AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE CONFIDENTIAL PORTIONS HAVE BEEN REDACTED AND ARE DENOTED BY A TRIPLE ASTERISK (***). THE CONFIDENTIAL PORTIONS HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

AGREEMENT AND PLAN OF MERGER

by and among

MEDICIS PHARMACEUTICAL CORPORATION (“ Parent ”),

DONATELLO, INC. (“ Merger Sub ”),

LIPOSONIX, INC. (the “ Company ”),

REBECCA ROBERTSON, AS THE EQUITYHOLDERS’ REPRESENTATIVE
(the “ Equityholders’ Representative ”)

and

WILFRED JAEGER, AS THE ALTERNATE EQUITYHOLDERS’ REPRESENTATIVE
(the “ Alternate Equityholders’ Representative ”)

dated as of

June 16, 2008

Table of Contents

EXHIBITS

AGREEMENT AND PLAN OF MERGER

      THIS AGREEMENT AND PLAN OF MERGER , dated as of June 16, 2008 (this “ Agreement ”), is entered into by and among Medicis Pharmaceutical Corporation, a Delaware corporation (“ Parent ”), Donatello, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Parent (“ Merger Sub ”), LipoSonix, Inc., a Delaware corporation (the “ Company ”), Rebecca Robertson, as the Equityholders’ Representative, and Wilfred Jaeger, as the Alternate Equityholders’ Representative. Parent, Merger Sub, the Company, the Equityholders’ Representative and the Alternate Equityholders’ Representative are sometimes referred to herein as the “ Parties .”

      WHEREAS , upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), Parent will acquire the Company through a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the “ Merger ”), which Merger will result in, among other things, the Company becoming a direct wholly-owned subsidiary of Parent;

      WHEREAS , the Board of Directors of Parent has unanimously (i) determined it is advisable and in the best interests of Parent and its stockholders for Parent to acquire the Company upon the terms and conditions set forth herein; and (ii) adopted and approved this Agreement, the Related Agreement and the transactions contemplated hereby and thereby, including the Merger, in accordance with the DGCL;

      WHEREAS , the Board of Directors of Merger Sub has unanimously (i) determined that this Agreement, the Related Agreement and the transactions contemplated hereby and thereby, including the Merger, are advisable and in the best interests of Merger Sub and its sole stockholder; (ii) adopted and approved this Agreement and the Related Agreement; (iii) approved the Merger and the other transactions contemplated under this Agreement and the Related Agreement; (iv) directed that this Agreement and the transactions contemplated hereby, including the Merger, be submitted to the sole stockholder of Merger Sub for consideration and approval by written consent in accordance with the DGCL; and (v) resolved to recommend and recommended the approval of this Agreement and the transactions contemplated hereby, including the Merger, by the sole stockholder of Merger Sub in accordance with the DGCL; and

      WHEREAS , the Board of Directors of the Company has unanimously (i) determined that this Agreement, the Related Agreement and the transactions contemplated hereby and thereby, including the Merger, are advisable and in the best interests of the Company and the Stockholders; (ii) adopted and approved this Agreement and the Related Agreement; (iii) approved the Merger and the other transactions contemplated under this Agreement and the Related Agreement; (iv) approved the proposed amendment to the Charter in the form attached hereto as Exhibit 1 (the “ Charter Amendment ”); (v) directed that this Agreement and the transactions contemplated hereby, including the Merger, and the Charter Amendment be submitted to the Stockholders entitled to vote on such matters for consideration and approval by written consent in accordance with the DGCL; and (vi) resolved to recommend and recommended the approval of this Agreement and the transactions contemplated hereby, including the Merger, and the Charter Amendment by the Stockholders in accordance with the DGCL;

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

ARTICLE 1

DEFINITIONS AND REFERENCES

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

ARTICLE 2

THE MERGER

      Section 2.1 The Merger. Upon the terms and subject to the conditions of this Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation. The Company, as the surviving corporation of the Merger, is hereinafter sometimes referred to as the “ Surviving Corporation ”.

      Section 2.2 Closing; Effective Time. Subject to the provisions of this Agreement, the closing of the Merger (the “ Closing ”) shall take place at the Washington, DC offices of Hogan & Hartson LLP, as soon as practicable, but in no event later than the second (2 ^nd ) Business Day after the satisfaction or, if permissible under applicable Law, waiver of the conditions set forth in Article 7 (excluding conditions that, by their terms, cannot be satisfied until the Closing, but the Closing shall be subject to the satisfaction or, if permissible, waiver of those conditions), or at such other place or in such other manner or on such other date as Parent and the Company may mutually agree in writing. The date on which the Closing actually occurs is hereinafter referred to as the “ Closing Date .” Concurrently with the Closing, on the Closing Date, the Parties hereto shall cause the Merger to be consummated by filing a certificate of merger in the form attached as Exhibit 2.2 hereto (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware, in such form as is required by, and executed and delivered in accordance with, the relevant provisions of the DGCL (the date and time of such filing, or such later time as is specified in the Certificate of Merger and as is agreed to by Parent and the Company, being the “ Effective Time ”) and shall make all other filings or recordings required under the DGCL in connection with the Merger.

      Section 2.3 Effects of the Merger. The Merger shall have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the property, rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

      Section 2.4 Charter; Bylaws.

               (a) The certificate of incorporation of the Surviving Corporation shall be amended at the Effective Time to read in the form attached hereto as Exhibit 2.4 , and, as so amended, such certificate of incorporation shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

               (b) The Company and Merger Sub shall take all necessary actions to cause the bylaws of Merger Sub as in effect immediately prior to the Effective Time to become the bylaws of the Surviving Corporation from and after the Effective Time until thereafter changed or amended as provided therein or by applicable Law; provided , however , that the name of the Company reflected in the bylaws of the Surviving Corporation shall be changed to LipoSonix, Inc.

      Section 2.5 Directors and Officers of the Surviving Corporation. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office until the earlier of his or her resignation, removal or death or until his or her successor is duly elected and qualified, as the case may be, in accordance with the certificate of incorporation and bylaws of the Surviving Corporation and applicable Law. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office with the Surviving Corporation, in each case until the earlier of his or her resignation, removal or death or until his or her successor is duly appointed and qualified, as the case may be, in accordance with the certificate of incorporation and bylaws of the Surviving Corporation and applicable Law.

ARTICLE 3

CONVERSION OF SECURITIES; MERGER CONSIDERATION

      Section 3.1 Conversion of Securities; Merger Consideration. Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the Stockholders:

               (a)  Common Stock . Subject to the provisions of this Article 3 , Article 9 and other applicable provisions in this Agreement, each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares) automatically shall cease to exist and shall no longer be outstanding and shall be converted into the right to receive: (i) an amount of cash (without interest thereon) equal to the Per Share Closing Consideration; and (ii) a contingent right to receive the following: (A) when and if

required to be paid, an additional amount or amounts of cash, if any, required to be distributed with respect to the Escrow Amount and the Equityholders’ Representative Expense Amount, in accordance with and subject to the terms and conditions of Article 9 and the Escrow Agreement; (B) when and if the FDA Milestone Payment is required to be made pursuant to Section 3.9 , an amount of cash (without interest thereon) equal to the Per Share FDA Milestone Payment; (C) when and if the Sales Milestone Payment is required to be made pursuant to Section 3.9 , an amount of cash (without interest thereon) equal to the Per Share Sales Milestone Payment; and (D) when and if any Sales/Profit Contingent Payments are required to be made pursuant to Section 3.9 , with respect to each Sales/Profit Contingent Payment, an amount of cash (without interest thereon) equal to the Per Share Sales/Profit Contingent Payment for the applicable Contingent Payment Year.

               (b)  Preferred Stock . Subject to the provisions of this Article 3 , Article 9 and other applicable provisions in this Agreement, each share of Preferred Stock issued and outstanding immediately prior to the Effective Time (other than any Dissenting Shares) automatically shall cease to exist and shall no longer be outstanding and shall be converted into the right to receive: (i) an amount of cash (without interest thereon) equal to the Per Share Closing Consideration; and (ii) a contingent right to receive the following: (A) when and if required to be paid, an additional amount or amounts of cash, if any, required to be distributed with respect to the Escrow Amount and the Equityholders’ Representative Expense Amount, in accordance with and subject to the terms and conditions of Article 9 and the Escrow Agreement; (B) when and if the FDA Milestone Payment is required to be made pursuant to Section 3.9 , an amount of cash (without interest thereon) equal to the Per Share FDA Milestone Payment; (C) when and if the Sales Milestone Payment is required to be made pursuant to Section 3.9 , an amount of cash (without interest thereon) equal to the Per Share Sales Milestone Payment; and (D) when and if any Sales/Profit Contingent Payments are required to be made pursuant to Section 3.9 , with respect to each Sales/Profit Contingent Payment, an amount of cash (without interest thereon) equal to the Per Share Sales/Profit Contingent Payment for the applicable Contingent Payment Year.

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

                    (i) The “ Aggregate Exercise Price ” means the aggregate exercise price of all Vested Stock Options outstanding as of immediately prior to the Effective Time and which were not exercised during the period beginning with the date of this Agreement and ending immediately prior to the Effective Time and are exercisable upon the payment of cash (whether or not also exercisable via a cashless exercise provision).

                    (ii) The “ Aggregate Exercise Proceeds ” means the aggregate cash proceeds actually received by the Company from the exercise of Vested Stock Options and Warrants during the period beginning on the date of this Agreement and ending immediately prior to the Effective Time.

                    (iii) The “ Closing Merger Consideration ” shall equal the amount of the Total Closing Calculation Amount minus the Aggregate Exercise Price.

                    (iv) The “ Merger Consideration ” shall equal the aggregate amount of the Closing Merger Consideration and, to the extent paid to Participating Rights Holders, all Contingent Payments and the amounts deposited in escrow under the Escrow Agreement.

                    (v) The “ Per Share Closing Consideration ” shall equal the quotient of (A) the Total Closing Calculation Amount divided by (B) the sum of (1) the number of outstanding shares of Common Stock as of immediately prior to the Effective Time, (2) the number of outstanding shares of Preferred Stock as of immediately prior to the Effective Time (assuming that each share of Preferred Stock will continue to be convertible into one share of Common Stock immediately prior to the Effective Time) and (3) the aggregate number of shares of Common Stock issuable pursuant to outstanding Vested Stock Options immediately prior to the Effective Time (such sum in this clause (B), the “ Fully Diluted Total ”). For purposes of clause (B) of this Section 3.1(c)(v), in the case of (x) any Stock Options that are exercised effective immediately prior to the Effective Time, such Stock Options shall not be deemed outstanding immediately prior to the Effective Time, and the shares of Common Stock issued on such exercise shall be deemed outstanding immediately prior to the Effective Time and (y) any Warrants that are converted, exchanged or exercised effective immediately prior to the Effective Time, such Warrants shall not be deemed outstanding immediately prior to the Effective Time, and the shares of Preferred Stock issued on such conversion, exchange or exercise shall be deemed outstanding immediately prior to the Effective Time.

                    (vi) A “ Stock Option ” is any option, right or other security or instrument that is outstanding and issued under the Stock Option Plans and directly or indirectly exercisable for shares of Common Stock.

                    (vii) The “ Total Closing Calculation Amount ” shall equal $150,000,000 plus (A) the Aggregate Exercise Price, plus (B) the Aggregate Exercise Proceeds (only to the extent that such Aggregate Exercise Proceeds are segregated pursuant to Section 6.15(d) and delivered in full at the Closing to Parent), minus (C) the difference, if positive, between (1) the amount necessary to cause all Existing Indebtedness that has not been satisfied in full prior to the Closing (including any amount paid by Parent and deemed to be Existing Indebtedness that has not been satisfied in full pursuant to Section 6.18 ) to be satisfied in full at the Closing, including the principal balances and all accrued and unpaid interest thereon and other fees and costs related thereto that are payable by the Company, minus (2) the aggregate amount of the Company’s cash and cash equivalents as of the Effective Time ( provided , that such amount shall not include any Aggregate Exercise Proceeds), minus (D) the amount of Company Transaction Expenses that have accrued as of the Effective Time and that have not been paid by the Company as of the Effective Time, minus (E) the Escrow Amount and minus (F) the Equityholders’ Representative Expense Amount.

                    (viii) An “ Unvested Stock Option ” is any Stock Option or a portion thereof that is not vested as of immediately prior to the Effective Time.

                    (ix) A “ Vested Stock Option ” is any Stock Option or a portion thereof that is vested as of immediately prior to the Effective Time.

                    (x) A “ Warrant ” is any warrant, right or other security or instrument issued by the Company that is not a Stock Option that is outstanding and directly or indirectly convertible into or exchangeable or exercisable for shares of any series of Preferred Stock.

      Section 3.2 Stock Options and Warrants.

               (a)  Stock Options .

                    (i) Subject to the provisions of this Article 3 , Article 9 and other applicable provisions in this Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the Optionholders, each Vested Stock Option outstanding immediately prior to the Effective Time and not exercised, shall be cancelled, extinguished and terminated and converted into and become a right following the Effective Time to receive: (A) an amount of cash (without interest thereon) equal to (1)(x) the Per Share Closing Consideration minus (y) the exercise price per share of such Vested Stock Option (such amount in this clause (1), the “ Per Option Share Consideration ”), multiplied by (2) the number of shares of Common Stock into which such Vested Stock Option is exercisable as of immediately prior to the Effective Time (such number of shares, the “ Option Shares ”); and (B) a contingent right to receive the following: (1) when and if required to be paid, an additional amount or amounts of cash, if any, distributed with respect to the Escrow Amount and the Equityholders’ Representative Expense Amount, in accordance with and subject to the terms and conditions of Article 9 and the Escrow Agreement; (2) when and if the FDA Milestone Payment is required to be made pursuant to Section 3.9 , an amount of cash (without interest thereon) equal to (x) the Per Share FDA Milestone Payment multiplied by (y) the number of Option Shares; (3) when and if the Sales Milestone Payment is required to be made pursuant to Section 3.9 , an amount of cash (without interest thereon) equal to (x) the Per Share Sales Milestone Payment multiplied by (y) the number of Option Shares; and (4) when and if any Sales/Profit Contingent Payments are required to be made pursuant to Section 3.9 , with respect to each Sales/Profit Contingent Payment, an amount of cash (without interest thereon) equal to (x) the Per Share Sales/Profit Contingent Payment for the applicable Contingent Payment Year multiplied by (y) the number of Option Shares.

                    (ii) As soon as practicable following the date of this Agreement, the Company shall (A) take all actions necessary to cause all issued and outstanding Stock Options granted under the 2001 Stock Option Plan and the 2004 Stock Option Plan and 50% of the issued and outstanding Stock Options granted under the 2008 Stock Option Plan that are unvested as of the date of this Agreement and will remain unvested until as of immediately prior to the Effective Time to vest effective immediately prior to the Effective Time without any further action by the holders of such Stock Options, and to give the holders of such Stock Options the right to exercise such Stock Options effective immediately prior to (and contingent upon the occurrence of) the Effective Time, and (B) notify each holder of Stock Options that are unvested as of the date of this Agreement of such vesting and such right to exercise; provided , however , that any acceleration of vesting of Stock Options and related right to exercise such Vested Stock Options pursuant to this Section 3.2(a)(ii) shall be conditioned on the occurrence of the Effective Time ( i.e. , consummation of the Merger).

                    (iii) Prior to the Effective Time, the Company shall take all actions necessary to, effective as of the Effective Time, terminate the Stock Option Plans so that from and after the Effective Time no employee or other service provider of the Company or any participant under the Stock Option Plans shall have any Stock Options to purchase shares of Common Stock or any other equity interest in the Company (in each case, without the creation of any additional liability of the Company).

                    (iv) Immediately prior to the Effective Time, all Unvested Stock Options shall be cancelled and terminated without payment therefor and have no further force or effect.

               (b)  Warrants . As soon as practicable following the date of this Agreement, but in any event no later than the required notice periods specified in the Warrants, the Company shall notify each holder of outstanding Warrants of this Agreement and the transactions contemplated hereby, including the Merger, and of the right to convert, exchange or exercise such Warrants prior to the Effective Time.

      Section 3.3 Capital Stock of Merger Sub. At the Effective Time, each share of common stock, par value $0.01, of Merger Sub (the “ Merger Sub Common Stock ”) issued and outstanding as of immediately prior to the Effective Time shall be automatically converted into and become one (1) share of common stock of the Surviving Corporation, par value $0.01 (the “ Surviving Corporation Common Stock ”), and shall thereafter constitute all of the issued and outstanding shares of capital stock of the Surviving Corporation. Each stock certificate representing shares of Merger Sub Common Stock shall continue after the Effective Time to represent such shares of Surviving Corporation Common Stock.

      Section 3.4 Parent to Provide Per Share Closing Consideration; Surrender and Exchange of Certificates; Escrow Amount.

               (a)  Maximum Payment to be Made by Parent at Closing . Notwithstanding anything in this Agreement to the contrary, at the Closing, neither Parent nor Merger Sub shall be required to pay any amounts in excess of the sum of (i) ***, plus (ii) the Escrow Amount (which amount shall be deposited with the Escrow Agent in accordance with Article 3 and Article 9 of this Agreement), plus (iii) the Equityholders’ Representative Expense Amount (which amount shall be deposited with the Escrow Agent in accordance with Article 3 and Article 9 of this Agreement) and plus (iv) the Aggregate Exercise Proceeds, in the aggregate upon the conversion pursuant to the Merger of all shares of Common Stock and Preferred Stock, Vested Stock Options and Warrants.

               (b)  Paying Agent . Prior to the Effective Time, Parent shall designate a bank or trust company reasonably acceptable to the Company to act as the paying agent in the Merger (the “ Paying Agent ”).

               (c)  Parent to Provide Per Share Closing Consideration .

                    (i) Promptly after the Effective Time (and in any event within one (1) Business Day after the Effective Time), Parent shall deposit with the Paying Agent cash necessary to pay the Stockholders (other than holders of Dissenting Shares) the Per Share

Closing Consideration for each such share. At any time following twelve (12) months after the Effective Time, all cash deposited with the Paying Agent pursuant to this Section 3.4(c)(i) which remains undistributed to the holders of the Certificates representing shares of Company Stock shall be delivered to Parent upon demand, and thereafter such holders of unexchanged shares of Company Stock shall be entitled to look only to Parent (subject to abandoned property, escheat or other similar Laws) only as general creditors thereof with respect to the Per Share Closing Consideration for payment upon due surrender of their Certificates.

                    (ii) Promptly after the Effective Time, Parent shall deposit with the Surviving Corporation cash necessary to pay the holders of Vested Stock Options the Per Option Share Consideration for each such share into which such Vested Stock Option is exercisable.

               (d)  Exchange/Payment Procedures .

                    (i) Parent shall mail or deliver or cause to be mailed or delivered, no fewer than ten (10) days prior to the anticipated Effective Time or on such other date as the Company and Parent shall mutually agree (the “ Mailing Date ”), to each holder of record of a stock certificate or certificates (the “ Certificates ”) that represented outstanding shares of Company Stock as of a record date no less than five (5) Business Days prior to the Mailing Date (the “ Transmittal Letter Record Date ”) a letter of transmittal (the “ Transmittal Letter ”), which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall contain instructions for use in effecting the surrender of the Certificates in exchange for the payment of the applicable aggregate Per Share Closing Consideration therefor (and which Transmittal Letter shall include a consent to the appointment and authority of the Equityholders’ Representative as set forth herein and an agreement to be bound by the escrow and indemnification provisions hereof). As soon as practicable following the Effective Time, the Surviving Corporation shall mail or deliver or cause to be mailed or delivered to each holder of record of a Certificate that represented outstanding shares of Company Stock as of immediately prior to the Effective Time who was not a holder of record as of the Transmittal Letter Record Date. Promptly upon (and in no event later than two (2) Business Days after) the later of (i) the Effective Time and (ii) the surrender of a Certificate to the Paying Agent, together with a Transmittal Letter, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to the instructions thereto, the holder of such Certificate shall be entitled to receive (and Parent or the Surviving Corporation shall cause the Paying Agent to distribute to such holder) in exchange therefor payment by check or at the election of such holder and for a processing fee not to exceed $100 per wire transfer to be deducted from such payment, by wire transfer, immediately available funds of the cash amount equal to the applicable aggregate Per Share Closing Consideration which amount such holder has the right to receive pursuant to Section 3.1 , after giving effect to any required withholding taxes, and the Certificate so surrendered shall forthwith be cancelled. Parent and the Surviving Corporation shall be entitled to rely entirely on the information contained in the Payout Schedule and any transmittal materials delivered hereunder for purposes of satisfying Parent’s and the Surviving Corporation’s obligation to deliver the Per Share Closing Consideration, the Escrow Amount, the Equityholders’ Representative Expense Amount and any Contingent Payment hereunder.

                    (ii) Promptly after the Effective Time, the Surviving Corporation shall make payments to the holders of Vested Stock Options of the applicable aggregate Per Option Share Consideration therefor, after giving effect to any required withholding taxes, payable to each holder of Vested Stock Options all as set forth in the Payout Schedule. Parent and the Surviving Corporation shall be entitled to rely entirely on the information contained in the Payout Schedule for purposes of satisfying Parent’s and the Surviving Corporation’s obligation to deliver the Per Option Consideration, the Escrow Amount, the Equityholders’ Representative Expense Amount and any Contingent Payment hereunder.

               (e)  Escrow Amount . Promptly after the Effective Time, and subject to and in accordance with the provisions of Article 9 , Parent shall pay to the Escrow Agent (i) the Escrow Amount to be deposited into an escrow fund (the “ Escrow Fund ”) and (ii) the Equityholders’ Representative Expense Amount to be deposited into an escrow fund (the “ Equityholders’ Representative Expense Fund ”). The Escrow Fund and the Equityholders’ Representative Expense Fund shall be held in escrow and, as provided in Article 9 , shall be available, in the case of the Escrow Fund, to compensate Parent Indemnified Persons and, in the case of the Equityholders’ Representative Expense Fund, to reimburse the Equityholders’ Representative and shall otherwise be distributed pursuant to Section 9.5 to the Participating Rights Holders. The “ Escrow Amount ” shall initially be ***, and shall be reduced from time to time in accordance with Article 9 , and shall be increased from time to time by the amount of any interest, dividends, earnings and other income on such amount in accordance with Article 9 and with the Escrow Agreement. The “ Equityholders’ Representative Expense Amount ” shall be $1,000,000, and shall be reduced from time to time in accordance with Article 9 , and shall be increased from time to time by the amount of any interest, dividends, earnings and other income on such amount in accordance with Article 9 and the Escrow Agreement. Parent agrees that payments from the Escrow Fund to Stockholders will be reported by Parent as deferred payments subject to installment sale treatment under Section 453 of the Code (and will be reported by Parent in part as payments of interest pursuant to Section 483 or Section 1274 of the Code).

               (f)  Payment to Registered Holders . If any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the Certificate surrendered in exchange therefor is registered, it will be a condition to such payment that (i) the Person requesting such exchange shall have executed and delivered an indemnity agreement with respect to such portion of the Merger Consideration in a form reasonably acceptable to Parent, (ii) the Certificate so surrendered will be properly endorsed and otherwise in proper form for transfer, and (iii) the Person requesting such exchange will have paid any transfer or other Taxes required by reason of such payment in a name other than the registered holder of the Certificate surrendered or established to the satisfaction of Parent, or any agent designated by Parent, that such Tax has been paid or is not applicable.

               (g)  No Liability . Notwithstanding anything to the contrary in this Agreement, none of the Paying Agent, Parent, Merger Sub or the Surviving Corporation (or any Affiliate thereof) shall be liable to a holder of a Certificate for any amount delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

               (h)  Withholding of Tax . Notwithstanding anything to the contrary in this Agreement, any of Parent, the Paying Agent or the Surviving Corporation (pursuant to

Parent’s request) will be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Participating Rights Holder such amounts as Parent or the Paying Agent shall determine in good faith they are required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Laws relating to Taxes. Such withheld amounts will be treated for all purposes of this Agreement as having been paid to the Participating Rights Holders in respect of which such deduction and withholding was made by Parent, the Paying Agent or the Surviving Corporation.

      Section 3.5 Further Ownership Rights in Company Stock. The applicable consideration paid upon the surrender for exchange of Certificates in accordance with the terms of this Article 3 (including the contingent right to receive payment, if any, in connection with (a) the distribution of the Escrow Amount and the Equityholders’ Representative Expense Amount pursuant to and in accordance with the terms and conditions of the Escrow Agreement and Article 9 and (b) any of the Contingent Payments) shall be in full satisfaction of all rights pertaining to Company Stock (including any rights to receive accumulated but undeclared dividends on such Company Stock, if any). At the Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of shares of Company Stock outstanding prior to the Effective Time on the records of the Surviving Corporation. From and after the Effective Time, the holders of Certificates representing ownership of shares of Company Stock outstanding prior to the Effective Time shall cease to have any rights with respect to such shares of Company Stock (including any rights to receive accumulated but undeclared dividends on such Company Stock, if any) except as otherwise specifically provided for herein. If, after the Effective Time, Certificates are presented to Parent or the Surviving Corporation (or any Affiliate thereof) for any reason, they shall be cancelled and exchanged as provided in this Article 3 .

      Section 3.6 Lost, Stolen or Destroyed Certificates. In the event any Certificates representing Company Stock shall have been lost, stolen or destroyed, the Paying Agent shall pay in exchange for such lost, stolen or destroyed Certificates, upon the making of an acceptable affidavit of that fact by the holder thereof and the delivery of such other documents reasonably requested by the Paying Agent, the applicable Per Share Closing Consideration; provided , however , that Parent may, in its sole discretion and as a condition precedent to the payment thereof, require the owner of such lost, stolen or destroyed Certificates (a) to execute and deliver an indemnity agreement with respect to such Certificate in a form reasonably acceptable to Parent and (b) to post a bond in such reasonable amount and on such customary terms as Parent may direct as indemnity against any claim that may be made against Parent or the Paying Agent with respect to such Certificate.

      Section 3.7 [Intentionally Omitted]

      Section 3.8 Appraisal Rights. Notwithstanding anything in this Agreement to the contrary, shares of Company Stock issued and outstanding immediately prior to the Effective Time that are held by any Stockholder (a) who has not voted in favor of the Merger or consented thereto in writing, (b) who shall have properly demanded in writing appraisal of such shares pursuant to, and who complies in all respects with, Section 262 of the DGCL (“ Section 262 ”) and (c) who has neither effectively withdrawn nor lost the right to such payment, shall not be converted in accordance with this Article 3 into the right to receive the consideration specified in

Section 3.1 , but rather the holders of such shares (“ Dissenting Shares ”) shall be entitled to payment of the fair value of such Dissenting Shares in accordance with Section 262; provided , however , that if any such Stockholder shall fail to perfect or otherwise shall waive, withdraw, or lose the right to appraisal under Section 262, or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262, then the right of such Stockholder to be paid the fair value of such Stockholder’s Dissenting Shares shall cease and such Dissenting Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for the right to receive, the consideration specified in this Article 3 , subject in all respects to the terms and conditions of this Agreement and the Escrow Agreement. The Company shall deliver prompt notice to Parent of any demands for appraisal of any shares of Company Stock, attempted withdrawals of such demands, and any other instruments served pursuant to the DGCL that are received by the Company relating to appraisal of any shares of Company Stock. The Company shall provide Parent with the opportunity to participate in and control all negotiations and proceedings with respect to demands for appraisal under the DGCL, and shall not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing.

      Section 3.9 Contingent Payments.

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

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

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

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

                    (iv) “ Contingent Payment Termination Date ” means the earliest of (A) December 31, 2019, (B) the date that is the last day of the Seventh Contingent Payment Year and (C) the date on which Parent has made (or has been deemed to have made pursuant to Section 3.10 ) (1) the FDA Milestone Payment (if the FDA Milestone is achieved on or before ***), (2) aggregate Sales/Profit Contingent Payments equal to the Maximum Sales/Profit Contingent Amount and (3) the Sales Milestone Payment.

                    (v) “ Contingent Payment Year ” means each of the seven (7) successive twelve (12) consecutive calendar month periods beginning with the twelve (12) calendar month period commencing on the Contingent Payment Commencement Date and ending with the sixth (6 ^th ) twelve (12) calendar month period following the initial twelve (12) consecutive calendar month period including the Contingent Payment Commencement Date (the “ First Contingent Payment Year ,” “ Second Contingent Payment Year ,” “ Third Contingent Payment Year ,” “ Fourth Contingent Payment Year ,” “ Fifth Contingent Payment Year ,” “ Sixth Contingent Payment Year ” and “ Seventh Contingent Payment Year ,” respectively); provided , however , that in the event that a Contingent Payment Year commences on or after January 1, 2019, then such Contingent Payment Year shall be deemed to be the final Contingent Year and end on December 31, 2019, regardless of whether or not such Contingent Payment Year includes twelve (12) calendar months. Notwithstanding anything to the contrary in this Agreement, in no event shall any Contingent Payment Year commence after December 31, 2019, and if a Contingent Payment Year ends on December 31, 2019 in accordance with the preceding sentence it shall be deemed to be the final Contingent Payment Year for all purposes of this Agreement.

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

                    (vii) “ FDA Milestone Payment Amount ” means the amount of ***.

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

                    (ix) “ LipoSonix Product ” means (A) the Company’s LipoSonix System, including the Sales Payment Product, which applies focused ultrasound for the purpose of using thermal lipolysis to treat adipose tissue, as it has been developed and commercialized by the Company prior to the Closing, and (B) following the Closing, any modified or enhanced form of the Company’s LipoSonix System, including the Sales Payment Product, so long as such modified or enhanced form of the Company’s LipoSonix System applies focused ultrasound for the purpose of using thermal lipolysis to treat adipose tissue.

                    (x) “ Maximum Sales/Profit Contingent Amount ” means (i) if the FDA Milestone is achieved on or before ***, the amount of *** or (ii) if the FDA Milestone is achieved after ***, the amount of ***.

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

                    (xii) “ Sales Milestone Payment Amount ” means the amount of ***.

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

                    (xiv) “ Sales/Profit Contingent Payment Amount ” means, with respect to any Contingent Payment Year, an amount equal to (x) the Sales/Profit Contingent Payment Percentage multiplied by (y) the Company Incremental Amount for such Contingent Payment Year.

                    (xv) “ Sales/Profit Contingent Payment Percentage ” means ***; provided , however , that if, prior to the achievement of the FDA Milestone, a Person who is not a member of the Buyer Group receives written approval or clearance from the FDA allowing for the initiation of the marketing or sales in the United States of a product for non-invasive body sculpting which applies high intensity focused ultrasound (HIFU) for the purpose of using thermal lipolysis to treat adipose tissue, then “ Sales/Profit Contingent Payment Percentage ” shall mean *** for the first four Contingent Payment Years, after which such time it shall mean ***.

                    (xvi) “ Worldwide Ancillary Gross Profit ” means (A) total gross revenues actually recognized from Contingent Payment Products, including, without limitation, (1) the leasing and servicing of Contingent Payment Products, (2) the use of Contingent Payment Products by third parties (such as on a “fee for service basis”) and (3) licenses and similar arrangements pursuant to which a Person is granted the right to manufacture and/or market, lease, sell, service or otherwise obtain revenues from a Contingent Payment Product (but in each case excluding gross revenues that are included in Worldwide Gross Profit or Worldwide Net Sales) minus (B) the cost of such revenues, each as adjusted by any Worldwide Ancillary Gross Profit Adjustments (including amortization and depreciation) and all as recorded by Parent (or any other applicable member of the Buyer Group if any such licensing, leasing or servicing contemplated hereby is recorded by such member of the Buyer Group but not by Parent), all in accordance with standard allocation procedures, allowance methodologies and accounting methods consistently applied, which procedures, methodologies and methods shall be in accordance with GAAP. Notwithstanding anything to the contrary in this Agreement or in any financial statements prepared by Parent with respect to any Contingent Payment Year or portion thereof, or to the extent it may otherwise be required pursuant to GAAP, the term “ Worldwide Ancillary Gross Profit ” shall not include: (A) any revenues or other value received for the lease

or service of a specified Contingent Payment Product used for research, manufacturing or quality testing, clinical trials, compassionate or humanitarian purposes including expanded access programs (which provide access to therapies for no monetary consideration) or charitable donations; (B) any revenues or other value received (and related costs) by Parent or any other member of the Buyer Group from the license of any Intellectual Property related to the Contingent Payment Products (other than for the right to manufacture and/or market, lease, sell, service or otherwise obtain revenues from any Contingent Payment Products); or (C) any amounts otherwise included in Worldwide Gross Profit or Worldwide Net Sales. For purposes of calculating “Worldwide Ancillary Gross Profit”, cost of revenues of any member of the Buyer Group shall exclude any payments, or amounts payable, to any other member of the Buyer Group, to the extent that such payments or amounts payable are in excess of actual costs incurred by such other member of the Buyer Group in connection with the applicable transaction.

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

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

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

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

                         (D) Taxes (excluding withholding Taxes and Taxes paid by Parent on the net income derived from licensing for manufacture and leasing of and servicing the Contingent Payment Products), tariffs, customs duties, surcharges and other governmental charges incurred in connection with the production, lease, service, transportation, delivery, use, exportation or importation of Contingent Payment Products that are incurred at the time of license for manufacture, lease or service or are directly related to the license for manufacture, lease or service and not otherwise previously deducted;

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

                         (F) warranties, guaranties and maintenance arrangements; and

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

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

                    (xix) “ Worldwide Net Sales ” means the gross amounts invoiced for sales by Parent (or any other applicable member of the Buyer Group if any sales contemplated hereby are recorded by such member of the Buyer Group but not by Parent) from the sales of a specified Contingent Payment Product by a member of the Buyer Group or its authorized or licensed distributor after the Effective Time to unaffiliated third parties less the Worldwide Net Sales Adjustments, all in accordance with standard allocation procedures, allowance methodologies and accounting methods consistently applied, which procedures and methodologies shall be in accordance with GAAP. For purposes of clarification, when measuring the Worldwide Net Sales recorded in respect of sales of a specified Contingent Payment Product by any Person other than a member of the Buyer Group, only the revenue recorded by Parent or another member of the Buyer Group shall be included (for example, the transfer price or other amount received by Parent or such other member of the Buyer Group, in the event of any sales by an authorized or licensed distributor of the specified Contingent Payment Product manufactured by Parent), and the amount of revenue that may be recorded or achieved by such other Person who is not a member of the Buyer Group shall be disregarded. Notwithstanding anything to the contrary in this Agreement or in any financial statements prepared by Parent with respect to any Contingent Payment Year or portion thereof, or to the extent it may otherwise be required pursuant to GAAP, the term “ Worldwide Net Sales ” shall not include (A) gross amounts invoiced for sales by Parent or any member of the Buyer Group from transactions with another member of the Buyer Group unless such other member of the Buyer Group is an end user of the specified Contingent Payment Product; provided , however , that “ Worldwide Net Sales ” shall in such event include the gross amounts invoiced for sales, if any, recorded upon the further resale of such specified Contingent Payment Product by such other member of the Buyer Group less the Worldwide Net Sales Adjustments or (B) distribution to a third party of a specified Contingent Payment Product for research, manufacturing or quality testing, clinical trials, compassionate or humanitarian purposes including expanded access programs (which provide access to therapies for no monetary consideration) or charitable donations.

In the event that Sales Payment Products are sold on a bundled basis with Gross Profit Payment Products, the gross amount invoiced for such bundled sale will be allocated for purposes of

Sections 3.9(a)(xviii) and (xix) between the Sales Payment Product and the Gross Profit Payment Product in proportion to the list price that would generally apply to sales to the applicable purchaser.

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

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

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

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

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

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

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

               (b)  Contingent Payments . In the event that the Merger is consummated, as additional consideration for the Merger, and subject to the set-off rights of Parent and the Surviving Corporation pursuant to Section 3.11(h) and Article 9 hereof, after the Effective Time but before the Contingent Payment Termination Date, the Participating Rights Holders shall be entitled to receive contingent payments (collectively, the “ Contingent Payments ”) when and if required to be made in accordance with the provisions of this Section 3.9 , Sections 3.1 , 3.2 , 3.10 and 3.11 , and subject to the limitation on such contingent payments set forth in this Section 3.9 and Sections 3.10 and 3.11 . The Contingent Payments

shall include the FDA Milestone Payment, the Sales Milestone Payment and the Sales/Profit Contingent Payments, as applicable, none of which Contingent Payments shall bear interest.

               (c)  FDA Milestone Payment . Subject to the set-off rights of Parent and the Surviving Corporation pursuant to Section 3.11(h) and Article 9 hereof, Parent shall make a one-time Contingent Payment equal to the FDA Milestone Payment Amount if and only if the FDA Milestone is achieved on or before *** (the “ FDA Milestone Payment ”). The consideration to be paid by Parent to each of the Participating Rights Holders at the time specified in Section 3.11 in connection with the FDA Milestone Payment shall equal that portion of the FDA Milestone Payment Amount allocated to each such Participating Rights Holder pursuant to Sections 3.1 and 3.2 .

               (d)  Sales Milestone Payment . Subject to the Contingent Payment Termination Date and the set-off rights of Parent and the Surviving Corporation pursuant to Section 3.11(h) and Article 9 hereof, Parent shall make a one-time Contingent Payment (the “ Sales Milestone Payment ”) equal to the Sales Milestone Payment Amount following achievement of the Sales Milestone. The consideration to be paid by Parent to each of the Participating Rights Holders at the time specified in Section 3.11 in connection with the Sales Milestone Payment shall equal that portion of the Sales Milestone Payment Amount allocated to each such Participating Rights Holder pursuant to Sections 3.1 and 3.2 .

               (e)  Sales/Profit Contingent Payments . Subject to the Contingent Payment Termination Date and the set-off rights of Parent and the Surviving Corporation pursuant to Section 3.11(h) and Article 9 hereof, Parent shall make a Contingent Payment, with respect to the Worldwide Net Sales for the Sales Payment Product, the Worldwide Gross Profit for the Gross Profit Payment Product and the Worldwide Ancillary Gross Profit for the Contingent Payment Products, equal to the Sales/Profit Contingent Payment Amount for each Contingent Payment Year (each, a “ Sales/Profit Contingent Payment ” and collectively, the “ Sales/Profit Contingent Payments ”), in accordance with Section 3.11 . The consideration to be paid by Parent to each of the Participating Rights Holders at the time specified in Section 3.11 in connection with each such Sales/Profit Contingent Payment shall equal that portion of the Sales/Profit Contingent Payment Amount for such Contingent Payment Year allocated to each such Participating Rights Holder pursuant to Sections 3.1 and 3.2 .

               (f)  Contingent Payments Not Certain . Each of Parent, the Company and the Equityholders’ Representative hereby acknowledge that the achievement of the FDA Milestone is uncertain and that Parent and its Affiliates may not achieve the FDA Milestone prior to the Contingent Payment Termination Date or at all, and it is therefore not assured that Parent will be required to pay the FDA Milestone Payment at all. Each of Parent, the Company and the Equityholders’ Representative hereby further acknowledge that the achievement of the Sales Milestone is uncertain and that Parent and its Affiliates may not achieve the Sales Milestone prior to the Contingent Payment Termination Date or at all, and it is therefore not assured that Parent will be required to pay the Sales Milestone Payment at all. Each of Parent, the Company and the Equityholders’ Representative hereby further acknowledge that the amount of Worldwide Net Sales for the Sales Payment Product and Worldwide Gross Profit for the Gross Profit Payment Product and the Worldwide Ancillary Gross Profit for the Contingent Payment Products, if any, that Parent and its Affiliates may generate during any one or more

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

               (g)  Parent Discretion . Prior to the achievement of the FDA Milestone, Parent shall expend no less than *** in connection with research and development, pre-clinical and clinical testing, regulatory submissions and obtaining FDA or other regulatory approvals, in each case related to the LipoSonix Product. Subject to the foregoing sentence, Parent shall have sole and absolute discretion over all matters relating to the LipoSonix Product, the Sales Payment Product and the Gross Profit Payment Product from and after the Effective Time, including, but not limited to, any matter relating to the development, testing, regulatory submission, regulatory approval, manufacturing, marketing, sales, pricing, service or maintenance thereof, or the specific items on which the *** set forth in the prior sentence shall be expended. Furthermore, the Parties acknowledge that circumstances may exist that (i) delay or prevent the achievement of the FDA Milestone or the Sales Milestone or (ii) limit, reduce or otherwise negatively impact the amount of Worldwide Gross Profit, Worldwide Ancillary Gross Profit or Worldwide Net Sales with respect to any Contingent Payment Product, if any, that any member of the Buyer Group may generate during any one or more Contingent Payment Years, thereby eliminating, or reducing the amount of, the Sales/Profit Contingent Payments for any such Contingent Payment Year. Accordingly, nothing herein shall be deemed to be an agreement on the part of any member of the Buyer Group to achieve the FDA Milestone or the Sales Milestone or to generate any amount of Worldwide Gross Profit, Worldwide Ancillary Gross Profit or Worldwide Net Sales with respect to any Contingent Payment Product during any one or more Contingent Payment Years. Notwithstanding the foregoing, from and after the Effective Time, Parent shall, and shall cause each member of the Buyer Group to, not take any actions in bad faith, including in the marketing and sales of the Gross Profit Payment Product or the Sales Payment Product or the operation of the Surviving Corporation, that would reasonably be expected to have the purpose of avoiding or reducing any of the Contingent Payments hereunder. For the avoidance of doubt, however, and in consideration of the substantial amount of Merger Consideration to be paid to the Equityholders promptly after the Effective Time, and subject to the obligation to expend *** set forth in the first sentence of this Section 3.9(g), no member of the Buyer Group shall be required to use any level of effort (including but not limited to commercially reasonable efforts, reasonable efforts, best efforts, diligent efforts or reasonable best efforts) to achieve the FDA Milestone or the Sales Milestone or to generate any amount of Worldwide Gross Profit, Worldwide Ancillary Gross Profit or Worldwide Net Sales with respect to any Contingent Payment Product during any one or more Contingent Payment Years.

               (h) From time to time and at the reasonable request of the Equityholders’ Representative, Parent shall provide the Equityholders’ Representative with updates concerning the progress of the Company’s regulatory filings and strategy for achieving the FDA Milestone. In connection with these updates, Parent shall make available to the Equityholders’ Representative copies of any written communications to or from the FDA concerning the LipoSonix Product.

      Section 3.10 Maximum Aggregate Sales/Profit Contingent Payments. Parent shall not be required to make any Sales/Profit Contingent Payments once Parent has made Sales/Profit Contingent Payments equal to the Maximum Sales/Profit Contingent Amount. Upon distributing Sales/Profit Contingent Payments equal to the Maximum Sales/Profit Contingent Amount, Parent’s obligation to make any additional or future Sales/Profit Contingent Payments pursuant to Article 3 shall cease, and the rights of the Participating Rights Holders to receive any further Sales/Profit Contingent Payments shall terminate. To the extent that any provision of Section 3.9 would otherwise require Parent to make a Sales/Profit Contingent Payment resulting in Parent paying Sales/Profit Contingent Payments based on Sales/Profit Contingent Payment Amounts that, in the aggregate, exceed the Maximum Sales/Profit Contingent Amount, Parent shall be entitled to reduce such Sales/Profit Contingent Payment such that the Maximum Sales/Profit Contingent Amount is not exceeded, and no further Sales/Profit Contingent Payment shall be due or payable thereafter. For purposes of this Section 3.10 , amounts off-set by Parent or the Surviving Corporation pursuant to Section 3.11(h) and Article 9 shall be included for purposes of determining under this Section 3.10 whether Parent has paid the Maximum Sales/Profit Contingent Amount. Notwithstanding anything herein to the contrary, Parent shall not be required to make, and the Participating Rights Holders shall not be entitled to receive, any further Sales/Profit Contingent Payments after the Contingent Payment Termination Date (except for the Sales/Profit Contingent Payment, if any, to be received by the Participating Rights Holders with respect to the Contingent Payment Year ending on the Contingent Payment Termination Date, which Sales/Profit Contingent Payment shall be made by Parent after the Contingent Payment Termination Date) in accordance with the provisions of Section 3.11 .

      Section 3.11 Payment of Contingent Payments.

               (a)  FDA Milestone Payment . On or prior to the thirtieth (30 ^th ) day following the achievement of the FDA Milestone, Parent shall deliver to each of the Participating Rights Holders that portion of the FDA Milestone Payment Amount allocated to such Participating Rights Holder pursuant to Sections 3.1 and 3.2 ; provided , however , that Parent shall not be required to make, and the Participating Rights Holders shall not be entitled to receive, the FDA Milestone Payment if the FDA Milestone is achieved after ***.

               (b)  Sales/Profit Contingent Payment Amount Certificates . On or prior to the ninetieth (90 ^th ) day following the last day of each Contingent Payment Year, Parent shall deliver to the Equityholders’ Representative a certificate (each, a “ Contingent Payment Certificate ”), setting forth for such Contingent Payment Year (i) the amount of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product and Worldwide Ancillary Gross Profit for the Contingent Payment Products, (ii) for the Gross Profit Payment Product, the number of units produced, the number of units sold, the average fully-loaded manufacturing cost per unit, and the average sales price per unit, (iii) for the Sales Payment Product, the number of units produced, the number of units sold, and the average sales price per unit, (iv) the unconsolidated revenue and gross profit of each entity within the Buyer Group that is derived from the LipoSonix Product, (v) an allocation of Worldwide Net Sales for the Sales Payment Product and Worldwide Gross Profit for the Gross Profit Payment Product from sales and an allocation of Worldwide Ancillary Gross Profit for the Contingent Payment Products from licensing, leasing and provision of services (each identified separately) by each member of the Buyer Group and (vi) Parent’s determination of the Sales/Profit

Contingent Payment Amount, if any, for such Contingent Payment Year (including the calculation thereof, in reasonable detail).

               (c)  Equityholders’ Representative Audit Rights . Parent hereby grants, and shall cause the other members of the Buyer Group to grant, the Equityholders’ Representative and its representatives and advisers, at the Equityholders’ Representative’s sole expense, the right, exercisable no more than once during each thirty (30) day period following the receipt by the Equityholders’ Representative of a Contingent Payment Certificate, subject to the execution of, and compliance with, a confidentiality agreement with Parent in substantially the form attached hereto as Exhibit 3.11(c) (which shall permit disclosure of information to the Equityholders’ Representative), to examine and have full access to the Buyer Group’s personnel, books of account and records of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product or Worldwide Ancillary Gross Profit for the Contingent Payment Products for the applicable Contingent Payment Year with respect to which the most recent Contingent Payment Certificate has been delivered, as well as the immediately prior Contingent Payment Year, at the location of such records on prior written notice of at least ten (10) days, for the purpose of verifying and assessing the amount of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product or Worldwide Ancillary Gross Profit for the Contingent Payment Products for such Contingent Payment Years (each such review shall be referred to herein as a “ Contingent Payment Audit ”). Notwithstanding the foregoing, absent fraud, willful misconduct, or the discovery (following the completion of any Contingent Payment Audit) of a material fact in existence at the time of such Contingent Payment Audit and not disclosed by Parent to the Equityholders’ Representative or its representatives in the course of conducting such Contingent Payment Audit, which material fact, if taken into account in the calculation of the applicable Sales/Profit Contingent Payment Amount, would have resulted in an increase in such Sales/Profit Contingent Payment Amount, the Equityholders’ Representative or its representatives shall not be permitted to review any records of Worldwide Net Sales, Worldwide Gross Profit or Worldwide Ancillary Gross Profit with respect to any Contingent Payment Product for any Contingent Payment Year for which a Contingent Payment Audit has previously been performed. For the purpose of conducting a Contingent Payment Audit, the Equityholders’ Representative may hire, at its expense, one or more auditors or attorneys of the Equityholders’ Representative’s choosing to assist in such examination; provided , that such auditors or attorneys have entered into confidentiality agreements with Parent in substantially the form attached hereto as Exhibit 3.11(c) (which shall permit disclosure of information to the Equityholders’ Representative). The Equityholders’ Representative and such representatives shall have access to all of the books, records and personnel required in the good faith judgment of the Equityholders’ Representative to perform any Contingent Payment Audit for a thirty (30) day period, beginning on the date on which access to substantially all of such books and records is first given to the Equityholders’ Representative. Nothing in this Section 3.11(c) shall be deemed to require any member of the Buyer Group to keep any books of account or records other than those which they maintain in the ordinary course of business in its usual and customary practice, to retain any such books of account or records for any period in excess of the period for which they retain such records in the ordinary course of business in their usual and customary practice, or to provide access to any books and records other than that specified above, and no presumption shall be made against any member of the Buyer Group as a result of the absence of any such books and records as a result of the disposition of any such books and records in the ordinary course of business after such

period as provided above; provided, however, that in no case shall any member of the Buyer Group dispose of such books of account or records with respect to a Contingent Payment Year earlier than the date one hundred eighty (180) days following the last day of the subsequent Contingent Payment Year or, if such Contingent Payment Year is the last Contingent Payment Year, one hundred eighty (180) days following the last day of such Contingent Payment Year; and, provided further , that once the Equityholders’ Representative gives notice of its intention to commence a Contingent Payment Audit with respect to a Contingent Payment Year or Contingent Payment Years, the Buyer Group shall keep and retain all books of account relating to Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product and Worldwide Ancillary Gross Profit for the Contingent Payment Products for the Contingent Payment Year or Contingent Payment Years for which such Contingent Payment Audit is being conducted that are identified in a request or requests from the Equityholders’ Representative with respect to the Sales/Profit Contingent Payment Amount for such Contingent Payment Year or Contingent Payment Years.

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

               (e)  Agreed Contingent Payment . In the event that the Equityholders’ Representative delivers a Dispute Notice within the Dispute Period, the Equityholders’ Representative and Parent shall for a period of not less than thirty (30) days after delivery of the Dispute Notice attempt in good faith to resolve the Sales/Profit Contingent Payment Amount that is in dispute (the “ Disputed Contingent Payment Amount ”), and mutually determine any adjustments to such Sales/Profit Contingent Payment Amount (the “ Agreed Contingent Payment Amount ”). Parent and the Equityholders’ Representative shall, subject to the execution of a confidentiality agreement in substantially the form attached hereto as Exhibit 3.11(c) , provide each other with such information, records and material kept in the ordinary course of business in such party’s possession and which such party may disclose without violating confidentiality obligations to third parties, as is reasonably necessary and appropriate in attempting to resolve such Disputed Contingent Payment Amount, including the delivery of a copy to the Equityholders’ Representative of any such information, records and material, to the extent then available, that was used to calculate the amount of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product, Worldwide Ancillary Gross Profit for the Contingent Payment Products and the Sales/Profit Contingent Payment Amount set forth on each relevant Contingent Payment Certificate. If the final Agreed Contingent Payment Amount determined pursuant to this Section 3.11(e) is greater than the Sales/Profit Contingent Payment Amount set forth on the relevant Contingent Payment

Certificate by an amount equal to more than $1,000,000, Parent shall pay all of the reasonable out-of-pocket costs and expenses actually incurred by the Equityholders’ Representative in connection with such Contingent Payment Audit.

               (f)  Arbitration of Disputes . In the event that no agreement can be reached by the Equityholders’ Representative and Parent as to the calculation of the Disputed Contingent Payment Amount within ninety (90) days after delivery of a Dispute Notice and such disagreement relates only to the amount of Worldwide Net Sales for the Sales Payment Product, Worldwide Gross Profit for the Gross Profit Payment Product or Worldwide Ancillary Gross Profit for the Contingent Payment Products, then, pursuant to this Section 3.11(f) , either party shall have the right to submit the Disputed Contingent Payment Amount to arbitration by the Los Angeles, California office of one (1) of the following entities or their respective successors, or such other accountants as the Equityholders’ Representative and Parent may mutually agree, so long as such entity or its successors is not the principal regularly-engaged outside accountant to Parent or the Company or any auditor that may have assisted the Equityholders’ Representative in any Contingent Payment Audit: Deloitte & Touche LLP, KPMG, Ernst & Young LLP, PricewaterhouseCoopers, BDO Seidman, LLP, Grant Thornton LLP, or any successor entity to the foregoing (individually, an “ Accountant ,” and collectively, the “ Accountants ”). The Equityholders’ Representative and Parent shall jointly select which of the Accountants will perform the calculation within thirty (30) days after the Equityholders’ Representative and Parent determine that they are unable to settle the amount independently; provided , that in the event that the Equityholders’ Representative and Parent are unable to agree upon the Accountant to perform such calculation within such thirty (30) day period, then each of the Equityholders’ Representative and Parent shall select one of the Accountants and such Accountants shall jointly select a third Accountant to perform such calculation; provided , that any Accountant consulted or selected in accordance with this sentence shall enter into a confidentiality agreement with Parent in substantially the form attached hereto as Exhibit 3.11(c) . The Accountant selected in accordance with the foregoing sentence shall be responsible for the determination of the Disputed Contingent Payment Amount (the “ Appraiser ”). The engagement and charge of the Appraiser shall be limited to determining the Worldwide Net Sales, Worldwide Gross Profit and Worldwide Ancillary Gross Profit of any identified Contingent Payment Product for the applicable Contingent Payment Year used to calculate the Disputed Contingent Payment Amount, and the Appraiser shall not be entitled to determine whether any products sold by Parent or its Affiliates are Gross Profit Payment Products or Sales Payment Products for purposes of this Agreement or any other matter (and any dispute with respect thereto shall be resolved in accordance with Section 11.8 ). The Appraiser shall determine the Disputed Contingent Payment Amount within the limitations set forth above within ninety (90) days after the date of such Appraiser’s engagement and the Appraiser shall be provided with such information and records, which may include on-site access and access to personnel, relating to such dispute as it may reasonably request. Any Disputed Contingent Payment Amount determined by an Appraiser in accordance with this Section 3.11(f) shall be deemed to be the final Sales/Profit Contingent Payment Amount for the applicable Contingent Payment Year for all purposes of this Agreement. The fees and expenses of the Appraiser shall be paid by the Equityholders’ Representative, provided , that if the final Sales/Profit Contingent Payment Amount determined by the Appraiser in any examination conducted pursuant to this Section 3.11(f) is greater than the Sales/Profit Contingent Payment Amount set forth on the relevant Contingent Payment Certificate by an amount equal to more than $1,000,000, then

Parent shall pay all of the fees and expenses of the Appraiser and all reasonable out-of-pocket costs and expenses actually incurred by the Equityholders’ Representative in connection with any Contingent Payment Audit.

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

                    (i) In the event the Equityholders’ Representative does not deliver a Dispute Notice with respect to the Sales/Profit Contingent Payment Amount set forth on the Contingent Payment Certificate delivered for such Contingent Payment Year within the Dispute Period, or the Equityholders’ Representative delivers to Parent a written notice informing Parent of its agreement with the Sales/Profit Contingent Payment Amount set forth on such Contingent Payment Certificate, the Sales/Profit Contingent Payment Amount set forth in the relevant Contingent Payment Certificate shall irrevocably be deemed to be the final such Sales/Profit Contingent Payment Amount for such Contingent Payment Year for all purposes of this Agreement, absent fraud and willful misconduct, and Parent shall, within ten (10) days after such determination, pay the amounts required to be paid based on such Sales/Profit Contingent Payment Amount and, if the Sales Milestone has also been achieved during such Contingent Payment Year, the Sales Milestone Payment Amount to the Participating Rights Holders pursuant to Sections 3.1 and 3.2 and subject to Section 3.11(h) .

                    (ii) In the event that the Equityholders’ Representative delivers a Dispute Notice pursuant to Section 3.11(d) with respect to a Sales/Profit Contingent Payment Amount, and Parent and the Equityholders’ Representative shall mutually determine the Agreed Contingent Payment Amount, then the Agreed Contingent Payment Amount shall irrevocably be deemed to be the final such Sales/Profit Contingent Payment Amount for such Contingent Payment Year for all purposes of this Agreement, absent fraud and willful misconduct, and Parent shall, within ten (10) days after such Agreed Contingent Payment Amount is determined, pay the amounts required to be paid based on such Sales/Profit Contingent Payment Amount and, if the Sales Milestone has also been achieved during such Contingent Payment Year, the Sales Milestone Payment Amount to the Participating Rights Holders pursuant to Sections 3.1 and 3.2 and subject to Section 3.11(h) .

                    (iii) In the event that the final Sales/Profit Contingent Payment Amount for such Contingent Payment Year is determined by an Appraiser pursuant to Section 3.11(f) above, then Parent shall, within ten (10) days after such determination, pay the amounts required to be paid based on such Sales/Profit Contingent Payment Amount and, if the Sales Milestone has also been achieved during such Contingent Payment Year, the Sales Milestone Payment Amount to the Participating Rights Holders pursuant to Sections 3.1 and 3.2 and subject to Section 3.11(h) .

                    (iv) The determination of any Sales/Profit Contingent Payment Amount and Sales Milestone Payment pursuant to Sections 3.11(g)(i)-(iii) shall, in the absence of fraud and willful misconduct, be conclusive, and in the absence of fraud and willful misconduct, Parent and the Surviving Corporation, and their Affiliates and Subsidiaries, the Equityholders’ Representative and Appraiser shall each be free from any and all liability

resultant from such determination except as expressly set forth herein. Furthermore, Parent shall not be required to make, and the Participating Rights Holders shall not be entitled to receive, the Sales Milestone Payment if the Sales Milestone is achieved after the Contingent Payment Termination Date.

               (h)  Unilateral Right of Set-Off . Subject to the express limitations and procedures set forth in Article 9 hereof, the obligation of Parent and the Surviving Corporation to make any Contingent Payment shall be qualified by the right of Parent and the Surviving Corporation to reduce the amount of any one or more of (i) the Sales Milestone Payment Amount, (ii) the FDA Milestone Payment Amount or (iii) the Sales/Profit Contingent Payment Amount for any Contingent Payment Year, by the amount of any Losses actually incurred or suffered, or more likely than not to be incurred or suffered, by Parent or the Surviving Corporation for which Parent or the Surviving Corporation is entitled to indemnification pursuant to Article 9 , but in no event shall such Contingent Payments be reduced by more than an aggregate of *** with respect to all Contingent Payments hereunder; provided , that (x) the right of Parent and the Surviving Corporation to reduce any Contingent Payment pursuant to this Section 3.11(h) is subject to the limitations, notice requirements and procedures set forth in Article 9 , including Section 9.4 and Sections 9.7 through 9.11 , and (y) with respect to Losses more likely than not to be incurred or suffered with respect to any Third Party Claim, such amount shall not exceed the amount stated in any notice provided by Parent of such Claim in accordance with Article 9 . In the event that (A) Parent sets off the amount of any Contingent Payment by the amount of any Losses that have not been, at the time such Contingent Payment is made, incurred by Parent or (B) the Equityholders’ Representative objects to a Claim as set forth in Section 9.11 , and it is later finally determined that the full amount of such Losses will not be incurred by Parent, or the applicable Parent Indemnified Person is not entitled to indemnification pursuant to Article 9 with respect to any portion of such Losses, as the case may be, then, following such determination, Parent shall either, in its discretion and subject to the Maximum Sales/Profit Contingent Amount, (i) increase the next Contingent Payment to be made by Parent by the amount, without interest, of such prior reduction attributable to such Losses that will not be incurred by Parent (or for which the applicable Parent Indemnified Person is not entitled to indemnification), or (ii) pay to the Participating Rights Holders, promptly after such determination and without interest, the amount of the prior reduction attributable to such Losses that will not be incurred by Parent (or for which the applicable Parent Indemnified Person is not entitled to indemnification) in the form of an additional Contingent Payment that is otherwise paid in accordance with the terms of this Agreement. Subject to Section 9.13 , Parent and the Surviving Corporation shall have no right to set-off or reduce the amount of any Contingent Payment otherwise required to be paid pursuant to this Section 3.11 except as is expressly set forth in this Section 3.11(h).

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

               (j)  Contingent Payments Not Royalties . The Contingent Payments provided for pursuant to this Article 3 are provided as a result of bona fide difficulties in determining the present value of the Company. The Contingent Payments represent (and shall be reported by Parent as) additional consideration for the Company Stock and are not intended to be royalty payments. Parent agrees that Contingent Payments to Stockholders will be reported by Parent as deferred payments subject to installment sale treatment under Section 453 of the Code (and will be reported by Parent in part as payments of interest pursuant to Section 483 or Section 1274 of the Code).

      Section 3.12 Mandatory Prepayment .

               (a) If, prior to second anniversary of the Closing:

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

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

then in each such case Parent shall promptly pay an amount equal to difference between (x) $150,000,000 and (y) the aggregate amount, if any, previously paid by Parent pursuant to Section 3.11 to the Participating Rights Holders in accordance with Sections 3.1 and 3.2 and subject to Section 3.11(h) , and upon such payment, Parent shall have no further obligation to make any further Contingent Payments pursuant to this Agreement.

               (b) If, on or after the second anniversary of the Closing and prior to the Contingent Payment Termination Date:

                    (i) Parent (or a Subsidiary thereof) shall cease to own a majority of the outstanding voting securities of the Surviving Corporation (or of any Successor Subsidiary); or

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

then in each such case Parent shall promptly pay an amount (the “ Mandatory Prepayment Amount ”) equal to the product of (x) *** multiplied by (y) the amount by which the aggregate proceeds received by Parent as a result of the transaction set forth in clause (b)(i) or (b)(ii) above exceeds the Parent Net Investment; provided , however , that under no circumstances shall such amount exceed *** of the amount equal to the difference between (1) $150,000,000 and (2) the aggregate amount, if any, previously paid by Parent pursuant to Section 3.11 to the Participating Rights Holders in accordance with Sections 3.1 and 3.2 and subject to Section 3.11(h) .

               (c) For purposes of this Section 3.12 , “ Parent Net Investment ” shall mean an amount equal to (A) $150,000,000 plus (B) the aggregate out-of-pocket expenditures by Parent and any of its Subsidiaries for costs related to research and development, pre-clinical and clinical testing, regulatory submissions and FDA or other regulatory approvals with respect to the LipoSonix Product, plus (C) the investment (net of any returns) by Parent into the Surviving Corporation for the operation of the Surviving Corporation with respect to the LipoSonix Product, plus (D) an amount equal to the amount of interest that Parent would have realized if Parent had invested all of the amounts set forth in clauses (A) through (C) of this sentence at a rate of 6% per annum, minus (E) the fair market value of any assets retained by Parent in an asset sale under clause (b)(ii) above.

               (d) Any Person acquiring a majority of the outstanding voting securities of the Surviving Corporation in a transaction described in clause (b)(i) of this Section 3.12 or all or substantially all of the Intellectual Property used in developing, marketing or selling the LipoSonix Product in a transaction described in clause (b)(ii) of this Section 3.12 , as the case may be, shall explicitly assume the obligations to make the Contingent Payments as set forth in this Agreement, in writing, and shall agree to be bound by and to comply with the terms and conditions set forth in this Agreement. Upon and following payment of the Mandatory Prepayment Amount pursuant to Section 3.12(b) and the express assumption referred to in the preceding sentence, (i) Parent shall have no further obligation to make any further Contingent Payments pursuant to this Agreement and (ii) the amount of each further Contingent Payment required to be made hereunder (before giving effect to any reduction pursuant to Section 3.11(h) ) shall be multiplied by an amount equal to (x) 1 minus (y) the quotient of (A) the Mandatory Prepayment Amount divided by (B) the amount equal to $150,000,000 minus the aggregate amount, if any, previously paid by Parent pursuant to Section 3.11 to the Participating Rights Holders in accordance with Sections 3.1 and 3.2 .

ARTICLE 4

REPRESENTATIONS AND
WARRANTIES OF THE COMPANY

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

      Section 4.1 Organization and Qualification .

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

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

      Section 4.2 Charter and Bylaws. The Company has heretofore provided to Parent true and complete copies of the Charter and Bylaws, as modified, supplemented, amended or restated. Such Charter and Bylaws are in full force and effect, and no other organizational documents are applicable to or binding upon the Company. Neither the Charter nor the Bylaws prohibits the holders of Company Stock from validly acting by written consent in lieu of a meeting.

      Section 4.3 Capitalization.

               (a) The authorized capital stock of the Company consists of 28,876,120 shares of Common Stock and 20,830,520 shares of Preferred Stock, of which 1,573,033 shares have been designated “Series A Convertible Preferred Stock”, 7,324,104 shares have been designated “Series B Convertible Preferred Stock”, 574,713 shares have been designated “Series B-2 Convertible Preferred Stock” and 11,358,670 shares have been designated “Series C Convertible Preferred Stock”. As of the date hereof, (i) 4,388,964 shares of Common Stock were issued and outstanding and 3,312,264 shares of Common Stock were duly reserved for future issuance pursuant to Stock Options outstanding as of the date hereof and awarded pursuant to the Stock Option Plans, (ii) 1,573,033 shares of Series A Convertible Preferred Stock were issued and outstanding, (iii) 7,147,485 shares of Series B Convertible Preferred Stock were issued and outstanding and 176,619 shares of Series B Convertible Preferred Stock were duly reserved for future issuance pursuant to Warrants outstanding as of the date hereof (iv) 574,713 shares of Series B-2 Convertible Preferred Stock were issued and outstanding, (v) 10,927,634 shares of Series C Convertible Preferred Stock were issued and

outstanding and 431,033 shares of Series C Convertible Preferred Stock were duly reserved for future issuance pursuant to Warrants outstanding as of the date hereof and (vi) no shares of Company Stock were owned beneficially or of record by the Company. As of the date hereof and immediately prior to the Effective Time, each share of Preferred Stock is and will be convertible into one share of Common Stock. Section 4.3(a) of the Company Disclosure Schedule sets forth, as of the date of this Agreement, a correct and complete list of the name and address of each holder of Common Stock, Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series B-2 Convertible Preferred Stock and Series C Convertible Preferred Stock and the number of shares of stock of each such class or series held by such holder. No share of Company Stock is held in the treasury of the Company. None of the outstanding shares of Company Stock is subject to, nor was it issued in violation of, any purchase option, call option, right of first refusal or offer, voting trust or similar arrangement, preemptive right, subscription right or any similar right. Except as set forth above, no shares of voting or non-voting capital stock, other equity interests, or other securities with voting rights of the Company are issued, reserved for issuance or outstanding. All Stock Options were granted in accordance with the Stock Option Plans, all Warrants were duly authorized and validly issued and all Convertible Notes were duly authorized and validly issued. Section 4.3(a) of the Company Disclosure Schedule sets forth, as of the date of this Agreement, a correct and complete list of each Stock Option, Warrant, Convertible Note and any other security convertible, exchangeable or exercisable into or right to purchase Company Stock or other capital stock of the Company, if any, outstanding, together with the name and address of the holder thereof, the number of shares of Company Stock or any other capital stock of the Company subject to such Stock Option, Warrant, Convertible Note, security or right, the extent to which such Stock Option, Warrant, Convertible Note, security or right is vested, exercisable and/or convertible, the date of grant or issuance, the exercise and/or conversion price (and, in the case of Stock Options, whether such option is a non-qualified stock option or an incentive stock option), and the expiration date of each such Stock Option, Warrant, Convertible Note, security and right, and the total number of such Stock Options, Warrants, Convertible Notes, securities and rights. There are no Stock Options convertible, exchangeable or exercisable into any class or series of stock other than Common Stock. All Stock Options granted under the 2001 Stock Option Plan and the 2004 Stock Option Plan and 50% of the Stock Options granted under the 2008 Stock Option Plan will vest immediately prior to the Effective Time without any further action by the holders of such Stock Options pursuant to and in accordance with the terms of such Stock Options and the applicable Stock Option Plans. Other than the portion of the Merger Consideration described in Section 3.2 , no Stock Option shall entitle the holder thereof to receive anything after the Effective Time in respect of such security. No Unvested Stock Option or Warrant shall entitle the holder thereof to receive any consideration at or at any time after the Effective Time in respect of such Unvested Stock Option or Warrant. All outstanding shares of Company Stock have been and are, and all shares of Company Stock which may be issued upon the exercise and/or conversion of Stock Options, Warrants and/or Convertible Notes will be, (i) duly authorized, validly issued, fully paid and nonassessable, (ii) issued in compliance with all applicable state and federal Laws concerning the issuance of securities, and (iii) not subject to any purchase option, call option, right of first refusal or offer, voting trust or similar arrangement, preemptive right, subscription right or similar right. Except for the Convertible Notes, there are no bonds, debentures, notes or other Indebtedness of the Company with voting rights (or convertible into, or exchangeable for, securities with voting rights) on any matters. All

recapitalizations, splits, combinations and the like (including those splits identified in Section 4.3(a) of the Company Disclosure Schedule) of the Company Stock have been effected in accordance with the Charter, the Bylaws and the DGCL. By virtue of the Merger and the terms of the Warrants, and without any action on the part of Parent, Merger Sub, the Company or the holders of Warrants (other than applicable notice requirements), each Warrant outstanding immediately prior to the Effective Time and not converted, exchanged or exercised, shall be cancelled, extinguished and terminated at the Effective Time without any right to receive any consideration at or at any time after the Effective Time in respect of such Warrant.

               (b) Except as identified in Section 4.3(a) of the Company Disclosure Schedule, there are no outstanding securities, interests, options, warrants, calls, rights, convertible or exchangeable securities or Contracts or obligations of any kind (contingent or otherwise) to which the Company is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other securities of the Company or obligating the Company to issue, grant, extend or enter into any such security, interest, option, warrant, call, right or Contract. Except as set forth in Section 4.3(b) of the Company Disclosure Schedule, there are no outstanding obligations of the Company (contingent or otherwise) to repurchase, redeem or otherwise acquire any shares of capital stock or other securities (or options or warrants to acquire any such interests) of the Company. There are no outstanding or authorized stock-appreciation rights, registration rights (including piggyback rights), rights of first offer, stock-based performance units, “phantom” stock rights or other Contracts or obligations of any character (contingent or otherwise) pursuant to which any Person is or may be entitled to receive any payment or other value based on the revenues, earnings or financial performance, stock price performance or other attribute of the Company or its business or assets or calculated in accordance therewith other than royalties payable under licenses listed in Section 4.3(b) of the Company Disclosure Schedule (collectively, “ Stock-Based Rights ”) or to cause the Company to file a registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”), or which otherwise relate to the registration of any securities of the Company. Except as set forth in Section 4.3(b) of the Company Disclosure Schedule, there are no voting trusts, proxies, stockholder agreements or other Contracts of any character to which the Company or, to the Knowledge of the Company, any of its Equityholders is a party or by which any of them is bound with respect to the issuance, holding, purchase, acquisition, voting or disposition of any shares of capital stock or similar interests of the Company.

               (c) The Convertible Notes have been duly authorized and are validly issued by the Company and are binding obligations of the Company. As of the date hereof and immediately prior to the Effective Time, the Convertible Notes are not convertible into any class or series of Company Stock. No unconverted Convertible Note shall entitle the holder thereof to receive any consideration at or at any time after the Effective Time in respect of such Convertible Note other than any amounts set forth on the Payout Schedule.

      Section 4.4 Authority; Enforceability. The Company has all necessary corporate power and authority to execute and deliver this Agreement, the Related Agreement and each other instrument and document required to be executed and delivered by it at or prior to the Closing, and, subject to obtaining the Stockholder Approvals, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Company of this Agreement and the Related Agreement, the

performance by the Company of its obligations hereunder and thereunder, and the consummation by the Company of the transactions contemplated hereby and thereby, including the Merger, have been approved by the Company’s Board of Directors, duly and validly authorized by all necessary action and no other proceedings on the part of the Company or its Equityholders (other than the Stockholder Approvals in the case of this Agreement and the Merger) are necessary to authorize this Agreement or the Related Agreement or to perform the Company’s obligations hereunder or thereunder or to consummate the transactions so contemplated. Each of this Agreement and the Related Agreement has been duly and validly executed and delivered by the Company, or will be duly and validly executed and delivered by the Company at or prior to Closing, and assuming the due authorization, execution and delivery thereof by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar Laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

      Section 4.5 Required Vote. The Board of Directors of the Company has, at a meeting duly called and held prior to the execution and delivery of this Agreement, unanimously (a) determined that this Agreement, the Related Agreement and the transactions contemplated hereby and thereby, including the Merger, are advisable and in the best interests of the Company and the Stockholders; (b) adopted and approved this Agreement and the Related Agreement; (c) approved the Merger and the other transactions contemplated under this Agreement and the Related Agreement; (d) adopted and approved the Charter Amendment; (e) directed that this Agreement and the transactions contemplated hereby, including the Merger, and the Charter Amendment be submitted to the Stockholders entitled to vote on such matters for consideration and approval by written consent in accordance with the DGCL; and (f) resolved to recommend and recommended the approval of this Agreement and the transactions contemplated hereby, including the Merger, and the Charter Amendment by the Stockholders in accordance with the DGCL. The affirmative vote or affirmative action by written consent of (x) holders of at least a majority of the outstanding shares of Common Stock and Preferred Stock, voting or acting by written consent as a single class, with each share of Common Stock entitled to one vote per share and each holder of outstanding shares of Preferred Stock entitled to the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are then convertible under the Charter and (y) holders of not less than 50% of the outstanding shares of Preferred Stock, voting or acting by written consent together as a single class, and (z) holders of not less than 50% of the outstanding shares of each of Series A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series B-2 Convertible Preferred Stock and Series C Convertible Preferred Stock, each voting separately or acting separately by written consent as a single class (collectively, the “ Stockholder Approvals ”) are the only votes, approvals, consents or other actions of the Company or the holders of any class or series of Company Stock necessary to authorize and adopt the Charter Amendment, this Agreement, the Merger and the other transactions contemplated hereby and to consummate the Merger. Due execution and delivery of the Stockholder Consent and Agreement, in the form attached hereto as Exhibit 4.5 , by Stockholders holding at least the amounts of Common Stock or Preferred Stock, as applicable, set forth in the immediately preceding sentence shall be sufficient to constitute the Stockholder Approvals. After receipt of the Stockholder Approvals, no vote, approval or other action on the part of any holder of any capital stock or other security of the

Company is required to approve or adopt the Charter Amendment, this Agreement, the Related Agreement, the Merger and the other transactions contemplated hereby and thereby and to perform the Company’s obligations hereunder and thereunder and to consummate the Merger. No vote, consent, approval or authorization is required by the holders of Stock Options, Warrants or Convertible Notes to approve, authorize and adopt the Charter Amendment, this Agreement, the Related Agreement, the Merger or the other transactions contemplated hereby and thereby or to consummate the Merger.

      Section 4.6 No Conflict; Required Filings and Consents.

               (a) The execution and delivery by the Company of this Agreement, the Related Agreement and each other instrument and document required by this Agreement, including the Charter Amendment, to be executed and delivered by the Company do not, and the performance of this Agreement, the Related Agreement and each other instrument and document required by this Agreement to be executed and delivered by the Company, shall not, (i) conflict with or violate the Charter or Bylaws, (ii) conflict with or violate any voting trusts, proxies, stockholder agreements or other Contracts of any character to which the Company or, to the Knowledge of the Company, any of the Equityholders is a party or by which any of them is bound with respect to the issuance, holding, purchase, acquisition, voting or disposition of any shares of capital stock or similar interests of the Company, (iii) subject to the filings and other matters referred to in Section 4.6(b) , conflict with or violate in any respect any Law or Order, in each case applicable to the Company, or by which its properties, rights or assets is bound or affected, or (iv) except as set forth in Section 4.6(a) of the Company Disclosure Schedule result in any breach or violation of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair the Company’s rights or alter the rights or obligations of any party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the termination of any Material Contract or in the creation of a Lien on any of the properties, rights or assets of the Company pursuant to any bond, indenture, Contract, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or its properties, rights or assets is bound or affected.

               (b) The execution and delivery by the Company of this Agreement, the Related Agreement and each other instrument and document required by this Agreement, including the Charter Amendment, to be executed and delivered by the Company at or prior to the Closing do not, and the performance of this Agreement, the Related Agreement and any instrument required by this Agreement to be executed and delivered by the Company at or prior to the Closing, shall not, require the Company to, except as set forth in Section 4.6(b) of the Company Disclosure Schedule, obtain any Approval of any Person, observe any waiting period imposed by, or make any filing with or notification to, any Governmental Authority, except for (i) compliance with any applicable requirements of the pre-merger notification requirements of the HSR Act, and any applicable Foreign Competition Laws, (ii) the Stockholder Approvals, (iii) the filing and effectiveness of the Charter Amendment in accordance with the DGCL and (iv) the filing and effectiveness of the Certificate of Merger in accordance with the DGCL.

      Section 4.7 Material Contracts.

               (a)  Section 4.7(a)-1 of the Company Disclosure Schedule sets forth, as of the date of this Agreement, a true and complete list, and if oral, an accurate and complete summary, of all Contracts to which the Company is a party or by which its properties, rights or assets are bound which are material to the Company or the operation of its business as conducted or as planned by the Company to be conducted as of the date hereof (collectively, together with those entered into after the date hereof and those contracts required to be listed pursuant to this Section 4.7(a) , whether or not listed on Section 4.7(a)-1 of the Company Disclosure Schedule, “ Material Contracts ”), including, without limitation, the following Contracts:

                    (i) employment Contracts, consulting Contracts or sales and distributor Contracts with any employee, consultant, sales representative, distributor or other agent of the Company (other than offer letters with employees providing for “at will” employment with the Company with no obligation to pay severance), and all severance, change in control or similar Contracts with any current or former Stockholder, director, officer, employee, consultant, sales representative, distributor or other agent, or any member of their immediate family or any Affiliate of the Company that would result in any obligation (absolute or contingent) of the Company to make any payment to any current or former Stockholder, director, officer, employee, consultant, sales representative, distributor or other agent, or any member of their immediate family or any Affiliate of the Company following either the consummation of the transactions contemplated hereby or by the Related Agreement, termination of employment (or the relevant relationship), or both;

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

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

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

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

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

                    (vii) Contracts containing any provision limiting in any respect the freedom of the Company or any of its Affiliates (or which after the Effective Time purport to limit or would limit the freedom of Parent, the Surviving Corporation or any of their respective Subsidiaries or Affiliates) to engage in any line of business, to develop, market or distribute Products or services, to compete with any Person, to operate at any location in the world or to

change sales quotas or targets under any Contracts with distributors, sales representatives, or other agents;

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

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

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

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

                    (xii) all outstanding powers of attorney empowering any Person to act on behalf of the Company;

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

                    (xiv) Contracts involving the issuance or repurchase of any capital stock or other equity interest of the Company, other than with respect to the issuance of Company Stock upon exercise, conversion and/or exchange of Stock Options, Warrants and Convertible Notes listed in Section 4.3(a) of the Company Disclosure Schedule;

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

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

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

                    (xviii) Contracts concerning Intellectual Property, including any agreements described in Sections 4.19(i) and 4.19(l) of this Agreement;

                    (xix) Contracts which would be “material contracts” under Rule 601 of Regulation S-K of the United States Securities and Exchange Commission or which are otherwise material to the Company or the operation of its business as conducted and as planned by the Company as of the date hereof to be conducted;

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

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

                    (xxii) Contracts for the conduct of research; and

                    (xxiii) Contracts with customers, suppliers and distributors involving amounts in excess of $10,000.

               (b) Except as set forth in Section 4.7(b)-1 of the Company Disclosure Schedule, true and complete copies of all Material Contracts have been provided to Parent by the Company. Section 4.7(b)-2 of the Company Disclosure Schedule separately sets forth a true and complete list of all Contracts that would purport to bind Parent or any of its Affiliates (other than the Company) following the consummation of the Merger or as a result of the execution and delivery of this Agreement or the Related Agreement.

               (c) Except as set forth in Section 4.7(c)-1 of the Company Disclosure Schedule, other than Material Contracts that have terminated or expired in accordance with their terms, each Material Contract is in full force and effect, is a valid and binding obligation of the Company and of each other party thereto and is enforceable against the Company and against each other party thereto, and such Material Contracts will continue to be (i) valid, binding and enforceable against the Company and, to the Knowledge of the Company, of each other party thereto, and (ii) in full force and effect immediately following the consummation of the transactions contemplated hereby, with no alteration or acceleration or increase in fees or liabilities, payments, obligations or burdens. The Company is not alleged to be and, to the Knowledge of the Company, no other party is or is alleged to be in, or has received notice of any, default under, or breach or violation of, any Material Contract and, to the Knowledge of the Company, no event has occurred which, with the giving of notice or passage of time or both, would constitute such a default, breach or violation and the Company has no reasonable basis for suspecting that any such default, breach or violation exists or will be forthcoming. No break-up or other similar fee is due or owing by the Company in connection with any prior negotiations, discussions or arrangements regarding any transaction, similar to the Merger or otherwise, or other Contract. Except as set forth in Section 4.7(c)-2 of the Company Disclosure Schedule, the Company is not currently involved, nor has it been involved since December 31, 2007, in any dispute with any counterparty to any Material Contract, and the Company has not received written or, to the Company’s Knowledge, oral notice since December 31, 2007 from any such counterparty to the effect that such counterparty intends to terminate or otherwise alter or modify the terms of any such Material Contract.

               (d)  Section 4.7(d) of the Company Disclosure Schedule sets forth any Material Contract which, by its terms, will be modified or adjusted, will become terminable by any other party thereto, or will require consent by or notification to any other party thereto, in each case, as a result of the execution of this Agreement or the Related Agreement, or the consummation of the Merger or any other transaction contemplated hereby or thereby.

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

               (f)  Disclosure of Relationships . The Company has disclosed to Parent all contractors, subcontractors, agents, and other persons who currently provide services to the Company (including, but not limited to, vendors, clinical investigators, and consultants), regardless of whether the relationship is documented in a written agreement. The Company has provided to Parent copies of all written agreements with any such parties, and the Company has identified for Parent any such relationships that are operating without a written agreement. The Company has disclosed all entities with whom the Company has entered joint venture agreements, co-marketing agreements, and/or agreements to distribute and purchase its products, where such agreements are currently in effect. The Company has provided to Parent copies of all such written agreements.

      Section 4.8 Compliance.

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

               (b) Except as set forth in Section 4.8(b) of the Company Disclosure Schedule, the Company (i) is not, to the Knowledge of the Company, under investigation by any Governmental Authority with respect to any material violation of any Approval or any Law or Order and (ii) has not been charged with, threatened to be charged with or received notice of any revocation or modification of any Approval or any Law or Order applicable to the Company.

               (c)  Section 4.8(c) of the Company Disclosure Schedule sets forth a complete and accurate list of all permits issued to or held by the Company. Such listed permits are the only permits that are required for the Company to conduct its business as presently conducted, except for those the absence of which, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on the Company. Each such permit is in full force and effect; the Company is in material compliance with the terms of

each such permit; and, to the Knowledge of the Company, no suspension or cancellation of such permit is threatened.

      Section 4.9 Financial Statements.

               (a)  Section 4.9(a) of the Company Disclosure Schedule contains true, correct and complete copies of (i) the audited balance sheet of the Company as of December 31, 2005, 2006 and 2007, and the related audited statements of operations, redeemable convertible preferred stock and stockholders’ deficit and cash flows of the Company for the fiscal years then ended, together with all related notes and schedules thereto, accompanied by the reports thereon of the Company’s accountants (collectively referred to herein as the “ Financial Statements ”) and (ii) the unaudited balance sheet of the Company as of April 30, 2008, and the related statements of operations, redeemable convertible preferred stock and stockholders’ deficit and cash flows for the four months then ended (collectively referred to herein as the “ Interim Financial Statements ”). Except as set forth in Section 4.9(a) of the Company Disclosure Schedule, the Financial Statements and Interim Financial Statements (i) were prepared in accordance with the books of account and other financial records of the Company, (ii) present fairly in all material respects the financial condition and results of operations of the Company as of the dates thereof or for the periods covered thereby, subject, in the case of the Interim Financial Statements, to normal and recurring year-end audit adjustments that will not be material in amount and to the absence of footnotes, (iii) have been prepared in accordance with GAAP applied on a basis consistent with the past practices of the Company and (iv) include all adjustments (consisting only of normal recurring accruals) that are necessary to present fairly in all material respects the financial condition of the Company and its results of operations as of the dates thereof or for the periods covered thereby.

               (b) Except as set forth in Section 4.9(b) of the Company Disclosure Schedule, the Company maintains a standard system of accounting established and administered in accordance with GAAP. Except as set forth in Section 4.9(b) of the Company Disclosure Schedule, the Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Section 4.9(b) of the Company Disclosure Schedule lists, and the Company has provided to Parent complete and correct copies of, all written policies, manuals and other documents promulgating such internal accounting controls.

               (c) Since December 31, 2005, neither the Company nor any of its directors, officers, employees or, to the Knowledge of the Company, auditors, accountants or representatives, has received or otherwise had or obtained, actual knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or its internal accounting controls, including any complaint, allegation, assertion or claim that the Company has engaged in questionable accounting or auditing practices. No attorney representing the Company,

whether or not employed by the Company, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its directors, officers, employees or agents to the Company’s Board of Directors or any committee thereof or to any director or officer of the Company. Since December 31, 2005, there have been no internal investigations regarding accounting treatment or revenue recognition, in accordance with GAAP, discussed with, reviewed by or initiated at the direction of the Company’s chief executive officer, chief financial officer, chief accounting officer or principal legal counsel or the Company’s Board of Directors or any committee thereof.

               (d) To the Knowledge of the Company, no employee of the Company has provided or is providing information to any law enforcement agency regarding the commission or possible commission of any crime or the violation or possible violation of any applicable Law. Neither the Company nor any officer or employee or, to the Knowledge of the Company, any contractor, subcontractor or agent of the Company, has discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against any employee of the Company in the terms and conditions of employment because of any act of such employee described in 18 U.S.C. § 1514A(a).

      Section 4.10 Absence of Certain Changes or Events.

               (a) Except as described in Section 4.10(a) of the Company Disclosure Schedule, during the period from December 31, 2007 to the date hereof, the Company has conducted its business only in the ordinary course of business consistent with past practice, and, since such date, there has not been any change, development, circumstance, condition, event, occurrence, damage, destruction or loss that has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company.

               (b) Except as described in Section 4.10(b) of the Company Disclosure Schedule, during the period from December 31, 2007 to the date hereof:

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

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

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

                    (iv) the Company has not sold, transferred, delivered, leased, subleased, licensed, sublicensed, mortgaged, pledged, encumbered, impaired or otherwise

disposed of (in whole or in part), or created, incurred, assumed or caused to be subjected to any Lien on, any of the rights, assets or properties of the Company (including any Intellectual Property or accounts receivable), except for the sale of inventory in the ordinary course of business consistent with past practice;

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

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

                    (vii) the Company has not (A) incurred or modified any Indebtedness or issued any debt securities or any warrants or rights to acquire any debt security, (B) assumed, guaranteed or endorsed or otherwise become responsible for, the obligations of any Person, (C) entered into any off-balance sheet financing arrangement or any accounts receivable or payable financing arrangement, or (D) made any loans or advances (except for advances of reasonable business expenses in the ordinary course of business consistent with past practice) in excess of $50,000;

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

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

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

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

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

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

      Section 4.11 No Undisclosed Liabilities. The Company does not have any liabilities or obligations of any nature (whether known or unknown, absolute or contingent, liquidated or unliquidated, due or to become due, accrued, fixed or otherwise), and there is no existing fact, condition or circumstance which could reasonably be expected to result in such liabilities or obligations, except liabilities or obligations (a) disclosed in the balance sheet of the Company as of December 31, 2007 (the “ Company Balance Sheet ”), (b) not required to be disclosed in a balance sheet under GAAP, or (c) incurred since December 31, 2007 in the ordinary course of business consistent with past practice (excluding any incurrence of Indebtedness), except as described in Section 4.11 of the Company Disclosure Schedule.

      Section 4.12 Absence of Litigation. Except as described in Section 4.12 of the Company Disclosure Schedule, there is no (a) Claim pending on behalf of or against or, to the Knowledge of the Company, Claim threatened on behalf of or against the Company or its properties, rights or assets (including cease and desist letters or requests for a license), (b) Order outstanding to which the Company or its properties, rights or assets is subject or (c) Claim which questions or challenges (i) the validity of this Agreement or the Related Agreement or (ii) any action taken or to be taken by the Company pursuant to this Agreement or the Related Agreement or in connection with the transactions contemplated hereby or thereby. No director, officer, employee, consultant or agent of the Company has asserted a Claim or demand for payment or has a basis for a Claim or demand for payment against the Company in respect of the period prior to and including the Effective Time (other than accrued and unpaid compensation earned in the ordinary course of business).

      Section 4.13 Employee Benefit Plans.

          (a) As of the date of this Agreement, Section 4.13(a) of the Company Disclosure Schedule lists and, in the case of employee benefit plans not reduced to writing, describes all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)), including, without limitation, multiemployer plans within the meaning of Section 3(37) of ERISA, and all incentive and compensation plans, including without limitation all cash (including without limitation bonus) and equity (including without limitation stock option, restricted stock, stock purchase, stock appreciation rights), incentive, deferred compensation, retirement or supplemental retirement, severance, golden parachute, vacation, cafeteria, dependent care, medical care, employee assistance program, education or tuition assistance programs, insurance and other similar fringe or employee benefit plans, programs or arrangements, whether written or oral, and any

employment or executive compensation or severance Contracts, written or otherwise, for the benefit of, or relating to, any present or former employee, director or independent contractor of the Company, (i) which is or has been entered into, contributed to, established by, participated in and/or maintained by the Company or any trade or business (whether or not incorporated) which is a member of a controlled group or which is under common control with the Company (an “ ERISA Affiliate ”) within the meaning of Section 414 of the Code, or (ii) under which the Company or ERISA Affiliate has any liability whether or not such plan is terminated (together, the “ Employee Plans ”). The Company has provided to Parent correct and complete copies of (where applicable) (i) all plan documents and amendments thereto, including without limitation all adoption and participation agreements, summary plan descriptions, summaries of material modifications, and resolutions related to each Employee Plan, (ii) the most recent determination letters or opinion letters received from the IRS for each Employee Plan, (iii) the three most recent IRS Forms 5500 Annual Report for each Employee Plan, (iv) the most recent audited financial statement and actuarial valuation report for each Employee Plan, (v) the most recent discrimination testing results for each Employee Plan, (vi) all related agreements (including trust agreements), insurance Contracts and other Contracts which implement each Employee Plan and (vii) all correspondence with, rulings by or opinions by the United States Internal Revenue Service (the “ IRS ”) or the U.S. Department of Labor for each Employee Plan. There are no restrictions on the ability of the sponsor of each Employee Plan (which is currently the Company) to amend or terminate any Employee Plan, and each Employee Plan may be transferred to or assumed by Parent, Merger Sub or, after the Effective Time, the Surviving Corporation, as the case may be.

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

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

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

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

          (f)  Section 4.13(f) of the Company Disclosure Schedule sets forth a true and complete list of each current or former employee, consultant, officer, director and investor of the Company who holds, as of the date hereof, any Stock Option, together with the number of shares of Common Stock subject to such Stock Option, the date of grant or issuance of such Stock Option, the extent to which such Stock Option is vested and/or exercisable (or shall become vested and/or exercisable in connection with the transactions contemplated in this Agreement), the exercise price of such Stock Option, whether such Stock Option is intended to qualify as an incentive stock option within the meaning of Section 422(b) of the Code, and the expiration date of each such Stock Option. Section 4.13(f) of the Company Disclosure Schedule also sets forth the total number of outstanding Stock Options as of the date of this Agreement. True and complete copies of each Contract (including all amendments and modifications thereto) between the Company and each holder of such Stock Options relating to the same have been provided to Parent.

          (g) [Intentionally Omitted]

          (h) Except as set forth in Section 4.13(h) of the Company Disclosure Schedule, no Employee Plan exists that, as a result of the execution and delivery of this Agreement or the Related Agreement, the Stockholder Approvals, the Merger or the other transactions contemplated by this Agreement (whether alone or in connection with any subsequent event(s)), could result in (i) severance pay or any increase in severance pay upon any termination of employment after the date of this Agreement, (ii) accelerating the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or result in any other material obligation pursuant to, any of the Employee Plans (except with respect to the acceleration of vesting of Stock Options) or (iii) any breach or violation of, or default under, any of the

Employee Plans. The Company has not made any payments, is not obligated to make any payments, and is not a party to any agreements that under any circumstances could obligate it to make any payments, that will not be deductible under Section 280G of the Code (after giving effect to the procedure described in Section 6.14 ).

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

      Section 4.14 Employment and Labor Matters.

          (a) As of the date of this Agreement, Section 4.14(a) of the Company Disclosure Schedule identifies (i) all current directors and officers of the Company and (ii) all current employees, consultants and agents (including sales representatives and distributors) employed or engaged by the Company and, for each individual identified in clauses (i) or (ii), sets forth each such individual’s rate of pay or annual compensation, job title and date of hire and the number and type of shares of Company Stock, Stock Options, Warrants and Convertible Notes beneficially owned or held by such individual. As of the date of this Agreement, except as set forth in Section 4.14(a) of the Company Disclosure Schedule, there are no employment, consulting, commission, incentive or bonus pay, severance pay, retention or continuation pay, termination or indemnification agreements or other similar Contracts of any nature (whether in writing or not) between the Company and any current or former stockholder, officer, director, employee, consultant, labor organization or other representative of the Company’s employees providing for payments in an aggregate amount of $50,000 or greater, nor is any such Contract presently being negotiated. There are no collective bargaining agreements or other similar Contracts (whether in writing or not) between the Company and any current or former officer, employee, labor organization or other representative of the Company’s employees, nor is any such Contract presently being negotiated. The Company has provided to Parent complete and correct copies of all such agreements and Contracts. The Company has not failed to make or is not otherwise delinquent in payments to any of its employees or consultants for any wages, salaries, overtime pay, commissions, bonuses, benefits or other compensation for any services or otherwise arising under any policy, practice, Contract, plan, program or Law. Except as set forth in Section 4.14(a) of the Company Disclosure Schedule, none of the Company’s employment policies or practices is currently being audited or investigated by any Governmental Authority or Court. Except as set forth in Section 4.14(a) of the Company Disclosure Schedule, there is no pending or, to the Knowledge of the Company, threatened Claim, unfair labor practice charge, or other charge or inquiry against the Company brought by or on behalf of any employee, prospective employee, former employee, retiree, labor organization or other representative of the employee, or other individual or any Governmental Authority with respect to employment practices brought by or before any Court or Governmental Authority.

          (b) Except as set forth in Section 4.14(b) of the Company Disclosure Schedule, (i) there are no controversies pending or, to the Knowledge of the Company, threatened, between the Company, on the one hand, and its employees or consultants, on the other hand; (ii) the Company is not a party to any collective bargaining agreement or other labor union Contract applicable to Persons employed by the Company nor are there any activities or

proceedings of any labor union to organize any such employees of the Company; (iii) since December 31, 2005, there have been no strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to any employees of the Company; and (iv) there are no employment-related grievances pending or, to the Knowledge of the Company, threatened. The Company is not a party to, or otherwise bound by, any consent decree with, or citation or other Order by, any Governmental Authority relating to employees or employment practices. The Company is in compliance in all material respects with all applicable Laws, Contracts and policies relating to employment, employment practices, wages, hours and terms and conditions of employment, including the obligations of the Worker Adjustment and Retraining Notification Act of 1988, as amended (the “ WARN Act ”), and similar Laws, and all other notification and bargaining obligations arising under any collective bargaining agreement, by Law or otherwise. The Company has not effectuated a “plant closing” or “mass layoff” as those terms are defined in the WARN Act and similar Laws, affecting in whole or in part any site of employment, facility, operating unit or employee of the Company, without complying with all provisions of the WARN Act or implemented any early retirement, separation or window program within the past five (5) years, nor has the Company planned or announced any such action or program for the future.

      Section 4.15 Absence of Restrictions on Business Activities. Except as set forth in Section 4.15 of the Company Disclosure Schedule, there is no Contract or Order binding upon the Company or its properties, rights or assets which currently has or could reasonably be expected to have the effect of prohibiting or impairing any current business practice of Parent, the Company, the Surviving Corporation or any of their respective Subsidiaries or Affiliates or prohibiting or impairing the conduct of business by Parent or its Affiliates, the Company, the Surviving Corporation or any of their respective Subsidiaries or Affiliates as currently conducted, following the consummation of the Merger. The consummation of the Merger will not result in the granting by Parent or any of its Subsidiaries or Affiliates (including the Surviving Corporation) of any rights or licenses to any Intellectual Property to a third party (including any covenant not to sue). Except as set forth in Section 4.15 of the Company Disclosure Schedule, the Company is not subject to any non-competition, non-solicitation, standstill or similar restriction on its business. Except as set forth in Section 4.15 of the Company Disclosure Schedule, the Company has not granted any exclusive rights of any kind.

      Section 4.16 Title to Assets; Leases.

          (a) Except as described in Section 4.16(a) of the Company Disclosure Schedule, the Company has good and marketable title to all of its real or personal properties (whether owned or leased), rights and assets, free and clear of all Liens. The Company does not currently own nor has ever owned any real property or interest therein, nor has received any notice of any Lien with respect to any of its leasehold interests.

          (b)  Section 4.16(b) of the Company Disclosure Schedule contains a true and complete list of all leases of real property to which the Company is a party or by which it holds a leasehold interest or is otherwise obligated (collectively, “ Real Property ”). The Company has provided to Parent complete and accurate copies of all such leases for Real Property. Each Real Property lease to which the Company is a party is legal, valid, binding and in full force and effect in accordance with its terms, and all rents and additional rents due to date

from the Company on each such lease have been paid. As of the date of this Agreement, the Company has not received written notice that it is in material default under any Real Property lease to which the Company is a party, and there exists no material default by the Company, or to the Knowledge of the Company, by any other party under any such lease. Except as set forth in Section 4.16(b) of the Company Disclosure Schedule, there are no leases, subleases, licenses, concessions or any other Contracts to which the Company is a party granting to any Person other than the Company any right to possession, use occupancy or enjoyment of any of the Real Property or any portion thereof and the Company is not obligated under or bound by any option, right of first refusal, purchase Contract, or other Contract to sell or otherwise dispose of any Real Property or any other interest in any Real Property.

          (c)  Section 4.16(c) of the Company Disclosure Schedule contains a true and complete list of all leases of all property (other than Real Property) to which the Company is a party or by which it holds a leasehold interest.

      Section 4.17 Taxes. For purposes of this Agreement, “ Tax ” or “ Taxes ” shall mean taxes, duties, fees, premiums, assessments, imposts, levies and governmental impositions of any kind, payable to any federal, state, local or foreign Governmental Authority, including, but not limited to, those on or measured by or referred to as income, franchise, profits, gross receipts, goods and services, capital, ad valorem, advance, corporation, custom duties, alternative or add-on minimum taxes, estimated, environmental, disability, registration, value added, sales, use, service, real or personal property, capital stock, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes, and interest, penalties and additions to tax imposed with respect thereto; and “ Tax Returns ” shall mean returns, reports, forms and information statements, including any schedule or attachment thereto, with respect to Taxes required to be filed with the IRS or any other Governmental Authority or taxing authority or agency, domestic, state, local or foreign, including consolidated, combined and unitary tax returns. Except as set forth in Section 4.17 of the Company Disclosure Schedule:

          (a) All Tax Returns required to be filed by or on behalf of the Company and each affiliated, combined, consolidated or unitary group of which the Company is or was at any time a member have been timely filed, and all such Tax Returns are true, complete and correct in all material respects.

          (b) All Taxes payable by or with respect to the Company (whether or not shown on any Tax Return) have been timely paid, and adequate reserves (other than a reserve for deferred Taxes established to reflect timing differences between book and Tax treatment) in accordance with GAAP are provided on the Company Balance Sheet for any Taxes not yet due. All assessments for Taxes due and owing by or with respect to the Company with respect to completed and settled examinations or concluded litigation have been paid. The Company has not incurred a Tax liability from the date of the latest Company Balance Sheet other than a Tax liability in the ordinary course of business consistent with past practice. There are no Tax Liens on any assets, properties or rights of the Company except Liens for current Taxes not yet due and payable.

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

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

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

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

          (g) [Intentionally Omitted]

          (h) The Company will not be required to include any item o