AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (this “Agreement”) is made and entered into as of July 4, 2011 by and among Radiancy, Inc., a Delaware corporation (“Radiancy”), PhotoMedex, Inc., a Nevada corporation (“PhotoMedex”), and PHMD Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of PhotoMedex (“Merger Sub”).  Radiancy, PhotoMedex and Merger Sub are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

A.           The Parties intend to effect the merger of Merger Sub with and into Radiancy (the “Merger”), with Radiancy continuing as the surviving entity in the Merger, and as a result of which all issued and outstanding common stock, par value $0.01 per share, of Radiancy (the “Radiancy Common Stock”), will be deemed for all purposes to represent the right to receive the Merger Consideration (as defined hereafter) upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware General Corporations Law, as amended (the “DGCL”).

(a) Upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, at the Effective Time (as hereafter defined), Merger Sub shall be merged with and into Radiancy.  Upon the consummation of the Merger, the separate existence of Merger Sub shall thereupon cease and Radiancy, as the surviving company in the Merger (hereafter sometimes referred to as the “Surviving Company”), shall continue its corporate existence under the laws of the State of Delaware as a wholly owned subsidiary of PhotoMedex.

(b) On the Closing Date, PhotoMedex shall (i) cause to be paid or issued to stockholders of record of Radiancy (the “Radiancy Stockholders”) as of the Effective Time, in accordance with the terms and conditions of this Agreement and the allocation attached hereto as Exhibit 1.1(b)(i) (the “Radiancy Stockholder Allocation”), newly issued common stock, par value $0.01 per share, of PhotoMedex (the “PhotoMedex Common Stock”) equal to the sum of [A] the number of shares of PhotoMedex Common Stock that is equal to three (3) times the number of shares of PhotoMedex Common Stock that are issued and outstanding immediately prior to the consummation of the Merger (including, for these purposes, any shares of PhotoMedex Common Stock that are issuable upon conversion or exercise of any outstanding convertible securities of PhotoMedex having a conversion price or exercise price that is less than $25.00 per share, but excluding those certain options to purchase 95,200 shares of PhotoMedex Common Stock which are provided for in the employment agreements of Messrs. Dennis McGrath and Michael Stewart), plus [B] Three Million Forty Thousand (3,040,000) shares of PhotoMedex Common Stock (collectively, the “Merger Consideration”) and (ii) cause to be paid or issued to the stockholders of record of PhotoMedex entitled to vote for or against the Merger at the stockholder meeting (the “PhotoMedex Stockholders”) to approve the Merger, in accordance with the terms and conditions of this Agreement, warrants to purchase an aggregate of Nine Hundred Forty One Thousand, Six Hundred Sixty Seven (941,667) shares of PhotoMedex Common Stock (the “Warrants”), of which warrants to purchase 95,200 shares of PhotoMedex Common Stock will instead be issued as options to Messrs. Dennis McGrath and Michael Stewart under their employment agreements with PhotoMedex, such Warrants to be issued pro rata to such stockholders based upon the number of issued and outstanding shares of PhotoMedex Common Stock held by each such holder on the record date (the “PhotoMedex Stockholder Allocation”).

(d) As soon as practicable after the Effective Time, PhotoMedex shall cause Broadridge Corporate Issuer Solutions, Inc. (or such other Person as may be mutually agreed upon by the Parties, the “Exchange Agent”) to mail each holder of record holding a Radiancy Common Stock certificate (the “Certificate”) a letter of transmittal as prepared by PhotoMedex and reasonably acceptable to Radiancy (which shall specify, among other things, that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon actual receipt of the Certificates by the Exchange Agent) and instructions for effecting the surrender of the Certificates in exchange for the Merger Consideration.  Upon proper surrender to the Exchange Agent of a Certificate or Certificates for exchange, together with such properly completed letter of transmittal, duly executed, and any other documents and instruments reasonably required by the Exchange Agent, the holder of such Certificate or Certificates shall be entitled to receive in exchange therefore a certificate representing the number of whole PhotoMedex Common Stock to which such holder of Radiancy Common Stock shall have become entitled to hereunder and in accordance with the Radiancy Stockholder Allocation, and the Certificate or Certificates so surrendered shall be canceled.  Until so surrendered, each Certificate shall represent after the Effective Time for all purposes only the right to receive the Merger Consideration.

 

(f) After the Effective Time, there shall be no transfers on the stock transfer books of Radiancy of the shares of Radiancy Common Stock that were issued and outstanding immediately prior to the Effective Time other than to settle transfers of Radiancy Common Stock that occurred prior to the Effective Time.  If, after the Effective Time, Certificates (properly endorsed or accompanied by an appropriate instrument of transfer) representing such shares are presented for transfer to the Exchange Agent, they shall represent the right to receive the Merger Consideration as provided in this Section 1.1.

 

(g) Any portion of the Merger Consideration that remains unclaimed by the holders of Certificates as of the first anniversary of the Effective Time shall be paid to PhotoMedex.  Any former stockholders of Radiancy who have not theretofore complied with this Section 1.1 shall thereafter look only to PhotoMedex (subject to the terms of this Agreement, abandoned property, escheat and other similar Laws (as defined below)) for payment of the Merger Consideration to such stockholder as determined pursuant to this Agreement and without any interest thereon.  Any consideration remaining unclaimed immediately prior to such time when such consideration would otherwise escheat or become the property of any Governmental Authority (as defined below), shall, to the extent permitted by applicable Law, become the property of PhotoMedex, free and clear of all claims or interest of any Person previously entitled thereto.  Notwithstanding the foregoing, none of Radiancy, PhotoMedex, the Surviving Company or the Exchange Agent shall be liable to any holder of a Certificate for any Merger Consideration delivered in respect of such Certificate to a public official pursuant to any abandoned property, escheat or other similar Law.

 

(h) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by PhotoMedex, the posting by such Person of a bond in such amount as PhotoMedex may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration pursuant to this Agreement.

 

(i) The Warrants shall be in substantially the form attached hereto as Exhibit 1.1(i) and shall have the terms set forth therein, including, without limitation, (i) a warrant exercise price of Twenty Dollars ($20.00) per share of PhotoMedex Common Stock, (ii) an exercise period of three (3) years following the Effective Time, and (iii) notwithstanding the three-year exercise period, the right of PhotoMedex to notify the holders of Warrants of an earlier expiration of the Warrants at any time following such time as the PhotoMedex Common

(m) Tax Withholding.  PhotoMedex, the Surviving Company and the Escrow Agent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable in accordance with this Agreement such amounts as PhotoMedex, the Surviving Company and the Exchange Agent reasonably believe are required by applicable Law (including, without limitation, Israeli Tax Laws). To the extent that amounts are so withheld by PhotoMedex, the Surviving Company or the Exchange Agent, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Radiancy Stockholder in respect of which such deduction and withholding was made by PhotoMedex, the Surviving Corporation or the Escrow Agent, as the case may be. Notwithstanding the foregoing in this Section 1.1(m), PhotoMedex, the Surviving Company or the Escrow Agent, as the case may be, shall: (i) not withhold any amounts in the event that the Israeli Tax Ruling (as defined in Section 5.13 below) is obtained, unless such withholding (if any) is made only in accordance with the provisions of said Israeli Tax Ruling; (ii) comply with a withholding Tax extension (if obtained); (iii) not withhold any amounts pursuant for Israeli Tax purposes if the recipient has represented to PhotoMedex, the Surviving Company or the Escrow Agent, as the case may be, in an Israeli tax declaration which will be attached to a letter of transmittal (the “Israeli Tax Declaration”) that the recipient is not a resident of the State of Israel; and (iv) not withhold or withhold a reduced Tax amount if the recipient has provided a Valid Certificate at least three (3) Business Days prior to any payment payable pursuant to this Agreement.  A “Valid Certificate” shall be a certificate or ruling issued by the Israeli Tax Authority (the “ITA”) which is sufficient to enable PhotoMedex, the Surviving Company or the Escrow Agent, as the case may be, to conclude that no withholding (or reduced withholding) of Israeli Tax is required

(a) Unless this Agreement shall have been terminated in accordance with Section 7.1 and subject to the satisfaction or waiver of the conditions set forth in Article VI, the closing of the Merger (the “Closing”) shall take place by the exchange of original or facsimile or electronic copies of this Agreement and each ancillary agreement hereto at 10:00 a.m. (EST) no later than the third Business Day (as defined herein) after the date that all of the closing conditions set forth in Article VI have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) unless another time, date or place is agreed upon in writing by the Parties hereto; provided, however, that the Closing shall occur, subject to the satisfaction or waiver of the conditions set forth in Article VI, no later than January 31, 2012 (the “Drop Dead Date”).  The date on which the Closing occurs is herein referred to as the “Closing Date.”

 

(b) Subject to the terms and conditions hereof, concurrently with the Closing and after the satisfaction or, if permissible, waiver of the conditions set forth in Article VI, the Parties shall as promptly as practicable cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware (the “Delaware Secretary of State”) a certificate of merger for the Merger in accordance with the DGCL (referred to herein as the “Certificate of Merger”), executed in accordance with the relevant provisions of the DGCL, and shall make all other filings or recordings required under the DGCL in order to effect the Merger.  The Merger shall become effective upon the filing of the Certificate of Merger or at such other time (on or before the Drop Dead Date) as is agreed in writing by the Parties hereto and specified in the Certificate of Merger.  The time when the Merger shall become effective is herein referred to as the “Effective Time.”

 

1.3 Escrow

 

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(a) At Closing, PhotoMedex, Radiancy, the PhotoMedex Representative (as defined below), the Radiancy Representative (as defined below) and Broadridge Corporate Issuer Solutions, Inc. (or such other Person as may be mutually agreed upon by the Parties, the “Escrow Agent”) shall enter into an Escrow Agreement, in the form and substance reasonably satisfactory to the Parties (the “Escrow Agreement”) and PhotoMedex shall deposit with the Escrow Agent certificates representing Eight Hundred Thousand (800,000) shares of PhotoMedex Common Stock (the “Escrow Securities”).  As the remedy of PhotoMedex and the PhotoMedex Indemnified Parties (as defined below), on one hand, or as the remedy of Radiancy and the Radiancy Indemnified Parties (as defined below), on the other hand, the Escrow Securities shall be applied to satisfy any PhotoMedex indemnification claims or Radiancy indemnification claims pursuant to and in accordance with Section 5.18.  Upon release from escrow, the Escrow Securities shall be allocated in accordance with the PhotoMedex Stockholder Allocation in the event of a PhotoMedex indemnification claim or allocated in accordance with the Radiancy Stockholder Allocation in the event of a

(b) The Parties agree that (i) Dr. Yoav Ben-Dror shall be appointed as the Radiancy Representative and the attorney-in-fact for and on behalf of the Radiancy Stockholders with respect to this Section 1.3, Section 5.18 and the Escrow Agreement and the taking by the Radiancy Representative of any and all actions and the making of any decisions required or permitted to be taken by him or her under this Section 1.3, Section 5.18 or the Escrow Agreement; and (ii) James W. Sight shall be appointed as the PhotoMedex Representative and the attorney-in-fact for and on behalf of the PhotoMedex Stockholders with respect to this Section 1.3, Section 5.18 and the Escrow Agreement and the taking by the PhotoMedex Representative of any and all actions and the making of any decisions required or permitted to be taken by him or her under this Section 1.3, Section 5.18 or the Escrow Agreement; including in each case the exercise of the power to (i) agree to, negotiate, enter into settlements and compromises of and comply with orders of courts with respect to any indemnification claims, (ii) resolve any indemnification claims, and (iii) take all actions necessary in the judgment of the Radiancy Representative or the PhotoMedex Representative, as the case may be, for the accomplishment of the other terms, conditions and limitations of this Section 1.3, Section 5.18 and the Escrow Agreement.  Each Party and the Escrow Agent shall only be required to acknowledge or act upon written communication signed by the Radiancy Representative and/or the PhotoMedex Representative.  No bond shall be required of the Radiancy Representative or the PhotoMedex Representative, and neither the Radiancy Representative nor the PhotoMedex Representative shall receive any compensation for his or her services under this Agreement and the Escrow Agreement with respect to the Escrow Securities and any indemnification claims hereunder.  The Radiancy Representative shall have no liability whatsoever to the Radiancy Stockholders relating to his or her service as Radiancy Representative (including any action taken or omitted to be taken), except that he or she shall be liable for harm that he or she directly causes by an act of willful misconduct.  The PhotoMedex Representative shall have no liability whatsoever to the PhotoMedex Stockholders relating to his

or her service as PhotoMedex Representative (including any action taken or omitted to be taken), except that he or she shall be liable for harm that he or she directly causes by an act of willful misconduct.  PhotoMedex shall pay all reasonable out-of-pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, experts and consultants) incurred by the Radiancy Representative or the PhotoMedex Representative, as the case may be, in connection with the performance of his or her respective obligations as the Radiancy Representative or the PhotoMedex Representative, as the case may be, under this Agreement and the transactions contemplated hereby.

(a) Except as set forth in Section 2.2(b) of the PhotoMedex Disclosure Letter, there are no (i) outstanding options, warrants, puts, calls, convertible securities, preemptive or similar rights, (ii) bonds, debentures, notes or other Indebtedness having general voting rights or that are convertible or exchangeable into securities having such rights, or (iii) except as expressly contemplated by this Agreement, subscriptions or other rights, agreements, arrangements, contracts or commitments of any character, relating to the issued or unissued capital equity of PhotoMedex or obligating PhotoMedex to issue, transfer, deliver or sell or cause to be issued, transferred, delivered, sold or repurchased any options, capital stock or securities convertible into or exchangeable for such securities, or obligating PhotoMedex to grant, extend or enter into any option, warrant, call, subscription or other right, agreement, arrangement or commitment for such securities.

 

(c) Upon delivery of the Merger Consideration pursuant to this Agreement to the stockholders of Radiancy who have exchanged their respective Certificates therefore, such stockholders will have good title to such Merger Consideration free and clear of any restrictions on transfer, Encumbrances (other than any restriction under the Securities Act, or any state “blue sky” securities Laws, by the terms of the Merger Consideration or Encumbrances or similar restrictions which are created by the Radiancy Stockholders), warrants, purchase rights, contracts, assignments, commitments, equities, claims and demands.

 

(d) There are no registration rights (except as expressly contemplated by this Agreement), and there is no voting trust, proxy, rights plan, anti-takeover plan or other contracts or understandings to which PhotoMedex is a party or by which PhotoMedex is bound with respect to any of its capital stock. Except as set forth in this Agreement or disclosed in Section 2.2(f) of the PhotoMedex Disclosure Letter, as a result of the consummation of the Merger, no shares of capital stock, warrants, options or other securities of PhotoMedex are issuable and no rights in connection with any shares, warrants, rights, options or other securities of PhotoMedex accelerate or otherwise become triggered (whether as to vesting, exercisability, convertibility or otherwise).

 

(e) Except as disclosed in Section 2.2(g) of the PhotoMedex Disclosure Letter, no Indebtedness of PhotoMedex or any of the PhotoMedex Subsidiaries contains any restriction upon (i) the prepayment of any of such Indebtedness, (ii) the incurrence of Indebtedness by PhotoMedex or any of the PhotoMedex Subsidiaries, or (iii) the ability of PhotoMedex or any of the PhotoMedex Subsidiaries to grant any Encumbrance on its properties or assets.  As used in this Agreement, “Indebtedness” means (A) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than Expenses, capitalized lease expenses and current trade liabilities incurred in the ordinary course of business consistent with past practice and payable in accordance with customary practices), (B) any other indebtedness that is evidenced by a note, bond, debenture, credit agreement or similar instrument, (C) all obligations in respect of bankers’ acceptances issued or created, (D) all indebtedness referred to in clauses (A) through (B) secured by an Encumbrance on any property of such Person and (E) all guarantee obligations for indebtedness of others referred to in clauses (A) through (D).

(a) Section 2.3(a)(i) of the PhotoMedex Disclosure Letter sets forth a true, complete and correct list of each of the PhotoMedex Subsidiaries and their respective jurisdictions of incorporation, formation or organization.  Except as otherwise set forth in Section 2.3(a)(ii) of the PhotoMedex Disclosure Letter, all of the capital stock and other equity interests of the PhotoMedex Subsidiaries are owned, directly or indirectly, by PhotoMedex free and clear of any Encumbrance (other than any restriction under the Securities Act, or any state “blue sky” securities Laws) with respect thereto.  All of the outstanding shares of capital stock or other equity interests in each of the PhotoMedex Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and non-assessable, and with respect to the PhotoMedex Subsidiaries that are limited liability companies, are duly authorized, validly issued, fully paid and non-assessable and were issued free of preemptive rights and were not issued in material violation of any applicable foreign, federal or state securities Laws.  Neither PhotoMedex nor any PhotoMedex Subsidiary owns, directly or indirectly, any shares of capital stock or other equity or voting interests in (including any securities exercisable or exchangeable for or convertible into capital stock or other equity or voting interests in) any other Person other than publicly traded securities constituting less than five percent (5%) of the outstanding equity of the issuing entity, other than capital stock or other equity interest of the PhotoMedex Subsidiaries owned by PhotoMedex or another PhotoMedex Subsidiary.

(a) The financial statements and notes contained or incorporated by reference in the SEC Reports (the “PhotoMedex Financials”) fairly present the financial condition and the results of operations, changes in stockholders’ equity, and cash flow of PhotoMedex and the PhotoMedex Subsidiaries as at the respective dates of and for the periods referred to in such financial statements, all in accordance with (i) GAAP and (ii) Regulation S-X or Regulation S-K, as applicable, subject, in the case of interim financial statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and the omission of notes to the extent permitted by Regulation S-X or Regulation S-K, as applicable.  To the extent required by the Exchange Act, PhotoMedex has designed and maintains a system of internal controls over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.  No financial statements other than those of PhotoMedex and the PhotoMedex Subsidiaries are required by GAAP to be included in the consolidated financial statements of PhotoMedex.  Section 2.7(b) of the PhotoMedex Disclosure Letter contains a description of all non-audit services performed by PhotoMedex’s auditors for PhotoMedex and the PhotoMedex Subsidiaries since January 1, 2008 and the fees paid for such services; further, all such non-audit services were approved by the audit committee of the PhotoMedex Board.  PhotoMedex has no off-balance sheet arrangements.  For purposes of this Agreement, “GAAP” means United States generally accepted accounting principles consistently applied, as in effect from time to time.

(b) Except as disclosed in Section 2.11(b) of the PhotoMedex Disclosure Letter, each of PhotoMedex, the PhotoMedex Subsidiaries, and each employee of PhotoMedex or any PhotoMedex Subsidiary who is legally required to be licensed by a Governmental Authority in order to perform his or her duties with respect to his or her employment with PhotoMedex or such PhotoMedex Subsidiary, hold all material permits, licenses, franchises, grants, authorizations, consents, exceptions, variances, exemptions, orders and other authorizations of Governmental Authorities, certificates, consents and approvals necessary to lawfully conduct PhotoMedex’s or the PhotoMedex Subsidiaries’ respective business as presently conducted, and to own, lease and operate PhotoMedex’s or the PhotoMedex Subsidiaries’ respective assets and properties, except for any such permits, licenses, franchises, grants, authorizations, consents, exceptions, variances, exemptions, certificates and approvals, the failure of which to obtain, individually or in conjunction with another, would not reasonably be expected to result in a PhotoMedex Material Adverse Effect (collectively, the “PhotoMedex Permits”).  PhotoMedex has made available to Radiancy true, correct and complete copies of all material PhotoMedex Permits.  All of PhotoMedex Permits are in full force and effect, and no suspension or cancellation of any of PhotoMedex Permits is pending or, to PhotoMedex’s knowledge, threatened, except, in each case, where the failure of any PhotoMedex Permits to have been in full force and effect, or the suspension or cancellation of any of PhotoMedex Permits, would not reasonably be expected to result in a PhotoMedex Material Adverse Effect.  PhotoMedex and the PhotoMedex Subsidiaries are not in violation in any material respect of the terms of any PhotoMedex Permit, except for any violations which would not reasonably be expected to result in a PhotoMedex Material Adverse Effect.

(a) Section 2.14(a) of the PhotoMedex Disclosure Letter sets forth a true, correct and complete list of, and PhotoMedex has made available to Radiancy, true, correct and complete copies of, each material written contract, agreement, commitment, arrangement, lease, license, or plan and each other instrument in effect to which PhotoMedex or any PhotoMedex Subsidiary is a party or by which PhotoMedex, any PhotoMedex Subsidiary, or any of their respective properties or assets are bound or affected, in each case as of the date hereof (each, a “PhotoMedex Material Contract”) that:

 

(i) contains covenants that materially limit the ability of PhotoMedex or any PhotoMedex Subsidiary (A) to compete in any line of business or with any Person or in any geographic area or to sell, or provide any service or product, including any non-competition covenants, exclusivity restrictions, rights of first refusal or most-favored pricing clauses or (B) to purchase or acquire an interest in any other entity, except, in each case, for any such contract that may be canceled without any penalty or other liability to PhotoMedex or any PhotoMedex Subsidiary upon notice of 60 days or less;

(iii) company or other similar agreement or arrangement relating to the formation, creation, operation, management or control of any partnership or joint venture that is material to the business of PhotoMedex and the PhotoMedex Subsidiaries, taken as a whole;

(iv) involves any exchange traded, over the counter or other swap, cap, floor, collar, futures, contract, forward contract, option or other derivative financial instrument or contract, based on any commodity, security, instrument, asset, rate or index of any kind or nature whatsoever, whether tangible or intangible, including currencies, interest rates, foreign currency and indices;

 

(v) evidences Indebtedness (whether incurred, assumed, guaranteed or secured by any asset) having an outstanding principal amount in excess of $100,000;

 

(vi) involves the acquisition or disposition (to the extent such transaction would be consummated after the date hereof), directly or indirectly (by merger or otherwise), of assets with an aggregate value in excess of $100,000 (other than in the ordinary course of business) or capital stock or other equity interests of another Person;

 

(vii) by its terms calls for aggregate payments by PhotoMedex or any PhotoMedex Subsidiary under such contract of more than $100,000 per year;

 

(viii) with respect to any material acquisition of another Person, pursuant to which PhotoMedex or any PhotoMedex Subsidiary has (A) any continuing indemnification obligations in excess of $100,000 or (B) any “earn out” or other contingent payment obligations;

 

(ix) obligates PhotoMedex or any PhotoMedex Subsidiary to provide continuing indemnification or a guarantee of obligations of a third party after the date hereof in excess of $100,000;

 

(x) is between PhotoMedex or any PhotoMedex Subsidiary and any of their respective directors or executive officers that cannot be cancelled by PhotoMedex (or the applicable PhotoMedex Subsidiary) within 60 days’ notice without material liability, penalty or premium;

 

(xi) obligates PhotoMedex or any PhotoMedex Subsidiary to make any capital commitment or expenditure in excess of $100,000 (including pursuant to any joint venture); or

(xii) relates to the development, ownership, licensing or use of any Intellectual Property material to the business of PhotoMedex or any PhotoMedex Subsidiary, other than “shrink wrap,” “click wrap,” and “off the shelf” software agreements and other agreements for software commercially available on reasonable terms to the public generally with license, maintenance, support and other fees of less than $100,000 per year (collectively, “Off-the-Shelf Software Agreements”).

 

2.15 Intellectual Property.

 

(a) Section 2.15(a)(i) of the PhotoMedex Disclosure Letter contains a list of: (i) all right, title and interest in and to all registered Intellectual Property and Intellectual Property that is the subject of a pending application for registration in each case that is, owned by PhotoMedex or any of the PhotoMedex Subsidiaries and is material to the business of PhotoMedex as currently conducted (“PhotoMedex Intellectual Property”); and (ii) all material Intellectual Property, other than as may be licensed pursuant to Off-the-Shelf Software Agreements, that is licensed to PhotoMedex or any of the PhotoMedex Subsidiaries and is material to the business of PhotoMedex (“PhotoMedex Licensed Intellectual Property”).  Except where failure to own, license or otherwise possess such rights has not had and would not reasonably be expected to result in a PhotoMedex Material Adverse Effect, each of PhotoMedex and the PhotoMedex Subsidiaries (x) has all right, title and interest in and to PhotoMedex Intellectual Property owned by it, free and clear of all Encumbrances, other than rights and interest licensed to any other Person and Permitted Encumbrances, and (y) has valid rights to use the PhotoMedex Licensed Intellectual Property.  Except as set forth in Section 2.15(a)(ii) of the PhotoMedex Disclosure Letter, neither PhotoMedex nor any of the PhotoMedex Subsidiaries has received any written notice alleging that it has infringed, diluted or misappropriated, or, by conducting its business as currently conducted, has infringed, diluted or misappropriated, the Intellectual Property rights of any Person and, except as set forth in

 

(b) For purposes of this Agreement, “Intellectual Property” means (i) United States, international and foreign patents and patent applications, including divisionals, continuations, continuations-in-part, reissues, reexaminations and extensions thereof and counterparts claiming priority therefrom; utility models; invention disclosures; and statutory invention registrations and certificates; (ii) United States and foreign registered, pending and unregistered trademarks, service marks, trade dress, logos, trade names, corporate names and other source identifiers, domain names and registrations and applications for registration for any of the foregoing, together with all of the goodwill associated therewith; (iii) United States and foreign copyrights, and registrations and applications for registration thereof; and copyrightable works, including website content; (iv) all inventions and design rights (whether patentable or unpatentable) and all categories of trade secrets as defined in the Uniform Trade Secrets Act, including business, technical and financial information; and (v) confidential and proprietary information including, without limitation, know-how, recipes and formulas.

(a) Section 2.16(a) of the PhotoMedex Disclosure Letter lists, with respect to PhotoMedex and the PhotoMedex Subsidiaries, (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), (ii) material loans from PhotoMedex to officers and directors other than advances for expense reimbursements incurred in the ordinary course of business, (iii) any securities option, securities stock purchase, phantom securities, securities appreciation right, equity-related, supplemental retirement, severance, sabbatical, medical, dental, vision care, disability, employee relocation, cafeteria benefit (Code section 125) or dependent care (Code Section 129), life insurance or accident insurance plans, programs,

agreements or arrangements, (iv) all bonus, pension, retirement, profit sharing, savings, deferred compensation or incentive plans, programs, policies, agreements or arrangements, (v) other material fringe, perquisite, or employee benefit plans, programs, policies, agreements or arrangements, and (vi) any current or former employment, change of control, retention or executive compensation, termination or severance plans, programs, policies, collective bargaining, agreements or arrangements, written or otherwise, as to which material unsatisfied liabilities or obligations, contingent or otherwise, remain for the benefit of, or relating to, any present or former employee, consultant, manager or director, or which could reasonably be expected to have any material liabilities or obligations (together, the “PhotoMedex Benefit Plans”).  The term PhotoMedex Benefit Plans also includes all benefit plans subject to Title IV of ERISA in connection with which any trade or business (whether or not incorporated) that is treated as a single employer with PhotoMedex and the PhotoMedex Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code (a “PhotoMedex ERISA Affiliate”) may have any liability.

 

(b) Other than as would not reasonably be expected to result in a PhotoMedex Material Adverse Effect, (i) there has been no “prohibited transaction,” as such term is defined in Section 406 of ERISA and Section 4975 of the Code, by PhotoMedex or by any trusts created thereunder, any trustee or administrator thereof or any other Person, with respect to any PhotoMedex Benefit Plan, (ii) each PhotoMedex Benefit Plan has been administered in material accordance with its terms and in compliance in all material respects with the requirements prescribed by any and all applicable Laws (including ERISA and the Code), (iii) PhotoMedex and each PhotoMedex ERISA Affiliate have performed in all material respects all obligations required to be performed by them under, are not in any respect in default under or violation of, and have no knowledge of any default or violation by any other party to, any of PhotoMedex Benefit Plans that are subject to Title IV of ERISA, and (iv) all contributions and premiums required to be made by PhotoMedex or any PhotoMedex ERISA Affiliate to any PhotoMedex Benefit Plan have been made on or before their due dates, including any legally permitted extensions.  Except with respect to claims for benefits in the ordinary course, no Action has been brought, or to the knowledge of PhotoMedex is threatened, against or with respect to any such PhotoMedex Benefit Plan, including any audit or inquiry by the IRS, United States Department of Labor (the “DOL”) or other Governmental Authority (other than as would not reasonably be expected to result in a PhotoMedex Material Adverse Effect).  Each PhotoMedex Benefit Plan that is a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code and any awards thereunder, in each case that is subject to Section 409A of the Code, has been operated in good faith compliance, in all material respects, with Section 409A of the Code since January 1, 2005.  Each PhotoMedex Benefit Plan that is intended to be qualified under Section 401(a) of the Code is the subject of a favorable determination letter from the IRS upon which the sponsor of such PhotoMedex Benefit Plan is entitled to rely, has applied to the IRS for such favorable determination letter within the applicable remedial amendment period under Section 401(b) of the Code, or is maintained pursuant to a volume submitter or prototype document for which it may properly rely on the applicable advisory or opinion letter, and neither PhotoMedex nor any PhotoMedex Subsidiary is aware of any circumstances that could result in revocation of any such favorable determination letter or the loss of the qualification of such PhotoMedex Benefit Plan under Section 401(a) of the Code.

 

(c) Except as disclosed in Section 2.16 of the PhotoMedex Disclosure Letter, or as otherwise provided in this Agreement, any ancillary agreement related hereto or as provided by applicable Law, with respect to PhotoMedex Benefit Plans, the consummation of the transactions contemplated by this Agreement and any ancillary agreement related hereto to which PhotoMedex is a party, will not, either alone or in combination with any other event or events, (i) entitle any current or former employee, manager, director or consultant of PhotoMedex or any of the PhotoMedex Subsidiaries to any payment of severance pay, golden parachute payments, or bonuses, (ii) accelerate, forgive indebtedness, vest, distribute, or increase benefits or obligation to fund benefits with respect to any employee or director of PhotoMedex or any of the PhotoMedex Subsidiaries, or (iii) accelerate the time of payment or vesting of options to purchase securities of PhotoMedex, or increase the amount of compensation due any such employee, director or consultant.

 

(d) None of the PhotoMedex Benefit Plans contains any provision requiring a gross-up pursuant to Section 280G or 409A of the Code or similar Tax provisions.

 

(e) No PhotoMedex Benefit Plan maintained by PhotoMedex or any of the PhotoMedex Subsidiaries provides material benefits, including death or medical benefits (whether or not insured), with respect to current or former employees of PhotoMedex or any of the PhotoMedex Subsidiaries after termination of employment (other than (i) coverage mandated by applicable Laws, (ii) death benefits or retirement benefits under any “employee pension benefit plan,” as that term is defined in Section 3(2) of ERISA, or (iii) benefits, the full direct cost of which is borne by the current or former employee (or beneficiary thereof)).

 

(f) Neither PhotoMedex nor any PhotoMedex ERISA Affiliate has any liability with respect to any (i) employee pension benefit plan that is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code, (ii) ”multiemployer plan” as defined in Section 3(37) of ERISA or (iii) ”multiple employer plan” within the meaning of Sections 4063 and 4064 of ERISA or Section 413(c) of the Code.

 

(g) Except as set forth in Section 2.16(g) of the PhotoMedex Disclosure Letter, no PhotoMedex Benefit Plan is maintained outside the jurisdiction of the United States (any such PhotoMedex Benefit Plan set forth in Section 2.16(g) of the PhotoMedex Disclosure Schedule, “PhotoMedex Foreign Benefit Plans”).  All PhotoMedex Foreign Benefit Plans have been established, maintained and administered in compliance in all material respects with their terms and all applicable statutes, laws, ordinances, rules, orders, decrees, judgments, writs, and regulations of any controlling governmental authority or instrumentality and all PhotoMedex Foreign Benefit Plans that are required to be funded are fully funded, and with respect to all other PhotoMedex Foreign Benefit Plans, adequate reserves therefor have been established in accordance with applicable foreign accounting standards on the accounting statements of the applicable PhotoMedex or PhotoMedex Subsidiary entity.

 

2.17 Taxes and Returns.

 

(a) PhotoMedex has or will have timely filed, or caused to be timely filed, all material federal, state, local and foreign Tax returns and reports required to be filed by it

 

or the PhotoMedex Subsidiaries (taking into account all available extensions) (collectively, “Tax Returns”), which Tax Returns are true, accurate, correct and complete in all material respects, and has paid, collected or withheld, or caused to be paid, collected or withheld, all material Taxes required to be paid, collected or withheld, other than such Taxes for which adequate reserves in the PhotoMedex Financials have been established.

 

(b) Section 2.17(b) of the PhotoMedex Disclosure Letter sets forth each jurisdiction where PhotoMedex and each PhotoMedex Subsidiary files or is required to file a Tax Return.

 

(c) To the Knowledge of PhotoMedex, neither PhotoMedex nor any of the PhotoMedex Subsidiaries is being audited by any taxing authority or has been notified by any Tax authority that any such audit is contemplated or pending.

 

(d) There are no material claims, assessments, audits, examinations, investigations or other proceedings pending against PhotoMedex or any of the PhotoMedex Subsidiaries in respect of any Tax, and neither PhotoMedex nor any of the PhotoMedex Subsidiaries has been notified in writing of any proposed Tax claims or assessments against PhotoMedex or any of the PhotoMedex Subsidiaries (other than, in each case, claims or assessments for which adequate reserves in the PhotoMedex Financials have been established or are immaterial in amount).

 

(e) There are no material liens with respect to any Taxes upon any of PhotoMedex’s or the PhotoMedex Subsidiaries’ assets, other than (i) Taxes, the payment of which is not yet due, or (ii) Taxes or charges being contested in good faith by appropriate proceedings and for which adequate reserves in the PhotoMedex Financials have been established.

 

(f) Neither PhotoMedex nor any of the PhotoMedex Subsidiaries has any outstanding waivers or extensions of any applicable statute of limitations to assess any material amount of Taxes.  There are no outstanding requests by PhotoMedex or any of the PhotoMedex Subsidiaries for any extension of time within which to file any Tax Return or within which to pay any Taxes shown to be due on any Tax Return.

 

(g) Neither PhotoMedex nor any of the PhotoMedex Subsidiaries has made any change in accounting method or received a ruling from, or signed an agreement with, any taxing authority that would reasonably be expected to have a material impact on Taxes following the Closing.

 

(h) Neither PhotoMedex nor any of the PhotoMedex Subsidiaries participated in, or sold, distributed or otherwise promoted, any “reportable transaction,” as defined in Treasury Regulation section 1.6011-4.

 

(i) Neither PhotoMedex nor any PhotoMedex Subsidiary has any material liability or potential material liability for the Taxes of another Person (i) under any applicable Tax Law, (ii) as a transferee or successor, or (iii) by contract, indemnity or otherwise.

 

(j) Neither PhotoMedex nor any PhotoMedex Subsidiary is a party to

 

or bound by any Tax indemnity agreement, Tax sharing agreement or Tax allocation agreement or similar agreement, arrangement or practice with respect to material Taxes (including advance pricing agreement, closing agreement or other agreement relating to Taxes with any taxing authority) that will be binding on PhotoMedex or any PhotoMedex Subsidiary with respect to any period following the Closing Date.

 

(k) Neither PhotoMedex nor any PhotoMedex Subsidiary has requested or is the subject of or bound by any private letter ruling, technical advice memorandum, closing agreement or similar ruling, memorandum or agreement with any taxing authority with respect to any material Taxes, nor is any such request outstanding.

 

(l) For purposes of this Agreement, the term “Tax” or “Taxes” shall mean any tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, imposed by any Governmental Authority (including any federal, state, local, foreign or provincial income, gross receipts, property, sales, use, net worth, premium, license, excise, franchise, employment, payroll, social security, workers compensation, unemployment compensation, alternative or added minimum, ad valorem, transfer or excise tax) together with any interest, addition or penalty imposed thereon.

 

2.18 Finders and Investment Bankers

 

.  Except as set forth in Section 2.18 of the PhotoMedex Disclosure Letter, PhotoMedex and/or Merger Sub has not incurred, nor will it incur, any liability for any brokerage, finder’s or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of PhotoMedex.

 

2.19 Title to Properties; Assets

 

.

 

(a) Section 2.19(a)(i) of the PhotoMedex Disclosure Letter contains a correct and complete list, of all real property and interests in real property leased or subleased by or for the benefit of PhotoMedex or any of the PhotoMedex Subsidiaries from or to any Person (collectively, the “PhotoMedex Real Property”).  The list set forth in Section 2.19(a)(i) of the PhotoMedex Disclosure Letter contains, with respect to each of PhotoMedex Real Properties, all existing leases, subleases, licenses, guarantees or other occupancy contracts to which PhotoMedex or any of the PhotoMedex Subsidiaries is a party or by which PhotoMedex or any of the PhotoMedex Subsidiaries is bound, and all assignments, amendments, modifications, extensions and supplements thereto (collectively, the “PhotoMedex Leases”), the terms of which have been complied with by PhotoMedex and any PhotoMedex Subsidiary, except for any non-compliances as would not reasonably be expected to result in a PhotoMedex Material Adverse Effect.  PhotoMedex Real Property set forth in Section 2.19(a)(i) of the PhotoMedex Disclosure Letter comprises all of the real property necessary and/or currently used in the operations of the business of PhotoMedex and the PhotoMedex Subsidiaries.  PhotoMedex does not own any real property.  Except as set forth in Section 2.19(a)(ii) of the PhotoMedex Disclosure Letter, PhotoMedex or a PhotoMedex Subsidiary has good and valid title to, a valid leasehold interest in, or valid license to use, all of the material personal property, assets and rights used by them in the operation of their respective businesses, free and clear of all

 

Encumbrances other than Permitted Encumbrances.

 

(b) A true, correct, complete and full execution copy of each PhotoMedex Lease set forth in Section 2.19(a)(i) of the PhotoMedex Disclosure Letter has been made available to Radiancy.  Except as set forth in Section 2.19(b)(i) of the PhotoMedex Disclosure Letter, PhotoMedex or PhotoMedex Subsidiary’s interests in each of the PhotoMedex Leases are free and clear of all Encumbrances, other than Permitted Encumbrances, and each of the PhotoMedex Leases is in full force and effect and are free and clear of all Encumbrances, other than Permitted Encumbrances, and each of the PhotoMedex Leases is in full force and effect.  Except as set forth in Section 2.19(b)(ii) of the PhotoMedex Disclosure Letter, neither PhotoMedex nor any of the PhotoMedex Subsidiaries nor, to the knowledge of PhotoMedex, any other party to any PhotoMedex Lease is in breach of or in default under (with or without notice or lapse of time or both), in any material respect, any of the PhotoMedex Leases, except for any breaches or defaults which would not reasonably be expected to result in a PhotoMedex Material Adverse Effect.  PhotoMedex and the PhotoMedex Subsidiaries enjoy peaceful and undisturbed possession under all such PhotoMedex Leases and have not received notice of any material default, delinquency or breach on the part of PhotoMedex or any PhotoMedex Subsidiary.  For purposes of this Agreement, the term “Permitted Encumbrances” means (i) Encumbrances for water and sewer charges, Taxes or assessments and similar governmental charges or levies, which either are [A] not delinquent or [B] being contested in good faith and by appropriate proceedings, and adequate reserves have been established with respect thereto, (ii) other Encumbrances imposed by operation of Law (including mechanics’, couriers’, workers’, repairers’, materialmen’s, warehousemen’s, landlord’s and other similar Encumbrances) arising in the ordinary course of business for amounts which are not due and payable and as would not in the aggregate materially adversely affect the value of, or materially adversely interfere with the use of, the property subject thereto, (iii) Encumbrances incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other types of social security, (iv) Encumbrances on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the ordinary course of business, (v) title of a lessor under a capital or operating lease and the terms and conditions of a lease creating any leasehold interest, (vi) Encumbrances arising under this Agreement or any ancillary agreement hereto, and (vii) such other imperfections in title as are not, in the aggregate, reasonably likely to result in a PhotoMedex Material Adverse Effect or a Radiancy Material Adverse Effect (as defined below), as the case may be.

 

2.20 Employee Matters

 

.

 

(a) There are no material Actions pending or, to the knowledge of PhotoMedex, threatened involving PhotoMedex or any PhotoMedex Subsidiary and any of their respective employees or former employees (with respect to their status as an employee or former employee, as applicable) including any harassment, discrimination, retaliatory act or similar claim.  To PhotoMedex’s knowledge, since January 1, 2008, there has been: (i) no labor union organizing or attempting to organize any employee of PhotoMedex or any of the PhotoMedex Subsidiaries into one or more collective bargaining units with respect to their employment with PhotoMedex or any of the PhotoMedex Subsidiaries; and (ii) no labor dispute, strike, work slowdown, work stoppage or lock out or other collective labor action by or with respect to any

 

employees of PhotoMedex or any of the PhotoMedex Subsidiaries pending with respect to their employment with PhotoMedex or any of the PhotoMedex Subsidiaries or threatened against PhotoMedex or any of the PhotoMedex Subsidiaries.  Neither PhotoMedex nor any of the PhotoMedex Subsidiaries is a party to, or bound by, any collective bargaining agreement or other agreement with any labor organization applicable to the employees of PhotoMedex or any of the PhotoMedex Subsidiaries and no such agreement is currently being negotiated.

 

(b) Except as set forth in Section 2.20(b) of the PhotoMedex Disclosure Letter, PhotoMedex and the PhotoMedex Subsidiaries (i) are in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment, health and safety and wages and hours, including Laws relating to discrimination, disability, labor relations, hours of work, payment of wages and overtime wages, pay equity, immigration, workers compensation, working conditions, employee scheduling, occupational safety and health, family and medical leave, and employee terminations, and have not received written notice, or any other form of notice, that there is any Action involving unfair labor practices against PhotoMedex or any of the PhotoMedex Subsidiaries pending, (ii) are not liable for any material arrears of wages or any material penalty for failure to comply with any of the foregoing, and (iii) are not liable for any material payment to any trust or to any Governmental Authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees, independent contractors or consultants (other than routine payments to be made in the ordinary course of business and consistent with past practice), and except for any non-compliances or liabilities which not reasonably be expected to result in a PhotoMedex Material Adverse Effect.  Except as would not reasonably be expected to result in a PhotoMedex Material Adverse Effect, there are no Actions pending or, to the knowledge of PhotoMedex, threatened against PhotoMedex or any PhotoMedex Subsidiary brought by or on behalf of any applicant for employment, any current or former employee, any Person alleging to be a current or former employee, or any Governmental Authority, relating to any such Law or regulation, or alleging breach of any express or implied contract of employment, wrongful termination of employment, or alleging any other discriminatory, wrongful or tortious conduct in connection with the employment relationship.

 

2.21 Environmental Matters

 

.  Except as set forth in Section 2.21 of the PhotoMedex Disclosure Letter or as would not reasonably be expected to result in a PhotoMedex Material Adverse Effect:

 

(a) Neither PhotoMedex nor any of the PhotoMedex Subsidiaries is the subject of any national, international, federal, state, local or foreign Order, judgment or written claim, and neither PhotoMedex nor any of the PhotoMedex Subsidiaries has received any written notice or claim, or entered into any negotiations or agreements with any Person, in each case that would impose a liability or obligation under any Environmental Law;

 

(b) PhotoMedex and the PhotoMedex Subsidiaries are in compliance in all material respects with all applicable Environmental Laws;

 

(c) Neither PhotoMedex nor any of the PhotoMedex Subsidiaries has manufactured, treated, stored, disposed of, arranged for or permitted the disposal of, generated, handled or released any Hazardous Substance, or owned or operated any property or facility, in a

 

manner that has given or would reasonably be expected to give rise to any liability or obligation under applicable Environmental Laws; and

 

(d) Each of PhotoMedex and the PhotoMedex Subsidiaries holds and is in compliance in all material respects with all PhotoMedex Permits required to conduct its business and operations under all applicable Environmental Laws.

 

“Environmental Laws” means any Law relating to (a) the protection, preservation or restoration of the environment (including air, water vapor, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or (b) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substances, and including restrictions on Hazardous Substances in electrical and electronic equipment, in each case as in effect before or at the date hereof.

 

“Hazardous Substance” means any substance listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous or as a pollutant or contaminant under any Environmental Law.  Hazardous Substances include any substance to which exposure is regulated by any Governmental Authority or any Environmental Law, including (a) petroleum or any derivative or byproduct thereof, toxic mold, asbestos or asbestos containing material or polychlorinated biphenyls, (b) all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National and Hazardous Substances Contingency Plan, 40 C.F.R. Section 300.5 and (c) substances restricted under the European Union Directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment, 2002/95/EC.

 

2.22 Transactions with Affiliates

 

.  Other than (i) for payment of salary and benefits for services rendered, (ii) reimbursement for expenses incurred on behalf of PhotoMedex or any PhotoMedex Subsidiary, (iii) for other employee benefits made generally available to all employees, (iv) with respect to any Person’s ownership of membership interests, capital stock or other securities of PhotoMedex or any PhotoMedex Subsidiary or such Person’s employment with PhotoMedex or any PhotoMedex Subsidiary, (v) as set forth in Section 2.22 of the PhotoMedex Disclosure Letter, or (vi) as stated in the PhotoMedex Financials, there are no contracts or arrangements that are in existence as of the date of this Agreement under which there are any material existing or future liabilities or obligations between PhotoMedex or any of the PhotoMedex Subsidiaries, on the one hand, and, on the other hand, any (y) present manager, officer or director of either PhotoMedex or any of the PhotoMedex Subsidiaries or (z) record or beneficial owner of more than five percent (5%) of the outstanding PhotoMedex Common Stock as of the date hereof (each, a “PhotoMedex Affiliate Transaction”).

 

2.23 Insurance

 

.  Section 2.23 of the PhotoMedex Disclosure Letter sets forth a correct and complete list of all material insurance policies issued in favor of PhotoMedex or any PhotoMedex Subsidiary, or pursuant to which PhotoMedex, any PhotoMedex Subsidiary or any of their respective directors and/ or officers are a named insured or otherwise a beneficiary.  With respect to each such insurance policy, (i) the policy is in full force and effect and all

 

premiums due thereon have been paid and (ii) neither PhotoMedex nor any PhotoMedex Subsidiary is in any material respect, in breach of or default under, and neither PhotoMedex nor any PhotoMedex Subsidiary has taken any action or failed to take any action which, with notice or the lapse of time or both, would constitute such a breach or default, or permit termination or modification of, any such policy.

2.24 Books and Records

 

.  All of the financial books and records of PhotoMedex and the PhotoMedex Subsidiaries are complete and accurate in all material respects and, since January 1, 2008, have been maintained in the ordinary course consistent with past practice and in accordance with applicable Laws.

 

2.25 Accounts Receivable

 

.  All accounts, notes and other receivables, whether or not accrued, and whether or not billed, of PhotoMedex and/or the PhotoMedex Subsidiaries, in accordance with GAAP (the “PhotoMedexAccounts Receivable”) arose in the ordinary course of business and represent valid obligations to PhotoMedex and/ or the PhotoMedex Subsidiaries arising from their respective businesses.  To PhotoMedex’s knowledge, none of the PhotoMedex Accounts Receivable are subject to any right of recourse, defense, deduction, return of goods, counterclaim, offset, or set off on the part of the obligor in excess of any amounts reserved therefore on the PhotoMedex Financials.

 

2.26 Inventory

 

.  Except as would not be reasonably expected to result in a PhotoMedex Material Adverse Effect, the inventory of PhotoMedex and the PhotoMedex Subsidiaries (a)  is of good quality, (b) is usable and saleable in the ordinary course for the purposes for which it was intended and merchantable and fit for the purpose for which it was procured or manufactured (except for allowances for obsolete or excess inventory consistent with past practice or as otherwise reflected in the PhotoMedex Financials), (c) meets applicable manufacturing specifications, requirements of applicable Law, and PhotoMedex and the PhotoMedex Subsidiaries customers’ policies on shelf life and “sell by dates” in all material respects, and (d) is not spoiled, damaged or contaminated (except for allowances for obsolete or excess inventory consistent with past practice or as otherwise reflected in the PhotoMedex Financials).

 

2.27 Listing                      

 

.  The PhotoMedex Common Stock is quoted for trading on the NASDAQ.  Except as set forth in Section 2.27 of the PhotoMedex Disclosure Letter, there is no action or proceeding pending or, to PhotoMedex’s knowledge, threatened against PhotoMedex by FINRA with respect to any intention by such entity to prohibit or terminate the quotation of the PhotoMedex Common Stock on the NASDAQ.

 

2.28 FDA

 

.  As to each product or service subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold, rendered and/or marketed by PhotoMedex or any of the PhotoMedex Subsidiaries (each such product, a “PhotoMedex Product”), such PhotoMedex Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed by PhotoMedex or the PhotoMedex Subsidiaries in compliance with all applicable requirements under FDCA and similar Laws, rules and regulations (including, without limitation, the FDA’s Quality System

 

Regulation at 21 C.F.R. Part 820 for products sold in the United States and respective counterpart Laws promulgated by any Governmental Authority outside the United States) relating to registration, investigational use, premarket clearance, licensure, or application approval, good manufacturing practices, good laboratory practices, good clinical practices, product listing, quotas, labeling, advertising, record keeping and filing of reports, except where the failure to be in compliance would not reasonably be expected to result in a PhotoMedex Material Adverse Effect.  There is no pending, completed or, to PhotoMedex’s knowledge, threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge, complaint, or investigation) against PhotoMedex or any of the PhotoMedex Subsidiaries, and none of PhotoMedex or any of the PhotoMedex Subsidiaries has received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) contests the premarket clearance, licensure, registration, or approval of, the uses of, the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the labeling and promotion of any PhotoMedex Product, (ii) withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any PhotoMedex Product, (iii) imposes a clinical hold on any clinical investigation by PhotoMedex or any of the PhotoMedex Subsidiaries, (iv) enjoins production at any facility of PhotoMedex or any of the PhotoMedex Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with PhotoMedex or any of the PhotoMedex Subsidiaries, or (vi) otherwise alleges any violation of any Laws, rules or regulations by PhotoMedex or any of the PhotoMedex Subsidiaries, and which, with respect to clauses (i) through (vi), either individually or in the aggregate, would reasonably be expected to result in a PhotoMedex Material Adverse Effect.  The properties, business and operations of PhotoMedex and the PhotoMedex Subsidiaries have been and are being conducted in all respects in accordance with all applicable rules and regulations of the FDA, except for any non-compliances as would not reasonably be expected to result in a PhotoMedex Material Adverse Effect.  Except as would not reasonably be expected to result in a PhotoMedex Material Adverse Effect, PhotoMedex has not been informed by the FDA that the FDA will prohibit the marketing, sale, license or use of any product proposed to be developed, produced or marketed by PhotoMedex or the PhotoMedex Subsidiaries nor has the FDA expressed any concern as to approving or clearing for marketing any product being developed or proposed to be developed by PhotoMedex or the PhotoMedex Subsidiaries.  Since January 1, 2008, no PhotoMedex Product nor any manufacturing site manufacturing PhotoMedex Products has been subject to a FDA shutdown or import or export prohibition, nor has PhotoMedex received any FDA Form 483 notice of inspectional observations, “warning letters”, “untitled warning letters” or written requests to make changes to the operations of PhotoMedex or any PhotoMedex Subsidiary business or any PhotoMedex Product or similar correspondence or written notice from the FDA in respect of PhotoMedex’ or the PhotoMedex Subsidiaries’ business and alleging or asserting  noncompliance with applicable Law that, if not complied with, would reasonably be expected to result in a PhotoMedex Material Adverse Effect.  Since January 1, 2008, no vigilance reports or medical device reports with respect to PhotoMedex Products have been reported by PhotoMedex and/ or any PhotoMedex Subsidiary and, to the knowledge of PhotoMedex, no vigilance report or medical device report is under investigation by any Governmental Authority with respect to any PhotoMedex Product.   PhotoMedex and each PhotoMedex Subsidiary is in compliance in all material respects with all certifications currently held by PhotoMedex and/ or any PhotoMedex Subsidiary governing quality systems and manufacturing processes.  To

PhotoMedex’ knowledge, any third party assembler, sterilizer or manufacturer of PhotoMedex Products is in compliance in all material respects with all applicable Law.

2.29 Investment Company Act

 

.  PhotoMedex is not an “investment company” or a person directly or indirectly “controlled” by or acting on behalf of an “investment company”, in each case within the meaning of the Investment Company Act of 1940, as amended.

 

2.30 Information Supplied

 

.  None of the information relating to PhotoMedex or any PhotoMedex Subsidiary, which is supplied or to be supplied by PhotoMedex or any PhotoMedex Subsidiary expressly for inclusion or incorporation by reference in the filings with the SEC or the mailings to PhotoMedex’s stockholders as it relates to the Registration Statement and Proxy Statement will, at the date of filing or mailing, or any amendment thereto, as the case may be, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading (subject to the qualifications and limitations set forth in the materials provided by PhotoMedex and the PhotoMedex Subsidiaries or that is included in the SEC filings or mailings).  None of the information supplied or to be supplied by PhotoMedex and the PhotoMedex Subsidiaries expressly for inclusion or incorporation by reference in any of the Signing Filing, the Signing Press Release, the Closing Filing and the Closing Press Release (each such capitalized term, as hereafter defined) (collectively, the “Ancillary Public Disclosures”) will, at the time filed with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading (subject to the qualifications and limitations set forth in the materials provided by PhotoMedex and the PhotoMedex Subsidiaries or that is included in the Ancillary Public Disclosures).  Notwithstanding the foregoing, PhotoMedex and Merger Sub make no representation, warranty or covenant with respect to any information supplied by Radiancy or any Radiancy Subsidiary for inclusion in any such filings with the SEC, mailings to PhotoMedex’s stockholders or the Radiancy Stockholders or Ancillary Public Disclosures.  PhotoMedex has delivered or provided access to Radiancy all material information, documents and instruments necessary in order for Radiancy to conduct its due diligence with respect to the representations and warranties in this Article II.

 

2.31 No Additional Representations

 

.  PhotoMedex and Merger Sub both acknowledge that neither Radiancy nor any of its officers, directors, members or stockholders, has made any representation or warranty, express or implied, of any kind, including without limitation any representation or warranty as to the accuracy or completeness of any information regarding Radiancy furnished or made available to PhotoMedex and/or Merger Sub and any of their Representatives (as defined below), in each case except as expressly set forth in Article III or in any of the documents or instruments referred to herein, including any exhibits attached hereto and the Radiancy Disclosure Letter.

(a) The authorized capital stock of Radiancy consists of 5,000,000 shares of Radiancy Common Stock, par value $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per share.  Section 3.2(a) of the Radiancy Disclosure Letter sets forth the number of shares of Radiancy Common Stock and Radiancy preferred stock which are issued and outstanding (subject to Section 3.2(b) hereinbelow).  Except as set forth in Section 3.2(b) below, no shares of capital stock or other voting securities of Radiancy are issued, reserved for issuance or outstanding.  All outstanding shares of Radiancy Common Stock are duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the Radiancy Organization Documents or any contract to which Radiancy is a party or by which Radiancy is bound.  Except as set forth in the Radiancy Organization Documents, there are no outstanding contractual obligations of Radiancy to repurchase, redeem or otherwise acquire any shares of Radiancy Common Stock or any capital equity of any of Radiancy or the Radiancy Subsidiaries.  There are no outstanding contractual obligations of Radiancy to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person.

 

(b) Except as set forth in Section 3.2(b) of the Radiancy Disclosure Letter, there are no (i) outstanding options, warrants, puts, calls, convertible securities, preemptive or similar rights, (ii) bonds, debentures, notes or other Indebtedness having general voting rights or that are convertible or exchangeable into securities having such rights, or (iii) except as expressly contemplated by this Agreement, subscriptions or other rights, agreements, arrangements, contracts or commitments of any character, relating to the issued or unissued capital equity of Radiancy or obligating Radiancy to issue, transfer, deliver or sell or

 

cause to be issued, transferred, delivered, sold or repurchased any options, their respective capital stock or securities convertible into or exchangeable for such shares or interests, or obligating Radiancy to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment for such capital equity.  All shares of Radiancy Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and non assessable.

 

(c) Except as set forth in Section 3.2(c) of the Radiancy Disclosure Letter, there are no registration rights (except as expressly contemplated by the Agreement), and there is no voting trust, proxy, rights plan, anti-takeover plan or other contracts or understandings to which Radiancy is a party or by which Radiancy is bound with respect to any of its capital stock.  Except as set forth in Section 3.2(c) of the Radiancy Disclosure Letter, as a result of the consummation of the Merger, no shares of capital stock, warrants, options or other securities of Radiancy are issuable and no rights in connection with any shares, warrants, rights, options or other securities of Radiancy accelerate or otherwise become triggered (whether as to vesting, exercisability, convertibility or otherwise).

 

(d) Except as disclosed on Section 3.2(d) of the Radiancy Disclosure Letter, no Indebtedness of Radiancy or any of the Radiancy Subsidiaries contains any restriction upon (i) the prepayment of any of such Indebtedness, (ii) the incurrence of Indebtedness by Radiancy or any of the Radiancy Subsidiaries, or (iii) the ability of Radiancy or any of the Radiancy Subsidiaries to grant any Encumbrance on its properties or assets.

 

(e) Since January 1, 2008, Radiancy has not declared or paid any distribution or dividend in respect of the Radiancy Common Stock and has not repurchased, redeemed or otherwise acquired any securities or equity interest of Radiancy, and the Radiancy Board has not authorized any of the foregoing

 

3.3 Subsidiaries

 

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(a) Section 3.3(a)(i) of the Radiancy Disclosure Letter sets forth a true, complete and correct list of each of the Radiancy Subsidiaries and their respective jurisdictions of incorporation, formation or organization.  Except as otherwise set forth on Section 3.3(a)(ii) of the Radiancy Disclosure Letter, all of the capital stock and other equity interests of the Radiancy Subsidiaries are owned, directly or indirectly, by Radiancy free and clear of any Encumbrance (other than any restriction under the Securities Act, or any state “blue sky” securities Laws) with respect thereto.  All of the outstanding shares of capital stock or other equity interests in each of the Radiancy Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and non-assessable, and with respect to the Radiancy Subsidiaries that are limited liability companies, are duly authorized, validly issued, fully paid and non-assessable and were issued free of preemptive rights and were not issued in material violation of any applicable foreign, federal or state securities Laws.  Neither Radiancy nor any Radiancy Subsidiary owns, directly or indirectly, any shares of capital stock or other equity or voting interests in (including any securities exercisable or exchangeable for or convertible into capital stock or other equity or voting interests in) any other Person other than publicly traded securities constituting less than five percent (5%) of the outstanding equity of the issuing entity, other than capital stock or other

 

equity interest of the Radiancy Subsidiaries owned by Radiancy or another Radiancy Subsidiary.

 

(b) Section 3.3(b) of the Radiancy Disclosure Letter lists all jurisdictions in which each of Radiancy and each Radiancy Subsidiary is qualified to conduct its respective business.

 

3.4 Authorization; Binding Agreement

 

.  Radiancy has all requisite corporate power and authority to execute and deliver this Agreement and each other ancillary agreement related hereto to which it is a party, and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and each other ancillary agreement related hereto to which it is a party and the consummation of the transactions contemplated hereby and thereby, (i) have been duly and validly authorized by the Radiancy Board and (ii) except for the approval of the stockholders of Radiancy (the “Radiancy Stockholder Approval”), and the filing of appropriate merger documents as contemplated by the DCGL, no other corporate proceedings on the part of Radiancy are necessary to authorize the execution and delivery of this Agreement and each other ancillary agreement related hereto to which it is a party or to consummate the Merger, and the other transactions contemplated hereby and thereby.  This Agreement has been, and each ancillary agreement to which Radiancy is a party shall be when delivered, duly and validly executed and delivered by Radiancy and assuming the due authorization, execution and delivery of this Agreement and any such ancillary agreements by the other Parties hereto and thereto, constitutes, or when delivered shall constitute, the legal, valid and binding obligation of Radiancy, enforceable against Radiancy in accordance with its terms, subject to the Enforceability Exceptions.

 

3.5 Governmental Approvals

 

.  Except as otherwise described in Section 3.5 of the Radiancy Disclosure Letter, no Consent of or with any Governmental Authority on the part of Radiancy or any of the Radiancy Subsidiaries is required to be obtained or made in connection with the execution, delivery or performance by Radiancy of this Agreement or any ancillary agreement related hereto or the consummation by Radiancy of the transactions contemplated hereby or thereby other than (i) such filings as may be required in any jurisdiction where Radiancy or any Radiancy Subsidiary is qualified or authorized to do business as a foreign corporation in order to maintain such qualification or authorization, (ii) such filings as contemplated by this Agreement and pursuant to the Merger, (iii) for applicable requirements of the Securities Act and Exchange Act or any state “blue sky” securities Laws, and the rules and regulations thereunder, (iv) pursuant to Antitrust Laws, and (v) where the failure to obtain or make such Consents or to make such filings or notifications would not reasonably be expected to result in a Radiancy Material Adverse Effect or prevent the consummation of the transactions contemplated by this Agreement.

 

3.6 No Violations

 

.  Except as otherwise described in Section 3.6 of the Radiancy Disclosure Letter, the execution and delivery by Radiancy of this Agreement and each other ancillary agreement related hereto and the consummation by Radiancy of the transactions contemplated hereby and thereby and compliance by Radiancy with any of the provisions hereof or thereof will not (i) conflict with or violate any provision of the Radiancy Organization Documents, (ii) require any Consent under or result in a violation or breach of, or constitute

 

(with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, amendment or acceleration) under, any Radiancy Material Contract, (iii) result (immediately or with the passage of time or otherwise) in the creation or imposition of any Encumbrance (except for Permitted Encumbrances) upon any of the properties, rights or assets of Radiancy or any of the Radiancy Subsidiaries or (iv) subject to obtaining the Consents from Governmental Authorities referred to in Section 3.5 hereof, and the waiting periods referred to therein have expired, and any condition precedent to such consent, approval, authorization or waiver has been satisfied, conflict with, contravene or violate in any respect any Law to which Radiancy or any of the Radiancy Subsidiaries or any of their assets or properties is subject, except, in the case of clauses (ii), (iii) and (iv) above, for any deviations from the foregoing that would not reasonably be expected to result in a Radiancy Material Adverse Effect.

3.7 Radiancy Financial Statements

 

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(a) As used herein, the term “Signing Radiancy Financials” means Radiancy’s (i) audited consolidated financial statements (including, in each case, any related notes thereto), consisting of Radiancy’s consolidated balance sheets as of December 31, 2010 and December 31, 2009, and the related statements of operations, changes in members’ equity and cash flows for the years then ended and (ii) the unaudited consolidated financial statements, consisting of Radiancy’s consolidated balance sheet as of March 31, 2011, and the related statements of operations, changes in members’ equity and cash flows for the nine months then ended.  As used herein, the term “Closing Radiancy Financials” means Radiancy’s unaudited consolidated financial statements (including, in each case, any related notes thereto), consisting of Radiancy’s consolidated balance sheet, as of calendar quarter prior to the Closing Date, and the related statements of operations, changes in members’ equity and cash flows for the period then ended.  As used herein, the term “Radiancy Financials” means the Signing Radiancy Financials and the Closing Radiancy Financials.  True and correct copies of the Signing Radiancy Financials have been provided to PhotoMedex.  The Signing Radiancy Financials (i) in all material respects accurately reflect Radiancy’s books and records as of the times and for the periods referred to therein, (ii) were prepared in accordance with GAAP methodologies applied on a consistent basis throughout the periods involved (except as set forth on Section 3.7(a) of the Radiancy Disclosure Letter and except for the absence of footnotes and audit adjustments in the case of unaudited Signing Radiancy Financials), (iii) fairly present in all material respects the consolidated financial position of Radiancy as of the respective dates thereof and the consolidated results of Radiancy’s operations and cash flows for the periods indicated and (iv) to the extent required for inclusion in the filings with the SEC and mailings to PhotoMedex’s stockholders as it relates to the Registration Statement and Proxy Statement, comply, in all material respects with the Securities Act, Regulation S-X and the published general rules and regulations of the SEC.  Any Closing Radiancy Financials delivered pursuant to the terms of this  Agreement will  when delivered (i) in all material respects accurately reflect Radiancy’s books and records as of the times and for the periods referred to therein, and (ii) be prepared in accordance with GAAP methodologies applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto and except for the absence of footnotes and audit adjustments in the case of unaudited Closing Radiancy Financials), (iii) fairly present in all material respects the consolidated financial position of Radiancy as of the respective dates thereof and the

 

(b) Radiancy has disclosed to PhotoMedex, Radiancy’s outside auditors and the Radiancy Board any material fraud that to Radiancy’s knowledge has arisen that involves management or other employees who have a significant role in Radiancy’s internal controls over financial reporting.

(c) Since January 1, 2008, none of Radiancy, any Radiancy Subsidiary, or any director, officer or employee of Radiancy or any Radiancy Subsidiary, any auditor or accountant of Radiancy or any Radiancy Subsidiary has received any written complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies or methods of Radiancy or any Radiancy Subsidiary or their respective internal accounting controls, including any material written complaint, allegation, assertion or claim that Radiancy or any Radiancy Subsidiary has engaged in questionable accounting or auditing practices.  To Radiancy’s knowledge, since January 1, 2008, no employee and no member of the Radiancy Board nor any attorney representing Radiancy or any Radiancy Subsidiary, whether or not employed by Radiancy or any Radiancy Subsidiary, has received written notice from any Governmental Authority or any Person of any violation of consumer protection, insurance or securities Laws, breach of fiduciary duty or similar violation by Radiancy, any Radiancy Subsidiary or any of their respective officers, directors, employees or agents or reported written evidence of any such violations to the Radiancy Board or any committee thereof or to any director or executive officer of Radiancy.

 

(a)           From January 1, 2011 through the date hereof, except as described in Section 3.8(a) of the Radiancy Disclosure Letter and as expressly contemplated by this Agreement, Radiancy and the Radiancy Subsidiaries have conducted their respective businesses in the ordinary course of business consistent with past practice.

 

(b)           From January 1, 2011 through the date hereof, there has not been any fact, change, effect, occurrence, event, development or state of circumstances that has had or would reasonably be expected to result in a Radiancy Material Adverse Effect.

3.9 Absence of Undisclosed Liabilities

 

.  Neither Radiancy nor any Radiancy Subsidiary is subject to any material liabilities or obligations of the type required to be reflected on a balance sheet prepared in accordance with GAAP that is not adequately reflected or reserved on or provided for in the Radiancy Financials, other than (i) liabilities or obligations of the type that have been incurred in the ordinary course of business consistent with past practice, (ii) liabilities or obligations reflected in the Radiancy Disclosure Letter, and (iii) liabilities or

obligations under the payment terms of Radiancy Material Contracts (but not including liabilities for breaches or for indemnification obligations thereunder), except, in each case, for such liabilities or obligations that would not reasonably be expected to result in a Radiancy Material Adverse Effect.

 

3.11 Regulatory Agreements; Permits

 

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(a) Except as disclosed in Section 3.11(a) of the Radiancy Disclosure Letter, there are no material written agreements, memoranda of understanding, commitment letters, or cease and desist orders, to which Radiancy or any Radiancy Subsidiary is a party, on the one hand, and any Governmental Authority is a party or addressee, on the other hand.

 

(b) Except as disclosed in Section 3.11(b) of the Radiancy Disclosure Letter, each of Radiancy, the Radiancy Subsidiaries, and each employee of Radiancy or any Radiancy Subsidiary who is legally required to be licensed by a Governmental Authority in order to perform his or her duties with respect to his or her employment with Radiancy or such Radiancy Subsidiary, holds all material permits, licenses, franchises, grants, authorizations, consents, exceptions, variances, exemptions, orders and other authorizations of Governmental Authorities, certificates, consents and approvals necessary to lawfully conduct Radiancy’s or the Radiancy Subsidiaries’ respective business as presently conducted, and to own, lease and operate Radiancy’s or the Radiancy Subsidiaries’ respective assets and properties, except for any such permits, licenses, franchises, grants, authorizations, consents, exceptions, variances, exemptions, certificates and approvals, the failure of which to obtain, individually or in conjunction with another, would not reasonably be expected to result in a Radiancy Material Adverse Effect (collectively, the “Radiancy Permits”).  Radiancy has made available to PhotoMedex true, correct and complete copies of all material Radiancy Permits.  All of Radiancy Permits are in full force and effect, and no suspension or cancellation of any of Radiancy Permits is pending or, to Radiancy’s knowledge, threatened, except, in each case, where the failure of any Radiancy Permits to have been in full force and effect, or the suspension or cancellation of any of Radiancy Permits, would not reasonably be expected to result in a Radiancy Material Adverse Effect.  Radiancy and the Radiancy Subsidiaries are not in violation in any material respect of the terms of any Radiancy Permit, except for violations which would not reasonably be expected to result in a Radiancy Material Adverse Effect.

 

3.14 Material Contracts

 

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(a) Section 3.14(a) of the Radiancy Disclosure Letter sets forth a true, correct and complete list of, and Radiancy has made available to PhotoMedex, true, correct and complete copies of, each material written contract, agreement, commitment, arrangement, lease, license, or plan and each other instrument in effect to which Radiancy or any Radiancy Subsidiary is a party or by which Radiancy, any Radiancy Subsidiary, or any of their respective properties or assets are bound or affected, in each case as of the date hereof (each, a “Radiancy Material Contract”) that:

 

(i) contains covenants that materially limit the ability of Radiancy or any Radiancy Subsidiary (A) to compete in any line of business or with any Person or in any geographic area or to sell, or provide any service or product, including any non-competition covenants, exclusivity restrictions, rights of first refusal or most-favored pricing clauses or (B) to purchase or acquire an interest in any other entity, except, in each case, for any such contract that may be canceled without any penalty or other liability to Radiancy or any Radiancy Subsidiary upon notice of 60 days or less;

 

(iii) involves any exchange traded, over the counter or other swap, cap, floor, collar, futures, contract, forward contract, option or other derivative financial instrument or contract, based on any commodity, security, instrument, asset, rate or index of any kind or nature whatsoever, whether tangible or intangible, including currencies, interest rates, foreign currency and indices;

 

(iv) evidences Indebtedness (whether incurred, assumed, guaranteed or secured by any asset) having an outstanding principal amount in excess of $100,000;

 

(v) involves the acquisition or disposition (to the extent such transaction would be consummated after the date hereof), directly or indirectly (by merger or otherwise), of assets with an aggregate value in excess of $100,000 (other than in the ordinary course of business) or capital stock or other equity interests of another Person;

 

(vi) by its terms calls for aggregate payments by Radiancy or any Radiancy Subsidiary under such contract of more than $100,000 per year;

 

(vii) with respect to any material acquisition of another Person, pursuant to which Radiancy or any Radiancy Subsidiary has (A) any continuing indemnification obligations in excess of $100,000 or (B) any “earn out” or other contingent payment obligations;

 

(viii) obligates Radiancy or any Radiancy Subsidiary to provide continuing indemnification or a guarantee of obligations of a third party after the date hereof in excess of $100,000;

 

(ix) is between Radiancy or any Radiancy Subsidiary and any of their respective directors or executive officers that cannot be cancelled by Radiancy (or the applicable Radiancy Subsidiary) within 60 days’ notice without material liability, penalty or premium;

 

(x) obligates Radiancy or any Radiancy Subsidiary to make any capital commitment or expenditure in excess of $100,000 (including pursuant to any joint venture); or

 

(xi) relates to the development, ownership, licensing or use of any Intellectual Property material to the business of Radiancy or any Radiancy Subsidiary, other than Off-the-Shelf Software Agreements.

 

(b) Except as disclosed on Section 3.14(b) of the Radiancy Disclosure Letter, with respect to each Radiancy Material Contract:  (i) such Radiancy Material Contract is valid and binding and enforceable in all respects against Radiancy or the Radiancy Subsidiary party thereto (subject to Enforceability Exceptions) and, to Radiancy’s knowledge, the other

 

3.15 Intellectual Property

 

.  Section 3.15(a)(i) of the Radiancy Disclosure Letter contains a list of: (i) all right, title and interest in and to all registered Intellectual Property and Intellectual Property that is the subject of a pending application for registration in each case that is, owned by Radiancy or any of the Radiancy Subsidiaries and is material to the business of Radiancy as currently conducted (“Radiancy Intellectual Property”); and (ii) all material Intellectual Property, other than as may be licensed pursuant to Off-the-Shelf Software Agreements, that is licensed to Radiancy or any of the Radiancy Subsidiaries and is material to the business of Radiancy (“Radiancy Licensed Intellectual Property”).  Except where failure to own, license or otherwise possess such rights has not had and would not reasonably be expected to result in a Radiancy Material Adverse Effect, each of Radiancy and the Radiancy Subsidiaries (x) has all right, title and interest in and to Radiancy Intellectual Property owned by it, free and clear of all Encumbrances, other than rights and interest licensed to any other Person and Permitted Encumbrances, and (y) has valid rights to use the Radiancy Licensed Intellectual Property.  Except as set forth in Section 3.15(a)(ii) of the Radiancy Disclosure Letter, neither Radiancy nor any of the Radiancy Subsidiaries has received any written notice alleging that it has infringed, diluted or misappropriated, or, by conducting its business as currently conducted, has infringed, diluted or misappropriated, the Intellectual Property rights of any Person, and, except as set forth in Section 3.15(a)(iii) of the Radiancy Disclosure Letter, to the knowledge of Radiancy, there is no valid basis for any such allegation.  Except as set forth in Section 3.15(a)(iv) of the Radiancy Disclosure Letter, to Radiancy’s knowledge neither the execution nor delivery of this Agreement nor the consummation of the transactions contemplated hereby will materially impair or materially alter Radiancy’s or any Radiancy Subsidiary’s rights to any Radiancy Intellectual Property or Radiancy Licensed Intellectual Property.  To Radiancy’s knowledge, all of Radiancy Intellectual Property and the license rights to the Radiancy Licensed Intellectual Property are valid, enforceable and subsisting

 

3.16 Employee Benefit Plans

 

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(a) Section 3.16(a) of the Radiancy Disclosure Letter lists, with respect to Radiancy and the Radiancy Subsidiaries, (i) all employee benefit plans (as defined in Section 3(3) of ERISA), (ii) material loans from Radiancy to officers and directors other than advances for expense reimbursements incurred in the ordinary course of business, (iii) any securities option, securities stock purchase, phantom securities, securities appreciation right, equity-related, supplemental retirement, severance, sabbatical, medical, dental, vision care, disability, employee relocation, cafeteria benefit (Code section 125) or dependent care (Code Section 129), life insurance or accident insurance plans, programs, agreements or arrangements, (iv) all bonus, pension, retirement, profit sharing, savings, deferred compensation or incentive plans, programs, policies, agreements or arrangements, (v) other material fringe, perquisite, or employee benefit plans, programs, policies, agreements or arrangements, and (vi) any current or former employment, change of control, retention or executive compensation, termination or severance plans, programs, policies, collective bargaining, agreements or arrangements, written or otherwise, as to which material unsatisfied liabilities or obligations, contingent or otherwise, remain for the benefit of, or relating to, any present or former employee, consultant, manager or director, or which could reasonably be expected to have any material liabilities or obligations (together, the “Radiancy Benefit Plans”).  The term Radiancy Benefit Plans also includes all benefit plans subject to Title IV of ERISA in connection with which any trade or business (whether or not incorporated) that is treated as a single employer with Radiancy and the Radiancy Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of the Code (a “Radiancy ERISA Affiliate”) may have any liability.

 

(b) Other than as would not reasonably be expected to result in a Radiancy Material Adverse Effect, (i) there has been no “prohibited transaction,” as such term is defined in Section 406 of ERISA and Section 4975 of the Code, by Radiancy or by any trusts created thereunder, any trustee or administrator thereof or any other Person, with respect to any Radiancy Benefit Plan, (ii) each Radiancy Benefit Plan has been administered in material accordance with its terms and in compliance in all material respects with the requirements prescribed by any and all applicable Laws (including ERISA and the Code), (iii) Radiancy and each Radiancy ERISA Affiliate have performed in all material respects all obligations required to be performed by them under, are not in any respect in default under or violation of, and have

 

(c) Except as set forth in Section 3.16(c) of the Radiancy Disclosure Letter or as otherwise provided in this Agreement, any ancillary agreement related hereto or as provided by applicable Law, with respect to Radiancy Benefit Plans, the consummation of the transactions contemplated by this Agreement and any ancillary agreement related hereto to which Radiancy is a party, will not, either alone or in combination with any other event or events, (i) entitle any current or former employee, manager, director or consultant of Radiancy or any of the Radiancy Subsidiaries to any payment of severance pay, golden parachute payments, or bonuses, (ii) accelerate, forgive indebtedness, vest, distribute, or increase benefits or obligation to fund benefits with respect to any employee or director of Radiancy or any of the Radiancy Subsidiaries, or (iii) accelerate the time of payment or vesting of options to purchase securities of Radiancy, or increase the amount of compensation due any such employee, director or consultant.

 

(d) Except as set forth in Section 3.16(d) of the Radiancy Disclosure Letter, none of Radiancy Benefit Plans contains any provision requiring a gross-up pursuant to Section 280G or 409A of the Code or similar Tax provisions.

 

(e) No Radiancy Benefit Plan maintained by Radiancy or any of the Radiancy Subsidiaries provides material benefits, including death or medical benefits (whether or not insured), with respect to current or former employees of Radiancy or any of the Radiancy Subsidiaries after termination of employment (other than (i) coverage mandated by applicable Laws, (ii) death benefits or retirement benefits under any “employee pension benefit plan,” as that term is defined in Section 3(2) of ERISA, or (iii) benefits, the full direct cost of which is borne by the current or former employee (or beneficiary thereof)).

 

(f) Neither Radiancy nor any Radiancy ERISA Affiliate has any liability with respect to any (i) employee pension benefit plan that is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code, (ii) ”multiemployer plan” as defined in Section 3(37) of ERISA or (iii) ”multiple employer plan” within the meaning of Sections 4063 and 4064 of ERISA or Section 413(c) of the Code.

 

(g) Except as set forth in Section 3.16(g) of the Radiancy Disclosure Letter, no Radiancy Benefit Plan is maintained outside the jurisdiction of the United States (any such Radiancy Benefit Plan set forth in Section 3.16(g) of the Radiancy Disclosure Letter, “Radiancy Foreign Benefit Plans”).  All Radiancy Foreign Benefit Plans have been established, maintained and administered in compliance in all material respects with their terms and all applicable statutes, laws, ordinances, rules, orders, decrees, judgments, writs, and regulations of any controlling governmental authority or instrumentality and all Radiancy Foreign Benefit Plans that are required to be funded are fully funded, and with respect to all other Radiancy Foreign Benefit Plans, adequate reserves therefor have been established in accordance with applicable foreign accounting standards on the accounting statements of the applicable Radiancy or Radiancy Subsidiary entity.

 

3.17 Taxes and Returns

 

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(a) Except as set forth in Section 3.17(a) of the Radiancy Disclosure Letter, Radiancy has or will have timely filed, or caused to be timely filed, all material federal, state, local and foreign Tax Returns and reports required to be filed by it and the Radiancy Subsidiaries (taking into account all available extensions), which Tax Returns are true, accurate, correct and complete in all material respects, and has paid, collected or withheld, or caused to be paid, collected or withheld, all material Taxes required to be paid, collected or withheld, other than such Taxes for which adequate reserves in the Radiancy Financials have been established.

 

(b) Section 3.17(b) of the Radiancy Disclosure Letter sets forth each jurisdiction where Radiancy and each Radiancy Subsidiary files or is required to file a Tax Return.

 

(c) To the knowledge of Radiancy, neither Radiancy nor any of the Radiancy Subsidiaries is being audited by any Tax authority or has been notified by any Tax authority that any such audit is contemplated or pending.

 

(d) Except as set forth in Section 3.17(d) of the Radiancy Disclosure Letter, there are no material claims, assessments, audits, examinations, investigations or other proceedings pending against Radiancy or any of the Radiancy Subsidiaries in respect of any Tax, and neither Radiancy or any of the Radiancy Subsidiaries has been notified in writing of any proposed Tax claims or assessments against Radiancy or any of the Radiancy Subsidiaries (other than, in each case, claims or assessments for which adequate reserves in the Radiancy Financials have been established or are immaterial in amount).

 

(e) There are no material liens with respect to any Taxes upon any of Radiancy’s or Radiancy Subsidiaries’ assets, other than (i) Taxes, the payment of which is not yet due, or (ii) Taxes or charges being contested in good faith by appropriate proceedings and for

 

which adequate reserves in the Radiancy Financials have been established.

 

(f) Except as set forth in Section 3.17(f) of the Radiancy Disclosure Letter, neither Radiancy nor any of the Radiancy Subsidiaries has any outstanding waivers or extensions of any applicable statute of limitations to assess any material amount of Taxes.  There are no outstanding requests by Radiancy or any of the Radiancy Subsidiaries for any extension of time within which to file any Tax Return or within which to pay any Taxes shown to be due on any Tax Return.

 

(g) Except as set forth in Section 3.17(g) of the Radiancy Disclosure Letter, neither Radiancy nor any of the Radiancy Subsidiaries has made any change in accounting method or received a ruling from, or signed an agreement with, any taxing authority that would reasonably be expected to have a material impact on Taxes following the Closing.

 

(h) Neither Radiancy nor any of the Radiancy Subsidiaries has participated in, or sold, distributed or otherwise promoted, any “reportable transaction,” as defined in Treasury Regulation section 1.6011-4.

 

(i) Neither Radiancy nor any of the Radiancy Subsidiaries has any material liability or material potential liability for the Taxes of another Person (i) under any applicable Tax Law, (ii) as a transferee or successor, or (iii) by contract, indemnity or otherwise.

 

(j) Neither Radiancy nor any of the Radiancy Subsidiaries is a party to or bound by any Tax indemnity agreement, Tax sharing agreement or Tax allocation agreement or similar agreement, arrangement or practice with respect to material Taxes (including advance pricing agreement, closing agreement or other agreement relating to Taxes with any taxing authority) that will be binding on Radiancy or any Radiancy Subsidiary with respect to any period following the Closing Date.

 

(k) Neither Radiancy nor any of the Radiancy Subsidiaries has requested, or is it the subject of or bound by any private letter ruling, technical advice memorandum, closing agreement or similar ruling, memorandum or agreement with any taxing authority with respect to any material Taxes, nor is any such request outstanding.

 

(l) Additional Israeli Tax Matters.

 

(i) Tax-Free Reorganization Restrictions. Neither Radiancy nor any Radiancy Subsidiary is subject to any restrictions or limitations pursuant to Part E2 of the Israeli Tax Ordinance (the “ITO”).

 

(ii) Residence.  Radiancy is not controlled and managed from the State of Israel and is not, and has not been, otherwise a resident of the State of Israel and the fair market value of the assets of Radiancy held, directly or indirectly, outside of the State of Israel constitute a majority of the fair market value of Radiancy.

 

3.18 Finders and Investment Bankers

 

.  Except as set forth in Section 3.18 of the Radiancy Disclosure Letter, Radiancy has not incurred, nor will it incur, any liability for any brokerage, finder’s or other fee or commission in connection with the transactions contemplated

(b) Except as set forth on Section 3.20(b) of the Radiancy Disclosure Letter, Radiancy and the Radiancy Subsidiaries (i) are in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment, health and safety and wages and hours, including Laws relating to discrimination, disability, labor relations, hours of work, payment of wages and overtime wages, pay equity, immigration, workers compensation, working conditions, employee scheduling, occupational safety and health, family and medical leave, and employee terminations, and have not received written notice, or any other form of notice, that there is any Action involving unfair labor practices against Radiancy or any of the Radiancy Subsidiaries pending, (ii) are not liable for any material arrears of wages or any material penalty for failure to comply with any of the foregoing, and (iii) are not liable for any material payment to any trust or to any Governmental Authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for employees, independent contractors or consultants (other than routine payments to be made in the ordinary course of business and consistent with past practice), and except for any non-compliances or liabilities which not reasonably be expected to result in a Radiancy Material Adverse Effect.  Except as would not reasonably be expected to result in a Radiancy Material Adverse Effect, there are no Actions pending or, to the knowledge of Radiancy, threatened against Radiancy or any Radiancy Subsidiary brought by or on behalf of any applicant for employment, any current or former employee, any Person alleging to be a current or former employee, or any Governmental Authority, relating to any such Law or regulation, or alleging breach of any express or implied contract of employment, wrongful termination of employment, or alleging any other discriminatory, wrongful or tortious conduct in connection with the employment relationship.

(a) Between the date of this Agreement and the Closing, each of PhotoMedex and the PhotoMedex Subsidiaries, on the one hand, and Radiancy and the Radiancy Subsidiaries, on the other hand, shall give, and shall direct its accountants and legal counsel to give, Radiancy and the Radiancy Subsidiaries, on the one hand, and PhotoMedex and the PhotoMedex Subsidiaries, on the other hand, respectively, and its respective Representatives, at reasonable times during normal business hours and upon reasonable intervals and notice, and subject to any confidentiality agreements with third Persons (the existence and scope of which have been disclosed to the other Parties), access to all offices and other facilities and to all employees, properties, contracts, agreements, commitments, books and records, financial and operating data and other information (including Tax Returns, internal working papers, client files, client contracts and director service agreements), of or pertaining to such Party and its subsidiaries, as the requesting Party or its Representatives may reasonably request regarding such Party’s business, assets, liabilities, employees and other aspects (including unaudited quarterly financial statements, including a consolidated quarterly balance sheet and income

(b) All information obtained by PhotoMedex or any PhotoMedex Subsidiary, on the one hand, and Radiancy or any Radiancy Subsidiary, on the other hand, pursuant to this Agreement or otherwise, shall be kept confidential in accordance with and subject to the reciprocal Confidentiality and Non-Use Agreements, dated March 23, 2011, by and between Radiancy and PhotoMedex (the “Confidentiality Agreements”).  The Parties further acknowledge and agree that the existence and terms of this Agreement and the Merger are strictly confidential and that they and their respective officers, managers, directors, employees, accountants, consultants, legal counsel, financial advisors, agents or other representatives (collectively, the “Representatives”) shall not disclose to the public or to any third Person the terms of this Agreement and the Merger other than with the express prior written consent of the other Parties, except (i) as may be required by applicable Law or at the request of any Governmental Authority having jurisdiction over the such Party or any of its Representatives, control persons or affiliates (including, without limitation, to the extent applicable, the rules and regulations of the SEC and FINRA), (ii) as required to carry out a Party’s obligations hereunder, or (iii) as may be required to defend any action brought against such Person in connection with the Merger, and in the case of clause (iii), in accordance with and subject the terms and conditions of the Confidentiality Agreements.

(b) Subject to the other provisions of this Section 4.3, during the Executory Period neither PhotoMedex nor any PhotoMedex Subsidiary, on the one hand, nor Radiancy or any Radiancy Subsidiary, on the other hand, shall, directly or indirectly, authorize or permit any of its respective Representatives to, (i) solicit, assist, initiate or facilitate the making, submission or announcement of, or intentionally encourage, any Acquisition Proposal, (ii) furnish any non-public information regarding PhotoMedex or any PhotoMedex Subsidiary, on the one hand, or Radiancy or any Radiancy Subsidiary, on the other hand, to any Person or group (other than a Party to this Agreement or their respective Representatives) in connection with or in response to an Acquisition Proposal, (iii) engage or participate in discussions or negotiations with any Person or group with respect to, or that could be expected to lead to, an Acquisition Proposal, (iv) withdraw or propose publicly to withdraw the approval of this Agreement or the Merger or the PhotoMedex Board’s, the Merger Sub Board’s or the Radiancy Board’s (or any respective committees of any of such Boards), respective recommendation that holders of such Party’s voting equity securities adopt this Agreement (with respect to PhotoMedex, such recommendation being the “PhotoMedex Board Recommendation”, and with respect to Radiancy, such recommendation being the “Radiancy Board Recommendation”), (v) approve, endorse or recommend, or publicly propose to approve, endorse or recommend, any Acquisition Proposal, (vi) negotiate or enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Acquisition Proposal, or (vii) agree to do any of the foregoing; provided, however, that prior to the meeting of the PhotoMedex Stockholders or the meeting of the Radiancy Stockholders, each as contemplated by Section 5.5 hereof, as the case may be, this Section 4.3(b) shall not prohibit PhotoMedex or Radiancy, as the case may be, from furnishing nonpublic information regarding PhotoMedex or Radiancy, as applicable, to, or entering into discussions and negotiations with, any Person in response to an Acquisition Proposal made by such Person (and not withdrawn) that constitutes, or could reasonably be expected to result in the submission by such Person to PhotoMedex or Radiancy, as applicable, of a Superior Proposal if: (1) neither PhotoMedex or Radiancy, as the case may be, nor any of their Representatives or their Subsidiaries’ Representatives shall have breached any of the provisions of this Section 4.3, (2) the PhotoMedex Board or the Radiancy Board, as the case may be, determines in good faith and after consultation with outside legal counsel that, in light of such Superior Proposal, not taking such action would be inconsistent with the fiduciary duties of the PhotoMedex Board or the Radiancy Board, as the case may be, to the stockholders of PhotoMedex or Radiancy, as the case

(c) Each of PhotoMedex and Radiancy shall notify the other hereto as promptly as practicable (and in any event within 48 hours) orally and in writing of the receipt by PhotoMedex, the PhotoMedex Subsidiaries or any of their respective Representatives, on one hand, or Radiancy, the Radiancy Subsidiaries or any of their respective Representatives, on the other hand, of (i) any bona fide inquiries, proposals or offers, requests for information or requests for discussions or negotiations regarding or constituting any Acquisition Proposal or any bona fide inquiries, proposals or offers, requests for information or requests for discussions or negotiations that could be expected to result in an Acquisition Proposal, and (ii) any request for non-public information relating to PhotoMedex or any PhotoMedex Subsidiary or Radiancy or any Radiancy Subsidiary, as applicable, specifying in each case the material terms and conditions thereof (including a copy thereof if in writing or a written summary thereof if verbal) and the identity of the party making such inquiry, proposal, offer or request for information.  PhotoMedex or Radiancy, as applicable, shall keep the other Party hereto promptly informed of the status of any such inquiries, proposals, offers or requests for information.  During the Executory Period, PhotoMedex and Radiancy shall immediately cease and cause to be terminated any solicitations, discussions or negotiations with any Person with respect to any Acquisition Proposal and shall direct, and use their respective reasonable best efforts to cause, PhotoMedex’s Representatives, the PhotoMedex Subsidiaries and their respective Representatives, on one hand, and Radiancy’s Representatives, the Radiancy Subsidiaries and their respective Representatives, on the other hand, to cease and terminate any such solicitations, discussions or negotiations.

(d) Notwithstanding anything in this Section 4.3 to the contrary, at any time prior to the time that the PhotoMedex Stockholder Approval is obtained, if PhotoMedex receives a bona fide Acquisition Proposal which the PhotoMedex Board concludes in good faith, after consultation with outside legal counsel and its financial advisors, constitutes a Superior Proposal that was made after the date hereof and that did not result from a breach of this Section 4.3 by PhotoMedex, the PhotoMedex Board may, if it determines in good faith and after consultation with outside legal counsel that, in light of such Superior Proposal, not taking such action would be inconsistent with the fiduciary duties of the PhotoMedex Board to its stockholders under applicable Law, the PhotoMedex Board may withdraw, qualify or modify, or publicly propose to withdraw, qualify or modify, in a manner adverse to Radiancy, the approval or recommendation by such board or committee of the adoption of this Agreement and the consummation of the transactions contemplated hereby, including the effectuation of the Merger

(e) Notwithstanding anything in this Section 4.3 to the contrary, at any prior to the time that the Radiancy Stockholder Approval is obtained, if Radiancy receives a bona fide Acquisition Proposal which the Radiancy Board concludes in good faith, after consultation with outside legal counsel and its financial advisors, constitutes a Superior Proposal that was made after the date hereof and that did not result from a breach of this Section 4.3 by Radiancy, the Radiancy Board may, if it determines in good faith and after consultation with outside legal counsel that, in light of such Superior Proposal, not taking such action would be inconsistent with the fiduciary duties of the Radiancy Board to its stockholders under applicable Law, the Radiancy Board may withdraw, qualify or modify, or publicly propose to withdraw, qualify or modify, in a manner adverse to PhotoMedex, the approval or recommendation by such board or committee of the adoption of this Agreement and the consummation of the transactions contemplated hereby, including the effectuation of the Merger (a “Radiancy Change of Board Recommendation”), and approve or recommend such Superior Proposal; provided, however, that Radiancy shall not be entitled to exercise its right to make a Radiancy Change of Board Recommendation pursuant to this sentence unless Radiancy has:  (A) provided PhotoMedex five (5) Business Days’ prior written notice (such notice, a “Radiancy Notice of Superior Proposal”), which notice shall not be deemed to be a Radiancy Change of Board Recommendation, advising PhotoMedex that the Radiancy Board intends to take such action and specifying the reasons therefor, including the then current material terms and conditions of any Superior Proposal that is the basis of the proposed action by the Radiancy Board and the identity of the Person making the proposal (it being understood and agreed that any amendment to the financial terms or any material amendment to any other material term of any such Superior Proposal shall require a new Radiancy Notice of Superior Proposal and a new three (3) Business Day period), (B) during the applicable notice period, if requested by PhotoMedex, engaged in good faith negotiations with PhotoMedex to amend this Agreement in

(g) For the purposes of this Agreement, a “Superior Proposal” means any bona fide written Acquisition Proposal (on its most recently amended or modified terms, if amended or modified) on terms which the PhotoMedex Board or Radiancy Board, as applicable, has determined in its good faith judgment are more favorable to the stockholders of PhotoMedex or Radiancy, as applicable, if consummated in accordance with its terms from a financial point of view than the transactions contemplated by this Agreement, after consultation with its respective legal counsel and financial advisor and after taking into account all legal, financial (including the financing terms of such proposal), regulatory, conditions to consummation, timing and other aspects of such proposal and this Agreement (taking into account any modifications to this Agreement that the other Party proposes to make), and taking into account the identity of the Person making such Acquisition Proposal and the likelihood of consummation of such Acquisition Proposal; provided, however, that for purposes of this definition, the references to “twenty percent (20%)” in the definition of “Acquisition Proposal” shall be deemed to be references to “fifty percent (50%).”

(a) Contemporaneously with the Closing (or at such other time and upon such terms and conditions as may be mutually agreed upon by the Parties), Radiancy agrees to provide, from its available cash, to PhotoMedex an aggregate amount as shall be sufficient to allow PhotoMedex to satisfy in full its payment obligation under that certain Repurchase Right Agreement, dated as of May 27, 2011 (the “Repurchase Right Agreement”), by and between PhotoMedex and Perseus Partners VII, L.P. (“Perseus”).  The Parties hereby agree that any payments to be made pursuant to this Section 4.4 may be made by Radiancy, in its sole discretion, directly to Perseus.

(a) PhotoMedex and Radiancy shall each have, upon written notice to the other Party hereto (a “New Disclosure Notice”), the right at any time after the date of this Agreement, until that date which is two Business Days prior to the Closing Date, to amend the PhotoMedex Disclosure Letter or Radiancy Disclosure Letter, as the case may be, to reflect any new disclosure information not set forth in such letter as of the date of this Agreement; provided, that any such new disclosure information does not reflect facts, circumstances or events that would reasonably be expected to result in a PhotoMedex Material Adverse Effect or a Radiancy Material Adverse Effect, as the case may be.  In the event that any such new disclosure information reflects facts, circumstances or events that would reasonably be expected to result in a PhotoMedex Material Adverse Effect or a Radiancy Material Adverse Effect, as the case may be, a Party may notify the other Party in writing of its election to reject the inclusion of such new disclosure information in the applicable disclosure letter within two (2) Business Days of receipt of the New Disclosure Notice (a “Disclosure Rejection Notice”), in which case such new disclosure information shall not be included in the PhotoMedex Disclosure Letter or the Radiancy Disclosure Letter, as the case may be.  Failure by a Party to reject such new disclosure information within such two (2) Business Day period shall be deemed an acceptance by a Party of such new disclosure information in the PhotoMedex Disclosure Letter or Radiancy Disclosure Letter, as the case may be.

(b) Notwithstanding the provisions of Section 4.5(a) above, no new disclosure information contained in a New Disclosure Notice shall be deemed to cure any breach of any representation or warranty made in this Agreement, provided, however, that any update of information in the PhotoMedex Disclosure Letter or the Radiancy Disclosure Letter, as the case may be, shall not be deemed to be a breach of any representation or warranty for any purpose under this Agreement, including the indemnity obligations under Section 5.18 of this Agreement, so long as such update reflects actions which are permitted to be taken pursuant to Section 4.1 of this Agreement.

(a) Subject to the terms and conditions of this Agreement, prior to the expiration of the Executory Period, each Party shall use commercially reasonable efforts, and shall cooperate fully with the other Parties, to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws and regulations to consummate the Merger and the other transactions contemplated by this Agreement (including the receipt of all Requisite Regulatory Approvals), and to comply as promptly as practicable with all requirements of Governmental Authorities applicable to the transactions contemplated by this Agreement.  In furtherance and not in limitation of the foregoing, to the extent required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and any other Laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (“Antitrust Laws”), each Party hereto agrees to make any required filing or application under Antitrust Laws, as applicable, at such Party’s sole cost and expense, with respect to the transactions contemplated hereby as promptly as practicable, to supply as promptly as reasonably practicable any additional information and documentary material that may be requested pursuant to Antitrust Laws and to take all other actions necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods under Antitrust Laws as soon as practicable, including by requesting early termination of the waiting period provided for under the Antitrust Laws.

(b) Radiancy, on the one hand, and each of PhotoMedex and Merger Sub, on the other hand, shall, in connection with the efforts referenced in Section 5.2(a) to obtain all requisite approvals and authorizations for the transactions contemplated by this Agreement under any Antitrust Law, use its commercially reasonable efforts to:  (i) cooperate in all respects with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private Person; (ii) keep the other Party reasonably informed of any communication received by such Party from, or given by such Party to, the Federal Trade Commission (the “FTC”), the

(c) In furtherance and not in limitation of the covenants of the Parties contained in Section 5.2(a) and Section 5.2(b), if any objections are asserted with respect to the transactions contemplated hereby under any Antitrust Law or any other applicable Law or if any suit is instituted (or threatened to be instituted) by the FTC, the DOJ or any other applicable Governmental Authority or any private Person challenging any of the transactions contemplated hereby as violative of any Antitrust Law or any other applicable Law or which would otherwise prevent, materially impede or materially delay the consummation of the transactions contemplated hereby, each of Radiancy, PhotoMedex and Merger Sub shall use its commercially reasonable efforts to resolve any such objections or suits so as to permit consummation of the transactions contemplated by this Agreement, including in order to resolve such objections or suits which, in any case if not resolved, could reasonably be expected to prevent, materially impede or materially delay the consummation of the transactions contemplated hereby.

(d) For purposes of Section 5.2(c), “commercially reasonable efforts” shall not include nor require any Party or any of its Subsidiaries to (A) propose, negotiate, or offer to commit or agree to or effect by consent decree, hold separate order, or otherwise, the sale, divestiture, license, disposition or hold separate of any asset, in each case if such sale, divestiture, license, disposition or hold separate with respect thereto would, individually or in the aggregate, reasonably be expected to have a PhotoMedex Material Adverse Effect or a Radiancy Material Adverse Effect (after giving effect to the Merger), as the case may be, or (B) conduct or agree to conduct its business in any particular manner if such conduct or agreement with respect thereto would, individually or in the aggregate, reasonably be expected to have a PhotoMedex Material Adverse Effect or a Radiancy Material Adverse Effect (after giving effect to the Merger), as the case may be.  Notwithstanding anything herein to the contrary, neither PhotoMedex, Radiancy, nor any of their respective Subsidiaries shall propose, negotiate or offer to commit to any sale, divestiture, license, disposition or hold separate of any asset contemplated to be held by the Surviving Company following the consummation of the Merger without the prior written consent of the other Parties.

(f) Prior to the expiration of the Executory Period, Radiancy shall use its commercially reasonable efforts to obtain any Consents of third Persons with respect to any Radiancy Material Contract as may be necessary or appropriate for the consummation of the transactions contemplated hereby or required by the terms of any contract as a result of the execution, performance or consummation of the transactions contemplated hereby.  Prior to the expiration of the Executory Period, PhotoMedex shall use its commercially reasonable efforts to obtain any Consents of third Persons with respect to any PhotoMedex Material Contract as may be necessary or appropriate for the consummation of the transactions contemplated hereby or required by the terms of any contract as a result of the execution, performance or consummation of the transactions contemplated hereby.

(a) as promptly as practicable after the execution of this Agreement, Radiancy and PhotoMedex shall mutually agree on and issue a press release announcing the execution of this Agreement (the “Signing Press Release”).  Immediately after the issuance of the Signing Press Release, PhotoMedex shall prepare and file a Current Reports on Form 8-K pursuant to the Exchange Act to report the execution of this Agreement, attaching this Agreement and the Signing Press Release thereto (“Signing Filing”), which Radiancy shall review, comment upon and approve (which approval shall not be unreasonably withheld, conditioned or delayed) prior to filing; and

(a) Any consideration payable or otherwise deliverable pursuant to this Agreement (including the Merger Consideration) to Radiancy Stockholders that are non-Israeli residents (as defined in Section 1 of the ITO), other than in respect to Radiancy Common Stock held by the Section 102 Trustee on behalf of any non-Israeli resident Stockholder, is exempted from any Israeli Tax withholding obligation, or clarifying that no such obligation exists upon receipt of a signed Israeli Tax Declaration that such Radiancy Stockholder is not an Israeli resident;

 

(c) Radiancy Stockholders who are Israeli residents will be allowed to elect to defer the Tax event, pursuant to section 104H of the ITO, with respect to the conversion of Radiancy Common Stock into the Merger Consideration, subject to the terms and conditions to be included within the Israeli Tax Ruling;

 

(d) (i) the deposit with the Section 102 Trustee of any consideration payable or otherwise deliverable by PhotoMedex pursuant to this Agreement (including the Merger Consideration) for 102 Radiancy options, and/ or Radiancy Common Stock arising from the exercise of any such 102 Radiancy options, subject to the statutory holding period under Section 102 of the ITO (“Section 102”, and such 102 Radiancy options, “Restricted 102 Grants”) will not result in a requirement for an immediate Israeli Tax payment or affect the Tax treatment of the Restricted 102 Grants and that the Israeli taxation of the Merger Consideration will be deferred until release of such PhotoMedex Common Stock and/ or options and/ or other type of consideration whatsoever (as applicable), and remain subject to the provisions of Section 102 of the ITO; (ii) the statutory holding period applicable to Restricted 102 Grants will continue uninterrupted from

(a) In the event the Merger is consummated, then until the seventh anniversary of the Effective Time, PhotoMedex will, and will cause the Surviving Company and any PhotoMedex Subsidiary or Radiancy Subsidiary, to comply with, fulfill and honor, in any and all respects, all of the obligations of PhotoMedex, Radiancy and any PhotoMedex Subsidiary or Radiancy Subsidiary to their respective present and former directors and officers (the “Covered Persons”) pursuant to indemnification agreements with PhotoMedex, Radiancy or any PhotoMedex Subsidiary or Radiancy Subsidiary in effect on the Effective Time and pursuant to the PhotoMedex Organization Documents, the Radiancy Organization Documents, the PhotoMedex Subsidiary Organization Documents and the Radiancy Subsidiary Organization Documents, in each case, in effect on the Effective Time (the “Indemnification Provisions”), with respect to claims arising out of acts or omissions occurring at or prior to the Effective Time

(b) In the event the Merger is consummated, if PhotoMedex, the Surviving Company, any PhotoMedex Subsidiary or any Radiancy Subsidiary shall (i) consolidate with or merge into any other Person and shall not be the continuing or surviving Person of such consolidation or merger or (ii) transfer all or substantially all of its properties and assets to any Person, then, in each such case, proper provisions shall be made so that the successors and assigns of PhotoMedex, the Surviving Company, any PhotoMedex Subsidiary or any Radiancy Subsidiary, as applicable, assume all of their respective obligations as set forth in this Section 5.15.

(d) In the event the execution of this Agreement or the undertaking of any act or omission by PhotoMedex required by this Agreement prior to the Closing Date causes any insurance policy, in place for the benefit of any PhotoMedex or PhotoMedex Subsidiary Covered Persons immediately prior to the date of this Agreement, to terminate or causes any reduction in the benefits of such policy, PhotoMedex or any PhotoMedex Subsidiary may purchase insurance policies for the benefit of such Covered Persons; provided, however, that such new policies shall not exceed the coverage that was provided under such terminated insurance policy or such policy where benefits were reduced.

(a) Survival.  The representations, warranties and covenants to be performed prior to the Closing of a Party which are contained in or made pursuant to this Agreement will survive the Closing until that date which is the six (6) month anniversary of the Closing Date; provided, however, that any representation, warranty or covenant the breach or violation of which is made the basis of a claim for indemnification will survive until such time as such claim is finally resolved in accordance with this Agreement and the Escrow Agreement, provided that the Radiancy Representative notifies the PhotoMedex Representative, or the PhotoMedex Representative notifies the Radiancy Representative, as the case may be, in writing of the existence of such claim in accordance with the provisions of clause (d)(i) below.

 

(b) Indemnification Due to Breaches by PhotoMedex or Payments to Perseus.  Subject to the terms and conditions of this Section 5.18, from and after the Closing until that date which is the six (6) month anniversary of the Closing Date, the Radiancy Stockholders and each of their respective successors and permitted assigns (each, a “Radiancy Indemnified Party”), shall be entitled to indemnification from the escrow fund holding the Escrow Securities, against any liabilities, claims (including claims by third parties), demands, judgments, losses, costs, damages or expenses whatsoever (including reasonable attorneys’, consultants’ and other professional fees and disbursements of every kind, nature and description) (collectively, “Damages”), that such Radiancy Indemnified Party may sustain, suffer or incur and that result from, arise out of or relate to (i) any breach by PhotoMedex and/ or Merger Sub of any of their respective representations, warranties, pre-closing covenants or pre-closing agreements contained in this Agreement, and/ or (ii) any payments which are made to Perseus pursuant to the terms of the Repurchase Transaction to the extent such payments are in excess of Nineteen Million Five Hundred Thousand Dollars ($19,500,000); provided, however, that no Radiancy Indemnified Party shall be entitled to indemnification pursuant to clause (ii) above if the Closing did not occur by October 16, 2011 as a result of the failure of any of the conditions set forth in Section 6.3 to have been satisfied by such date (except for Section 6.3(g) or Section 6.3(i) (provided, with respect to Section 6.3(i), that Radiancy has satisfied its obligations under Section 4.4 of this Agreement)).

(b) Requisite Regulatory Approvals and Stockholder Approvals.  All authorizations, approvals and permits required to be obtained from or made with any Governmental Authority in order to consummate the transactions contemplated by this Agreement, except for any such authorizations, approvals and/or permits the failure of which to obtain would not reasonably be expected to result in a PhotoMedex Material Adverse Affect or a Radiancy Material Adverse Affect (the “Requisite Regulatory Approvals”), the PhotoMedex Stockholder Approval and the Radiancy Stockholder Approval shall have each been obtained or made.

 

(c) Listing on the NASDAQ.  The PhotoMedex Common Stock to be issued as the Merger Consideration  and the PhotoMedex Common Stock to be issuable in connection with the exercise or conversion of the Warrants shall have been authorized for listing on the NASDAQ subject to official notice of issuance.

 

(d) Registration Statement.  The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC.

 

(e) No Law.  No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) or Order that is then in effect and which has the effect of making the Merger or the other transactions or agreements contemplated by this Agreement illegal or which otherwise prevents or prohibits consummation of the Merger, any other transactions contemplated by this Agreement or the other ancillary agreements related to this Agreement, or the filing of the Amended and Restated Articles of Incorporation or the Merger Certificate.

(a) Representations and Warranties.  Each of the representations and warranties of PhotoMedex and Merger Sub set forth in this Agreement (without giving effect to any limitation as to “materiality” or “PhotoMedex Material Adverse Effect”) shall be true and correct as of the Effective Time as though made as of the Effective Time (except to the extent that such representations and warranties refer specifically to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date), except where the failure to be so true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate with respect to all such failures, a PhotoMedex Material Adverse Effect.