health care facility to which
Borrower provides services to participate in any reimbursement program of any
private insurance carrier or other Obligor applicable to it;

     

    (f)         notice
of any material reduction in the level of reimbursement expected to be received
with respect to any receivables;

     

    (g)         notice
of any reimbursement payment contract or process that results or may result in
any material claim against Borrower or Affiliate of Borrower (including on
account of overpayments, settlement payments, appeals, repayment plan requests);
and

     

    (h)         copies
of any report or communication from any governmental authority in connection
with any inspection of any facility of Borrower or any Affiliate of
Borrower.

     

    7.14    Post-Closing
Obligations.

     

    (a)        Borrower
shall cooperate with Lender to cause Lender to perfect its security interest
with the U.S. Patent and Trademark Office promptly upon any patent being issued
to Borrower in or on its NeuroMove products.

     

    (b)        On
or before September 30, 2008, Borrower shall send to each Account Debtor written
notice, in form and content acceptable to Lender as shown on Exhibit D, directing each
Account Debtor to send to the Lockbox address specified by Lender all
remittances with respect to all amounts payable by Account Debtors, and submit
copies of such notices to Lender.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 27 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    Section 8.    FINANCIAL AND
COLLATERAL REPORTING

     

    So long
as this Agreement shall be in effect or any of the Obligations shall be
outstanding, Borrower covenants and agrees as follows:

    

    8.1    Financial
Statements.

     

    (a)         Audited Year-End Financial
Statements.  As soon as available, but in any event within one
hundred twenty (120) days after Borrower’s
Fiscal Year-End, Borrower shall furnish to Lender copies of Borrower’s Fiscal
Year-End audited consolidated and consolidating balance sheet of Borrower and
its subsidiaries as of the Fiscal Year-End and the related audited consolidated
and consolidating statements of income, shareholders’ equity and cash flow for
such fiscal year, in each case setting forth in comparative form the figures for
the previous year of Borrower and its subsidiaries, together with an unqualified
audit report certified by independent certified public accountants selected by
Borrower and acceptable to Lender.  In addition, on or before such
date, Borrower shall provide Lender with copies of all management reports
received from its certified public accountants.

     

    (b)         Monthly Financial
Statements.  As soon as available, but in any event within
twenty (20) days after the end of each month, Borrower shall furnish to Lender
copies of the unaudited consolidated and consolidating balance sheet of Borrower
and its subsidiaries as of the end of such month and the related unaudited
consolidated and consolidating income statement and statement of cash flow of
Borrower and its subsidiaries for such month and for the portion of the fiscal
year of Borrower through such month, certified by the chief financial officer of
Borrower as presenting fairly the financial condition and results of operations
of Borrower and its subsidiaries as of the date thereof and for the periods
ended on such date, subject to normal year-end adjustments.

     

    (c)         Projected Financial
Statements.  At least thirty (30) but not more than sixty (60)
days prior to the Fiscal Year-End of Borrower, Borrower shall furnish to Lender
forecasted financial statements, prepared by Borrower, consisting of
consolidated and consolidating balance sheets, cash flow statements and income
statements of Borrower and its subsidiaries, reflecting projected borrowing
hereunder and setting forth the assumptions on which such forecasted financial
statements were prepared, covering the one-year period until the next fiscal
year end.

     

    All such
financial statements shall be complete and correct in all material respects and
all such financial statements referred to in clauses (a) and (b) shall be prepared
in accordance with GAAP (except, with respect to interim financial statements,
for the omission of footnotes) applied consistently throughout the periods
reflected therein.  Further, all such financial statements shall be in
a form acceptable to Lender.

     

    8.2    Compliance
Certificate.  Together with each delivery of financial
statements required by Sections 8.1(a) and
(b), Borrower
shall furnish to Lender a certificate of Borrower’s president or chief financial
officer in the form of Exhibit
B.

     

    8.3    Collateral Information and
Reports.

     

    (a)         Schedules of
Accounts.  Within ten (10) days after the end of each month,
Borrower shall furnish to Lender a Schedule of Accounts.  Lender must
receive the Schedule of Accounts no later than 5:00 p.m. Pacific Time at least
two (2) business days prior to the receipt of the Borrowing Base Certificate for
purposes of determining the amount of any Advance.

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 28 of 43

          
            

          

        

        
           

        

      

    

     

    (b)         Schedules of Accounts
Payable.  Within ten (10) days after the end of each month,
Borrower shall furnish to Lender a schedule of accounts payable of Borrower and
aging information as of the last business day of such month setting forth
(i) a detailed aged trial balance of all of Borrower’s then existing
accounts payable, specifying the name of and the balance due to each creditor,
and (ii) a reconciliation to the schedule of accounts payable to Borrower’s
general ledger as of such month end.

     

    (c)         Borrowing Base
Certificate.  Not less often than monthly or such other period
of time as specified by Lender, Borrower shall furnish to Lender a Borrowing
Base Certificate, along with supporting documentation, in form and substance
satisfactory to Lender (including but not limited to information on sales,
credits, collections, adjustments, and Accounts).

     

    (d)         Reconciliation.  Not
less than monthly Borrower shall prepare and submit to Lender a reconciliation
of the most recently submitted Borrowing Base Certificate to the Borrower’s most
recently submitted month-end unaudited consolidated and consolidating balance
sheet of Borrower and its subsidiaries.

     

    (e)         Tax
Returns.   Borrower shall within fifteen (15) days after
filing, provide Lender a copy of all federal, state and local income tax
returns, all payroll tax returns, all sales tax returns or any other tax return
or filing filed by Borrower or any Affiliate of Borrower.

     

    (f)         NeuroMove.  Borrower
shall report at the end of each quarter on the status of Borrower’s patent
application on Borrowers’ NeuroMove products.

     

    (g)         Other
Information.  Lender may, in its sole and absolute discretion,
from time to time require Borrower to deliver the schedules and certificates
described in Section
8.3 more or less often and on different schedules than specified in such
Section.  Borrower shall also furnish to Lender such other additional
information as Lender may from time to time request.

     

    (h)         Certification.  Each
of the schedules and certificates delivered to Lender by Borrower pursuant to
this Section
8.3 shall be in a form acceptable to Lender and shall be signed and
certified by the president, chief financial officer, or treasurer of Borrower to
be true, correct, and complete as of the date indicated thereon.  In
the event any of such schedules or certificates are delivered electronically or
without signature, such schedules and/or certificates shall, by virtue of their
delivery, be deemed to have been signed and certified by the president of
Borrower to be true, correct, and complete as of the date indicated
thereon.

     

    Section 9.    NEGATIVE
COVENANTS

     

    So long
as this Agreement shall be in effect or any of the Obligations shall be
outstanding, Borrower covenants and agrees as follows:

     

    9.1    Financial
Covenants.

     

    (a)         Minimum
EBITDA.  Borrower shall at all times continuously maintain the
Minimum EBITDA amount shown on Schedule A.

     

    (b)         Minimum Debt Service
Coverage Ratio.  Borrower shall at all times continuously
maintain the Minimum Debt Service Coverage Ratio shown on Schedule A.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 29 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    (c)         Minimum Current
Ratio.  Borrower shall at all times continuously maintain the
Minimum Current Ratio amount shown on Schedule A.

     

    (d)         Capital
Expenditures.  Borrower shall not, directly or indirectly, make
or incur Capital Expenditures which exceed in the aggregate in any fiscal year
the amount shown on Schedule
A.  The amounts listed in Schedule A for Capital
Expenditures shall not include amounts Borrower expends for rental units that
are rented to patients by Borrower.

     

    (e)         Operating Leases.
 Borrower shall
not, directly or indirectly, suffer to exist or enter into any lease other than
a Capitalized Lease which would cause the annual payment obligations of Borrower
under all leases (other than Capitalized Leases) to exceed  the amount
shown on Schedule
A.

     

    (f)         Permitted
Indebtedness.  Borrower shall not incur purchase money
Indebtedness to finance, or provide the funds for, the acquisition of assets,
which outstanding principal Indebtedness exceeds the amount shown on Schedule A, plus (ii) the
Indebtedness described on Schedule 5.1 attached
hereto and made a part hereof, plus (iii) the
Obligations.

     

    9.2    Prohibited Distributions and
Payments, Etc.  Borrower shall not, directly or indirectly,
declare or make any Prohibited Distribution or Prohibited Payment, except as
follows: on the express condition that no Default or Event of Default has
occurred or would result therefrom,

     

    (a)        Zynex,
Inc. may make regularly scheduled payments of principal and interest on the
Shareholder’s Loans, including demand payments on the Shareholder’s Loan
evidenced by a demand promissory note; and

     

    (b)        Borrower
may pre-pay purchase money Capitalized Lease Obligations.

     

    9.3    Indebtedness.  Except
as disclosed on Schedule 5.1,
Borrower shall not, directly or indirectly, create, assume, or otherwise become
or remain obligated in respect of, or permit or suffer to exist or to be
created, assumed, or incurred or to be outstanding, any Indebtedness, except for
Permitted Indebtedness.

     

    9.4    Liens.  Borrower
shall not, directly or indirectly, create, assume, or permit or suffer to exist
or to be created or assumed any Lien on any of the property or assets of
Borrower, real, personal or mixed, tangible or intangible, except for Permitted
Liens or the liens identified on Schedule
5.1.

     

    9.5    Loans.  Borrower
shall not make any loans or advances to or for the benefit of any officer,
director, manager, shareholder, member, or partner of Borrower except advances
for routine expense allowances in the ordinary course of
business.  Borrower shall not make or suffer to exist any loans or
advances to or for the benefit of any Affiliate of Borrower, except for loans or
advances from one Borrower to another.  Borrower shall not make any
payment on any obligation owing to any officer, director, manager, shareholder,
member, partner, or Affiliate of Borrower, except payments of any reasonable
compensation (whether salary, bonus, stock awards or other compensation amounts
as reported as executive compensation on Borrower’s annual report or proxy
statement filed with the Securities and Exchange Commission) and payments to the
holder of any Subordinated Indebtedness, if any, in accordance with the terms of
the subordination agreement among such subordinated creditor, Borrower, and
Lender.

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 30 of 43

          
            

          

        

        
           

        

      

    

     

    9.6    Merger, Consolidation, Sale
of Assets, Acquisitions.  Borrower shall not, directly or
indirectly, merge or consolidate with any other Person or sell, lease, or
transfer or otherwise dispose of any assets to any Person, other than sales of
inventory or licensing of assets in the ordinary course of business, or the
disposition of worn out, obsolete property or property no longer used by
Borrower.  Borrower shall not directly or indirectly acquire all or
substantially all of the assets of any Person or the assets constituting the
business or a division or operating unit of any Person.

     

    9.7    Transactions with
Affiliates.  Borrower shall not, directly or indirectly, effect
any transaction with any Affiliate on a basis less favorable to Borrower than
would be the case if such transaction had been effected with a Person not an
Affiliate, provided
that Borrower shall not enter into any lease with any Affiliate.

     

    9.8    Deposit
Accounts.  Borrower shall not establish any Deposit Account
other than those described on Schedule
5.1.

     

    9.9    Guaranties.  Borrower
shall not, directly or indirectly, become or remain liable with respect to any
guaranty of any obligation of any other Person.

     

    9.10    Benefit
Plans.  Borrower shall not, directly or indirectly, permit, or
take any action which would cause, the Unfunded Vested Liabilities under all
Benefit Plans of Borrower to exceed $0.

     

    9.11    Sales and
Leasebacks.  Borrower shall not, directly or indirectly, enter
into any arrangement with any Person providing for the leasing from such Person
of real or personal property which has been or is to be sold or transferred,
directly or indirectly, by Borrower to such Person.

     

    9.12    Amendments.  Borrower
shall not amend or modify, or permit any amendment or modification to, whether
orally, in writing, or otherwise, any agreement evidencing or relating to
Subordinated Indebtedness.

     

    9.13    USA Patriot
Act.  Borrower shall not (a) be or become subject at any
time to any law, regulation, or list of any government agency (including,
without limitation, the U.S. Office of Foreign Asset Control list) that
prohibits or limits Lender from making any advance or extension of credit to
Borrower or from otherwise conducting business with Borrower, or (b) fail
to provide documentary and other evidence of Borrower’s or its corporate
officers’ identities as may be requested by Lender at any time to enable Lender
to verify Borrower’s identity or to comply with any applicable law or
regulation, including, without limitation, Section 326 of the USA Patriot Act of
2001, 31 U.S.C. §5318.

     

    Section 10.    DEFAULT

     

    10.1    Events of
Default.  Each of the following events shall constitute an
Event of Default:

     

    (a)         Borrower
fails to pay any of the Obligations when due and payable;

     

    (b)         Borrower
fails to continuously observe, meet, or perform any term, covenant obligation,
or duty contained in this Agreement or any of the Loan Documents;

     

    (c)         Any
Obligor fails to timely perform properly any covenant in this Agreement or in
any of the other Loan Documents;

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 31 of 43

          
            

          

        

        
           

        

      

    

     

    (d)         Any
Lockbox Agreement is breached or terminated;

     

    (e)         There
is an occurrence of any default or event of default under any of the other Loan
Documents;

     

    (f)         Borrower
defaults under any other agreement with Lender;

     

    (g)         Any
representation or warranty contained herein or in any of the other Loan
Documents is false or misleading in any material respect when made or deemed
made;

     

    (h)         Borrower
shall (i) apply for or consent to the appointment of a receiver, trustee,
custodian, intervenor, or liquidator of Borrower or of all or a substantial part
of Borrower’s assets, (ii) file a voluntary petition in bankruptcy, (iii) admit
in writing that Borrower is unable to pay its debts as they become due, (iv)
make a general assignment for the benefit of creditors, (v) file a petition or
answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy or insolvency proceeding, or (vii) take corporate,
company, or partnership action for the purpose of effecting any of the
foregoing;

     

    (i)         Either
(i) an involuntary petition or complaint shall be filed against Borrower
seeking bankruptcy or reorganization of Borrower or the appointment of a
receiver, custodian, trustee, intervenor, or liquidator of Borrower, or of all
or substantially all of Borrower’s assets or (ii) an order, order for
relief, judgment, or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of Borrower or appointing an intervenor or liquidator of
Borrower, or of all or substantially all of Borrower’s assets;

     

    (j)         Any
Obligor other than Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian, intervenor, or liquidator of such Obligor or of
all or a substantial part of such Obligor’s assets, (ii) file a voluntary
petition in bankruptcy, (iii) admit in writing that such Obligor is unable to
pay its debts as they become due, (iv) make a general assignment for the benefit
of creditors, (v) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or insolvency
proceeding, or (vii) take corporate, company, or partnership action for the
purpose of effecting any of the foregoing;

     

    (k)         An
involuntary petition or complaint shall be filed against any Obligor other than
Borrower seeking bankruptcy or reorganization of such Obligor or the appointment
of a receiver, custodian, trustee, intervenor, or liquidator of such Obligor, or
of all or substantially all of such Obligor’s assets; or an order, order for
relief, judgment, or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of such Obligor or appointing an intervenor or liquidator
of such Obligor, or of all or substantially all of such Obligor’s
assets;

     

    (l)         Any
money judgment is rendered against Borrower that is not paid within thirty (30)
days, or the failure, within a period of ten (10) days after the commencement
thereof, to have discharged any attachment, sequestration, or similar
proceedings against Borrower’s assets;

     

    (m)         Lender
shall cease to have a valid, perfected, and first priority Lien on any of the
Collateral, except as otherwise expressly permitted herein or consented to in
writing by Lender;

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 32 of 43

          
            

          

        

        
           

        

      

    

     

    (n)         Lender
reasonably believes that the prospect of payment or performance by Borrower
under any of the Loan Documents is or may be impaired or any of the Collateral
is or may be in jeopardy, becomes unsafe or insecure, or its value is or may
become otherwise impaired;

     

    (o)         Thomas
Sandgaard shall cease to own, beneficially and of record, at least 51% of the
outstanding voting capital stock of Zynex, Inc.;

     

    (p)         Zynex,
Inc. shall cease to own 100% of the capital stock of Zynex Medical,
Inc.;

     

    (q)         There
shall be any Change of Control;

     

    (r)         Any
guarantor of the Obligations, or such guarantor’s successors, heirs, or personal
representatives, shall (i) default under the terms of its guaranty to
Lender, (ii) repudiate its or his/her obligations under, or commit an
anticipatory breach of, its or his/her guaranty executed for the benefit of
Lender or (iii) attempt to terminate such guaranty, or (iv) commence
any legal proceeding to terminate or hold invalid in any respect such guaranty;
or

     

    (s)         There
is any default under the Validity Guaranty.

     

    For any
Event of Default other than a default arising for failure to pay any of the
Loans when due, Lender shall provide Borrower with fifteen (15) days written
notice of Event of Default and opportunity to cure such noticed Event of
Default.

    

    10.2    Remedies.

     

    (a)         Acceleration and Termination
of Facilities.  Upon the occurrence of an Event of Default,
(i) the principal of and the accrued interest on the Loans at the time
outstanding, and all other amounts owed to Lender under this Agreement or any of
the Loan Documents and all other Obligations, shall thereupon become due and
payable upon Lender’s notice of acceleration, but without other presentment,
demand, protest, notice of protest and non-payment, notice of default, or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or any of the Loan Documents to the contrary notwithstanding, and
(ii) the commitment of Lender to make Loans hereunder shall immediately
terminate.

     

    (b)         Other
Remedies.  Without limiting the terms of Section 10.2(a)
above, if any Event of Default shall have occurred and be continuing, Lender, in
its sole and absolute discretion, may:

     

    (i)           declare
the principal of and accrued interest on the Loans at the time outstanding, and
all other amounts owed to Lender under this Agreement or any of the Loan
Documents and all other Obligations, to be forthwith due and payable, whereupon
the same shall immediately become due and payable without presentment, demand,
protest, notice of protest and non-payment, notice of default, notice of
acceleration or intention to accelerate, or other notice of any kind, all of
which are expressly waived, anything in this Agreement or the Loan Documents to
the contrary notwithstanding;

     

    (ii)           terminate
any commitment of Lender to make Loans hereunder;

     

    (iii)           enter
upon any premises where Collateral is located and take possession of the
Collateral;

    

    
      
        
        

      

      
        Exhibit
10.1 - Page 33 of 43

        
          

        

      

      
        
        

      

    

    

     

    (iv)           collect
any Accounts from any Account Debtor;

     

    (v)           require
Borrower to assemble the Collateral and make it immediately available to
Lender.  Without limiting the generality of the foregoing with respect
to that portion of the Collateral that is comprised of Patient Lists, Borrower
shall make immediately available all Patient Lists to Lender;

     

    (vi)           sell
all or any part of the Collateral at either a public or private sale or both, by
way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower’s premises) as Lender determines
is commercially reasonable;

     

    (vii)           collect,
foreclose, receive, appropriate, set off, and realize upon any and all
Collateral;

     

    (viii)           without
notice to Borrower (such notice being expressly waived), and without
constituting an acceptance of any Collateral in satisfaction of an obligation
(within the meaning of the UCC or any successor statute or law of similar
effect), set off and apply to the Obligations any and all balances and deposits
of Borrower held by Lender (including any amounts received in the Lockboxes), or
indebtedness at any time owing to or for the credit or the account of Borrower
held by Lender;

     

    (ix)           obtain
the appointment of a receiver, trustee, or similar official over Borrower to
manage all of Borrower’s affairs and to effect all transactions contemplated by
this Agreement, realize upon the Collateral, or as is otherwise necessary to
perform or enforce this Agreement;

     

    (x)           declare
a default on any other contract or agreement between Borrower and Lender;
and

     

    (xi)           exercise
any or all rights and remedies available under the Loan Documents, at law and/or
in equity including, without limitation, the rights and remedies of a secured
party under the UCC (whether or not the UCC is applicable).  Borrower
agrees that, to the extent notice of sale shall be required by law, at least
ten (10) days’
notice to Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable notice,
but notice given in any other reasonable manner or at any other reasonable time
shall also constitute reasonable notification.

     

    10.3    Application of
Proceeds.  All proceeds from each sale of, or other realization
upon, all or any part of the Collateral following an Event of Default shall be
applied to the payment of the Obligations (with Borrower remaining liable for
any deficiency) in any order which Lender may elect with the balance (if any)
paid to Borrower or to whomsoever is entitled thereto.

     

    10.4    Power of
Attorney.  Borrower hereby irrevocably designates, makes,
constitutes, and appoints Lender (and all Persons designated by Lender from time
to time) as Borrower’s true and lawful attorney and agent in fact to act in name
of Borrower to effectuate any term in this Agreement after the occurrence and
during the continuation of any Event of Default.  Without limiting the
generality of the foregoing, Borrower’s power of attorney to Lender authorizes
Lender to:

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 34 of 43

          
            

          

        

        
           

        

      

    

    

     

    (a)         demand
payment of the Accounts, enforce payment thereof by legal proceedings or
otherwise, settle, adjust, compromise, extend, or renew any or all of the
Accounts or any legal proceedings brought to collect the Accounts, discharge and
release the Accounts or any of them, and exercise all of Borrower’s rights and
remedies with respect to the collection of Accounts;

     

    (b)         prepare,
file, and sign the name of Borrower on any proof of claim in bankruptcy or any
similar document against any Account Debtor or any notice of Lien, assignment,
or satisfaction of Lien or similar document in connection with any of the
Collateral;

     

    (c)         use
the stationery of Borrower, open Borrower’s mail, notify the post office
authorities to change the address for delivery of Borrower’s mail to an address
designated by Lender, and sign the name of Borrower to verifications of the
Accounts and on any notice to the Account Debtors; and

     

    (d)         use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, inventory, or other
Collateral.

     

    10.5    Joint and Several
Liability.   Zynex, Inc., and Zynex Medical, Inc. are
jointly and severally liable under this Agreement.

     

    10.6    Additional Provisions
Concerning Rights and Remedies.

     

    (a)         Time
Essence.  Time is of the essence of all of Borrower’s
Obligations under this Agreement.

     

    (b)         Rights
Cumulative.  The rights and remedies of Lender under the Loan
Documents shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have.  In exercising such rights and remedies,
Lender may be selective and no failure or delay by Lender in exercising any
right shall operate as a waiver of such right nor shall any single or partial
exercise of any power or right preclude its other or further exercise or the
exercise of any other power or right

     

    (c)         Extensions of
Time.  Lender may extend or postpone the due dates of
Borrower’s Obligations, amend any agreement evidencing, guaranteeing, or
securing any of Borrower’s Obligations, take or not take any action respecting
any of the Collateral, or extend or postpone the due dates of Borrower’s
Obligations without affecting Borrower’s liability under this
Agreement.

     

    (d)         Waiver of
Marshaling.  Borrower hereby waives any right to require any
marshaling of assets and any similar right.

     

    10.7    Trademark
License.  All trademarks, patents, copyrights, service marks
and licenses owned by Borrower, and all trademarks, patents, copyrights, service
marks, and software licensed by Borrower, are listed on Schedule
5.1.  Borrower hereby grants to Lender the nonexclusive right
and license to use all of Borrower’s trademarks, patents, copyrights, service
marks, and licenses and any other trademarks, patents, copyrights, service
marks, and licenses now or hereafter used by Borrower to realize on the
Collateral and to permit any purchaser of any portion of the Collateral through
a foreclosure sale or any other exercise of Lender’s rights and remedies under
the Loan Documents to use, sell, or otherwise dispose of the Collateral bearing
any such trademarks, patents, copyrights, service marks, and
licenses.  Such right and license is granted free of charge, without
the requirement that any monetary payment whatsoever be made to Borrower or any
other Person by Lender.

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 35 of 43

          
            

          

        

        
           

        

      

    

     

    Section
11.    MISCELLANEOUS

     

    11.1    Notices.

     

    (a)         Method of
Communication.  All notices and the communications hereunder
and thereunder shall be in writing.  Notices in writing shall be
delivered personally or sent by overnight courier service, by certified or
registered mail, postage pre-paid, or by facsimile transmission, and shall be
deemed received, in the case of personal delivery, when delivered, in the case
of overnight courier service, on the next business day after delivery to such
service, in the case of mailing, on the third day after mailing (or, if such day
is a day on which deliveries of mail are not made, on the next succeeding day on
which deliveries of mail are made) and, in the case of facsimile transmission,
upon transmittal.

     

    (b)         Addresses for
Notices.  Notices to any party shall be sent to it at the
following addresses, or any other address of which all the other parties are
notified in writing.

     

    
      	 
      	
              If
      to Borrower:

            	 
      	
              See
      Schedule 5.1 for Borrower’s address
      and contact information.

            
	 
      	 
      	 
      	 
      
	 
      	
              If
      to Lender:

            	 
      	
              Marquette
      Healthcare Finance

            
	 
      	 
      	 
      	
              900
      SW Fifth Avenue, Suite 1920

            
	 
      	 
      	 
      	
              Portland,
      Oregon 97204

            
	 
      	 
      	 
      	
              Attention:  Jennifer
      Sheasgreen

            
	 
      	 
      	 
      	
              Facsimile
      No.:  (503) 221-5031

            

    

    

    11.2    Press
Releases.  Borrower and Lender may make press releases or other
public disclosure concerning this Agreement, including without limitation the
execution of this Agreement, and a description of the amount of credit
facilities made available to Borrower with the prior written consent of the
other party, such consent not to be unreasonably withheld or
delayed.  Borrower authorizes Lender to use any of Borrower’s
trademarks, trade names or logos in such press releases or other public
disclosure.  Notwithstanding the forgoing, Borrower may report any
information about this Agreement as required by the Securities Exchange Act of
1934 and the regulations promulgated thereunder without the prior written
consent of Lender.

     

    11.3    Setoff.  In
addition to any rights now or hereafter granted under applicable law, and not by
way of limitation of any such rights, upon and after the occurrence of any Event
of Default, Lender and any participant with Lender in the Loans are hereby
authorized by Borrower at any time or from time to time, without notice to
Borrower or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and to apply any and all deposits (general or
special, time or demand, including, but not limited to, indebtedness evidenced
by certificates of deposit, whether matured or unmatured) and any other
indebtedness at any time held or owing by Lender or any participant to or for
the credit or the account of Borrower against and on account of the Obligations
irrespective or whether or not (a) Lender shall have made any demand under this
Agreement or any of the Loan Documents, or (b) Lender shall have declared any or
all of the Obligations to be due and payable as permitted by Section 10.2 and
although such Obligations shall be contingent or unmatured.

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 36 of 43

          
            

          

        

        
           

        

      

    

    

    

     

    11.4    Venue; Service of
Process. BORROWER HEREBY
IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN MULTNOMAH COUNTY, OREGON, and agrees and consents that service
of process may be made upon it in any legal proceeding relating to this
Agreement, any borrowing hereunder, or any other relationship between Lender and
Borrower by any means allowed under state or federal law.  Any legal
proceeding arising out of or in any way related to this Agreement, any borrowing
hereunder, or any other relationship between Lender and Borrower may be brought
and litigated in any one of the state or federal courts located in Multnomah
County, Oregon.  Borrower and Lender waive and agree not to assert, by
way of motion, as a defense or otherwise, that any such proceeding is brought in
an inconvenient forum or that the venue thereof is improper.  Nothing
herein shall limit the right of the Lender to bring proceedings against Borrower
in the courts of any other jurisdiction.  Any judicial proceeding by
Borrower against the Lender involving, directly or indirectly, any matter in any
way arising out of, related to, or in connection with this Agreement shall be
brought only in a court in Portland, Oregon. Borrower expressly waives
personal service of the summons and complaint or other process or papers issued
therein and agrees that service of such summons and complaint or other process
or papers may be made by registered or certified mail addressed to Borrower at
the address referenced in Section 11.1, which
service shall be deemed to have been made on the date that receipt is deemed to
have occurred for registered or certified mail as provided in Section
11.1.

     

    11.5    Assignment;
Participation.  All the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights or obligations under this Agreement. Lender may assign to one or more
Persons, or sell participations to one or more Persons in, all or a portion of
its rights and obligations hereunder and under this Agreement and any promissory
notes issued pursuant hereto and, in connection with any such assignment or sale
of a participation, may assign its rights and obligations under the Loan
Documents.  Borrower agrees that Lender may provide any information
that Lender may have about Borrower or about any matter relating to this
Agreement to any of its Affiliates or their successors, or to any one or more
purchasers or potential purchasers of any of its rights under this Agreement or
any one or more participants or potential participants.

     

    11.6    Amendments.  Any
term, covenant, agreement, or condition of this Agreement or any of the other
Loan Documents may be amended or waived, and any departure therefrom may be
consented to if, but only if, such amendment, waiver, or consent is in writing
signed by Lender and, in the case of an amendment, by
Borrower.  Unless otherwise specified in such waiver or consent, a
waiver or consent given hereunder shall be effective only in the specific
instance and for the specific purpose for which given.

     

    11.7    Performance of Borrower’s
Duties.  If Borrower shall fail to do any act or thing which it
has covenanted to do under this Agreement or any of the Loan Documents, Lender
may (but shall not be obligated to) do the same or cause it to be done either in
the name of Lender or in the name and on behalf of Borrower, and Borrower hereby
irrevocably authorizes Lender so to act.

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 37 of 43

          
            

          

        

        
           

        

      

    

     

    11.8    Indemnification.  Borrower
shall reimburse Lender and its Affiliates and their officers, employees,
directors, shareholders, agents, and legal counsel (collectively, the “Indemnified Parties”
and individually, an “Indemnified Party”)
for all reasonable costs and expenses, including legal fees and expenses,
incurred and shall indemnify and hold the Indemnified Parties harmless from and
against all losses suffered by any Indemnified Party, other than losses
resulting from an Indemnified Party’s gross negligence or willful misconduct, in
connection with (a) the exercise by Lender or any of its Affiliates of any
right or remedy granted to it under this Agreement or any of the Loan Documents
or at law, (b) any claim, and the prosecution or defense thereof, arising
out of or in any way connected with this Agreement or any of the Loan Documents,
except in the case of a dispute between Borrower and Lender in which Borrower
prevails in a final unappealed or unappealable judgment, and (c) the
collection or enforcement of the Obligations or any of them.  BORROWER AND LENDER EXPRESSLY INTEND
THAT THE FOREGOING INDEMNITY SHALL COVER, AND THAT BORROWER SHALL INDEMNIFY AND
HOLD THE INDEMNIFIED PARTIES HARMLESS FROM AND AGAINST, COSTS, EXPENSES, AND
LOSSES SUFFERED AS A RESULT OF THE NEGLIGENCE OF ANY INDEMNIFIED
PARTY.

     

    11.9    All Powers Coupled with
Interest.  All powers of attorney and other authorizations
granted to Lender and any Persons designated by Lender pursuant to any
provisions of this Agreement or any of the Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied or Lender has any obligations to make
Advances hereunder.

     

    11.10    Severability of
Provisions.  Any provision of this Agreement or any other Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective only to the extent of such prohibition or
unenforceability without invalidating the remainder of such provision or the
remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

     

    11.11    Governing
Law.  This Agreement and the promissory notes issued pursuant
hereto shall be construed in accordance with and governed by the laws of the
State of Oregon other than its conflict of laws principles.

     

    11.12    Jury
Waiver.  BORROWER AND LENDER HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT,
OR OTHERWISE) BETWEEN OR AMONG BORROWER AND LENDER AND LENDER’S AFFILIATES
ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT,
OR ANY RELATIONSHIP BETWEEN LENDER AND BORROWER OR BETWEEN BORROWER AND ANY
AFFILIATE OF LENDER.  THIS PROVISION IS A MATERIAL INDUCEMENT TO
LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN
DOCUMENTS.

     

    11.13    Attorney Fees and
Costs.The prevailing party in any litigation arising under or related to
this Agreement shall be entitled to recover from the non-prevailing party all of
the prevailing party’s reasonable attorney fees incurred in connection with such
litigation, together with all costs, deposition costs, court fees and other
costs and expenses of such litigation.

     

    
      
        
           

        

        
          Exhibit
10.1 - Page 38 of 43

          
            

          

        

        
           

        

      

    

     

    11.14    Counterparts.  This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and shall be binding upon all parties, their successors and
assigns, and all of which taken together shall constitute one and the same
agreement.  A facsimile or digital copy of any signed Loan Document,
including this Agreement, shall be deemed to be an original
thereof.

     

    11.15    Patriot Act
Notice.  IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A
NEW ACCOUNT.  To help the government fight the funding of terrorism
and money- laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies each
person or entity that opens an account, including any deposit account, treasury
management account, loan, other extension of credit, or other financial services
product.  What this means for Borrower:  When Borrower opens
an account, if Borrower is an individual, Lender will ask for Borrower’s name,
residential address, date of birth, and other information that will allow Lender
to identify Borrower, and if Borrower is not an individual, Lender will ask for
Borrower’s name, employer identification number, business address, and other
information that will allow Lender to identify Borrower.  Lender may
also ask, if Borrower is an individual, to see Borrower’s driver’s license or
other identifying documents, and if Borrower is not an individual, to see
Borrower’s legal organizational documents or other identifying
documents.

     

    11.16    Confidentiality.  In
handling any confidential information of Borrower, Lender will exercise
reasonable care, but disclosure of information may be made (i) to Lender’s
subsidiaries, Affiliates and representatives in connection with their business
with Borrower, (ii) to prospective transferees or purchasers of any interest in
the Loans, (iii) as required by law, regulation, subpoena, or other order, (iv)
as required in connection with Lender’s examination or audit and (v) as Lender
considers appropriate exercising any of its rights, responsibilities or remedies
under this Agreement.  Confidential information does not include
information that either:  (a) is in the public domain or in Lender’s
possession when disclosed to Lender, or becomes part of the public domain after
disclosure to Lender; or (b) is disclosed to Lender by a third party, if Lender
does not know that the third party is prohibited from disclosing the
information.  Lender will not use any of Borrower’s confidential
information in violation of any applicable securities laws.

     

    11.17    Statutory
Disclaimer.  UNDER OREGON LAW, MOST AGREEMENTS, PROMISES, AND
COMMITMENTS MADE BY A LENDER AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER
CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR
SECURED SOLELY BY THE BORROWER’S RESIDENCE, MUST BE IN WRITING, EXPRESS
CONSIDERATION, AND BE SIGNED BY THE LENDER TO BE ENFORCEABLE.

     

    [Signature
Page to Follow]

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 39 of 43

          
            

          

        

        
           

        

      

    

    

    THIS WRITTEN LOAN AGREEMENT REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

    

    

    
      	
              ZYNEX,
      INC.

            	 
	 
      	 
	 
      	 
	
              By:
      /s/ Thomas Sandgaard

            	 
	
              Name:  Thomas
      Sandgaard

            	 
	
              Title:  Chief
      Executive Officer and President

            	 
	 
      	 
	 
      	 
	
              ZYNEX,
      MEDICAL INC., f/d/b/a Stroke Recovery Systems

            	 
	 
      	 
	 
      	 
	
              By:
      /s/ Thomas Sandgaard

            	 
	
              Name:  Thomas
      Sandgaard

            	 
	
              Title:  President

            	 
	 
      	 
	 
      	 
	
              MARQUETTE
      BUSINESS CREDIT, INC., d/b/a MARQUETTE HEALTHCARE FINANCE

            	 
	 
      	 
	 
      	 
	
              By:
      /s/ Jennifer
    Sheasgreen

            	 
	
              Name:  Jennifer
      Sheasgreen

            	 
	
              Title:  Senior
      Vice President

            	 

    

     

    

    
      
        
           

        

        
          Exhibit
10.1 - Page 40 of 43

          
            

          

        

        
           

        

      

    

    

    Schedule
A

    Supplemental
Terms and Conditions

    

    
      	
              Facility
      Limit:

            	 	
              $3,000,000

            	 
	
              Margin:

            	 	
              2.5%

            	 
	
              Default
      Rate:

            	 	
              3.0%
      above the Interest Rate (i.e., Base Rate plus Margin).

            	 
	
              Concentration
      Limit*:

            	 	
              N/A

            	 
	
              Advance
      Rate on Eligible Accounts*:

               

               

            	 	
              85%
      of Eligible Accounts less than 120 days from the invoice
date;

              Account
      debtors with 50% or more of their total Account balance aged beyond 120
      days are ineligible, except for Medicare and Anthem Blue
      Cross.

            	 
	
              NCV
      (by Account Debtor type)*

            	 	 
      	 
	
              Medicare

            	 	
              26%

            	 
	
              Commercial

            	 	
              36%

            	 
	
              Unlitigated
      Workers Compensation

            	 	
              36%

            	 
	
              Self-pay

            	 	
              0%

            	 
	
              Reserve
      (initial amount)*:

            	 	
              $0.00

            	 
	
              Origination
      Fee:

            	 	
              1.5%
      of the Facility Limit ($45,000) due upon execution of this
      Agreement.

            	 
	
              Termination
      Date:

               

            	 	
              3
      years from the Closing Date

            	 
	
              Minimum
      Facility Availability as of the Closing Date after giving effect to the
      first Advance of the Loan and the Reserve established by
      Lender:

            	 	
              $150,000.

            	 
	
              Minimum
      EBITDA

            	 	
              Borrower’s
      Minimum EBITDA (on a trailing twelve-month basis) as of each quarterly
      reporting period shall be as set forth below:

               

              9/30/08:    $7,800,000

              12/31/08:  $9,600,000

              3/31/09:    $11,100,000

              6/30/09:    $12,500,000

              9/30/09:    $13,800,000

              12/31/09
      and thereafter:  $15,100,000

            	 
	
              Minimum
      Debt Service Coverage Ratio

            	 	
              From
      9/30/08 and thereafter, Borrower’s Minimum Current Ratio shall be at least
      3.0 to 1.0, measured on a quarterly basis.

               

            	 

    

     

     

    
      
        
        

      

      
        Exhibit
10.1 - Page 41 of 43

        
          

        

      

      
        
        

      

    

     

     

     

    
      	
              Minimum
      Current Ratio

            	 	
              From
      9/30/08 and thereafter, Borrower’s Minimum Current Ratio shall be at least
      1.5 to 1.0, measured on a quarterly basis.

               

            	 
	
              Capital
      Expenditures:

               

            	 	
              Borrower
      shall not, directly or indirectly, make or incur (i) unfinanced Capital
      Expenditures which exceed, in the aggregate, $600,000 in any fiscal year,
      or (ii) financed Capital Expenditures which exceed, in the aggregate,
      $800,000 in any fiscal year, exclusive of amounts Borrower expends for
      rental units that are rented to patients by Borrower.

            	 
	
              Maximum
      outstanding principal purchase money Indebtedness to finance, or provide
      the funds for, the acquisition of assets (used for the calculation of
      Permitted Indebtedness):

            	 	
              Total
      purchase money Indebtedness is limited in all respects in accordance with
      the provisions of the Agreement related to Capital
      Expenditures.  Purchase money Indebtedness other than Capital
      Expenditures without the prior consent of Lender is
      prohibited.

            	 
	
              Threshold
      for notice for amounts in dispute as set forth in Section 6.3(a).

            	 	
              $5,000

            	 
	
              Threshold
      for notice with respect to returns and credits as set forth in Section 6.3(b).

            	 	
              $25,000

            	 
	
              Account
      reduction limit as set forth in Section
      6.3(c).

            	 	
              $5,000
      with respect to a single account

              $25,000
      in the aggregate in any fiscal year

            	 
	
              Cut-Off
      Date:

            	 	
              120
      days after the date of invoice.

            	 
	
              Cross-Age
      Percentage*:

            	 	
              50%
      of total balance due from any insurance company that is aged beyond 120
      days with the exception of Medicare and Anthem Blue Cross.

            	 
	
              Annual
      Facility Fee:

            	 	
              None

            	 

    

     

    
 

    
      
        
           

        

        
          Exhibit
10.1 - Page 42 of 43

          
            

          

        

        
           

        

      

    

    

    Schedule
A (continued)

    Supplemental
Terms and Conditions

     

    
      	
              Early
      Termination Fee:

            	 	
              3%
      of the Facility Limit prior to the first annual anniversary of the Closing
      Date; 2% of the Facility Limit at anytime from the first anniversary to
      the second annual anniversary of the Closing Date: and 1% at anytime from
      the second anniversary to the day prior to the Termination Date of the
      Loan.

            	 
	
              Unused
      Line Fee:

            	 	
              0.5%
      per annum payable monthly in arrears on the first day of each month,
      calculated on the difference between the average daily balance and the
      total Facility Limit

            	 
	
              Collateral
      Monitoring Fee:

            	 	
              $1,500
      per month, payable monthly in arrears on the first day of each
      month.

            	 
	
              Collection
      Clearance Days:

            	 	
              3
      business days clearance on all items deposited into all Lockbox
      Accounts.

            	 
	
              Over
      Advance Fee:

            	 	
              $TBD

            	 
	
              Irregular
      Advance Request Fee:

            	 	
              1%
      of the amount of Borrower’s Advance Request not submitted in conformance
      with the requirements of this Agreement.

            	 
	
              Closing
      and legal fees:

            	 	
              All
      closing and legal fees incurred by Lender in connection with the Loan and
      the Agreement.

            	 
	
              Audit
      Fee:

            	 	
              In
      the event third-party auditors conduct the audit: actual audit fees
      incurred plus all out of pocket expenses.

              In
      the event Lender’s auditors conduct the audit: $1,000 per day, per
      auditor, plus all out of pocket expenses.

            	 
	
              Mailing
      Charges:

            	 	
              All
      costs and expenses of Lender.

            	 
	
              Wire
      Transfer Fees:

            	 	
              $20.00
      per wire

            	 
	
              Waiver
      Fee:

            	 	
              $TBD

            	 
	
              Termination
      Reserve

            	 	
              $10,000

            	 

    

    

    * Subject
to change from time to time in Lender’s sole discretion.

    
Exhibit 10.1 - Page 43
of 43

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