Exhibit 10.1
ASSET PURCHASE AGREEMENT
dated November 30, 2006
by and among
AMERICAN MEDICAL SYSTEMS, INC.,
LASERSCOPE
and
IRIDEX CORPORATION

 

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TABLE OF CONTENTS

                  Page
 
        ARTICLE 1 PURCHASE AND SALE OF ASSETS   2
1.1
  Purchase and Sale of Assets   2
1.2
  Excluded Assets   4
1.3
  Assumption and Retention of Liabilities   5
1.4
  Purchase Price   7
1.5
  Post-Closing Adjustment   7
1.6
  Allocation of Purchase Price   11
1.7
  Closing   11
 
        ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER   13
2.1
  Corporate Organization and Power   13
2.2
  Subsidiaries   14
2.3
  Authorization   15
2.4
  Non-Contravention   15
2.5
  Consents and Approvals   16
2.6
  Financial Statement Matters   16
2.7
  No Undisclosed Liabilities   17
2.8
  Absence of Certain Changes   17
2.9
  Receivables   18
2.10
  Purchased Assets   18
2.11
  Sufficiency of Purchased Assets; Operation of Aesthetics Business   18
2.12
  Assigned Contracts   18
2.13
  Real Property   19
2.14
  FDA and Global Regulation Compliance in Connection with the Aesthetics
Business   19
2.15
  Compliance with Applicable Laws   22
2.16
  Litigation   22
2.17
  Contracts   22
2.18
  Labor and Employment Matters Concerning the Employees   23
2.19
  Aesthetics Business Intellectual Property   27
2.20
  Insurance   29
2.21
  Tax Matters   29
2.22
  Brokers   31
2.23
  Environmental Matters   31
2.24
  Affiliate Transactions   33
2.25
  Customers and Suppliers   33
2.26
  Product and Service Warranties   33
2.27
  Service Parts   34
2.28
  Stock Consideration   34
2.29
  Scope of Representations and Warranties   34
 
        ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER   34
3.1
  Corporate Organization and Power; Stock Consideration   35
3.2
  Authorization   35
3.3
  Non-Contravention   36
3.4
  Consents and Approvals   36
3.5
  Litigation   36
3.6
  Brokers   36
3.7
  SEC Filings; No Material Adverse Change   36
3.8
  Funds   37

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                  Page
3.9
  Inspections; Limitation of Parent’s and Seller’s Representations and
Warranties   37
 
        ARTICLE 4 COVENANTS   38
4.1
  Confidentiality   38
4.2
  Preparation of Tax Returns; Tax Matters   39
4.3
  Pre-Closing Covenants   41
4.4
  Post-Closing Covenants   43
4.5
  Updated Disclosure; Breaches   48
 
        ARTICLE 5 EMPLOYEE MATTERS   50
5.1
  Scope of Article   50
5.2
  Employees   50
 
        ARTICLE 6 TERMINATION   53
6.1
  Termination   53
6.2
  Procedure and Effect of Termination   54
 
        ARTICLE 7 CONDITIONS   54
7.1
  Conditions to Obligations of Each Party   54
7.2
  Conditions to Obligations of Purchaser   55
7.3
  Conditions to Obligations of Parent and Seller   56
 
        ARTICLE 8 SURVIVAL AND INDEMNIFICATION   57
8.1
  Survival   57
8.2
  Indemnification by Parent and Seller   57
8.3
  Indemnification by Purchaser   58
8.4
  Claims for Indemnification   58
8.5
  Indemnification Limits and Calculation of Damages   59
8.6
  Exclusive Remedy   60
8.7
  Subrogation   61
8.8
  Adjustment of Purchase Price   61
 
        ARTICLE 9 DISPUTE RESOLUTION   61
9.1
  Injunctive Relief   61
9.2
  Dispute   61
9.3
  Notice   61
9.4
  Arbitration   61
 
        ARTICLE 10 DEFINITIONS   62
10.1
  Definitions   62
 
        ARTICLE 11 MISCELLANEOUS   70
11.1
  Notices   70
11.2
  Amendments; No Waivers   71
11.3
  Expenses   72
11.4
  Successors and Assigns   72
11.5
  Governing Law   72
11.6
  Counterparts; Effectiveness   72
11.7
  Entire Agreement   72
11.8
  Captions   72
11.9
  Severability   72
11.10
  Construction   72
11.11
  Cumulative Remedies   73
11.12
  Third Party Beneficiaries   73

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ASSET PURCHASE AGREEMENT
     THIS ASSET PURCHASE AGREEMENT, dated November 30, 2006 (this “Agreement”),
is by and among American Medical Systems, Inc., a Delaware corporation
(“Parent”), Laserscope, a California corporation and a wholly owned subsidiary
of Parent (“Seller”), and Iridex Corporation, a Delaware corporation
(“Purchaser”). Capitalized terms used in this Agreement have the meanings
provided in, or in such other sections hereof as are cross-referenced in,
Article 10.
Recitals
     A. Seller is in the business of designing, developing, using,
manufacturing, marketing, promoting, selling and distributing lasers and other
light-based treatment devices used or useful in the Field of Use (collectively
“Aesthetics Devices”). For purposes of this Agreement, “Field of Use” means all
cosmetic, therapeutic aesthetic and prophylactic aesthetic applications and
dermatology applications, including, without limitation (1) hair removal (e.g.,
pseudofolliculitis (shaving bumps) and hair growth prevention and reduction;
(2) minimally invasive and/or non-invasive skin resurfacing and rejuvenation
(e.g., variable depth resurfacing for conditions such as wrinkles and acne
scars, treatment and prevention of pigmented and vascular lesions, and collagen
stimulation for conditions such as wrinkles), (3) treatment and prevention of
vascular lesions of all kinds including without limitation port wine stains,
matter telangiectasia, rosacea, cherry angiomas, spider angiomas, venous lake,
red and blue spider leg veins and red and blue facial veins; (4) treatment and
prevention of pigmented lesions (e.g., solar lentigines, cafe au lait stains,
melasma, post-trauma hyperpigmentation); and (5) treatment and prevention of
acne but in all cases excluding, for the avoidance of doubt, applications in the
fields of urology, gynecology, colorectal disorders, sexual dysfunction and
related pelvic disorders, and all internal surgical treatments except for
internal surgical treatments for dermatological or aesthetic applications. For
purposes of this Agreement, “Aesthetics Business” means Seller’s business of
designing, developing, using, manufacturing, marketing, promoting, selling and
distributing Aesthetics Devices in the Field of Use.
     B. Seller has developed Intellectual Property related to the Aesthetics
Devices, including Intellectual Property applicable to laser or other
light-based treatment devices generally, and Intellectual Property that is
uniquely applicable to Aesthetics Devices and the Aesthetics Business.
     C. Purchaser wishes to purchase from Seller and Seller wishes to sell to
Purchaser, certain of Seller’s tangible and intangible assets and rights used by
Seller in the conduct of the Aesthetics Business and necessary for Buyer to
conduct the Aesthetics Business following the Closing.
     D. Purchaser and Seller wish to grant certain exclusive, worldwide licenses
(including in the case of the grant by Seller, to certain of Seller’s
Intellectual Property not uniquely applicable to Aesthetics Devices for use
exclusively within the Field of Use), as specified in the License Agreement.

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Agreement
     In consideration of the foregoing, incorporated herein by this reference,
and the representations, warranties, covenants and agreements contained herein,
the receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS

1.1   Purchase and Sale of Assets. Subject to the terms and conditions of this
Agreement, at the closing of the transactions contemplated hereby (the
“Closing”), on the Closing Date, Seller shall sell, transfer, convey, assign and
deliver to Purchaser and Purchaser shall purchase from Seller, free and clear of
any mortgage, lien, pledge, option, security interest, claim, charge, financing
statement or other lien of any kind whatsoever, whether or not of record
(“Liens”), other than Permitted Liens, all right, title and interest in and to
those assets specified below, or in each of the categories more particularly
described below (the “Purchased Assets”):

  (a)   Equipment. Those items of equipment and tooling specified on
Exhibit 1.1(a) hereto (collectively, the “Equipment”);     (b)   Finished Goods
Inventory. All completed Aesthetics Devices in inventory as of the close of
business on the Closing Date (the “Finished Goods Inventory”), including, but
not limited to the Finished Goods Inventory specified on Exhibit 1.1(b) hereto
(as such exhibit shall be updated immediately prior to Closing);     (c)  
Contracts. Those contracts and consulting agreements, or portions thereof,
specified on Exhibit 1.1(c) hereto (collectively, the “Assigned Contracts”);    
(d)   Transferred Intellectual Property. The Aesthetics Business Intellectual
Property, specified on Exhibit 1.1(d) hereto and all reissues, re-examinations
and extensions thereof, and all know-how and all invention records, including
for example “enveloppe Soleau” if applicable, created by internal and external
personnel, and in the case of know-how and invention records, to the extent
exclusively related to the Aesthetics Business regardless of whether proper
protection has been sought or maintained (hereinafter the “Transferred
Intellectual Property”);     (e)   Accounts Receivable and Prepaid Expenses. All
accounts and notes receivable, employee receivables, deposits, advances,
manufacturer and supplier rebates, and all other receivables to the extent
arising out of the sale of Seller Product prior to the Closing Date
(collectively, “Accounts Receivable”) including, but not limited to the Accounts
Receivable specified on Exhibit 1.1(e) hereto and all prepaid expenses to the
extent relating exclusively to the Aesthetics Business (the “Prepaid Expenses”),
including but not limited to the prepaid expenses specified on Exhibit 1.1(e)
(as such exhibit shall be updated immediately prior to Closing);

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  (f)   Government Permits. All federal, state, local, foreign and other
governmental or administrative bodies, licenses, permits, approvals,
authorizations, license applications, registrations and other rights specified
on Exhibit 1.1(f) hereto;     (g)   Personal Property Leases. All leases and
subleases of furniture, furnishings, computers, fixtures, equipment, machinery,
spare parts, tooling, supplies, vehicles and other personal property specified
on Exhibit 1.1(g) hereto (the “Personal Property Leases”), which Exhibit
specifies the items of personal property subject to each of the leases set forth
therein;     (h)   Equity Rights in Certain of Seller’s Subsidiaries. All of the
Seller’s outstanding Equity Interests in:

  (i)   Laserscope (UK) Ltd., a British private limited company incorporated in
England and Wales with registered number 02420543 (“Laserscope UK”); and    
(ii)   Laserscope France, S.A., a French société anonyme (“Laserscope France”
and, together with Laserscope UK, the “Subsidiaries”, and the equity interests
in the Subsidiaries so transferred, the “Transferred Equity Interests”),

including, but not limited to, the Equity Interests specified on Exhibit 1.1(h)
hereto;

  (i)   Service Parts. All components or parts in inventory as of the Closing
Date that could be used exclusively to provide service with respect to Seller
Product sold prior to the Closing Date (the “Service Parts”).     (j)   Business
Information. All business and tax information and related books and records,
including files, computer discs and tapes, invoices, credit and sales records,
personnel records (subject to Applicable Law), customer lists, supplier lists
(including supplier cost information), manuals, drawings, business plans and
other plans and specifications, accounting books and records, sales literature,
current price lists and discounts, promotional signs and literature, marketing
and sales programs and manufacturing and quality control records and procedures,
in all cases to the extent such information is (a) reasonably and readily
(i) identifiable, (ii) capable of segregation from Seller’s other business
information, books and records, and (iii) transferable by Seller, and
(b) exclusively related to, or is exclusively used or employed in, the
Aesthetics Business; provided, however, that Seller shall be entitled to retain
copies of any of the foregoing to the extent reasonably necessary for, and may
use such copies solely in connection with, tax or accounting matters or for the
defense or prosecution of any action or claim not assigned hereunder;     (k)  
Claims. All claims, credits, causes of action, and rights to damages, profits or
set-off whatsoever to the extent relating to any of the foregoing, whether known
or unknown, including for infringement of any Transferred Intellectual Property,
but in any case only to the extent related to the operation of the Aesthetics
Business; and

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  (l)   Goodwill. All of the goodwill of the Aesthetics Business, including the
right to represent itself as the successor to the Aesthetics Business.

provided, however, that notwithstanding any other provision hereof, immediately
prior to the Closing Seller will, pursuant to agreements and documentation
reasonably acceptable to each of Seller and Purchaser, (A) take appropriate
actions to cause inter-company receivables and certain other liabilities
identified on Schedule 1.1, as attached hereto and as the same shall be updated
immediately prior to Closing, to be assigned to designated Affiliates of Seller;
and (B) in payment of such receivables and liabilities, cause the Subsidiaries
to transfer and assign to such Affiliates of Seller all of the Subsidiaries’
right, title and interest in and to: (i) specified items of equipment and other
assets of the Subsidiaries not used in or necessary to the Aesthetics Business;
(ii) all finished goods, work in process, raw and packaging materials, and spare
and replacement parts held for sale other than in connection with the Aesthetics
Business; (iii) all accounts receivable and purchase orders relating to products
other than for Aesthetics Devices; (iv) all cash in hand, cash equivalents,
investments, and bank accounts except for such cash, cash equivalents, etc. that
Seller elects in its sole discretion to leave with the Subsidiaries; (v) certain
contract, intellectual property and other rights not used in or necessary to the
Aesthetics Business; and (vi) goodwill not related to the Aesthetics Business,
in each case as specified on Schedule 1.1 as attached hereto and as the same
shall be updated immediately prior to Closing (collectively, the transactions
referred to above are referred to herein as the “ Pre-Closing Transactions”).

1.2   Excluded Assets. All of Seller’s assets, other than those assets expressly
enumerated in the foregoing paragraph as Purchased Assets, are excluded from the
purchase and sale provided for in Section 1.1, and are referred to herein as the
“Excluded Assets.” The Excluded Assets include, without limitation:

  (a)   Certain Inventory. All raw materials and work-in-progress inventory
(collectively, the “Excluded Inventory”), which Excluded Inventory shall be
retained by Seller for purposes of its performance under the Product Supply
Agreement;     (b)   Cash. All cash in hand, cash equivalents, investments, and
bank accounts (including the consideration delivered to Seller at Closing
pursuant to this Agreement for the Purchased Assets);

  (c)   Real Property. All real property or interests in real property and all
buildings, structures, fixtures and improvements located thereon, and all
privileges, rights, easements and appurtenances belonging to or for the benefit
thereof, owned or leased by Seller (excluding, for the avoidance of doubt, the
Real Estate Leases);     (d)   Tax Refunds. Federal or state income tax refunds
relating to taxes paid by Seller, for all periods or portions of periods ending
on or prior to the Closing Date;

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  (e)   Business Information. All business information and related books and
records of Seller that is not included in Section 1.1(i); provided, however,
that Seller shall provide Purchaser with reasonable access to such portions of
such information relating to the Aesthetics Business from time to time from and
after the Closing, subject to prior notice and without undue interruption to the
business of Seller; and     (f)   Other. All rights of Seller under this
Agreement and all corporate minute books, records and seals of Seller
(excluding, for the avoidance of doubt, any corporate minute books, records or
seals of the Subsidiaries).

1.3   Assumption and Retention of Liabilities.

  (a)   Assumed Liabilities. From and after the Closing Date, Purchaser shall,
without any further responsibility or liability of, or recourse against, Parent
or Seller, or any of their respective Affiliates, or any of the respective
directors, shareholders, officers, employees, agents, consultants,
representatives, successors or assigns of any of the foregoing, absolutely and
irrevocably assume and be liable and solely responsible for all Liabilities
arising out of or relating to:

  (i)   The ownership, use or possession of the Purchased Assets and operation
of the Aesthetics Business after the effective time of the Closing (the
“Effective Time”), including, without limitation, any claim that a product used,
manufactured, sold or offered for sale by Purchaser after the Effective Time
infringes any rights in Intellectual Property of any third party (not affiliated
with Parent or Seller);     (ii)   Employee and employee benefits matters
assumed by Purchaser under Article 5;     (iii)   Liabilities first arising in
the ordinary course of the Aesthetics Business after the Closing Date under the
Assigned Contracts, specifically excluding any liabilities or obligations
arising from or in connection with any breach, violation, default or failure of
performance of Seller arising prior to the Effective Time and any Liabilities,
obligations and responsibilities of Seller arising out of or relating to the
Ancillary Agreements;     (iv)   All Product Warranty Claims;     (v)   Those
customer service contracts set forth on Exhibit 1.3(a)(v) hereto, as such
exhibit is updated as of the Closing Date to reflect those additional customer
service contracts entered into between the date hereof and the Closing Date
(collectively, the “Assumed Service Contracts”); and     (vi)   Any Transfer
Taxes and Straddle Period Taxes attributable to Purchaser pursuant to
Sections 4.2(c) and 4.2(e) of this Agreement.

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For the avoidance of doubt, and notwithstanding any other provision hereof
except as provided in Sections 1.3(b)(v), 4.2(e) and 8.2(d), each of the
Subsidiaries will, after the Closing Date (after giving effect to the
Pre-Closing Transactions) remain subject to all Liabilities they may have on the
Closing Date. The obligations described in this Section 1.3(a), including the
Liabilities of the Subsidiaries, are hereinafter collectively referred to as the
“Assumed Liabilities”.

  (b)   Retained Liabilities. Except for the Assumed Liabilities, Purchaser
shall not assume and hereby expressly disclaims any assumption of any other
Liabilities of Seller, whether or not related to the Aesthetics Business (the
“Retained Liabilities”), including, but not limited to, any liabilities (except
for the liabilities specifically described in clauses (i) — (vi) of
Section 1.3(a)) relating to or arising out of:

  (i)   The ownership, use or possession of the Purchased Assets and operation
of the Aesthetics Business on or before the Effective Time;     (ii)  
Liabilities first arising in the ordinary course of the Aesthetics Business on
or before the Closing Date under the Assigned Contracts;     (iii)   Seller’s
Retained Environmental Liabilities;     (iv)   All Liabilities with respect to
those employees of the Subsidiaries to be employed by Seller after the Closing
Date, as identified in Schedule 1.3(b) (the “Retained Employees”) whether such
Liabilities arise under (A) the Acquired Rights Directive (77/187/EEC); or (B)
UK or French legislation implementing the Acquired Rights Directive into
national law; or (C) otherwise;     (v)   Any Taxes of Seller, any Income Taxes
of any Subsidiary arising after application of its NOL Threshold or other Taxes
of any Subsidiary, including any liability for Taxes arising from or
attributable to Seller’s operation of the Aesthetics Business or use or
ownership of the Purchased Assets (other than Taxes attributable to either of
the Subsidiaries for taxable periods (or portions thereof) ending on or prior to
the Closing Date to the extent that they are reflected in the Final Subsidiary
Closing Balance Sheet) for all taxable periods (or portions thereof) ending on
or prior to the Closing Date, and including any Transfer Taxes, if any, and
Straddle Period Taxes attributable to Seller pursuant to Sections 4.2(c) and
4.2(e) of this Agreement;     (vi)   All amounts owed under any Contract
disclosed in Section 2.24 of the Disclosure Schedule;     (vii)   Any
Liabilities under any Contracts other than the Assigned Contracts and any
Liabilities arising from or in connection with any breach, violation, default or
failure of performance of Seller or any third party under the Assigned Contracts
prior to the Closing Date;

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  (viii)   All Liabilities, obligations and responsibilities of Seller arising
out of or relating to the Ancillary Agreements; and     (ix)   All Liabilities
arising out of Section 4.2(a) (relating to “lump sum payment” obligations of
Seller) under that certain Non-Exclusive Patent License between Seller and
Palomar Medical Technologies, dated October 18, 2006.

1.4   Purchase Price. At the Closing, in addition to assuming the Assumed
Liabilities and subject to the terms and conditions of this Agreement, including
without limitation any adjustment required under Section 1.5, in reliance on the
representations, warranties and agreements of Parent and Seller contained herein
and in consideration of the sale, assignment, transfer and delivery of the
Purchased Assets, Purchaser agrees to pay to Seller (a) the sum of $28,000,000,
payable by delivery of (i) $26,000,000 in immediate available funds at Closing;
and (ii) issuance of a number of shares of Purchaser’s common stock having a
value equal to $2,000,000 based upon the average of the daily closing price of
such shares as reported by the Nasdaq Stock Market for the twenty (20) trading
days immediately preceding the Closing Date (the “Stock Consideration”) plus,
(b) an amount equal to the book value of the Service Parts as of the Closing
Date, which such amount will be payable in immediately available funds on the
date that payment for the “Product Inventory” becomes due under Section 7.3(c)
of the Product Supply Agreement (including such extensions as provided therein)
(collectively, the “Purchase Price”).

1.5   Post-Closing Adjustment.

  (a)   The Purchase Price shall be (A) increased by the amount, if any, by
which the amount of the Balance Sheet Items reflected in the Final Closing
Balance Sheet Item Statement (the “Final Closing Balance Sheet Item Amount”)
total to an amount greater than $9,500,000, or decreased by the amount, if any,
by which the Final Closing Balance Sheet Item Amount is less than $7,300,000,
(B) increased by the amount of the Cash of the Subsidiaries, (C) decreased by
Fifty Percent (50%) of the Adjusted Liabilities of the Subsidiaries,
(D) decreased by the amount of the Income Tax Liability of the Subsidiaries,
(E) decreased by the amount of any liability for Taxes attributable to the
Pre-Closing Transactions to the extent not included in clauses (C) or (D) all,
in the case of clauses (B) through (E), to the extent reflected in the Final
Subsidiary Closing Balance Sheet (as defined below) and (F) increased by the
amount of any payments that become due on or after December 31, 2006 pursuant to
any bonus plan or any severance plan or retention plan disclosed on
Schedule 5.2(d) and that are paid by Parent or Seller prior to the Closing Date
to any Transferred Employee or any employee of a Subsidiary that is not a
Retained Employee.

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  (b)   As used herein:

  (i)   “Balance Sheet Items” means (i) the book value all Equipment, Finished
Goods Inventory, Accounts Receivable and Prepaid Expenses, aggregated with all
such similar balances of the Subsidiaries, and all other inventory items of the
Subsidiaries, all after giving effect to the Pre-Closing Transactions, less
(ii) Seller’s reserves for Product Warranty Claims and the unearned service
revenue accrued with respect to the Assumed Service Contracts, in each case,
aggregated with all such similar balances of the Subsidiaries after giving
effect to the Pre-Closing Transactions.     (ii)   “Cash of the Subsidiaries”
means all cash and cash equivalents of the Subsidiaries.     (iii)   “Adjusted
Liabilities of the Subsidiaries” means (A) all Liabilities of the Subsidiaries,
except for (w) Income Tax Liability, (x) liability for Taxes attributable to the
Pre-Closing Transactions, (y) Liabilities described in clause (ii) of the
definition of, and taken into account in the calculation of, Balance Sheet Items
and (z) any liability described in clauses (ii) through (vi), inclusive, of
Section 1.3(a), less (B) the amount, if any, by which input Value Added Taxes
paid by the relevant Subsidiary prior to the Closing Date exceeds the amount of
output Value Added Taxes payable by such Subsidiary prior to the Closing to the
extent that such amount can be used to reduce the future liability of the
Subsidiaries for Value Added Taxes, less (C) the amount of any Liability that
establishes a reserve against any Tax asset included on the Final Subsidiary
Closing Balance Sheet created by any net operating loss or net operating loss
carryover.     (iv)   “Income Tax Liability of the Subsidiaries” means any
Liability accrual for Income Tax, but shall expressly not include any Liability
that establishes a reserve against any Tax asset included on the Final
Subsidiary Closing Balance Sheet created by any net operating loss or net
operating loss carryover.     (v)   “Subsidiary Closing Balance Sheet” means the
combined balance sheet of the Subsidiaries as of the close of business on the
Closing Date, after giving effect to the Pre-Closing Transactions (including any
Tax liability arising therefrom).     (vi)   “Adjusted Purchase Price” means the
Purchase Price as adjusted pursuant to this Section 1.5.

  (c)   Not later than 15 days after the Closing Date, Seller will prepare and
deliver to Purchaser a proposed statement of the Balance Sheet Items as of the
close of business on the Closing Date (the “Proposed Closing Balance Sheet Item
Statement”) and a proposed Subsidiary Closing Balance Sheet (the “Proposed
Subsidiary Closing Balance Sheet”), each prepared on a basis consistent with
Sections 2.6(a) and (b), respectively, except that the Proposed Subsidiary
Closing Balance Sheet shall include all Liabilities for Income Taxes. Purchaser
agrees to provide Seller and its accountants, at no cost to Seller, access to
the books and records of the Aesthetics Business to the extent reasonably
requested by Seller for purposes of preparing the Proposed Closing Balance Sheet
Item Statement and the Proposed Subsidiary Closing Balance Sheet, and will cause
appropriate personnel of Purchaser to provide reasonable assistance to Seller
and its representatives, at no cost to Seller, in the preparation of the
Proposed Closing Balance Sheet Item Statement and the Proposed Subsidiary
Closing Balance Sheet.

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  (d)   Unless Purchaser notifies Seller in writing that it disagrees with any
aspect of the Proposed Closing Balance Sheet Item Statement or the Proposed
Subsidiary Closing Balance Sheet (such notice to include Purchaser’s objections
and reasonably detailed proposed revisions to said documents and in reasonable
detail the basis therefor along with any relevant supporting data), within
30 days after receipt thereof, the Proposed Closing Balance Sheet Item Statement
and/or the Proposed Subsidiary Closing Balance Sheet, as applicable, shall be
conclusive and binding on Seller and Purchaser. If Purchaser so notifies Seller
in writing within such 30-day period, then Seller and Purchaser shall attempt to
resolve their differences with respect thereto within 15 days after Seller’s
receipt of Purchaser’s written notice of disagreement. Any disputes not resolved
by Seller and Purchaser within such 15-day period regarding the Proposed Closing
Balance Sheet Item Statement or the Proposed Subsidiary Closing Balance Sheet
will be resolved by the San Jose or San Francisco/Oakland metropolitan area
office of an accounting firm of national reputation that has not received fees
in excess of $10,000 during the preceding twelve (12) months from either the
Parent or the Seller on the one hand or Purchaser on the other hand and is
mutually agreed upon by the parties or, if the parties are unable to agree on a
firm, such firm as may be selected by the American Institute of Certified Public
Accountants (the “Firm”), and each party agrees to execute, if requested by the
Firm, a reasonable engagement letter. Not later than 30 days after the
engagement of the Firm (as evidenced by its written acceptance by facsimile or
otherwise to the parties), the parties shall submit simultaneous briefs to the
Firm (with a copy to the other parties) setting forth their respective positions
regarding the issues in dispute, and not later than 30 days after the submission
of such briefs the parties shall submit simultaneous reply briefs (with a copy
to the other parties). The Firm shall render its decision resolving the dispute
within 30 days after submission of the reply briefs. If additional briefing, a
hearing, or other information is required by the Firm, the Firm shall give
notice thereof to the parties as soon as practicable before the expiration of
such 30-day period, and the parties shall promptly respond with a view to
minimizing any delay in the decision date.     (e)   The Firm shall make a
determination on the disputes so submitted as well as such modifications, if
any, to the Proposed Closing Balance Sheet Item Statement and/or the Proposed
Subsidiary Closing Balance Sheet, as applicable, as reflect such determination,
and the same shall be conclusive and binding upon the parties and
non-appealable; provided, however, that neither the Firm’s determination of nor
the parties’ agreement regarding the Final Closing Balance Sheet Item Statement
and/or the Proposed Subsidiary Closing Balance Sheet (unless otherwise
specifically agreed to by the parties) shall prevent either party from making
claims under Article 8 hereof. The Firm shall be instructed by the parties

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      to use those procedures and calculations set forth in Section 1.5(c) to
resolve any disputes in respect of the Proposed Closing Balance Sheet
Item Statement and/or the Proposed Subsidiary Closing Balance Sheet and act in
strict accordance with the terms of this Agreement. The determination of the
Firm for any item in dispute cannot, however, be in excess of, nor less than,
the greatest or lowest value, respectively, claimed for that particular item in
the Proposed Closing Balance Sheet Item Statement, in the case of Seller, or in
the notice described in the first sentence of Section 1.5(d), in the case of
Purchaser. The fees and expenses of the Firm shall be shared equally by Seller
and Purchaser. As used herein, “Final Closing Balance Sheet Item Statement”
shall mean either (x) the Proposed Closing Balance Sheet Item Statement as
delivered and received without timely objection hereunder or as mutually agreed
to by the parties, or (y) in the event of any dispute resolved by the Firm, the
Proposed Closing Balance Sheet Item Statement as amended and restated by the
Firm and “Final Subsidiary Closing Balance Sheet” shall mean either (x) the
Proposed Subsidiary Closing Balance Sheet as delivered and received without
timely objection hereunder or as mutually agreed to by the parties, or (y) in
the event of any dispute resolved by the Firm, the Proposed Subsidiary Closing
Balance Sheet as amended and restated by the Firm.

  (f)   Any adjustment required hereunder shall be payable as follows:

  (i)   If the amount calculated under Section 1.5(a) above results in a net
decrease to the Purchase Price, within five Business Days of the final
determination of the Final Closing Balance Sheet Item Statement and the Final
Subsidiary Closing Balance Sheet, Seller shall pay such net decrease to
Purchaser.     (ii)   If the amount calculated under Section 1.5(a) above
results in a net increase to the Purchase Price, within five Business Days of
the final determination of the Final Closing Balance Sheet Item Statement and
the Final Subsidiary Closing Balance Sheet, Purchaser shall pay such net
increase to Seller.     (iii)   Any amount paid under this Section 1.5 will be
accompanied by interest thereon at the rate of LIBOR plus 0.25% per annum from
(but excluding) the Closing Date through and including the date of payment. Such
payment shall be made by a wire transfer of immediately available funds in US
currency to a bank account designated in writing by Purchaser or Seller, as
applicable.

  (g)   The purpose of this Section 1.5 is to determine the purchase price to be
paid by Purchaser under this Agreement. Accordingly, any determination pursuant
to subsection (d) above made by the Firm shall not be deemed to be an
indemnification by either Seller or Purchaser, as the case may be, pursuant to
Article 8, nor subject to the limitation on indemnities set forth in Section 8.5
hereof.

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1.6   Allocation of Purchase Price. Seller and Purchaser mutually agree to the
allocation of the Purchase Price and the amount of the Assumed Liabilities among
the Purchased Assets, and the non-competition provision set forth in
Section 4.4(b), as set forth on Schedule 1.6 and in accordance with Section 1060
of the Code. Seller and Purchaser shall prepare and file Form 8594 or such other
form or statement as may be required by Applicable Law, and any comparable state
or local income tax form, and any return in respect of Taxes payable in respect
of the transfer of the shares of the Subsidiaries in a manner consistent with
such allocation.   1.7   Closing. Unless this Agreement has been terminated and
the transactions contemplated herein have been abandoned pursuant to Article 6,
the Closing will be held at the offices of Oppenheimer Wolff & Donnelly LLP,
Suite 3300, 45 South Seventh Street, Minneapolis, Minnesota at 10:00 a.m., local
Minneapolis, Minnesota time on January 2, 2007, (or, if later, on a date no
later than two Business Days after all of the conditions set forth in Article 7
shall have been satisfied or waived (other than those conditions that by their
terms are not capable of being satisfied or waived until the Closing)), or such
other place, time and date as the parties shall agree in writing. The time and
date on which the Closing is actually held is sometimes referred to herein as
the “Closing Date”. All matters at the Closing will be considered to take place
simultaneously and no delivery of any document will be deemed complete until all
transactions and deliveries of documents are completed.

  (a)   At the Closing, Seller shall deliver to Purchaser the following:

  (i)   Possession and control of the Purchased Assets, together with such bills
of sale and instruments of conveyance, transfer and assignment, dated as of the
Closing Date, as shall be sufficient to transfer to and vest in Purchaser good
and valid title to the Purchased Assets, free and clear of all Liens other than
Permitted Liens, together with documents evidencing release of any Lien other
than Permitted Liens on the Purchased Assets;     (ii)   Certified copies of
resolutions duly adopted by the Boards of Directors of Parent and Seller, and of
Parent, as the sole shareholder of Seller, each authorizing the execution and
delivery of this Agreement, the Ancillary Agreements (to the extent applicable)
and all other documents being entered into or delivered by Parent and Seller,
related to, or arising from, this Agreement;     (iii)   An executed original of
the License Agreement between Seller and Purchaser in the form of
Exhibit 1.7(a)(iii) hereto (the “License Agreement”);     (iv)   An executed
original of the Assignment and Assumption Agreement between Seller and Purchaser
in the form of Exhibit 1.7(a)(iv) hereto (the “Assignment and Assumption
Agreement”);

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  (v)   An executed original of the Product Supply Agreement between Purchaser
and Seller in the form of Exhibit 1.7(a)(v)(A) hereto (the “Product Supply
Agreement”) and the Administrative Services Agreement between Purchaser and
Seller in the form of Exhibit 1.7(a)(v)(B) hereto (the “Administrative Services
Agreement,” collectively with the Product Supply Agreement, the License
Agreement and the Assignment and Assumption Agreement, the “Ancillary
Agreements”);     (vi)   The Consents listed on Exhibit 1.7(a)(vi) hereto (the
“Required Consents”);     (vii)   Letters of Resignation, dated as of the
Effective Time, in substantially the form of Exhibit 1.7(a)(vii) hereto from the
officers and directors of the Subsidiaries;     (viii)   Certified copies of the
resolutions adopted by the corporate bodies of the Subsidiaries authorizing the
transfer of the Transferred Equity Interests to the Purchaser and providing for
the replacement of the officers and directors of the Subsidiaries by Purchaser’s
appointees and the other matters set out on Exhibit 1.7(a)(viii);     (ix)  
Executed stock transfer forms and certificates evidencing all outstanding equity
of each of Laserscope UK and Laserscope France except for equity of Laserscope
UK and Laserscope France not owned by Seller as disclosed on Section 2.2 of the
Disclosure Schedule;     (x)   Such other duly executed agreements, deeds,
certificates or other instruments of conveyance, transfer and assignment,
including transfer tax registration forms, as shall be reasonably necessary, in
the opinion of Purchaser, to effect the transactions contemplated by this
Agreement; and     (xi)   All documents and instruments necessary to effect
filings with any Governmental Authority which are required to properly register
the products and relevant establishments in the Purchaser’s name, effective as
of the Closing Date (for example, the Federal Food and Drug Administration and
its overseas counterparts’ products and establishment licenses and environmental
permits, etc.) in connection with the Aesthetics Business.

  (b)   At the Closing, Purchaser shall deliver to Seller the following:

  (i)   The cash portion of the Purchase Price specified in clause (a) of
Section 1.4, by wire transfer of immediately available funds to a bank account
designated by Seller and stock certificates representing the Stock
Consideration;     (ii)   Certified copies of resolutions duly adopted by the
Board of Directors of Purchaser, authorizing the execution and delivery of this
Agreement, the Ancillary Agreements and all other documents being entered into
or delivered by Purchaser, related to, or arising from, this Agreement;

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  (iii)   Executed originals of each of the Ancillary Agreements;     (iv)  
Resale and/or other exemption certificates providing for an exemption of sales,
use or other Transfer Taxes to the extent an exemption is available for any of
the Purchased Assets; and     (v)   Such other duly executed agreements, deeds,
certificates or other instruments of purchase and assumption as shall be
reasonably necessary, in the opinion of Parent or Seller, to effect the
transactions contemplated by this Agreement.

ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
     Parent and Seller hereby represent and warrant to Purchaser that, except as
set forth in the Disclosure Schedule delivered by Seller to Purchaser on the
date hereof (the “Disclosure Schedule”), and in all cases qualified by the
effects of the Pre-Closing Transactions, on the date hereof, and as of the
Closing as though made at the Closing (subject, however, to the provisions of
Section 4.5 and 7.2(c)), the statements contained in this Article 2 are true and
correct. Each item disclosed in the Disclosure Schedule shall constitute an
exception to the representations and warranties given and shall be deemed to be
disclosed with respect to each section of the Disclosure Schedule (i) that is
specifically identified (by cross reference or otherwise) in the Disclosure
Schedule as being qualified by such exception, or (ii) with respect to which the
relevance of such exception is reasonably apparent on the face of the disclosure
set forth in the Disclosure Schedule.
     With respect to any information disclosed by Parent and Seller in the
Disclosure Schedule: (i) such disclosure is not an admission by the Seller that
the such information is material; and (ii) no representation or warranty is made
with respect to such information to the extent such information is not required
to be disclosed because it is clearly below specific dollar thresholds specified
in the representations and warranties contained in the Agreement. Furthermore, a
threshold of materiality being provided by Parent and Seller on a particular
section of the Disclosure Schedule is not intended to be an indication of the
threshold of materiality for any other section of the Disclosure Schedule or
otherwise. Nothing in the Disclosure Schedule constitutes an admission of any
liability or obligation of Parent or Seller to any third party or an admission
against Parent’s or Seller’s interest

2.1   Corporate Organization and Power. Each of Parent and Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, in the case of Parent, and California, in the case of
Seller, and has all requisite corporate power and authority, and all
governmental licenses, governmental authorizations, governmental consents and
governmental approvals, required to carry on its business as now conducted and,
in the case of Seller, to own, lease and operate the assets and properties of
Seller as now owned, leased and operated.

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2.2   Subsidiaries.

  (a)   Laserscope UK is a private limited company duly organized, validly
existing and in good standing under the laws of England and Wales, and has all
requisite corporate power and authority, and all Government Authority licenses,
authorizations, consents and approvals, required to carry on its business as now
conducted and to own, lease and operate the assets and properties of Laserscope
UK as now owned, leased and operated.     (b)   Laserscope France is a société
anonyme duly organized, validly existing and in good standing under the laws of
the Republic of France and has all requisite corporate power and authority, and
all Governmental Authority licenses, authorizations, consents and approvals,
required to carry on its business as now conducted and to own, lease and operate
the assets and properties of Laserscope France as now owned, leased and
operated.     (c)   All of the outstanding equity interests in the Subsidiaries
(i) have been duly authorized and were validly issued, are fully paid and
nonassessable, are not subject to any right of rescission, are not subject to
preemptive rights by statute or otherwise, and (ii) will be, as of the Closing,
owned directly by Seller, free and clear of all Liens other than Permitted
Liens. Except with respect to Purchaser’s rights to acquire all of Seller’s
equity ownership interest in the Subsidiaries under this Agreement, there are no
options, warrants or other rights, agreements, arrangements or commitments to
which the Subsidiaries or Seller is a party of any character relating to the
issued or unissued equity interests in the Subsidiaries or obligating the
Subsidiaries to grant, issue or sell any equity interests in the Subsidiaries.
Neither Subsidiary owns, or has the right to acquire, any equity interest in any
other entity and nor does either Subsidiary operate or have any branch, agency,
place of business or establishment outside the country of its incorporation.    
(d)   The Transferred Equity Interests represent all of the authorized Equity
Interests of each Subsidiary which are clear of any Lien or Encumbrances.    
(e)   The assets or good will (“fonds de commerce”) of the Subsidiaries are not
the subject of any Lien or Encumbrances. The Subsidiaries have not guaranteed in
any manner the obligations of third parties.     (f)   There has been no formal
request for the annulment or the dissolution of any of the Subsidiaries nor has
any petition been filed with any competent authority requesting the initiation
of any restructuring or liquidation or winding up procedures with respect to the
Subsidiaries and the accounts of Laserscope France as of December 31, 2005
recorded a net equity amount equal to at least one half of its “share capital.”

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2.3   Authorization.

  (a)   Each of Parent and Seller has the corporate power and authority to enter
into this Agreement and, to the extent a party thereto, the Ancillary
Agreements, and to carry out the transactions contemplated herein and therein.  
  (b)   The Boards of Directors of Seller and Parent, and Parent, as the sole
shareholder of Seller, have taken all action required by law and Seller’s
Articles of Incorporation and otherwise to duly and validly authorize and
approve the execution, delivery and performance by Seller of this Agreement, the
Ancillary Agreements and the consummation by Seller of the transactions
contemplated herein and therein and no other corporate proceedings on the part
of Seller are, or will be, necessary to authorize this Agreement, the Ancillary
Agreements or to consummate the transactions contemplated hereby and thereby.  
  (c)   The Board of Directors of Parent has taken all action required by law
and Parent’s Certificate of Incorporation and otherwise to duly and validly
authorize and approve the execution, delivery and performance by Parent of this
Agreement, the Ancillary Agreements and the consummation by Parent of the
transactions contemplated herein and therein and no other corporate proceedings
on the part of Parent are, or will be, necessary to authorize this Agreement or
to consummate the transactions contemplated hereby.     (d)   To the extent a
party thereto, this Agreement and the Ancillary Agreements have been duly and
validly executed and delivered by each of Parent and Seller and, assuming the
due authorization, execution and delivery by Purchaser of this Agreement and the
Ancillary Agreements, constitute the legal, valid and binding obligations of
Parent and Seller, enforceable against each of Parent and Seller in accordance
with their respective terms, subject to laws of general application relating to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and rules of law governing specific
performance, injunctive relief or other equitable remedies.

2.4   Non-Contravention. Neither the execution, delivery or performance of this
Agreement or the Ancillary Agreements nor the consummation of the transactions
contemplated herein and therein will (a) contravene or conflict with charter
documents of Parent, Seller or any Subsidiary, (b) contravene or conflict with
or constitute a violation of any provision of any Applicable Law binding upon or
applicable to Parent, Seller or any Subsidiary, or any of the Purchased Assets;
(c) result in the creation or imposition of any Lien, other than a Permitted
Lien, on any of the Purchased Assets or the assets of the Subsidiaries, or
(d) be in conflict with, constitute (with or without due notice or lapse of time
or both) a default under, result in the loss of any benefit under, or give rise
to any right of termination, cancellation, increased payments or acceleration
under any terms, conditions or provisions of any note, bond, lease, mortgage,
indenture, license, contract, franchise, permit, instrument or other agreement
or obligation material to the Aesthetics Business and to which Seller or any
Subsidiary is a party, or by which any of the Purchased Assets or any of the
respective properties or assets of the Subsidiaries may be bound, except in the
case of subsections (b) and (d) above, for such breaches or violations, if any,
which would not, individually or in the aggregate, be expected to have a
Material Adverse Effect.

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2.5   Consents and Approvals. No consent, approval, order or authorization of or
from, or registration, notification, declaration or filing with (hereinafter
sometimes separately referred to as a “Consent” and sometimes collectively as
“Consents”) any Person, including without limitation any Government Authority,
is required in connection with the execution, delivery or performance of this
Agreement or the Ancillary Agreements by Seller or, to the extent a party hereto
and thereto, Parent, or the consummation by Seller or Parent, of the
transactions contemplated herein and therein other than as set forth in Schedule
2.5.   2.6   Financial Statement Matters.

  (a)   Statement of Balance Sheet Items. Attached hereto as Schedule 2.6(a) is
an unaudited statement, as of September 30, 2006, of the Balance Sheet Items,
which statement (i) has been compiled from and is in all material respects in
accordance with the books and records of Seller to the extent relating to the
Aesthetics Business, (ii) was prepared in accordance with GAAP in all material
respects consistently applied, subject to: (A) the failure to include
comparative amounts for previous periods; (B) the failure to include footnotes;
(C) the failure to include income tax expense; (D) the failure to include the
effect of certain intercompany transactions; (E) the inclusion of the effect of
the elimination of the intercompany payables and receivables, including by
making an assumption that the contribution of amounts owed with respect to the
Aesthetics Business to Seller and its Affiliates into “additional paid in
capital” of Seller; (F) the inclusion of the operations of certain entities
within the Aesthetics Business whose inclusion may not otherwise be permitted by
GAAP; and (G) the inclusion of certain reasonable estimates for items that had
not previously been identified specific to the Aesthetics Business.     (b)  
Financial Statements of Subsidiaries. Attached hereto as Schedule 2.6(b) are
unaudited balance sheets (the “Subsidiary Balance Sheets” or the “Subsidiary
Financial Statements”) as of September 30, 2006 (the “Subsidiary Balance Sheet
Date”). The Subsidiary Financial Statements (i) have been compiled from and are
in all material respects in accordance with the books and records of each of the
Subsidiaries, (ii) fairly present the financial position of each Subsidiary as
of their respective dates (and, as such, include the financial position not
specifically related to the Aesthetics Business), and (iii) were prepared in
accordance with GAAP in all material respects consistently applied, subject to:
(A) the failure to include comparative amounts for previous periods; (B) the
failure to include footnotes; (C) the failure to include income tax expense;
(D) the failure to include the effect of certain intercompany transactions;
(E) the failure to include “other income and expenses” including, for example,
foreign exchange gains and losses and interest income and expense; (F) the
inclusion of the effect of the elimination of the intercompany payables and
receivables.

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2.7   No Undisclosed Liabilities. The Subsidiaries do not have any Liabilities
of a nature required by GAAP to be reflected on or disclosed on the face of the
Subsidiary Financial Statements except for (a) Liabilities disclosed, reflected
or reserved against in the Subsidiary Financial Statements, (b) Liabilities
incurred after the Subsidiary Balance Sheet Date in the ordinary course of
business, (c) the matters disclosed in or arising out of matters set forth on
Schedule 2.7 of the Disclosure Schedule, (d) Liabilities incurred in connection
with this Agreement and the transactions contemplated hereby.

2.8   Absence of Certain Changes. Other than in connection with the transactions
contemplated by this Agreement (including, without limitation, the Pre-Closing
Transactions), since August 1, 2006, Seller has owned and operated the
Aesthetics Business in the ordinary course and consistent with past practice,
and, without limiting the generality of the foregoing, Seller has not, in
connection with the Aesthetics Business:

  (a)   experienced any change which has had a Material Adverse Effect or
experienced any event or failed to take any action which reasonably could be
expected to result in a Material Adverse Effect;     (b)   permitted or allowed
any of its property or assets (real, personal or mixed, tangible or intangible)
to be subjected to any Lien, other than Permitted Liens;     (c)   sold,
transferred, or otherwise disposed of any of its properties or assets (real,
personal or mixed, tangible or intangible), except in the ordinary course of
business and consistent with past practice;     (d)   disposed of or permitted
to lapse any rights to the use of any patent, trademark, trade name or
copyright, or disposed of or disclosed (except as necessary in the conduct of
its business) to any person or entity other than representatives of Purchaser
any trade secrets, process or know-how not theretofore a matter of public
knowledge;     (e)   granted any general increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee;     (f)  
made any change in any method of financial or Tax accounting or financial or Tax
accounting practice other than pursuant to GAAP;     (g)   paid, loaned or
advanced any amount to, or sold, transferred or leased any properties or assets
(real, personal or mixed, tangible or intangible) to, or entered into any
agreement or arrangement with, any of its officers or directors or any Affiliate
of any of its officers or directors;     (h)   settled or compromised any
material Proceeding; or

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  (i)   agreed, whether in writing or otherwise, to take any action or suffer
any consequence described in this Section 2.8.

2.9   Receivables. The Accounts Receivable and the receivables reflected in the
Subsidiary Financial Statements (a) are valid, (b) arose from bona fide
transactions in the ordinary course of business, and (c) have not arisen from
consignment sales that are subject to return. To Seller’s Knowledge, there are
not any valid defenses, set-offs or counterclaims against the receivables
reflected in the Subsidiary Financial Statements for which allowances have not
been established on the applicable Subsidiary Financial Statement.

2.10   Purchased Assets. (a) Seller has good and valid right, title and interest
in and to the Purchased Assets, free and clear of all Liens other than Permitted
Liens, (b) each Subsidiary has good and valid right, title and interest in and
to, or a leasehold interest in and to, all of its machinery, equipment, vehicles
and other personal property reflected in the applicable Subsidiary Balance Sheet
and purchased or otherwise acquired since the Subsidiary Balance Sheet Date
(except for such items sold or leased in the ordinary course of business since
such date), and (c) the Purchased Assets and the assets, machinery, equipment,
vehicles and other personal property of each Subsidiary that are necessary to
the conduct of the Aesthetics Business as presently conducted are in good
operating condition and repair (excluding ordinary wear and tear and taking into
account the age of such items), and fit for the intended purposes thereof.

2.11   Sufficiency of Purchased Assets; Operation of Aesthetics Business. To the
Seller’s Knowledge, the Purchased Assets, together with the rights provided
under the Ancillary Agreements, constitute, and on the Closing Date will
constitute, all of the assets, properties and rights used by or under authority
of Seller or its Affiliates principally or exclusively in or necessary to
conduct the Aesthetics Business as currently conducted or proposed to be
conducted by Seller or Parent.

2.12   Assigned Contracts. Except for the Contracts set forth on Schedule 2.12
and portions of Contracts necessary to be retained by Seller to satisfy its
obligations under the Product Supply Agreement, the Assigned Contracts listed on
Schedule 1.1(c) and the Contracts of the Subsidiaries are all of the Contracts
between Seller or a Subsidiary on the one hand, and any third party on the other
hand, used in or necessary to conduct the Aesthetics Business as currently
conducted or proposed to be conducted by Seller or Parent, including without
limitation with respect to products, technology or services currently under
development, and true and complete copies of all such Contracts have been made
available to Purchaser. Each Assigned Contract is in full force and effect and
neither Seller, Parent or any Subsidiary is subject to any default thereunder,
nor to the Knowledge of Seller is any party obligated to Seller, Parent or any
Subsidiary pursuant to any such Assigned Contract subject to any default
thereunder. None of Seller, Parent, or any Subsidiary has materially breached,
violated or defaulted under, nor to the Knowledge of Seller received notice that
any such party has materially breached, violated or defaulted under, any of the
terms or conditions of any Assigned Contract. Following the Closing, Purchaser
will be permitted to exercise all of the rights Seller had under the Assigned
Contracts without the payment of any additional amounts or consideration other
than ongoing fees, royalties or payments which Seller would otherwise be
required to pay pursuant to the terms of such Assigned Contracts had the
transactions contemplated by this Agreement not occurred.

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2.13   Real Property. The Subsidiaries do not currently own any real property.
Schedule 2.13 contains a complete and accurate list of each lease, sublease,
license and other written occupancy agreement pursuant to which the Subsidiaries
hold or have been granted the right to use or occupy, now or in the future, any
real property or any portion thereof (collectively, the “Leased Real Property”),
including any and all modifications, amendments, renewals, extensions and
supplements thereto and any assignments thereof (collectively, the “Real Estate
Leases”). Neither Seller nor the Subsidiaries have entered into a lease,
sublease, license or other occupancy agreement of any kind, whether oral or
written, pursuant to which Seller or the Subsidiaries have granted to a third
party a right to use or occupy any portion of the Leased Real Property. All of
the Real Estate Leases are in full force and effect in accordance with their
respective terms, and neither the Subsidiary party, nor, to Seller’s Knowledge,
any other party thereto, is in breach, violation or default thereunder in any
material respect. The Leased Real Property is in good operating condition and
repair, free from structural, physical and mechanical defects, is maintained in
a manner consistent with standards generally followed with respect to similar
properties, and is structurally sufficient and otherwise suitable for the
conduct of the Aesthetics Business as presently conducted. Neither the operation
of the Seller nor any of its Subsidiaries on the Leased Real Property nor such
Leased Real Property, including the improvements thereon, violate in any
material respect any applicable building code, zoning requirement or other
Applicable Law relating to such property or operations thereon, and any such
non-violation is not dependent on so-called non-conforming use exceptions. There
are no Applicable Laws now in existence or, to the Knowledge of Seller, under
active consideration by any Governmental Authority which could require the
tenant of any Leased Real Property to make any expenditure in excess of $25,000
to modify or improve such Leased Real Property to bring it into compliance
therewith. Neither the Seller (with respect to the Aesthetics Business) nor any
Subsidiary shall be required to expend more than $25,000 in the aggregate under
all Real Estate Leases to restore the Leased Real Property at the end of the
term of the applicable Real Estate Lease to the condition required under the
Real Estate Lease (assuming the conditions existing in such Leased Real Property
as of the date hereof and as of the Closing). To Seller’s Knowledge, the
Subsidiaries have not in the past been the tenant or guarantor of any leasehold
premises not listed in Schedule 2.13 in respect of which any obligations or
liabilities could still accrue to either of the Subsidiaries.

2.14   FDA and Global Regulation Compliance in Connection with the Aesthetics
Business.

  (a)   Seller and the Subsidiaries have obtained and maintained each federal,
state, county, local or non-U.S. Business Permit (including all those that may
be required by the Federal Food and Drug Administration (the “FDA”) or any other
Governmental Authority engaged in the regulation of the Seller Products, the
Business or the Business’s manufacturing and other quality systems) that is
required for or has been applied for in operating the Business in any location
in which it is currently operated and all of such Business Permits are in full
force and effect. Schedule 2.14(a) of the Disclosure Schedule lists all annual

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      manufacturing registration and device listing, annual reports and similar
regulatory filing requirements that are required to be filed within six months
after the Termination Date in order to maintain Business Permits and
manufacturing facility licenses and where failure to timely file would result in
a Seller Material Adverse Effect. Neither Seller nor the Subsidiaries has
received any notice or written communication with respect to the Business from
any Governmental Authority regarding, and, there are no facts or circumstances
that are likely to give rise to, (i) any material adverse change in any Business
Permit, or any failure to materially comply with any Applicable Law or any term
or requirement of any Business Permit or (ii) any revocation, withdrawal,
suspension, cancellation, limitation, termination or modification of any
Business Permit. No such Business Permit will be terminated or impaired, or will
become terminable, in whole or in part, as a result of the consummation of the
transactions contemplated by this Agreement.     (b)   The operation of the
Business, including the manufacture, import, export, testing, development,
processing, packaging, labeling, storage, marketing, and distribution of all
Seller Products, is and at all times has been in material compliance with all
Applicable Laws including but not limited to regulation applicable to public
tenders and sale of material and equipment to medical entities, Business
Permits, Governmental Authorities and orders including those administered by the
FDA for products sold in the United States. There is no actual or, to the
Knowledge of Seller, threatened material action or investigation in respect of
the Business by the FDA or any other Governmental Authority which has
jurisdiction over the operations, properties, products or processes of the
Business or the Subsidiaries, or, to the Knowledge of Seller, by any third
parties acting on their behalf. Seller has no Knowledge that any Governmental
Authority is considering such action or of any facts or circumstances that are
likely to give rise to any such action or investigation.     (c)   Except as set
forth in Schedule 2.14(c) of the Disclosure Schedule, during the three (3) year
period ending on October 31, 2006, neither Seller nor any Subsidiary has had any
product or manufacturing site subject to a Governmental Authority (including the
FDA) shutdown or import or export prohibition, nor received any FDA Form 483 or
other Governmental Authority notice of inspectional observations, “warning
letters,” “untitled letters” or, to the Knowledge of Seller, requests or
requirements to make changes to the operations of the Aesthetics Business or
Seller Products that if not complied with would reasonably be expected to result
in a Seller Material Adverse Effect, or similar correspondence or written notice
from the FDA or other Governmental Authority in respect of the Business and
alleging or asserting noncompliance with any applicable Laws, Business Permits
or such requests or requirements of a Governmental Authority, and, to the
Knowledge of Seller, neither the FDA nor any Governmental Authority is
considering such action. Except as set forth in Schedule 2.14(b) of the
Disclosure Schedule, no vigilance report or medical device report with respect
to the Aesthetics Business or the Seller Products has been reported to Seller
during the 90 day period ending on October 31, 2006, and to the Knowledge of
Seller, as of October 31, 2006 no vigilance report or medical device report is
under investigation by any Governmental Authority with respect to the Seller
Products or the Aesthetics Business.

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  (d)   All studies, tests and preclinical and clinical trials in respect of the
Business being conducted by or on behalf of Seller or any Subsidiary that have
been or will be submitted to any Governmental Authority, including the FDA and
its counterparts worldwide, including in the European Union, in connection with
any Business Permit, are being or have been conducted in compliance in all
material respects with the required experimental protocols, procedures and
controls pursuant to accepted professional scientific standards and applicable
local, state, federal and foreign Laws, rules and regulations. Neither Seller
nor any Subsidiary has received any notices, correspondence or other
communication in respect of the Business from the FDA or any other Governmental
Authority requiring the termination or suspension of any clinical trials
conducted by, or on behalf of, Seller or in which Seller has participated, and
to the Knowledge of Seller neither the FDA nor any other Governmental Authority
is considering such action. During the six month period ending on October 31,
2006, neither Seller nor any Subsidiary has received specific written
notification from a Governmental Authority of the rejection of data obtained
from any clinical trials conducted by, or on behalf of, Seller or in which
Seller has participated with respect to the Aesthetics Business or Seller
Products, which data was submitted to the Governmental Authority and which was
necessary to obtain regulatory approval of a particular Seller Product.     (e)
  The manufacture of Seller Products by, or on behalf of, Seller or any
Subsidiary is being conducted in compliance in all material respects with all
applicable Laws including the FDA’s Quality Systems Regulation at 21 CFR
Part 820 for products sold in the United States, and the respective counterparts
thereof promulgated by Governmental Authorities in countries outside the United
States. Seller and each of the Transferred Subsidiaries, and, to the Knowledge
of Seller, any third party assembler, sterilizer or manufacturer of Seller
Products, components or accessories, are in material compliance with all
applicable Laws and certifications currently held by Seller.     (f)   Neither
Seller nor any Subsidiaries is the subject of any pending or, to the Knowledge
of Seller, threatened investigation in respect of the Aesthetics Business or
Seller Products, by the FDA pursuant to its “Fraud, Untrue Statements of
Material Facts, Bribery, and Illegal Gratuities” Final Policy set forth in 56
Fed. Reg. 46191 (September 10, 1991) and any amendments thereto. Neither Seller
nor any Subsidiaries has committed any act, made any statement or failed to make
any statement, in each case in respect of the Aesthetics Business or Seller
Products, that has resulted in FDA invoking, or to Seller’s Knowledge intending
to invoke, its policy with respect to “Fraud, Untrue Statements of Material
Facts, Bribery and Illegal Gratuities” and any amendments thereto. Neither
Seller nor any Subsidiaries or any of their respective officers, Employees or
agents has been convicted of any crime or engaged in any conduct that could

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      result in a material debarment or exclusion (i) under 21 U.S.C.
Section 335a, or (ii) any similar applicable Law. To the Knowledge of Seller, no
debarment or exclusionary claims, actions, proceedings or investigations in
respect of the Business are pending or threatened against Seller, any
Subsidiaries or any of their respective officers, employees or agents, except
for such debarments, claims, actions, proceedings or investigations that,
individually or in the aggregate, have not or would not reasonably be expected
to have a Seller Material Adverse Effect.

2.15   Compliance with Applicable Laws. Neither the Subsidiaries nor, with
respect to the Aesthetics Business and the Purchased Assets, Seller have
materially violated or infringed, or are in material violation or infringement
of, any Applicable Law or any order, writ, injunction, rule, regulation,
directive or decree of any Governmental Authority. No claims have been filed or,
to the Knowledge of Seller, are threatened against the Subsidiaries or, with
respect to the Aesthetics Business, Seller, alleging a material violation of any
Applicable Law.

2.16   Litigation. There are no (a) actions, suits, claims, hearings,
arbitrations, proceedings (public or private) or governmental investigations
that have been brought by any Governmental Authority or any other Person
(collectively, “Proceedings”) against or affecting the Subsidiaries or the
Seller with respect to the Aesthetics Business, nor any investigations or
reviews by any Governmental Authority pending or, to Seller’s Knowledge,
threatened, against or affecting the Subsidiaries or, with respect to the
Aesthetics Business, Seller, or any of the Purchased Assets or which seek to
enjoin or rescind the transactions contemplated by this Agreement, or the
Ancillary Agreements or which would materially adversely affect Seller’s ability
to perform its obligations hereunder, or under any Ancillary Agreement; or
(b) existing orders, judgments or decrees of any Governmental Authority naming
the Subsidiaries or, in connection with the Aesthetics Business, Seller, as an
affected party or otherwise affecting any of the Purchased Assets.

2.17   Contracts.

  (a)   The Disclosure Schedule lists, in the following categories, the
following Contracts of Seller or the Subsidiaries relating to the Aesthetics
Business (collectively, the “Scheduled Contracts”):

  (i)   Each Contract that requires payments in excess of $50,000 annually or in
excess of $50,000 over its term (including periods covered by any option to
extend or renew by either party), and is not terminable by Seller or the
Subsidiaries upon less than 30 days’ notice;     (ii)   Each Contract relating
to all material machinery, tools, equipment and other tangible personal property
(other than inventory and supplies) owned, leased or used by Seller or any
Subsidiary;     (iii)   Each material supply, manufacturing, marketing,
distribution or sale agreement or similar Contract;

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  (iv)   Each material consulting, development, joint development, research and
development or similar Contract, and each contract under which Seller or any
Subsidiary has granted or obtained a license to Intellectual Property, other
than commercial software licenses;     (v)   All acquisition, partnership, joint
venture, teaming arrangements or other similar Contracts;     (vi)   Any
Contract under which Seller or any Subsidiary has agreed not to compete or has
granted to a third party an exclusive right that restricts or otherwise
adversely affects the ability of Seller or any Subsidiary to conduct its
Aesthetics Business;     (vii)   All Contracts for clinical or marketing trials
relating to Aesthetics Devices and all Contracts with physicians, hospitals or
other healthcare providers, or other scientific or medical advisors.

  (b)   Seller has delivered to Purchaser true and correct copies (or summaries,
in the case of any oral Contracts) of all such Scheduled Contracts. To the
Knowledge of Seller, no notice of default arising under any Scheduled Contract
has been delivered to or by Seller or either Subsidiary. Each Scheduled Contract
is a legal, valid and binding obligation of Seller or a Subsidiary, as the case
may be, enforceable against Seller or the Subsidiary party, as the case may be,
in accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’
rights generally and subject to general principles of equity, and neither Seller
nor the Subsidiary party, as the case may be, nor, to Seller’s Knowledge, any
other party thereto, is in breach, violation or default thereunder in any
material respect.

2.18   Labor and Employment Matters Concerning the Employees.

  (a)   Schedules 2.18(a)(i) — (a)(iii) list the following as of the date of
this Agreement:

  (i)   All Employee Plans and Employee Agreements;

  (1)   “Employee Plan” shall mean any plan, program, policy, practice,
contract, agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each “employee benefit plan,” within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any ERISA Affiliate for the
benefit of any Employee, or with respect to which the Company or any ERISA
Affiliate has or may have any liability or obligation, including all Employee
Plans covering international Employees;

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  (2)   “Employee Agreement” shall mean each management, employment, severance,
consulting, relocation, repatriation, expatriation, visa, work permit or other
agreement, contract or understanding between the Company or any ERISA Affiliate
and any Employee;

  (ii)   All material written agreements and letters of understanding currently
in effect with works councils, labor unions or associations representing any
such employees other than mandatory collective bargaining agreements whether
national or industry wide; and     (iii)   Strikes related to the Aesthetics
Business in which any such Employees are participating or have participated
during the 12-month period preceding the date of this Agreement.

  (b)   Schedule 2.18(b) hereto lists, as of the date of this Agreement, with
respect to the Aesthetics Business and to the extent that Purchaser will be
required, following the Closing, to maintain similar, in the aggregate, employee
benefit plans (as defined in Section 3(3) of ERISA) and all written bonus,
incentive, pension, health insurance, life insurance, severance or other benefit
plans, programs or arrangements, which are maintained, contributed to or
sponsored by Seller with respect to any Employees of the Aesthetics Business
(collectively, the “Benefit Plans”).     (c)   Seller has made available to
Purchaser a complete and accurate copy of each Benefit Plan (and a written
summary of any unwritten Benefit Plan) and the most recently distributed summary
plan description and summary of material modifications relating to a Benefit
Plan. Neither the Seller nor any ERISA Affiliate has any plan or commitment to
establish any new Employee Plan or Employee Agreement, to modify any Employee
Plan or Employee Agreement (except to the extent required by law or to conform
any such Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Purchaser in writing, or
as required by this Agreement, or to adopt or enter into any Employee Plan or
Employee Agreement.     (d)   No Pension or Welfare Plans. Neither the Company
nor any ERISA Affiliate has ever maintained, established, sponsored,
participated in, or contributed to, any (i) Employee Plan which is subject to
Title IV of ERISA or Section 412 of the Code, (ii) any Employee which is a
“multiemployer plan,” as defined in Section 3(37) of ERISA, (iii) “multiple
employer plan” as defined in ERISA or the Code, or (iv) a “funded welfare plan”
within the meaning of Section 419 of the Code. No Employee Plan provides health
benefits that are not fully insured through an insurance contract, in each case,
that would be assumed by Purchaser.

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  (e)   Each of the Benefit Plans has been maintained in all material respects
in substantial compliance with their terms and Applicable Law. There are no
actions, suits or claims pending, or, to the knowledge of the Seller or Parent,
threatened or reasonably anticipated (other than routine claims for benefits)
against any Employee Plan or against the assets of any Employee Plan. Each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to Purchaser
or any of its ERISA Affiliates (other than ordinary administration expenses).
There are no audits, inquiries or proceedings pending or, to the knowledge of
the Seller or Parent or any ERISA Affiliates, threatened by the IRS or DOL, or
any other governmental entity with respect to any Employee Plan.     (f)  
Section 409A. Each “nonqualified deferred compensation plan” (as defined in
Section 409A(d)(1) of the Code) that is being assumed by Purchaser has been
operated since January 1, 2005 in good faith compliance with Section 409A of the
Code and IRS Notice 2005-1. No nonqualified deferred compensation plan that
provides deferred compensation benefits that were accrued and vested prior to
January 1, 2005 has been “materially modified” (within the meaning of IRS Notice
2005-1) at any time after October 3, 2004.     (g)   There are no audits,
inquiries or proceedings pending or threatened by the Tax Authorities, URSSAF or
Labor Authorities with respect to any Employee Plan or Benefit Plan. The
Subsidiaries are not subject to any penalty or Tax with respect to any Employee
Plan or Benefit Plan. The Subsidiaries have timely made all contributions and
other payments required by and due under the terms of each Employee Plan or
Benefit Plan. All social contributions, pension fund, benefit plan or similar
payments due by the Subsidiaries in favor of the employees under the law for any
period ending before Closing have been fully paid or provided for in the
Financial Statements of Subsidiaries.     (h)   Subsidiary Pension Plans.
Laserscope France has never maintained, established, sponsored, participated in,
or contributed to, any Pension Plan (“retraite chapeau”). Laserscope UK has
never maintained, established, sponsored, participated in or contributed to any
pension plan where the level of pension benefits payable are defined,
underwritten or guaranteed in any way by Laserscope UK.     (i)   No
Post-Employment Obligations within the Subsidiaries. No Employee Plan or
Employee Agreement provides, or reflects or represents any liability to provide,
post-termination or retiree life insurance, health or other employee welfare
benefits to ay person for any reason and the Subsidiaries have never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with life insurance,
health or other employee welfare benefits, except to the extent required by Law
in France and/or in the United Kingdom.

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  (j)   Effect of Transaction. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or any
termination of employment or service in connection therewith will (i) result in
any payment (including severance, golden parachute, bonus or otherwise),
becoming due to any Employee, (ii) result in any forgiveness of indebtedness
owed by any Employee, (iii) materially increase any benefits of any Employee or
(iv) result in the acceleration of the time of payment or vesting of any such
benefits.     (k)   Parachute Payments. There is no agreement, plan, arrangement
or other contract covering any employee of a Subsidiary that, considered
individually or considered collectively with any other such agreements, plans,
arrangements or other contracts, will, or could reasonably be expected to, give
rise directly or indirectly to the payment of any amount that would be
characterized as a severance plan/agreement in the United States (hereafter
referred to as a “parachute payment”).     (l)   Employment Matters. The
Subsidiaries are in compliance with all applicable laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment,
employee safety and health and wages and hours including with respect to the
recording of time worked effectively by employees and with respect to the
payment of overtime, and in each case, with respect to Employees: (i) have
withheld and reported all amounts required by law or by agreement to be withheld
and reported with respect to wages, salaries and other payments to Employees,
(ii) are not liable for any arrears of wages, severance pay or any Taxes or any
penalty for failure to comply with any of the foregoing, and (iii) are not
liable for any payment to any authority with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending or threatened
or reasonably anticipated claims or actions against the Subsidiaries in respect
of social matters. The Subsidiaries have no direct or indirect liability with
respect to any misclassification of any person as an independent contractor
rather than as an employee, or with respect to any employee leased from another
employer.     (m)   Labor. No employee has a notice period longer than three
months nor is there a termination compensation payable for termination on due
notice, which would exceed the equivalent of 3 months’ salary.     (n)   The
Subsidiaries complied fully with all obligations arising out of Laws and
regulation applicable to Employees, labor, health and safety matters and arising
out of the statutory regulation or the applicable collective bargaining
agreements and any other law or regulation. There are no current disputes with
any Governmental Authority, any works council or other employee representatives.
No mass dismissals, in particular those which would give rise to any
notification to public or administrative authorities, have been announced or are
being planned.

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  (o)   There are no strikes, work stoppages affecting the Subsidiaries,
disputes or other proceedings pending or overtly threatened by the employees in
connection with their employment. The Subsidiaries have never received notice of
the intent of any Government Authority responsible for the enforcement of any
labor law to conduct an investigation with respect to the any of the
Subsidiaries, and no such investigation is in progress. There is no material
action, pending or threatened against any of the Subsidiaries and any of their
current or former (including retired) directors, officers or employees,
including any action for wrongful termination or breach of express or implied
contract of employment or for violation of labor laws.

2.19   Aesthetics Business Intellectual Property.

  (a)   The Disclosure Schedule lists all Aesthetics Business Intellectual
Property that is registered with, has been applied for, or has been issued by
the U.S. Patent and Trademark Office, U.S. Copyright Office or a corresponding
foreign governmental or public authority, or that is licensed to or from any
third party. Seller has delivered or made available to Purchaser complete and
accurate copies of publicly available file histories and office actions that are
in the possession of Seller and that relate to the patents and patent
applications listed in the Disclosure Schedule. The Seller does not possess any
documents pertaining to litigation involving the Aesthetics Business
Intellectual Property. Each item of Aesthetics Business Intellectual Property
owned, licensed or used by Seller immediately prior to the Effective Time
hereunder will be owned, licensed or available for use by Purchaser or its
Subsidiaries on identical terms and conditions immediately after the Effective
Time pursuant to this Agreement or the License Agreement, except for such
limitations as imposed by the express terms of the License Agreement. Neither
the consummation of the transaction contemplated by this Agreement nor the
transfer to Buyer of any contracts, licenses, agreements or Aesthetics Business
Intellectual Property will cause or obligate Buyer (i) to grant to any third
party any rights or licenses with respect to any Intellectual Property of Buyer;
or (ii) pay any royalties or other amounts in excess of those being paid by
Seller prior to the Closing; nor result in the loss of, or otherwise adversely
affect, any ownership rights of Seller in any Aesthetics Business Intellectual
Property or result in the breach or termination of any license, contract or
agreement to which Seller is a party respecting any material Aesthetics Business
Intellectual Property.     (b)   Seller owns, free and clear of any Lien other
than Permitted Liens, and possesses all right, title and interest, or holds a
license, in and to all Aesthetics Business Intellectual Property, and has taken
all reasonable action to protect the Aesthetics Business Intellectual Property.
All necessary registration, maintenance and renewal fees currently due in
connection with any currently registered or applied for Aesthetics Business
Intellectual Property, have been paid, all formal legal requirements (including
the timely post-registration applications) relating to any Aesthetics Business
Intellectual Property currently registered or applied for have been made, and
all necessary documents, recordations and certificates in connection with
Aesthetics Business Intellectual Property have been filed with the

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      relevant patent, trademark or other authorities in the U.S. or foreign
jurisdictions, as the case may be, for the purposes of perfecting and
maintaining the Aesthetics Business Intellectual Property. No Aesthetics
Business Intellectual Property or product, technology or service of the
Aesthetics Business is subject to any proceeding or outstanding decree, order,
judgment, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Seller or may affect the validity, use or
enforceability of such Aesthetics Business Intellectual Property. Section 2.19
of the Disclosure Schedule lists all action, including the payment of any fees,
that must, or should be, performed by, or on behalf of, Seller in the ninety-day
period following the Closing Date, with respect to any application for,
perfection of, preservation of, or continuation of any rights of Company with
respect to any Aesthetics Business Intellectual Property, including the filing
of any patent applications, response to Patent Office actions or payment of
fees, including renewal fees.

  (c)   To the Knowledge of Seller, all patents included in the Aesthetics
Business Intellectual Property are valid and enforceable. There are no
royalties, fees, honoraria or other payments payable by Seller to any Person by
reason of the ownership, development, modification, use, license, sublicense,
sale, distribution or other disposition of the Aesthetics Business Intellectual
Property other than salaries and sales commissions paid to employees and sales
agents in the ordinary course of business.     (d)   To the Knowledge of Seller,
all personnel, including employees, agents, consultants and contractors, who
have contributed to or participated in the conception or development, or both,
of the Aesthetics Business Intellectual Property on behalf of Seller and all
officers and technical employees of Seller either (i) have been a party to
“work-for-hire” arrangements or agreements with Seller in accordance with
Applicable Law that has accorded Seller full, effective, sole, exclusive and
original ownership of all tangible and intangible property thereby arising, or
(ii) have executed appropriate instruments of assignment in favor of Seller as
assignee that have conveyed to Seller effective, sole and exclusive ownership of
all tangible and intangible property arising thereby.     (e)   The conduct of
the Aesthetics Business as currently conducted by Seller has not infringed,
misappropriated or conflicted with, and does not and will not infringe,
misappropriate or conflict with any intellectual property right of any other
Person. Seller has not received any notice from any third party of any
infringement, misappropriation or violation by Seller of any Intellectual
Property of any third party and no notice has been received by Seller
challenging Seller’s ownership to any of the Aesthetics Business Intellectual
Property. To the Knowledge of Seller, no claim by any third party contesting the
validity of any Aesthetics Business Intellectual Property has been made, is
currently outstanding or, to the Knowledge of Seller, is threatened. To the
Knowledge of Seller, no third party is infringing any Aesthetics Business
Intellectual Property of Seller that is material to the Aesthetics Business.

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  (f)   None of the software that is currently used in or called for use in any
Seller Products is subject to any “copyleft” or other obligation or condition
(including any obligation or condition under any “open source” license such as
the GNU Public License, Lesser GNU Public License, or Mozilla Public License)
that (a) could require, or could condition the use or distribution of such
Seller Product (or software included therein) on, the disclosure, licensing, or
distribution of any source code for any portion of such Seller Product (or
software included therein), or (b) could otherwise impose any limitation,
restriction, or condition on the right or ability of Seller to use or distribute
any Seller Product (or software included therein).     (g)   The Aesthetics
Business Intellectual Property constitutes, and on the Closing Date will
constitute, all the Intellectual Property owned or licensed by Seller that is
used in or necessary to the conduct of the Aesthetics Business as currently
conducted or proposed to be conducted, including without limitation with respect
to products, technology or services currently under development.

2.20   Insurance. The Disclosure Schedule contains an accurate and complete list
of all insurance policies owned or held by Seller and the Subsidiaries in
connection with or relating to the Aesthetics Business, including, but not
limited to, general liability, specifying the insurer the policy number, and the
term of the coverage. All present policies are in full force and effect and all
premiums with respect thereto have been paid.

2.21   Tax Matters.

  (a)   To the extent that failure to do so would adversely impact the Purchased
Assets or the Purchaser’s ownership of the Purchased Assets or operation of the
Aesthetics Business, the Seller (a) has timely paid all Taxes it is required to
pay and (b) has timely filed all federal, state, local and foreign returns,
estimates, information statements and reports (“Returns”) relating to any and
all Taxes concerning or attributable to the Purchased Assets (exclusive of the
Subsidiaries) or the Aesthetics Business (exclusive of the Subsidiaries) and
such Returns are true, correct and complete in accordance with applicable law.  
  (b)   To the extent that failure to do so would adversely impact the Purchased
Assets or the Purchaser’s ownership of the Purchased Assets or operation of the
Aesthetics Business, Seller has timely paid or withheld with respect to the
Employees and other third parties to be employed by Purchaser following the
Closing, if any, (and timely paid over any withheld amounts to the appropriate
Taxing authority) all federal and state income taxes, Federal Insurance
Contribution Act, Federal Unemployment Tax Act and other Taxes required to be
withheld or paid by it.     (c)   Except for Transfer Taxes or Straddle Period
Taxes attributable to Purchaser pursuant to Sections 4.2(c) or 4.2(e), or Taxes
expressly assumed by Purchaser under this Agreement, Seller does not know of any
basis for the assertion of any claim for any liabilities for unpaid Taxes of
Seller, any Income Taxes in the case of any Subsidiary arising after application
of its NOL Threshold or any other Taxes of any Subsidiary, to the extent that
any such Subsidiary Taxes are not included in the Final Subsidiary Closing
Balance Sheet, for which Purchaser would become liable as a result of the
transactions contemplated by this Agreement or that would result in any Lien
(other than a Permitted Lien) on any of the Purchased Assets.

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  (d)   To the extent applicable to the Purchased Assets or the Purchaser’s
ownership of the Purchased Assets or operation of the Aesthetics Business, and
exclusive of the Subsidiaries, Seller has not been delinquent in the payment of
any Tax, nor is there any Tax deficiency outstanding, assessed or proposed
against Seller, nor has Seller executed any outstanding waiver of any statute of
limitations on or extension of the period for the assessment or collection of
any Tax.     (e)   To the extent applicable to the Purchased Assets or the
Purchaser’s ownership of the Purchased Assets or operation of the Aesthetics
Business, (i) no audit or other examination of any Return of Seller is presently
in progress, nor has Seller been notified of any request for such an audit or
other examination; (ii) no adjustment relating to any Return filed by Seller has
been proposed formally or, to the knowledge of Seller, informally by any tax
authority to Seller or any representative thereof; and (iii) no claim has ever
been made in writing by an authority in a jurisdiction where Seller does not
file Returns that it is or may be subject to taxation by that jurisdiction.    
(f)   There are no Liens upon any of the Purchased Assets relating or
attributable to Taxes, other than Permitted Liens. No deficiencies for any Taxes
have been asserted in writing or assessed against the Seller which, if unpaid,
might result in a Lien other than a Permitted Lien on any of the Purchased
Assets.     (g)   None of the Purchased Assets: (i) is “tax-exempt use property”
within the meaning of Section 168(h) of the Code; or (ii) directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of the
Code.     (h)   With respect to the Subsidiaries: (i) the Subsidiaries have
timely filed all Tax Returns they are required to file; (ii) all Income Taxes
due and owing by each Subsidiary arising after application of its NOL Threshold
and all other Taxes due and owing by each of the Subsidiaries (including Taxes
associated with the Pre-Closing Transactions) shall have been paid or shall be
paid by the Subsidiaries or adequate provision therefor shall be included as a
liability in the Final Subsidiary Closing Balance Sheet; (iii) no deficiency or
proposed adjustment which has not been paid or resolved for any material amount
of Tax has been asserted or assessed in writing by any Taxing authority against
any of the Subsidiaries; (iv) neither of the Subsidiaries has consented to
extend the time in which any Tax may be assessed or collected by any Taxing
authority which has not been previously resolved; and (v) there are no ongoing
or pending Tax audits by any Taxing authority against the Subsidiaries. The
foregoing representations in this Section 2.21(h) shall not be applicable where
the breach of any such representation results in an adjustment to the income of
a Subsidiary (for any taxable period (or portion

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      thereof) ending on or prior to the date of these representations) that
causes only a reduction of the net operating loss, net operating loss
carryovers, tax loss or tax loss carryovers, respectively (as such are
determined for tax purposes in the relevant jurisdiction) existing at such
Subsidiary as of the date of these representations and no increase in Income Tax
liability of such Subsidiary for such periods (as to each Subsidiary, the “NOL
Threshold”), but these representations will apply to the extent any such
adjustment exceeds such NOL Threshold for any Subsidiary, thereby resulting in
an actual increase in Income Taxes payable or in the imposition of indemnifiable
interest or penalties to a Subsidiary.     (i)   For purposes of this Agreement,
“Tax” or “Taxes” means (i) any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits taxes, environmental taxes, customs
duties, franchise, employees’ income, withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative or add-on minimum or
other tax, fee, assessment or charge of any kind whatsoever including any
interest, penalties or additions to Tax or additional amounts in respect of the
foregoing, (ii) any liability for the payment of any amounts of the type
described in clause (i) of this Section 2.21(i) as a result of being a member of
an affiliated, consolidated, combined or unitary group for any period, and
(iii) any liability for the payment of any amounts of the type described in
clauses (i) or (ii) of this Section 2.21(i) as a result of any express or
implied obligation to indemnify any other person or as a result of any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
or transferor entity. “Income Taxes” means Taxes imposed on the net income,
profits or gains of any Subsidiary.     (j)   For purposes of this Agreement,
“Tax Return” means any Tax return, declaration, report, claim for refund, or
information return or statement filed or required to be filed by a taxpayer.

2.22   Brokers. Neither Seller nor any of its directors, officers or employees
has employed any broker, finder, or financial advisor or incurred any liability
for any brokerage fee or commission, finder’s fee or financial advisory fee, in
connection with the transactions contemplated hereby.

2.23   Environmental Matters.

  (a)   Except as would not reasonably be expected to result in liability to the
Seller with respect to the Aesthetic Business or any Subsidiary, neither the
Seller with respect to the Aesthetics Business nor any Subsidiary has
transported, stored, used, manufactured, released, recycled, labeled, disposed,
sold, generated, or exposed its employees or any other person to, or
distributed, manufactured, sold, transported or disposed of any product or waste
containing any Hazardous Substance or product manufactured with ozone depleting
substances, including without limitation, any required labeling, payment of
waste fees and compliance with any product take-back or product content
requirements (collectively, “Hazardous Substance Activities”) in material
violation of any Applicable Law.

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  (b)   The Seller with respect to the Aesthetic Business and each Subsidiary
have been and are in compliance in all material respects with all Applicable
Laws which prohibit, regulate or control Hazardous Substances or any Hazardous
Substance Activity (collectively, “Environmental Laws”). Neither the Seller with
respect to the Aesthetic Business nor any Subsidiary has received any written
notice that forms or could be reasonably expected to form the basis of any
material claim, action, suit, order, proceeding, hearing or investigation with
respect to Environmental Laws, Hazardous Substance or Hazardous Substance
Activity.     (c)   The Seller with respect to the Aesthetic Business and its
Subsidiaries hold all permits, approvals, clearances, authorizations, licenses
and registrations required pursuant to Environmental Laws (“Environmental
Permits”), and have been and are in compliance with all such Environmental
Permits. No suspension or cancellation of any of the Environmental Permits is
pending or threatened.     (d)   Except in compliance with Environmental Laws in
a manner that could not reasonably be expected to subject the Seller or its
Subsidiaries to any material liability, and except as reasonably necessary to
conduct the Aesthetics Business, no Hazardous Substances are present on any
Leased Real Property or on any other real property previously owned, operated,
occupied, leased or controlled by the Seller with respect to the Aesthetic
Business or any Subsidiary (“Former Real Property”) at the time it ceased to be
owned, operated, occupied, leased or controlled by the Seller with respect to
the Aesthetic Business or any Subsidiary.     (e)   Except as would not
reasonably be expected to result in material liability to the Seller with
respect to the Aesthetic Business or its Subsidiaries, neither the Seller nor
any of its Subsidiaries has entered into any agreement that may require it to
guarantee, reimburse, pledge, defend, hold harmless or indemnify any other party
with respect to liabilities arising out of any Environmental Laws or the
Hazardous Substance Activities of the Seller with respect to the Aesthetic
Business or any of its Subsidiaries.     (f)   The Seller with respect to the
Aesthetic Business and its Subsidiaries are in compliance in all material
respects with, and there are no facts or circumstances likely to prevent or
delay timely compliance by the Seller or any of its Subsidiaries with the
European Directive 2002/96/EC on waste electrical and electronic equipment or
European Directive 2002/95/EC on the restriction of the use of certain hazardous
substances in electrical and electronic equipment, and their respective
implementing Laws;     (g)   The Seller and its Subsidiaries have made available
to Purchaser all environmental site assessments and audit reports in the
Seller’s possession or control which relate to the Leased Real Property or
Former Real Property.

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  (h)   Notwithstanding any other provision in this Agreement to the contrary,
Section 2.23 contains the only representations and warranties of Parent and
Seller regarding environmental matters.

2.24   Affiliate Transactions. To the Knowledge of Seller, no director or
officer or former director or officer of Parent, Seller or either Subsidiary
(a) owns, directly or indirectly, (i) any interest in any of the Purchased
Assets or the assets of either Subsidiary, or (ii) any interest (other than a
passive investment in less than five percent (5%) of the outstanding voting
securities of a company that is required to file reports pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended) in any Person that
is a supplier, customer or competitor of the Aesthetics Business, (b) serves as
an officer, director or employee of any Person that is a supplier, customer or
competitor of the Aesthetics Business, or (c) has received any loan from or is
otherwise a debtor of or has made any loan to or is otherwise a creditor of,
Seller or either Subsidiary where such loan is secured by any of the Purchased
Assets or the assets of either Subsidiary.

2.25   Customers and Suppliers

  (a)   Schedule 2.25(a) contains an accurate and complete list of the 10
largest end user customers of the Aesthetics Business for the nine-month-period
ended September 30, 2006 (each a “Business Customer”). Since September 30, 2006
, to the Knowledge of Seller, none of the Business Customers has given written
notice to Seller or either Subsidiary that it (i) will or intends to, or is
considering to, terminate or not renew any existing Contract with either
Subsidiary, or (ii) intends to, or is considering to, materially reduce the
volume of business transacted with such Subsidiary below current levels.     (b)
  Schedule 2.25 (b) contains an accurate and complete list of the 10 largest
suppliers of the Aesthetics Business for the nine-month-period ended September
30, 2006 (each a “Significant Supplier). To the Knowledge of Seller, there are
no outstanding material disputes concerning goods and/or services provided by
any Significant Supplier. Neither Seller nor either Subsidiary has received any
written notice of a termination or interruption in any existing Contract with
any Significant Supplier relating to the Aesthetics Business, nor has it
terminated its relationship with any Significant Supplier in connection with the
Aesthetics Business.

2.26   Product and Service Warranties. Schedule 2.26 sets forth the current
standard warranty terms and conditions for the Aesthetics Devices. Since
August 1, 2006, all Aesthetics Devices have been sold pursuant to the standard
warranty terms and conditions and are not subject to any binding agreement or
commitment providing any other guaranty, warranty or indemnity terms which
materially deviate from the standard terms. There are no product warranty or
return claims outstanding, or to the knowledge of Seller, threatened, relating
to any Aesthetics Devices in excess of applicable reserves.

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2.27   Service Parts. On the Closing Date, the inventory of Service Parts will
consist of quantities sufficient to allow Purchaser to fulfill obligations that
could reasonably be expected, consistent with Seller’s prior experience with the
Aesthetics Business, to arise under the Service Contracts during the first
thirty (30) days following the Closing Date, exclusive, however, of those items
of Service Parts that are to the Knowledge of Seller readily available from
third parties.

2.28   Stock Consideration. The Seller acknowledges that the issuance of the
shares in payment of the Stock Consideration has not been registered under the
Securities Act of 1933, as amended (the “Securities Act”) and that such shares
therefore may not be resold without compliance with the registration
requirements of Securities Act or an applicable exemption therefrom. Such shares
are being or will be acquired by the Seller solely for its own account and
without a view to distribution within the meaning of the Securities Act. Except
as provided in the Disclosure Schedule, none of the shares issued in payment of
the Stock Consideration will be, directly or indirectly, offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of except in
compliance with the Securities Act and the rules and regulations thereunder.
Seller acknowledges that the certificates representing the shares to be issued
to Seller in payment of the Stock Consideration shall bear the following legend:

THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT ISSUED IN A TRANSACTION
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“1933 ACT”), OR ANY
APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED HEREBY HAVE BEEN
ACQUIRED WITHOUT A VIEW TO DISTRIBUTION WITHIN THE MEANING OF THE 1933 ACT AND
MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS COVERED BY AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND APPLICABLE STATE
SECURITIES LAWS OR, IN THE OPINION OF COUNSEL TO THE ISSUER OR AN OPINION OF
COUNSEL TO THE HOLDER REASONABLY ACCEPTABLE TO THE ISSUER, IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND SUCH LAWS.

2.29   Scope of Representations and Warranties. The representations and
warranties stated in this Article 2 and in the Ancillary Agreements are the only
representations and warranties Parent and Seller have given to Purchaser in
connection with the transactions contemplated by this Agreement. Except as set
forth in this Article 2 and in the Ancillary Agreements, Parent and Seller have
not made, and hereby expressly disclaim, any other or further representation or
warranty, either express or implied, concerning the subject matter of this
Agreement.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
     Purchaser hereby represents and warrants to Seller that, except as set
forth in the Purchaser Disclosure Schedule delivered by Purchaser to Seller on
the date hereof (the “Purchaser Disclosure Schedule”), on the date hereof, and
as of the Closing as though made at the Closing, the statements contained in
this Article 3 are true and correct. Each item disclosed in the Purchaser
Disclosure Schedule shall constitute an exception to the representations and
warranties given and shall be deemed to be disclosed with respect to each
section of the Purchaser Disclosure Schedule that is specifically identified (by
cross reference or otherwise) in the Purchaser Disclosure Schedule as being
qualified by such exception.

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     With respect to any information disclosed by Purchaser in the Purchaser
Disclosure Schedule: (i) such disclosure is not an admission by the Purchaser
that the such information is material; and (ii) no representation or warranty is
made with respect to such information to the extent such information is not
required to be disclosed because it is clearly below specific dollar thresholds
specified in the representations and warranties contained in the Agreement.
Furthermore, a threshold of materiality being provided by Purchaser on a
particular section of the Purchaser Disclosure Schedule is not intended to be an
indication of the threshold of materiality for any other section of the
Purchaser Disclosure Schedule or otherwise.

3.1   Corporate Organization and Power; Stock Consideration. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation and has all requisite corporate power and
authority, and all governmental licenses, governmental authorizations,
governmental consents and governmental approvals, required to carry on its
business as now conducted and to own, lease and operate the assets and
properties of Purchaser as now owned, leased and operated. Purchaser is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in every jurisdiction in which the character or location of its
properties and assets owned, leased or operated by Purchaser or the nature of
the business conducted by Purchaser requires such qualification or licensing,
except where the failure to be so qualified, licensed or in good standing in
such other jurisdiction would not, individually or in the aggregate, have a
Material Adverse Effect. The shares to be issued to Seller pursuant to this
Agreement in payment of the Stock Consideration have been duly authorized and,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable and free and clear of all Liens, except for
any Liens created by the Seller and encumbrances resulting from restrictions on
transferability imposed by federal and state securities laws (as evidenced by
the restrictive legend set forth in Section 2.27). Upon delivery to the Seller
of the certificates evidencing such shares, the Seller shall acquire good and
valid title thereto.

3.2   Authorization. Purchaser has the requisite corporate power and authority
to enter into this Agreement and the Ancillary Agreements and to carry out the
transactions contemplated herein and therein. The Board of Directors of
Purchaser has taken all action required by law and Purchaser’s Certificate of
Incorporation and otherwise to duly and validly authorize and approve the
execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements and the consummation by Purchaser of the transactions
contemplated herein and therein and no other corporate proceedings on the part
of Purchaser are, or will be, necessary to authorize this Agreement or the
Ancillary Agreements or to consummate the transactions contemplated hereby and
thereby. This Agreement and the Ancillary Agreements have been duly and validly
executed and delivered by Purchaser and, assuming the due authorization,
execution and delivery thereof by each of the other parties thereto, this
Agreement and the Ancillary Agreement constitute the legal, valid and binding
obligations of Purchaser enforceable against it in accordance with their
respective terms, subject to laws of general application relating to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and rules of law governing specific performance,
injunctive relief or other equitable remedies.

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3.3   Non-Contravention. Neither the execution, delivery and performance by
Purchaser of this Agreement or the Ancillary Agreements nor the consummation by
Purchaser of the transactions contemplated herein and therein will
(a) contravene or conflict with its charter documents, (b) contravene or
conflict with or constitute a violation of any provision of any Applicable Law
binding upon or applicable to Purchaser, or (c) be in conflict with, constitute
(with or without due notice or lapse of time or both) a default under, result in
the loss of any benefit under, or give rise to any right of termination,
cancellation, increased payments or acceleration under any terms, conditions or
provisions of any note, bond, lease, mortgage, indenture, license, contract,
franchise, permit, instrument or other agreement or obligation to which
Purchaser is a party, or by which any of its properties or assets may be bound,
except in the case of subsections (b) and (c) above, for such breaches or
violations, if any, which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

3.4   Consents and Approvals. No Consent by any Person, including without
limitation any Governmental Authority, is required in connection with the
execution, delivery or performance of this Agreement or the Ancillary Agreements
by Purchaser or the consummation by Purchaser of the transactions contemplated
herein and therein, other than where the failure to make any such filing, or to
obtain such permit, authorization, Consent or approval, would not prevent or
delay consummation of the transactions contemplated hereby and thereby or would
not otherwise prevent Purchaser from performing its obligations under this
Agreement or the Ancillary Agreements.

3.5   Litigation. There are no Proceedings, nor any investigations or reviews by
any Governmental Authority against or affecting Purchaser, pending or, to
Purchaser’s Knowledge, threatened, against or by Purchaser which seek to enjoin
or rescind the transactions contemplated by this Agreement or the Ancillary
Agreements or which would materially adversely effect Purchaser’s ability to
perform its obligations hereunder, or under any Ancillary Agreement.

3.6   Brokers. Neither Purchaser nor any of its directors, officers or employees
has employed any broker, finder, or financial advisor or incurred any liability
for any brokerage fee or commission, finder’s fee or financial advisory fee, in
connection with the transactions contemplated hereby.

3.7   SEC Filings; No Material Adverse Change.

  (a)   Except as set forth on Section 3.7 of the Purchaser Disclosure Schedule,
Purchaser has filed with the SEC all material forms, statements, reports and
documents required to be filed by it prior to the date hereof under each of the
1933 Securities Act, the 1934 Exchange Act, and the respective rules and
regulations thereunder, (a) all of which, as amended, if applicable, complied
when

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      filed in all material respects with all applicable requirements of the
applicable Act and the rules and regulations thereunder, and (b) none of which,
as amended, if applicable, including any financial statements or schedules
included therein, contains any untrue statement of material fact or omits to
state a material fact required to be stated therein or necessary in order to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.

  (b)   Except as set forth on Section 3.7 of the Purchaser Disclosure Schedule,
the consolidated statements of financial position and the related consolidated
statements of income, stockholders’ equity and cash flows (including the related
notes thereto) of Purchaser included in the forms, statements, reports and
documents filed by Purchaser with the SEC since January 1, 2004 (such reports,
the “Purchaser SEC Reports” and such financial statements, the “Purchaser
Financial Statements”) complied as to form in all material respects with
applicable accounting requirements and the rules and regulations of the SEC with
respect thereto, are in accordance with the books and records of Purchaser, have
been prepared in accordance with GAAP applied on a basis consistent with prior
periods, and present fairly the consolidated financial position of Purchaser and
its subsidiaries as of their respective dates, and the consolidated results of
their operations and their cash flows for the periods presented therein. The
authorized capital stock of Purchaser is as set forth in the Purchaser SEC
Reports.     (c)   Since the date of the financial statements included in the
most recent Form 10-Q or Form 10-K filed by the Purchaser with the SEC, there
has been no material adverse change in the financial condition or results of
operations of Purchaser.

3.8   Funds. Purchaser has sufficient funds or written commitments for
sufficient funds (true and complete copies of which have been delivered to
Seller) and as of the Closing shall have sufficient funds, to enable it to pay
the Purchase Price at the Closing as contemplated herein. Immediately following
the Closing after giving effect to the transactions contemplated hereby,
Purchaser will be Solvent.

3.9   Inspections; Limitation of Parent’s and Seller’s Representations and
Warranties. Purchaser is an informed and sophisticated participant in the
transactions contemplated by this Agreement and the Ancillary Agreements and has
undertaken such investigation, and has been provided with and has evaluated
certain documents and information in connection with the execution, delivery and
performance of this Agreement and the Ancillary Agreements. With respect to any
financial projection or forecast delivered on behalf of Seller to Purchaser,
Purchaser acknowledges that there are uncertainties inherent in attempting to
make such projections and forecasts, that it is familiar with such
uncertainties. Purchaser further acknowledges that it is acquiring the
Aesthetics Business without any representation or warranty, express or implied,
by Seller or any of its Affiliates except as expressly set forth in this
Agreement or in the Ancillary Agreements.

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ARTICLE 4
COVENANTS

4.1   Confidentiality.

  (a)   Mutual Covenant. Except as otherwise consented to by the Disclosing
Party in writing, (i) for the three-year period beginning on the date hereof,
Recipient will not, directly or indirectly disclose or use in a manner adverse
to the Disclosing Party, any Confidential Information of the Disclosing Party
except to the limited extent necessary for Recipient’s performance under the
Ancillary Agreements or as required by the terms of a valid and effective
subpoena or order issued by a court of competent jurisdiction or by a
governmental body, (ii) the Confidential Information will be the exclusive
property of the Disclosing Party and, if requested by the Disclosing Party,
Recipient will promptly deliver to the Disclosing Party all Confidential
Information, including all copies thereof, which are in the possession, or under
the control of Recipient or its agents or representatives, without making or
retaining any copies or extracts thereof (except to the limited extent necessary
for Recipient’s performance under the Administrative Services Agreement or
Product Supply Agreement), and (iii) if Recipient or its agents or
representatives receives a request to disclose all or any part of the
Confidential Information in connection with a legal proceeding, Recipient will
(A) immediately notify the Disclosing Party of the existence, terms and
circumstances surrounding such request, (B) consult with the Disclosing Party on
the advisability of taking legally available steps to resist or narrow such
request, and (C) if disclosure of such information is required, and at the
Disclosing Party cost and expense, exercise its best efforts to obtain an order
or other reliable assurance that confidential treatment will be accorded such
portion of the disclosed information which the Disclosing Party so designates.  
  (b)   Definitions.

  (i)   “Confidential Information” means any and all information of the
Disclosing Party relating to the management, operations, finances, products,
trade secrets, technology, financial data, employee information, computer
programs and systems, computer based information, plans, projections, existing
and proposed and contemplated projects or investments, formulae, processes,
methods, products, manuals, drawings, supplier lists, customer lists, purchase
and sales records, marketing information, commitments, correspondence and other
information, whether written, oral or computer generated.     (ii)   “Recipient”
means a party hereto that receives Confidential Information of the other party,
regardless of the means of disclosure.     (iii)   “Disclosing Party” means a
party hereto whose Confidential Information is received by the other party
hereto;

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  (c)   Exceptions. The obligations in Section 4.1(a) will not apply to the
extent a Disclosing Party’s Confidential Information: (i) is in the public
domain prior to its disclosure to, or receipt by, the Recipient; (ii) is
lawfully in the Recipient’s possession prior to disclosure to or receipt by the
Recipient; (iii) becomes part of the public domain by publication or otherwise
through no unauthorized act or omission on the part of the Recipient or its
employees or agents; (iv) is independently developed by an employee(s) of the
Recipient with no access to the disclosed information, or (v) Business
Information included in the Purchased Assets., but only to the extent used or
disclosed solely within the Field of Use     (d)   Remedy. The covenants and
undertakings contained in this Section 4.1 relate to matters which may be of a
special, unique and extraordinary character and a violation of any of the terms
of this Section 4.1 may cause irreparable injury to the Disclosing Party, the
amount of which may be impossible to estimate or determine and for which
adequate compensation may not be available. Therefore, the Disclosing Party
shall be entitled to an injunction, restraining order or other equitable relief
from a court of competent jurisdiction, restraining any violation or threatened
violation of any such terms by Recipient and such other persons as the court
orders.     (e)   Public Announcements. None of the parties hereto shall make
any public announcement with respect to the transactions contemplated herein
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld or delayed. Notwithstanding the foregoing, the parties
may, on a confidential basis, advise and release information regarding the
existence and content of this Agreement or the transactions contemplated hereby
to their respective Affiliates or any of their agents, accountants, attorneys
and prospective lenders or investors in connection with or related to the
transactions contemplated by this Agreement     (f)   Release of Certain
Confidentiality Obligations. Effective as of the Closing, Seller shall, or shall
cause the applicable Subsidiary to, release the Transferred Employees from any
confidentiality obligations they may have to Seller (or a Subsidiary thereof)
with respect to trade secret, confidential and other information that relates to
the Aesthetics Business, but only to the extent such information does not also
relate to any business or assets of Seller (or a Subsidiary thereof) not
transferred to Buyer (or a Subsidiary thereof) under this Agreement.

Notwithstanding the foregoing, nothing in this Section 4.1 shall prohibit
Purchaser on the one hand or Seller or Parent on the other hand from complying
with applicable Laws or the rules and regulations of any stock exchange or over
the counter trading market on or through which such party’s securities are
traded.

4.2   Preparation of Tax Returns; Tax Matters.

  (a)   Pre-Closing Tax Returns. Seller shall timely file at its expense all Tax
Returns required to be filed by the Subsidiaries on or before the Closing Date.

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  (b)   Post-Closing Tax Returns. Purchaser will file (or cause to be filed) all
Tax Returns of the Subsidiaries required to be filed after the Closing Date,
including Tax Returns for Tax periods (or portions thereof) ending on or prior
to the Closing Date.     (c)   Transaction Taxes. All sales, use, documentary,
stamp, recordation and/or similar transfer Taxes and similar charges (“Transfer
Taxes”) related to the sale of the Purchased Assets contemplated by this
Agreement (which shall not include any Transfer Taxes attributable to the
Pre-Closing Transactions) shall be paid by the Purchaser. The party required by
law to file a Tax Return with respect to such Transfer Taxes shall do so within
the time period prescribed by law, and Purchaser shall promptly, but in no event
later than ten (10) days, reimburse Seller for any such Transfer Taxes so paid
by Seller upon receipt of notice that such Transfer Taxes have been paid.    
(d)   Termination of Tax Allocation Agreements. Any and all tax allocation or
sharing agreements or arrangements (other than this Agreement), whether or not
written, that may have been entered into by and between the Subsidiaries and any
other person, shall be terminated as to the Subsidiaries immediately prior to
the Closing, and no payments which are owed by or to Seller pursuant thereto
shall be made thereunder.     (e)   Straddle Period Taxes. With respect to any
Taxes that are reported on a Tax Return covering a period commencing before the
Closing and ending thereafter (a “Straddle Period”), (i) in the case of any real
or personal property taxes (or other similar Taxes) attributable to the
Purchased Assets or property of a Subsidiary (“Property Taxes”), any such Taxes
not attributable to the Subsidiaries shall be prorated between Purchaser and
Seller on a per diem basis, and any such Taxes attributable to the Subsidiaries
shall be included in the Final Subsidiary Closing Balance Sheet on a per diem
basis and (ii) in the case of any Taxes other than Property Taxes, such Taxes
shall be computed as if such Straddle Period ended on the Closing Date and, in
the case of each Subsidiary, shall be included in the Final Subsidiary Closing
Balance Sheet, provided that exemptions, allowances or deductions that are
calculated on an annual basis (including depreciation and amortization
deductions), other than with respect to property placed in service after the
Closing, shall be allocated between the period ending on the Closing Date and
the period after the Closing Date in proportion to the number of days in each
period (the Taxes described in clauses (i) and (ii) above are referred to herein
as “Straddle Period Taxes”). The party required by law to pay any such Straddle
Period Tax (the “Paying Party”) shall file the Tax Return related to such
Straddle Period Tax within the time period prescribed by law and shall timely
pay such Straddle Period Tax. To the extent any such payment exceeds the
obligation of the Paying Party hereunder, the Paying Party shall provide the
other party (the “Non-Paying Party”) with notice of payment, and within 10 days
of receipt of such notice of payment, the Non-Paying Party shall reimburse the
Paying Party for the Non-Paying Party’s share of such Straddle Period Taxes.

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  (f)   Assistance and Cooperation. Each of Purchaser and Seller will provide
the other with such assistance as may reasonably be requested by each of them in
connection with the preparation of any Tax Return, any audit or other
examination by any Governmental Authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each will provide in due course
the other with any records or information which may be relevant to such Tax
Return, audit or examination, proceedings or determination. Such assistance
shall include making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder and shall include providing copies of any relevant Tax Return and
supporting work schedules.

4.3   Pre-Closing Covenants.

  (a)   Conduct of Business. During the period from the date hereof until the
Closing, except as otherwise contemplated by this Agreement or as consented to
in writing by Purchaser (“Permitted Changes”), Seller shall, and Seller shall,
if applicable, cause the Subsidiaries to:

  (i)   conduct the Aesthetics Business and utilize the Purchased Assets in the
ordinary course of business;     (ii)   not transfer, pledge, mortgage, encumber
or otherwise grant any rights in any Purchased Assets or assets of the
Subsidiaries, except (x) in the ordinary course of business, or (y) pursuant to
Permitted Liens;     (iii)   other than with respect to Retained Employees, not
make or grant any general wage or salary increase with respect to its Employees
or make any material increase in the payments of benefits with respect to its
Employees under any bonus, insurance, pension or other employee benefit plan or
program, in each case other than in the ordinary course of business or pursuant
to existing agreements or commitments or benefit plans or as required by law;  
  (iv)   not license, sell, transfer, pledge, modify, disclose, dispose of or
permit to lapse any rights to the use of any Aesthetics Business Intellectual
Property, or take any of the foregoing actions with respect to Intellectual
Property to be licensed under the License Agreement that are inconsistent with
the License Agreement;     (v)   not permit either of the Subsidiaries to make
or enter into any commitment for capital expenditures in excess of $10,000 for
additions to property, plant, equipment or intangible capital assets;     (vi)  
not terminate, enter into or amend in any material respect any Scheduled
Contract, or take any action or omit to take any action which will cause a
breach, violation or default (however defined) under any such Scheduled
Contract;

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  (vii)   not permit either of the Subsidiaries’ current insurance (or
reinsurance) policies to be cancelled or terminated or any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than
coverage remaining under those cancelled, terminated or lapsed are in full force
and effect;     (viii)   not permit either of the Subsidiaries’ to enter into
other Contracts not in the ordinary course of business or in excess of current
requirements;     (ix)   not make any change in accounting methods, principles
or practices except as required by GAAP; or     (x)   not agree in writing or
otherwise to take any of the foregoing actions or any action which would make
any representation, warranty, covenant or agreement of Parent or Seller in this
Agreement inaccurate or breached such that the conditions in Section 7.2 shall
not be satisfied at, or as of any time prior to, the Closing Date.

  (b)   No Solicitation of Alternate Transaction. Parent and Seller will not,
and will ensure that their respective directors, officers, employees,
independent contractors, consultants, counsel, accountants, investment advisors
and other representatives and agents will not, directly or indirectly, solicit
offers from, negotiate with, provide any nonpublic information to, enter into
any agreement with, or in any manner encourage, accept or consider any proposal
of, any third party relating to the acquisition of the Aesthetics Business or
the Subsidiaries or their assets or businesses, in whole or in part, whether
through a merger, consolidation, sale of substantial assets or of a significant
amount of assets, sale of securities, liquidation, dissolution or similar
transactions involving Seller or either Subsidiary or any division of Seller or
either Subsidiary (such proposals, announcements or transactions being called
herein “Acquisition Proposals”).     (c)   Access to Records and Properties.
From the date hereof until the Closing Date, Seller shall:

  (i)   provide Purchaser and its officers and other representatives and
employees with such access to the facilities of the Aesthetics Business
(including for the purpose of any environmental tests or investigations Seller
may desire) and its principal personnel and such books and records pertaining to
the Aesthetics Business, as Purchaser may reasonably request in order to
effectuate the transactions contemplated hereby, without charge by Seller to
Purchaser (but otherwise at Purchaser’s expense); provided, however, that
Purchaser agrees that such access will be requested and exercised during normal
business hours and without causing unreasonable interference with the operations
of the Aesthetics Business; and

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  (ii)   make available to Purchaser, upon reasonable request, for inspection
and review all documents, or copies thereof, listed in the Schedules hereto, and
all files, records and papers pertaining to any proceedings and matters listed
in the Schedules hereto.

  (d)   Third Party Consents. Seller shall use commercially reasonable efforts
to obtain all Consents, including, but not limited to the Required Consents,
required from third parties (other than Governmental Authorities), whose Consent
is required pursuant to any Scheduled Contract or otherwise to consummate the
transactions contemplated hereby. Purchaser shall use commercially reasonable
efforts (which shall not include any obligation of Purchaser to pay any
consideration therefor or agree to relinquish or modify any rights in exchange
therefor) to obtain all Consents required from third parties, whose Consent is
required to consummate the transactions contemplated hereby.     (e)  
Notification of Certain Matters. From and after the date of this Agreement until
the Closing, each party will give prompt notice to the other of any failure of
the notifying party to comply in any material respect with or satisfy any
covenant or agreement to be complied with or satisfied by it hereunder. Delivery
of any notice pursuant to this Section 4.3(e) shall not (a) limit or otherwise
affect any remedies available to the party receiving such notice, or
(b) constitute an acknowledgment or admission of a breach of this Agreement.

4.4   Post-Closing Covenants.

  (a)   Further Assurances.

  (i)   Each party hereto shall, before, at and after Closing, execute and
deliver such instruments and take such other actions as the other party or
parties, as the case may be, may reasonably require in order to carry out the
intent of this Agreement.     (ii)   After the Closing, Seller shall from time
to time, at the request of Purchaser and without further cost or expense to
Purchaser, execute and deliver such other instruments of conveyance and transfer
as Purchaser may reasonably request in order to more effectively consummate the
transactions contemplated herein and to vest in Purchaser title to the Purchased
Assets.     (iii)   To the extent any of the Purchased Assets are not assigned
or assignable to Purchaser, or if necessary Consent to such assignment shall not
have been obtained by Seller as of the Closing Date, Seller shall hold in trust
for the benefit of Purchaser all of Seller’s right, title and interest to such
Purchased Assets and, insofar as permissible, from time to time, assign such
interest to Purchaser. Seller shall cooperate in any reasonable arrangement to
the end that Purchaser shall be provided the use and benefits of such Purchased
Assets. Notwithstanding anything in this

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      Agreement to the contrary, neither this Agreement nor any document or
instrument delivered pursuant hereto shall constitute an assignment of any
claim, contract, license, permit, lease, commitment, sales order or purchased
order or any claim or right or any benefit arising thereunder or resulting
therefrom, if an attempted assignment thereof without the Consent of any other
party thereto or issuer thereof would constitute a breach thereof or in any way
adversely affect the rights to be assigned.

  (b)   Non-Competition.

  (i)   From and after the Closing Date:

  (A)   Seller will not engage, directly or indirectly, through an Affiliate or
otherwise, either for its own benefit or for the benefit of any other Person, in
any business which competes anywhere in the world in the Field of Use, at any
time up to the third anniversary of the Closing Date;     (B)   For the period
from the Closing Date until the expiration date of the last to expire of the
patents licensed by Seller to Purchaser under the License Agreement, Purchaser
will not seek regulatory approval for or market, or otherwise exploit the
Purchased Assets or the Intellectual Property licensed to Purchaser under the
License Agreement in connection with, any Competing Product or with any
indication(s) for use that include cutting, vaporizing or coagulating soft
tissue specifically for Pelvic Health applications;

provided, however, that the foregoing will not: (1) restrict or prohibit either
party from maintaining and/or undertaking all other activities of such party
whether existing at Closing or not, excluding activities in the Field of Use,
except as specified above in Section 4.4(b)(i); (2) restrict or prohibit either
party or any of its Affiliates from making passive investments in Persons
primarily engaged in any competitive business whose shares of stock are
regularly traded on a national securities exchange or on any over-the-counter
market, provided the aggregate interest represented by such investments does not
exceed five percent (5%) of any class of the outstanding equity or debt
securities of any such Person; or (3) restrict or prohibit any Person who
becomes an Affiliate of either party as the result of a Change in Control from
engaging in a competitive business.

  (ii)   Each party acknowledges that the period of restriction, the
geographical areas of restriction and the restraints imposed by the provisions
of Section 4.4(b)(i)are fair and reasonably required for the protection of the
other parties hereto. Notwithstanding the foregoing, if the final judgment of a
court of competent jurisdiction declares that any term or provision of

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      Section 4.4(b)(i) is invalid or unenforceable, the parties agree that the
court making the determination of invalidity or unenforceability will have the
power to reduce the scope, duration or area of the term or provision, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision and this Agreement will be enforceable against the parties as so
modified.

  (iii)   Non-Compete Definitions. For purposes of the non-competition
provisions contained in this Section:

  (A)   “Competing Product” means the Gemini, Lyra, Aura, Solis and Venus
products as sold by Seller to Purchaser, any other Restricted Laser Product, or
any Medical Delivery Device designed specifically for use with any of the
foregoing.; and     (B)   “Restricted Laser Products” means lamp-pumped solid
state lasers with laser emission range 500-650nm, 1064 nm and/or 2.9 µm that
meet any of the following requirements:

  •   Use rare earth-doped oxide crystal laser host, specifically yttrium
aluminum garnet (“YAG”) to generate laser power including:

  •   Nd:YAG to generate 500-650 nm and 1064 nm laser power, or     •   Er:YAG
to generate 2.9 µm laser power; or

  •   Are capable of delivering 500-650 nm laser power in excess of 30 watts
average, or 1064 nm laser power in excess of 100 watts, or 2.9 µm laser power in
excess of 20 watts average; or     •   Use KTP as harmonic generating material
when generating 500-650 nm laser power.

  (C)   “Medical Delivery Device” means fibers or other optical waveguides for
transmitting optical energy for medical applications.     (D)   “Pelvic Health”
means the diagnosis and treatment of acute and chronic conditions, diseases and
symptoms resulting from, on and within organs, all types of tissues, glands and
other biological structures in the pelvic and thoracic space of the human body.
Thus, Pelvic Health applications would include, as examples and without
limitation, all diagnoses and treatments of the

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      genitourinary organs and tissues, colorectal organs and tissues, biliary
structures and tissues, gastrointestinal tract, structures and tissues,
reproductive organs and tissues, and stones, other calcifications and
obstructive mineralizations of, and within, the upper and lower urinary tracts,
all of which include, but are not limited to, bladder, prostate, kidneys,
ureters, urethra, ovaries, fallopian tubes, uterus, male and female genitalia,
anal and rectal tracts and sphincters, ascending and descending colon, gall
bladder, seminal vesicles, testicular structures, organ and pelvic floor
prolapse and muscular laxity.

  (c)   Change Subsidiaries’ Names; Use of Trade Names. As promptly as
practicable following the Closing, Purchaser shall effect a change in the name
of each of the Subsidiaries to a name that does not contain the word
“Laserscope” or any word confusingly similar thereto. Purchaser may sell and
distribute the existing stock of Finished Goods Inventory and may utilize any
printed materials containing the Laserscope name, in the operation of the
Aesthetics Business; provided, however, that within 30 days following the
Closing Date, (i) Purchaser shall have provided Seller with the new company name
and any trade name(s) and/or trademark(s) to be used by Purchaser under the
Product Supply Agreement, and (ii) Purchaser shall cease all distribution and
other use of the existing stock of printed materials containing the Laserscope
name. Purchaser agrees that it shall only use the Laserscope name as set forth
above and shall not otherwise use the Laserscope name in connection with any
products, supplies, documents or other items purchased, developed, manufactured
or otherwise created after the Closing Date. Purchaser acknowledges and agrees
that any permitted use hereunder by Purchaser notwithstanding, Seller retains
all right, title and interest to the Laserscope trade name and trademark, and
Purchaser’s only rights to use the Laserscope name are the limited rights set
forth herein for the period set forth herein. All such uses, and all products
and services related thereto shall continue to be of the same quality as prior
to the Closing Date, and any goodwill from such continued use shall inure solely
to the benefit of Seller. The parties agree, because damages would be an
inadequate remedy, that a party seeking to enforce this Section 4.4(c) shall be
entitled to seek specific performance and injunctive relief as remedies for any
breach thereof, in addition to other remedies available at law or in equity.    
(d)   Records Retention. For a period of not less than seven years after the
Closing Date, Purchaser shall retain all books and records, including prior
years’ Tax Returns, supporting work schedules and other records or information
with respect to all sales, use and employment tax returns, relating to the
Aesthetics Business and the Purchased Assets with respect to periods prior to
the Closing Date. Purchaser shall have the right to destroy or dispose of all or
part of such books and records after the seventh anniversary of the Closing Date
if Purchaser gives Seller 60 days prior written notice of its intended
disposition of such books and records and offers to deliver to Seller, at
Seller’s expense, custody of such books and records as Purchaser intends to
destroy.

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  (e)   Piggyback Registration Rights. Purchaser shall notify Seller in writing
at least fifteen (15) days prior to the filing of any registration statement
under the Securities Act for purposes of a public offering of securities of
Purchaser (whether in connection with a public offering of securities by
Purchaser, a public offering of securities by stockholders of Purchaser, or
both, but excluding a registration relating solely to employee benefit plans, or
a registration relating to a corporate reorganization or other transaction on
Form S-4, or a registration on any registration form that does not permit
secondary sales) and will afford Seller an opportunity to include in such
registration statement all or part of such Registrable Securities held by Seller
as set forth herein. If the Seller desires to include in any such registration
statement all or any part of the Registrable Securities held by Seller, it shall
within fifteen (15) days after the above-described notice from the Purchaser, so
notify the Purchaser in writing. Such notice shall state the intended method of
disposition of the Registrable Securities by Seller as set forth herein. If
Seller decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Purchaser, Seller shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Purchaser with respect to offerings of its securities, all upon the terms
and conditions set forth herein. All expenses incurred in connection with
registrations pursuant to this Section 4.4(e) (excluding underwriters’ discounts
and commissions), including, without limitation, all registration and
qualification fees, printers’ and accounting fees, fees and disbursements for
counsel for Purchaser, and fees and disbursements for counsel for Seller, shall
be borne by the Purchaser. For purposes of this Section 4.4(e), “Registrable
Securities” means (i) the shares issued to Seller in payment of the Stock
Consideration; and (ii) any securities of the Purchaser issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange for
or in replacement of, such shares; provided, however, that Registrable
Securities shall not include any shares which have previously been registered or
which have been sold pursuant to Rule 144 under the Securities Act.     (f)  
Availability of Rule 144. With a view to making available the benefits of
certain rules and regulations under the Securities Act that may permit the
resale of the Registrable Securities to the public without registration, for a
period of two years after the Closing Date, Purchaser agrees to: (i) use its
commercially reasonable efforts to make and keep current public information (as
contemplated by Rule 144 under the Securities Act) regarding Purchaser
available; and (ii) to furnish to Seller upon written request a written
statement by Purchaser as to its compliance with the reporting requirements of
Rule 144 under the Securities Act, a copy of the most recent annual or quarterly
report of Purchaser, and such other reports and documents so filed as Seller may
reasonably request in availing itself of any rule or regulation of the
Securities and Exchange Commission allowing Seller to resell any such shares
without registration.

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  (g)   Preparation of Historical Financial Statements. Seller will use best
efforts to (i) assist Purchaser in seeking and obtaining the waiver or exemption
referred to in Section 7.2(f) below; and (ii) assist Purchaser in Purchaser’s
preparation of the historical financial statements related to the Aesthetics
Business that Purchaser will be required to file with the Form 8-K (as such
requirement may be modified by such waiver or exemption) and any other form or
report that Purchaser is required to file with the Securities and Exchange
Commission in connection with the transaction contemplated by this Agreement,
such efforts to include making appropriate personnel of Seller available to
Purchaser for such purpose.

4.5   Updated Disclosure; Breaches. On the date three Business Days prior to the
anticipated date of Closing, Purchaser and Seller shall each provide the other
with a written statement as to any of the following: (a) any change or event
having, or which could reasonably be expected to have, a Material Adverse
Effect, (b) any event or condition that might reasonably be expected to cause
any representations and warranties made by the party providing the statement not
to be true and correct at the Closing pursuant to the standards set forth in
Section 7.2(c) or 7.3(c), as applicable, (c) any event or condition the
occurrence or non-occurrence of which is reasonably expected to cause any
condition to the obligations of the party providing the statement to effect the
transactions contemplated by this Agreement not to be satisfied, or (d) the
failure of the party providing the statement to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by them
pursuant to this Agreement or any other Ancillary Agreement. The delivery of any
notice pursuant to this Section 4.6 shall not modify or otherwise affect in any
manner the representations, warranties, covenants or agreements of any party or
the conditions to the obligations of the parties under this Agreement and shall
not be deemed to cure any related breaches of the representations, warranties,
covenants or agreements contained in this Agreement or any other Ancillary
Agreement for purposes of determining whether the condition set forth in
Section 7.2(c) or 7.3(c), as applicable, has been satisfied (but, to the extent
related to an event or condition which occurred after the date hereof but prior
to the Closing Date, shall cure such breach for all other purposes under this
Agreement). Any disclosure made under this Section 4.5 that could have been made
prior to the date hereof, given facts and conditions which existed on the date
hereof and events which occurred prior to the date hereof, will not be deemed to
cure any related breaches of the representation, warranties, covenants or
agreements contained in this Agreement or any other Ancillary Agreements for any
purpose of this Agreement or any Ancillary Agreement.

4.6   Liaisons for Intellectual Property Transfer and Licensing. Each of Seller
and Purchaser shall designate one (1) individual to act as the exclusive liaison
for such party in designating, communicating and delivering, in the case of
Seller, and receiving, in the case of Purchaser, the Transferred Intellectual
Property and the Aesthetics Business Intellectual Property licensed under the
License Agreement. Each such liaison will be an individual holding a senior
management position with the respective party with responsibility for, and
expertise in, intellectual property and technical matters. The initial liaisons
will be designated by notice by each party, and may be changed from time to time
by like notice, but only under circumstances that, in the commercially
reasonable discretion of the parties, require such a change. It is the intent of
the parties that the liaisons will complete the knowledge transfer described
above in a commercially expedient fashion during the period from and after the
Closing Date and by no later than the end of the term of the Product Supply
Agreement.

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4.7   Funds Received After the Closing Date. If, after the Closing Date, Seller
or any of its Affiliates receive a payment on an accounts receivable that is
owned by Purchaser or any of its Affiliates, Seller (or its Affiliate) will
promptly remit such payment to Purchaser. If, after the Closing Date, Purchaser
or any of its Affiliates receive a payment on an accounts receivable that is
owned by Seller or any of its Affiliates, Purchaser (or its Affiliate) will
promptly remit such payment to Seller.

4.8   Post-Closing Financial Matters; Preparation of Historical Financial
Statement.

  (a)   Purchaser will use its best efforts after the Closing Date to obtain
financing that provides it with sufficient funds to timely discharge all of its
remaining obligations under this Agreement and the Ancillary Agreements,
including without limitation (i) making any payment under the Post-Closing
Adjustment provisions in Section 1.5, (ii) paying for the Service Parts as
contemplated in Section 1.4(b) and (iii) paying for inventory under
Section 7.3(c) of the Product Supply Agreement.     (b)   Purchaser will use its
best efforts to (i) file an initial request for the waiver or exemption referred
to in Section 7.2(f) below within three (3) Business Days following Purchaser’s
receipt of Seller’s final substantive comments on and input required for such
request; (ii) seek and obtain the waiver or exemption referred to in
Section 7.2(f) below (even if the initial request is rejected) and (iii) timely
prepare the historical financial statements related to the Aesthetics Business
that Purchaser will be required to file with the Form 8-K that Purchaser is
required to file with the Securities and Exchange Commission (as such
requirement may be modified by such waiver or exemption) in connection with the
transaction contemplated by this Agreement, such efforts to include, but not be
limited to, engaging (and being responsible for paying) a third party audit firm
to conduct such audit. Purchaser covenants and agrees that the initial request
for the waiver or exemption referred to in Section 7.2(f), and all amendments
and other written communications related thereto, shall be in form and substance
reasonably acceptable to Seller and Purchaser, and that all telephonic and other
oral communications with the staff of the Securities and Exchange Commission
shall be conducted jointly by representatives of Purchaser and Seller.     (c)  
From and after the Closing Date until such time as Purchaser’s obligations
specified in clauses (i) — (iii) of Section 4.8(a) above have been satisfied,
(or if earlier until an amount equal to Nine Million Dollars ($9,000,000) has
been placed in escrow with an institution reasonably acceptable to Seller for
the exclusive purpose of satisfying obligations of Purchaser under such clauses
(i) — (iii)), Purchaser will, and will cause its Affiliates to, comply with all
covenants and agreements that it is obligated to comply with pursuant to any
agreement it has with a financial institution at which Purchaser maintain a line
of credit or

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      which has made a loan to Purchaser (a “Loan Agreement”) or, if no such
Loan Agreement exists, then the covenants and agreements that were contained in
the last such Loan Agreement to which Purchaser was a party. In the event that
the lending party to a Loan Agreement waives compliance with a covenant or
agreement contained therein at a time when money is owed the lending party under
the Loan Agreement, then such waiver shall automatically also be deemed to be
given by Seller so long as Seller is promptly provided with a copy of the waiver
(or, if given orally, notice of such waiver).

ARTICLE 5
EMPLOYEE MATTERS

5.1   Scope of Article. This Article 5 contains the covenants and agreements of
the parties with respect to the status of employment of the employees of Seller
or its Affiliates, other than the Retained Employees, employed in the Aesthetics
Business as of the Closing Date (“Employees”). Nothing herein expressed or
implied confers upon any Employee any rights or remedies of any nature or kind
whatsoever under or by reason of this Article 5.

5.2   Employees. Set forth in Schedule 5.2 is a list of all Employees and
Retained Employees as of the date hereof.

  (a)   Employment.

  (i)   Offer of Employment. Purchaser shall offer employment effective as of
the Closing Date to all Employees, other than (A) Retained Employees, and
(B) any Employees employed by the Subsidiaries (whose employment shall continue
without interruption from and after the Closing Date). An individual who would
be such an Employee but for his or her absence immediately prior to the Closing
Date due to vacation, holiday, authorized leave of absence, illness, injury or
short-term or long-term disability shall be considered employed as of the
Closing Date as an Employee. Such Employees who become employed by Purchaser
through the acceptance of an offer of employment shall be referred to as
“Transferred Employees” and shall become employees of Purchaser as of the
Closing Date. Purchaser shall initially provide each Transferred Employee with a
position that provides substantially similar job requirements and
responsibilities. For the rest of 2006, Purchaser will provide the exact base
pay and bonus plans (including retention bonuses reflected on Schedule 5.2(d))
for Employees as those provided by Seller as of the date hereof. Thereafter,
Purchaser will provide Transferred Employees with base pay and also bonus and
other incentive opportunities consistent with those provided by Purchaser to
similarly situated employees of Purchaser.

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  (ii)   Work Location. For a period of twelve (12) months following the Closing
Date, for non-Sales employees, each offer of employment by Purchaser under this
Section 5.2(a) will be at a location no more than 50 miles from the Employee’s
principal place of business with Seller immediately prior to the Closing Date.
For Sales and UK employees, employment will be at a location which does not
require the Employee to move their primary household to perform their job.    
(iii)   If Purchaser terminates the employment of any Transferred Employee on or
prior to July 25, 2007, Purchaser shall pay such Transferred Employee a
severance benefit, consisting of notice pay, compensation (lump sum payment) and
continued benefits and insurance coverage, that shall in no event be less than,
or paid later than, the severance benefit, if any, to which such Transferred
Employee would have been entitled if Seller’s severance plans, as in effect as
of the Closing Date, applied to such termination of employment. For purposes of
this Section 5.2(a)(iii), service with both Sellers and Purchaser shall be taken
into account in computing the amount of such benefit, as well as service with
any business or entity that Sellers’ severance plans recognize as service with
Sellers for purposes of computing the amount of such benefit. In the case of US
sales employees, severance is an established lump sum amount which Buyer will
honor.

  (b)   Savings Plan.

  (i)   Purchaser shall maintain or establish as of the Closing Date one or more
tax-qualified defined contribution savings plan or plans (“Purchaser’s Savings
Plan”).     (ii)   Purchaser’s Savings Plan shall (i) permit immediate
participation and eligibility for employer contributions for all Transferred
Employees as of the Closing Date; (ii) credit all service with Seller for
purposes of the eligibility, participation, vesting requirements of Purchaser’s
Savings Plans; (iii) provide for tax-deferred contributions; and (iv) meet all
requirements for a qualified cash or deferred arrangement under Section 401(k)
of the Code.

  (c)   Employee Welfare Plans.

  (i)   Purchaser shall, as of the Closing Date, assume and pay all Liabilities
of Seller for the benefits payable or to become payable to Transferred Employees
and their beneficiaries under the medical, dental, life insurance, disability
and other welfare benefit plans and programs covering Employees identified in
Schedule 5.2 (collectively “Seller’s Welfare Benefit Plans”); provided, however,
that Purchaser shall not assume any Liability of Seller for medical, dental, or
life insurance benefit claims of Transferred Employees incurred prior to the
Closing Date (except, however, to the extent such Liabilities are accrued for on
the Final Closing Balance Sheet Item Statement). For purposes of this
Section 5.2(c)(i), a medical or dental benefit claim shall be deemed to be
incurred when the services giving rise to the claim are performed and not when
the Employee is billed for such services or submits a claim for benefits.

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  (ii)   Purchaser shall have established as of the Closing Date plans or
programs to provide medical, dental, life insurance, disability, vacation and
other welfare benefits to discharge the obligations of Purchaser as set forth in
this Section 5.2(c)(ii). Such plan or plans established by Purchaser shall
(i) credit all service with Seller for all purposes, including eligibility,
participation and benefit entitlement; (ii) waive any pre-existing condition
limitation or exclusion or any actively-at-work requirement; (iii) credit all
payments made for healthcare expenses during the current plan year for purposes
of deductibles, co-payments and maximum out-of-pocket limits; and (iv) for a
period of at least one year after the Closing Date, provide benefits which, in
the aggregate, are substantially comparable to those provided under Seller’s
Welfare Benefit Plans immediately prior to the Closing Date.

  (d)   Other Compensation Arrangements.

  (i)   With respect to the calendar year in which the Closing occurs, Purchaser
shall determine any incentive compensation awards for Transferred Employees
under Purchaser’s incentive compensation plan by taking into account Employees’
service with both Seller and Purchaser during such calendar year.     (ii)  
Purchaser shall, as of the Closing Date, assume, and be responsible for all
accrued and unused vacation balances, bonus amounts, severance balances and
retention balances and other amounts due under the severance plans, bonus plans
and retention plans, listed in Schedule 5.2(d) for all Transferred Employees.
For purposes of clarity, Purchaser shall be responsible for paying any amounts
due under any such severance plans and retention plans even if all conditions
that trigger such payments have been met prior to the Closing Date but such
amounts have not yet been paid as of the Closing Date (i.e., if a Transferred
Employee was entitled to a retention bonus because he or she was employed
through December 31, 2006, Purchaser would be obligated to pay such retention
bonus whether the Closing occurred before, on or after December 31, 2006 and the
retention bonus remain unpaid on the Closing Date).

  (e)   Severance and WARN Act Liability. Purchaser agrees to pay and be
responsible for all liability, cost or expense for severance, termination
indemnity payments, salary continuation, special bonuses and like costs that
arise from the termination of employment of any Transferred Employee by
Purchaser on or after the Closing Date, including but not limited to those
amounts reflected on Schedule 5.2(d). Purchaser agrees to pay and be responsible
for all liability, cost, expense and sanctions resulting from any failure to
comply with the WARN Act, and the regulations thereunder, in connection with the
consummation of the transactions described in or contemplated by this Agreement.

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  (f)   Health Care Continuation Coverage. Purchaser agrees to provide
Transferred Employees and their covered beneficiaries with continuation coverage
required by Section 4980B of the Code or Sections 601 through 608 of ERISA
(“COBRA”) as a result of “qualifying events” (as defined in Section 4980B of the
Code) which occur on or after the Closing.     (g)   Cooperation. Seller and
Purchaser shall cooperate with each other with respect to any employment-related
charge, complaint, investigation or inquiry of any kind relating to any Employee
or Former Employee, including but not limited to, providing copies of documents
and making witnesses available. Seller and Purchaser agree that Purchaser shall
reinstate any Former Employee if Purchaser consents to such reinstatement (which
consent shall not be unreasonably withheld) or if reinstatement is ordered by a
court or governmental agency; provided, however, that Seller must make a good
faith effort to defend against any such charge, complaint, investigation or
inquiry.     (h)   Workers’ Compensation. Purchaser shall, as of the Closing
Date, assume all Liabilities of Seller for workers’ compensation benefits
payable or to become payable to or on behalf of Transferred Employees. Purchaser
shall be responsible for the administration of any Transferred Employee’s
workers’ compensation claims arising out of or relating to occurrences on or
after the Closing Date.

ARTICLE 6
TERMINATION

6.1   Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing only:

  (a)   by mutual consent of Purchaser, on the one hand, and Parent and Seller,
on the other hand;     (b)   by either Purchaser, on the one hand, or Parent or
Seller, on the other hand, if, without fault of such terminating party, the
Closing shall not have occurred on or before the Termination Date, unless such
date is extended upon the mutual written agreement of Purchaser, on the one
hand, and Parent and Seller, on the other hand;     (c)   by Parent or Seller,
if neither Parent nor Seller is then in material breach of its obligations under
this Agreement, if (i) there has been a material breach of any representation,
warranty, covenant or agreement on the part of Purchaser set forth in this
Agreement of which notice has been given to Purchaser in writing by Parent or
Seller and which has not been fully cured or cannot be fully cured within the
earlier of (A) 30 days of the receipt of such notice, or (B) five days prior to
the Closing Date; or (ii) any of the other conditions specified in Section 7.1
or in Section 7.3 has not been met by Purchaser or waived by Parent or Seller at
such time as such condition can no longer be satisfied;

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  (d)   by Purchaser, if Purchaser is not then in material breach of its
obligations under this Agreement, if (i) there has been a material breach of any
representation, warranty, covenant or agreement on the part of Parent or Seller
set forth in this Agreement of which notice has been given to Parent by
Purchaser and which has not been fully cured or cannot be fully cured within the
earlier of (A) 30 days of the receipt of such notice or (B) five days prior to
the Closing Date; or (ii) any of the other conditions specified in Section 7.1
or in Section 7.2 has not been met by Parent and Seller or waived by Purchaser
at such time as such condition can no longer be satisfied;     (e)   by
Purchaser, on the one hand, or by Parent and Seller, on the other hand if the
Closing shall not have occurred on or before March 31, 2007 (the “Termination
Date”); provided, however, that the failure of the Closing to occur is not due
to a material breach hereof by the party seeking termination;     (f)   by
Parent and Seller at any time after December 8, 2006 if Purchaser has failed to
request the waiver or exemption referred to in Section 7.2(f) below in a writing
that is received by the SEC on or before by 5:00 p.m. EST on December 8, 2006;
or     (g)   by Parent and Seller on or after January 6, 2007 if Purchaser has
not, by January 5, 2007, either (i) provided Parent and Seller with evidence
that it has obtained the waiver or exemption referred to in Section 7.2(f) below
or (ii) irrevocably waived in writing the condition described in Section 7.2(f)
below.

6.2   Procedure and Effect of Termination. In the event of termination by
Purchaser, on the one hand, or Parent or Seller, on the other hand, pursuant to
Section 6.1, written notice thereof shall immediately be given to the other
party and this Agreement shall terminate, the transactions contemplated hereby
shall be abandoned without further action by any of the parties hereto.
Notwithstanding the foregoing, the obligations set forth in Section 4.1
(“Confidentiality”), including Section 4.1(e) (“Public Announcement”), Article 9
(“Dispute Resolution”) and Article 11 (“Miscellaneous”) shall survive
termination of this Agreement, and nothing herein shall relieve any party from
its obligations with respect to any breach of this Agreement occurring prior to
a termination. In such event, each party shall, upon request, return all
documents, work papers and other material of any other party (and all copies
thereof) relating to the transactions contemplated herein, whether so obtained
before or after the execution hereof, to the party furnishing the same.

ARTICLE 7
CONDITIONS

7.1   Conditions to Obligations of Each Party. The obligations of each party to
be performed at the Closing are subject to the satisfaction at or prior to the
Closing of each of the following conditions, unless waived by such party in its
sole discretion:

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  (a)   Absence of Injunction. No order, stay, judgment or decree shall have
been issued by any court and be in effect that prohibits, delays or enjoins in
any material respect the consummation of the transactions contemplated by this
Agreement or the Ancillary Agreements.     (b)   No Proceeding or Litigation. No
Proceeding by any Governmental Authority or other Person shall have been
instituted or threatened which delays or questions the validity or legality of
the transactions contemplated hereby or which has or, if successfully asserted,
would otherwise have, individually or in the aggregate, a Material Adverse
Effect.

7.2   Conditions to Obligations of Purchaser. The obligations of Purchaser to be
performed by Purchaser at the Closing are subject to the satisfaction at or
prior to the Closing of each of the following conditions, unless waived by
Purchaser in its sole discretion:

  (a)   Deliveries of Seller. Purchaser shall have received all certificates,
instruments, agreements (including the Ancillary Agreements), consents and other
documents to be delivered on or before the Closing Date pursuant to Article 1 of
this Agreement.     (b)   Covenants and Agreements. Each covenant, agreement,
obligation and condition of Parent and Seller required by this Agreement and any
Ancillary Agreements to be performed by them at or prior to the Closing will
have been duly performed and complied with in all material respects as of the
Closing. At the Closing, Purchaser will have received a certificate, dated the
Closing Date and duly executed by a senior executive officer of each of Parent
and Seller, to the effect that the conditions set forth in this Section 7.2(b)
have been satisfied.     (c)   No Breach. Each representation and warranty of
Parent and Seller contained in this Agreement and any Ancillary Agreements shall
be true and correct in all material respects as of the Closing as though such
representation and warranty was made on and as of such time (except to the
extent a different date is specified therein, in which case such representation
and warranty will be true and correct as of such date); provided, however, that
representations and warranties already themselves qualified by materiality or
Material Adverse Effect shall be true and correct in all respects. At the
Closing, Purchaser will have received a certificate, dated the Closing Date and
duly executed by a senior executive officer of each of Parent and Seller, to the
effect that the conditions set forth in this Section 7.2(c) have been satisfied.
    (d)   Absence of Certain Changes. Since the date of this Agreement, there
shall not have occurred or come into existence any change, event, occurrence,
state of facts or development that has had, or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. At the
Closing, Purchaser will have received a certificate, dated the Closing Date and
duly executed by a senior executive officer of each of Parent and Seller, to the
effect that the conditions set forth in this Section 7.2(d) have been satisfied.

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  (e)   Release of Liens. Purchaser shall have received from Seller a duly and
validly executed copy of all agreements, instruments, certificates and other
documents, in form and substance reasonably satisfactory to Buyer, that are
necessary or appropriate to evidence the release of all Liens relating to the
Purchased Assets, other than the Permitted Liens, but including security granted
over its assets by Laserscope UK to Silicon Valley Bank and to Barclays Bank
plc.     (f)   Waiver from SEC. Purchaser shall have received a waiver or
exemption from the Securities and Exchange Commission (“SEC”) under Rule 3-13 of
Regulation S-X that results in Purchaser being permitted to file the Form 8-K/A
required to be filed by Purchaser in connection with the transactions
contemplated by this Agreement that is substantially consistent, in all material
respects, with the request for such waiver or exemption (or the most recent
amendment thereto) submitted by Purchaser consistent with Section 4.8(b).

7.3   Conditions to Obligations of Parent and Seller. The obligations of Parent
and Seller to be performed by Parent and Seller at the Closing are subject to
the satisfaction at or prior to the Closing of each of the following conditions,
unless waived by Parent in its sole discretion:

  (a)   Deliveries of Purchaser. Seller shall have received payment of the
Purchase Price and all certificates, instruments, agreements (including the
Ancillary Agreements) and other documents to be delivered on or before the
Closing Date pursuant to Article 1 of this Agreement.     (b)   Covenants and
Agreements. Each covenant, agreement, obligation and condition of Purchaser
required by this Agreement and any Ancillary Agreements to be performed by
Purchaser at or prior to the Closing will have been duly performed and complied
with in all material respects as of the Closing. At the Closing, Purchaser will
have received a certificate, dated the Closing Date and duly executed by a
senior executive officer of Purchaser, to the effect that the conditions set
forth in this Section 7.3(b) have been satisfied.     (c)   No Breach. Each
representation and warranty of Purchaser contained in this Agreement and any
Ancillary Agreements shall be true and correct in all material respects as of
the Closing as though such representation and warranty was made on and as of
such time (except to the extent a different date is specified therein, in which
case such representation and warranty will be true and correct as of such date);
provided, however, that representations and warranties already themselves
qualified by materiality or Material Adverse Effect shall be true and correct in
all respects. At the Closing, Parent and Seller will have received a
certificate, dated the Closing Date and duly executed by a senior executive
officer of Purchaser, to the effect that the conditions set forth in this
Section 7.3(c) have been satisfied.     (d)   Consents. Purchaser shall have
obtained all Consents required on its part to perform its obligations under, and
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements in a form and substance satisfactory to Parent and Seller.

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ARTICLE 8
SURVIVAL AND INDEMNIFICATION

8.1   Survival. The representations and warranties of each party contained in
this Agreement, and the indemnification obligations of such party with respect
thereto under this Article 8, will survive the Closing and shall expire on the
date 12 months after the Closing Date. Notwithstanding the preceding sentence,
(a) the representations and warranties contained in Sections 2.1 and 3.1
(“Corporate Organization and Power” and “Corporate Organization and Power; Stock
Consideration”), Section 2.2 (“Subsidiaries”) and Sections 2.3 and 3.2
(“Authorization”), and the respective indemnification obligations of the parties
with respect thereto shall survive until the third anniversary of the Closing
Date; (b) the representations and warranties of Seller set forth in Section 2.21
(“Tax Matters”) and the indemnification obligations of Seller with respect
thereto shall survive until the expiration of the applicable statutes of
limitation plus six months; and (c) claims involving fraud (“Fraud Claims”) and
the indemnification obligations of the parties with respect thereto shall
survive indefinitely. The covenants set forth in this Agreement shall survive
the Closing according to the term specified therein, and, if none, indefinitely.
  8.2   Indemnification by Parent and Seller. Subject to Section 8.5, Parent and
Seller agree, jointly and severally, to indemnify, defend and hold harmless
Purchaser, its Affiliates, and their respective directors, officers, employees
and agents (each, a “Purchaser Indemnified Party”), from and against any and all
Damages asserted against, relating to, imposed upon, suffered or incurred by any
of the foregoing Persons by reason of or resulting from (a) any untrue
representation of, or breach of warranty by Parent or Seller in any part of this
Agreement; (b) any non-fulfillment of any covenant, agreement or undertaking of
Parent or Seller in any part of this Agreement; and (c) subject to the
immediately following sentence, any Retained Liability; (d) any liability for
Taxes resulting from or attributable to the Pre-Closing Transactions and any
liability for Taxes attributable to Seller or either of the Subsidiaries (with
Income Taxes of either of the Subsidiaries meaning Income Taxes arising after
application of the relevant NOL Threshold) for Taxable periods (or portions
thereof) ending on or prior to the Closing Date, other than Taxes reflected in
the Final Subsidiary Closing Balance Sheet and (e) either of the matters
described on Schedule 8.2. No claim for indemnity can be brought against Seller
under clause (c) of this Section 8.2 if the subject matter of the claim is based
on events, facts or circumstances that also constitute a breach of, or could
give rise to a valid claim of a breach of, a representation or warranty
contained in Section 2.11 (Sufficiency of Purchased Assets; Operations of
Aesthetics Business) (but only those provisions of Section 2.11 that do not
pertain to Tax Laws, Environmental Laws and laws that, if not

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    complied with would necessarily result in a breach of Section 2.19),
Section 2.14 (FDA and Global Regulation Compliance in Connection with the
Aesthetics Business), Section 2.15 (Compliance with Applicable Laws), (but only
those provisions of Section 2.15 that do not pertain to Tax Laws, Environmental
Laws and laws that, if not complied with would necessarily result in a breach of
Section 2.19), it being understood and agreed that the exclusive remedy of each
Purchaser Indemnified Party for any actions or claims the subject matter of
which is based on events, facts or circumstances that constitute a breach of, or
could give rise to a valid claim of a breach of, any of such representations or
warranties is a claim for indemnification under Section 8.2(a) and such actions
or claims will be subject to the limitations of Section 8.5.

8.3   Indemnification by Purchaser. Subject to Section 8.5, Purchaser agrees to
indemnify, defend and hold harmless Parent and Seller, their Affiliates, and
their respective directors, officers, employees and agents, from and against any
and all Damages asserted against, relating to, imposed upon, suffered or
incurred by any of the foregoing Persons by reason of or resulting from (a) any
untrue representation of, or breach of warranty by Purchaser in any part of this
Agreement, (b) any non-fulfillment of any covenant, agreement or undertaking of
Purchaser in any part of this Agreement or in any Ancillary Agreement, or
(c) any Assumed Liability.   8.4   Claims for Indemnification.

  (a)   Subject to Section 8.1, whenever any claim arises for indemnification
hereunder or an event which may result in a claim for such indemnification has
occurred, the party seeking indemnification (the “Indemnified Party”), will
promptly notify the party from whom indemnification is sought (the “Indemnifying
Party”) of the claim and, when known, the facts constituting the basis for such
claim; provided, however, that any failure to give such notice will not waive
any rights of the Indemnified Party, except to the extent the rights of the
Indemnifying Party are actually prejudiced thereby. In the case of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings of a third party (a “Third Party Claim”), the notice
to the Indemnifying Party will specify with reasonable specificity, if known,
the basis under which the right to indemnification is being asserted and the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnifying Party shall have the right to dispute and defend all Third Party
Claims and thereafter so defend and pay any adverse final judgment or award or
settlement amount in regard thereto. Such defense shall be controlled by the
Indemnifying Party, and the cost of such defense shall be borne by the
Indemnifying Party, except that the Indemnified Party shall have the right to
participate in such defense at its own expense; provided, however, that the
Indemnifying Party must first acknowledge that the claim is a bona fide
indemnification claim under this Agreement. The Indemnified Party shall
cooperate in all reasonable respects in the investigation, trial and defense of
any such claim, including making personnel, books, and records relevant to the
claim available to the Indemnifying Party, without charge, except for reasonable
out-of-pocket expenses. If the Indemnifying Party fails to take action within
30 days as set forth above, then the Indemnified Party shall have the right to
pay, compromise or defend any Third Party Claim and to assert the amount of any
payment on the Third Party Claim plus the reasonable expenses of defense or
settlement as the claim. The Indemnified Party shall also have the right and
upon delivery of 10 days advance written notice to such effect to the

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      Indemnifying Party, exercisable in good faith, to take such action as may
be reasonably necessary to avoid a default prior to the assumption of the
defense of the Third Party Claim by the Indemnifying Party, and any reasonable
expenses incurred by Indemnified Party so acting shall be paid by the
Indemnifying Party. Except as otherwise provided herein, the Indemnified Party
will not, except at its own cost and expense, settle or compromise any Third
Party Claim for which it is entitled to indemnification hereunder without the
prior written consent of the Indemnifying Party, which will not be unreasonably
withheld. The parties intend that all indemnification claims be made as promptly
as practicable.

  (b)   If the Indemnifying Party is of the opinion that the Indemnified Party
is not entitled to indemnification, or is not entitled to indemnification in the
amount claimed in such notice, the Indemnifying Party will deliver a written
objection to such claim and written specifications in reasonable detail of the
aspects or details objected to, and the grounds for such objection. The validity
and amount of such claim will be determined pursuant to Article 9.

8.5   Indemnification Limits and Calculation of Damages.

  (a)   In the event of any claim for indemnity under Section 8.2(a) with
respect to any breach of a representation and warranty by Seller or Parent (a
“Purchaser Rep Loss”):

  (i)   the Purchaser Indemnified Party under such representation and warranty
claim shall not be entitled to indemnification therefor unless such Purchaser
Indemnified Party, together with all related Purchaser Indemnified Parties, has
sustained Damages in excess of one percent of the Purchase Price (the “Basket
Amount”) in the aggregate, following which event such Purchaser Indemnified
Party and all related Purchaser Indemnified Parties shall be entitled to
indemnification to the extent of all Damages suffered or incurred in excess of
the Basket Amount; and     (ii)   the maximum amount of indemnification payable
to all Purchaser Indemnified Parties, in the aggregate, shall be equal to
10 percent of the Purchase Price (the “Maximum Amount”).

provided, however, that the Basket Amount shall not apply to any breach of the
representations and warranties of Seller and Parent set forth in Section 2.1
(“Corporate Organization and Power”), Section 2.2 (“Subsidiaries”), Section 2.3
(“Authorization”), Sections 2.10(a) and (b) (“Purchased Assets”), Section 2.11
(“Sufficiency of Purchased Assets”), Section 2.21 (“Taxes”) and Section 2.24
(“Brokers”). Additionally, and notwithstanding anything herein to the contrary,
(i) the Basket Amount and Maximum Amount shall not apply with respect to any
Fraud Claims of any Purchaser Indemnified Party; and (ii) the fact that
Purchaser shall also have a Rep Loss claim, in addition to another indemnifiable
claim, (but subject to the last sentence of Section 8.2), shall not subject,
cause or permit such other indemnifiable claim to count against the Basket
Amount or the Maximum Amount. The parties do not intend that the Basket Amount
or the Maximum Amount be deemed to be a definition of what is “material” for any
purpose under this Agreement.

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  (b)   Notwithstanding anything to the contrary in this Article 8, an
Indemnifying Party shall not be liable to any related Indemnified Parties for
any incidental or consequential damages, including without limitation loss of
anticipated profits or loss or diminution of revenues, and all such parties
shall take all reasonable steps to mitigate indemnifiable Damages upon and after
becoming aware of any event which has given rise to any liabilities and Damages
that are indemnifiable hereunder.     (c)   In determining the amount of any
claim for which an Indemnified Party is entitled to indemnification pursuant to
this Article 8, there shall be subtracted an amount equal to (i) any Tax savings
actually realized by such Indemnified Party or related Indemnified Parties in
connection with or by reason of such claim, (ii) all insurance proceeds actually
received or receivable by a party by reason of such claim (and no right of
subrogation shall accrue to any insurer or third party indemnitor under this
Agreement), (iii) the amount of any applicable accruals or reserves taken into
account for purposes of Section 1.5 or set forth in the Subsidiary Financial
Statements or thereafter accrued or reserved by the Subsidiaries in the ordinary
course of business, and (iv) any amounts recovered or recoverable by the
Indemnified Party pursuant to any indemnification by or indemnification
agreement with any third party. If a claim of an Indemnified Party is covered by
insurance or by indemnification by a third party, the Indemnified Party agrees
to use all reasonable efforts to recover the amount of such claim from the
issuer or such third party before seeking indemnification under this Agreement.
    (d)   Notwithstanding anything to the contrary contained in this Agreement:
(i) no claim or action for indemnity can be brought against Parent or Seller
under clause (a) or (b) of Section 8.2 or against Seller under clause (a) or
(b) of Section 8.3 unless such action is brought on or before the date on which
the applicable representation, warranty or covenant on which such claim or
action is based ceases to survive as set forth in Section 8.1.

8.6   Exclusive Remedy. The parties acknowledge that, except for (a) any Fraud
Claims, and (b) any equitable relief expressly provided for in this Agreement,
their sole and exclusive remedy after the Closing for any breach of any
representation, warranty or covenant contained in this Agreement shall be the
indemnification provisions set forth in this Article 8. In furtherance of the
foregoing, Purchaser hereby waives, to the fullest extent permitted under
Applicable Law, any and all other rights, claims and causes of action it may
have against Seller and Parent, whether known or unknown, foreseen or
unforeseen, or which exists or may arise in the future, or which it otherwise
might assert, relating to the subject matter of this Agreement arising under
this Agreement, at law or in equity. In addition, each party acknowledges that
all of its indemnification obligations under this Agreement are subject to and
shall be in accordance with this Article 8.

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8.7   Subrogation. To the extent that an Indemnifying Party has discharged any
claim for indemnification hereunder, the Indemnifying Party shall be subrogated
to all rights of the Indemnified Party against any third parties.   8.8  
Adjustment of Purchase Price. The Purchase Price shall be deemed to be increased
or decreased, as applicable, for federal, state, local and foreign income Tax
purposes in the amount of any payment made by any Indemnifying Party pursuant to
the provisions of this Article 8.

ARTICLE 9
DISPUTE RESOLUTION

9.1   Injunctive Relief. It is expressly agreed among the parties hereto that
monetary damages would be inadequate to compensate a party hereto for any breach
of the covenants and agreements in Articles 4 and 5 hereof. Accordingly, the
parties agree and acknowledge that any such violation or threatened violation
will cause irreparable injury to the non-breaching party and that, in addition
to any other remedies which may be available, the non-breaching party shall be
entitled to injunctive relief against the threatened breach of Articles 4 and 5
hereof or the continuation of any such breach without the necessity of proving
actual damages and may seek to specifically enforce the terms thereof.   9.2  
Dispute. Except as set forth in Section 9.1, and except for the engagement of
the Firm under Section 1.5, any controversy, claim or dispute of whatever nature
arising between the parties under this Agreement or any Ancillary Agreement, or
in connection with the transactions contemplated hereunder or thereunder,
including those arising out of or relating to the breach, termination,
enforceability, scope or validity hereof, whether such claim existed prior to or
arises on or after the Effective Time (a “Dispute”), shall be resolved by
binding arbitration. The agreement to arbitrate contained in this Article 9
shall continue in full force and effect despite the expiration, rescission or
termination of this Agreement.   9.3   Notice. No party shall commence an
arbitration proceeding pursuant to the provisions set forth below unless such
party shall first give a written notice (a “Dispute Notice”) to the other
parties setting forth the nature of the Dispute.   9.4   Arbitration.

  (a)   If the Dispute has not been resolved within 30 days after receipt of the
Dispute Notice or such greater period as the parties may agree upon in writing,
then the Dispute shall be determined by binding arbitration in the city in which
the arbitrator is located. The arbitration shall be conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association (“AAA”)
in effect on the date on which the Dispute Notice is sent, subject to any
modifications contained in this Agreement. The Dispute shall be determined by
one arbitrator. Members of the AAA Large, Complex Case Panel or a CPR Institute
for Dispute Resolution (“CPR”) Panel of Distinguished Neutrals, or persons who
have professional credentials similar to those persons listed on such AAA or CPR
panels shall be eligible to serve as arbitrators. The award shall be in writing
and shall set forth the reasons for the decision of the arbitrator(s).

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  (b)   The arbitration shall be governed by the substantive laws of the State
of New York without regard to conflicts-of-law rules, and by the arbitration law
of the United States Federal Arbitration Act (Title 9, U.S. Code). Judgment upon
the award rendered may be entered in any court having jurisdiction.     (c)  
Except as otherwise required by law, the parties and the arbitrator agree to
keep confidential and not disclose to third parties any information or documents
obtained in connection with the arbitration process, including the resolution of
the Dispute. The arbitrator shall have the discretion to award to the prevailing
party its reasonable costs and expenses incurred in connection with the
arbitration, including without limitation reasonable attorney fees. If a party
fails to proceed with arbitration as provided in this Agreement, or
unsuccessfully seeks to stay the arbitration, or fails to comply with the
arbitration award, or is unsuccessful in vacating or modifying the award
pursuant to a petition or application for judicial review, the other party or
parties, as applicable, shall be entitled to be awarded costs, including
reasonable attorneys’ fees, paid or incurred in successfully compelling such
arbitration or defending against the attempt to stay, vacate or modify such
arbitration award and/or successfully defending or enforcing the award.
Notwithstanding the foregoing, each party may disclose the resolution of the
arbitration, and the terms and conditions any settlement agreement, without
consent (i) to advisors, investors and others on a need-to-know basis under
conditions which reasonably ensure the confidentiality thereof, (ii) as required
by any court or other governmental body; (iii) in confidence to legal counsel of
such parties; (iv) in confidence, in connection with the enforcement of the
settlement agreement or rights under the settlement agreement; (v) in
confidence, in connection with a merger, acquisition of stock or assets,
proposed merger or acquisition, or the like; or (vi) as advisable or required in
connection with any government or regulatory filings, including without
limitation filings with the Securities and Exchange Commission.

ARTICLE 10
DEFINITIONS

10.1   Definitions. The following terms, as used herein, have the following
meanings:

  (a)   “Aesthetics Business Intellectual Property” shall refer collectively to
all Intellectual Property that is owned by, licensed to or otherwise controlled
by Seller or the Subsidiaries in connection with its operation of the Aesthetics
Business; excluding, however, (i) all trademarks (whether registered or not),
trademark applications, service mark registrations and service mark
applications, trade names, trade dress or logos, unless specifically set forth
on Exhibit 1.1(d); and (ii) all rights in those patents and patent applications
(and all reissues, substitutes, divisions, reexaminations, renewals, extensions,
provisionals, continuations and continuations-in-part thereof) identified as
“excluded patent rights” in Schedule 2.19.

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  (b)   “Affiliate” means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such other Person, through the ownership of all or part of any Person.    
(c)   “Applicable Law” means, with respect to any Person, any domestic or
foreign, federal, state or local common law or duty, case law or ruling,
statute, law, ordinance, policy, guidance, rule, administrative interpretation,
regulation, code, order, writ, injunction, directive, judgment, decree or other
requirement of any Governmental Authority applicable to such Person or any of
its Affiliates or any of their respective properties, assets, officers,
directors, employees, consultants or agents (in connection with such officer’s,
director’s, employee’s, consultant’s or agent’s activities on behalf of such
Person or any of its Affiliates).     (d)   “Business Day” or “business day”
shall mean a day other than a Saturday, Sunday or other day on which banks in
Minneapolis, Minnesota are required to or may be closed.     (e)   “Change in
Control” means, with respect to a party: (a) the sale or transfer of all or
substantially all of such party’s assets to any Person or group of Persons
(other than a subsidiary) by means of any transaction or series of transactions;
(b) the acquisition of such party by another Person by means of any transaction
or series of transactions (including, without limitation, any reorganization,
merger or consolidation, whether of such party with, or into, any other Person
or Persons, or otherwise, but excluding (x) any merger effected exclusively for
changing the domicile of such party or (y) any consolidation or merger following
which holders of equity securities outstanding immediately prior to the merger
or consolidation hold more than fifty percent (50%) of the equity securities of
the entity surviving the consolidation or merger or an entity controlling the
surviving entity after the consolidation or merger); or (c) a transaction or
series of transactions in which a Person or group of Persons acquires beneficial
ownership of more than fifty percent (50%) of the voting power of the party.    
(f)   “Code” means the Internal Revenue Code of 1986, as amended, and the
regulations or other binding pronouncements promulgated thereunder.     (g)  
“Contract” means any contract, lease, license, commitment, permit, sales order,
purchase order, invoice, warranty and or other agreement or understanding,
whether written or oral, and including any amendment or modifications made
thereto.     (h)   “Damages” means all demands, claims, actions or causes of
action, assessments, losses, damages, costs, expenses, Liabilities, judgments,
awards, fines, sanctions, penalties, charges and amounts paid in settlement,
including, but not limited to, reasonable costs, fees and expenses of attorneys,
accountants, bankers and other agents of the Person incurring such expenses.

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  (i)   “Equity Interest” means capital stock, membership interests, options,
warrants, stock appreciation rights, or rights to subscribe for, calls or other
instruments exercisable for, or convertible into, the capital stock, membership
interests or similar equity interests of any Person.     (j)   “ERISA” shall
mean the Employee Retirement Income Security Act of 1974, as amended;     (k)  
“ERISA Affiliate” shall mean each subsidiary of the Parent and any other person
or entity under common control with the Parent or any of its subsidiaries within
the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations
issued thereunder;     (l)   “GAAP” means generally accepted accounting
principles in the United States.     (m)   “Governmental Authority” means any
foreign, domestic, federal, territorial, state or local governmental authority,
quasi-governmental authority, instrumentality, court, government or
self-regulatory organization, commission, tribunal or organization or any
regulatory, administrative or other agency, or any political or other
subdivision, department or branch of any of the foregoing.     (n)   “Hazardous
Substance” means any material, chemical, emission or substances that has been
designated by any Governmental Authority to be radioactive, toxic, hazardous,
biohazardous, a pollutant, contaminant, or nuisance or otherwise a danger to
health, reproduction or the environment.     (o)   “Intellectual Property” shall
mean any and all of the following and any and all right and interests in,
arising out of, or associated therewith, throughout the world: rights in
patents, patent applications, and all reissues, substitutes, divisions,
reexaminations, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; trademarks (whether registered or not), trademark
applications, service mark registrations and service mark applications, trade
names, trade dress, logos, slogans, tag lines, uniform resource locators,
Internet domain names, and Internet domain name applications; copyright
applications, registered copyrighted works and commercially significant
unregistered copyrightable works (including proprietary software, books, written
materials, prerecorded video or audio tapes, and other copyrightable works),
renewals, and applications therefor, and all other rights corresponding thereto,
including rights in designs (whether or not registered or pending); technology,
inventions (whether or not patentable), formulas, algorithms, methods, processes
invention disclosures, software, trade secrets, know-how, technical
documentation, specifications, data, designs and other intellectual property and
proprietary rights, other than off-the-shelf computer programs, owned by or
licensed to Seller; all websites, and all designs related thereto; all rights in
databases and data collections; all moral, integrity, paternity, and economic
rights of authors and inventors, however denominated; any similar or equivalent
rights to any of the foregoing, whether or not in use, under development or
design, or inactive; and the right to sue for past, present, and future
infringement of any or all of the foregoing and to retain any damages awarded
pursuant to such action.

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  (p)   “Knowledge” relating to Seller, “Knowledge of Seller”, “Seller’s
Knowledge” means the knowledge actually possessed by Seller’s officers and
directors, and, relating to Purchaser, “Knowledge of Purchaser” or “Purchaser’s
Knowledge” means the knowledge actually possessed by the officers and directors
of Purchaser.     (q)   “Law” means any applicable laws, statutes, ordinances,
regulations, rules, interpretations, directives or orders of any Governmental
Authority anywhere in the world.     (r)   “Liability” or “Liabilities” means
any liabilities, obligations or claims of any kind whatsoever whether absolute,
accrued or un-accrued, fixed or contingent, matured or un-matured, asserted or
unasserted, known or unknown, direct or indirect, contingent or otherwise and
whether due or to become due, or any other debts, liabilities or obligations
relating to or arising out of any act, omission, transaction, circumstance, sale
of goods or services, state of facts or other condition.     (s)   “LIBOR” means
the rate for three-month US dollar deposits, which appears on the Bloomberg Page
BBAM as of 11:00 a.m., London time, on the day that is one Business Day
preceding the Closing Date. If such rate does not so appear on the Bloomberg
Page BBAM, “LIBOR” means the average of the rates at which three-month US dollar
deposits are offered by Morgan Guaranty Trust of New York and Bankers Trust
Company to first-class banks in the London interbank market at approximately
11:00 a.m. (London time) one Business Day preceding the Closing Date.     (t)  
“Material Adverse Effect” means, as to a party, any change, effect, fact, event,
or circumstance which has had or may reasonably be expected to have a material
adverse effect on, or a material adverse change in, the assets, liabilities,
financial condition, or business, taken as a whole, of the Aesthetics Business,
in the case of Seller, and of Purchaser, in the case of Purchaser (and in all
cases without regard to any potential insurance coverage or potential Tax
benefits), or which would preclude such party in any material respect from
consummating the transactions contemplated by this Agreement or any Ancillary
Agreement on a timely basis; provided, however, that in each case none of the
following shall be taken into account in determining whether there has been a
Material Adverse Effect: (i) any change, effect, fact, event or circumstance
exclusively relating to any acts of terrorism, sabotage, military action or war;
(ii) business or economic conditions primarily related to the medical device
industry; or (iii) the taking of any action contemplated by this Agreement and
the other agreements contemplated hereby.

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  (u)   “Person” means an individual, corporation, partnership, limited
liability company, association, trust, estate or other entity or organization,
including a Governmental Authority.     (v)   “Permitted Liens” means
(i) statutory Liens for Taxes not yet due or delinquent or the validity of which
are being contested in good faith by appropriate proceedings; (ii) mechanics’,
carriers’, workers’, repairmen’s and other similar Liens arising or incurred in
the ordinary course of business with respect to charges not yet due and payable;
(iii) statutory Liens incurred in the ordinary course of business in connection
with worker’s compensation, unemployment insurance, or other forms of
governmental insurance or benefits; (v) Liens arising due to acts done, or
suffered to be done by, and judgments against, Purchaser or any of its
Affiliates and those claiming by, through or under Purchaser or any of its
Affiliates, (vi) Liens related to consigned tooling, equipment inventory and
production fixtures, and (vii) Liens that will be released at or prior to the
Closing.     (w)   “Product Warranty Claims” means all Liabilities to customers
of the Aesthetics Business with respect or related to repair or replacement
claims resulting from defects in goods and equipment delivered to such customers
or services provided to such customers, or goods and equipment in transit to
such customers, regardless of when asserted and irrespective of whether pursuant
to (i) express product warranties provided by Seller or its Affiliates, or
(ii) product warranties or obligations implied or provided by Applicable Law and
excluding in all cases Liabilities relating to or arising from product liability
or similar claims seeking recourse beyond repair or replacement of the products
at issue.     (x)   “Seller Product” means each proprietary product or service
currently manufactured, marketed, or sold by or under license from Seller, or
that are currently under development by or under license from Seller, in all
cases solely in the Aesthetics Business.     (y)   “Seller’s Retained
Environmental Liabilities” shall mean any liability, obligation, judgment,
penalty, fine, cost or expense, of any kind or nature, or the duty to indemnify,
defend or reimburse any person with respect to: (i) the presence on or before
the Closing Date of any Hazardous Substances in the soil, groundwater, surface
water, air or building materials of the any Leased Real Property or any Former
Real Property (“Pre-Existing Contamination”); (ii) the migration at any time
prior to or after the Closing Date of Pre-Existing Contamination to any other
real property, or the soil, groundwater, surface water, air or building
materials thereof; (iii) any Hazardous Substance Activities conducted on the
Leased Real Property or any Former Real Property prior to the Closing Date or
otherwise occurring prior to the Closing Date in connection with or to benefit
the Aesthetics Business (“Pre-Closing Hazardous Substance Activities”); (iv) the
exposure of any person to Pre-Existing Contamination or to Hazardous Substances
in the course of or as a consequence of any Pre-Closing Hazardous Substance
Activities, without regard to whether any health effect of the exposure has been
manifested as of the Closing Date; (v) the violation of any Environmental Laws
by the Seller with respect to the Aesthetic Business or any Subsidiary, or any
of their agents, employees, predecessors in interest, contractors, invitees or
licensees prior to the Closing Date or in connection with any Pre-Closing
Hazardous Substance Activities prior to the Closing Date; (vi) any actions or
proceedings brought or threatened by any third party with respect to any of the
foregoing; and (viii) any of the foregoing to the extent they continue after the
Closing Date.

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  (z)   “Solvent” means with respect to any Person on a particular date, that on
such date (i) the fair value of the property of such Person is greater than the
total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (iii) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person’s ability to pay such debts
and liabilities as they mature and (iv) such Person is not engaged in business
or a transaction, and is not about to engage in business or a transaction, for
which such Person’s property would constitute an unreasonably small capital. The
amount of contingent liabilities at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.

     The following additional terms are defined elsewhere in this Agreement, as
indicated below (whether in singular or plural form):
List of Defined Terms

         
AAA
    62  
Accounts Receivable
    2  
Acquisition Proposals
    43  
Adjusted Liabilities of the Subsidiaries
    8  
Adjusted Purchase Price
    9  
Administrative Services Agreement
    12  
Aesthetics Business
    1  
Aesthetics Devices
    1  
Agreement
    1  
Ancillary Agreements
    12  
Assigned Contracts
    2  
Assignment and Assumption Agreement
    12  
Assumed Liabilities
    6  
Assumed Service Contracts
    6  
Balance Sheet Items
    8  
Basket Amount
    60  
Benefit Plans
    25  
Business Customer
    34  
Cash of the Subsidiaries
    8  
Closing
    2  

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Closing Date
    2,11  
COBRA
    53  
Competing Product
    45  
Confidential Information
    39  
Consent
    16  
Consents
    16  
CPR
    62  
Disclosing Party
    39  
Disclosure Schedule
    13  
Dispute
    62  
Dispute Notice
    62  
Effective Time
    5  
Employee Agreement
    24  
Employee Plan
    24  
Employees
    51  
Environmental Laws
    32  
Environmental Permits
    32  
Equipment
    2  
Excluded Assets
    4  
Excluded Inventory
    4  
FDA
    20  
Final Closing Balance Sheet Item Amount
    7  
Final Closing Balance Sheet Item Statement
    10  
Final Subsidiary Closing Balance Sheet
    10  
Finished Goods Inventory
    2  
Firm
    9  
Former Real Property
    33  
Fraud Claims
    58  
Government Permits
    3  
Hazardous Substance Activities
    32  
Income Tax Liability of the Subsidiaries
    8  
Income Taxes
    32  
Indemnified Party
    59  
Indemnifying Party
    59  
Knowledge
    66  
Knowledge of Purchaser
    66  
Knowledge of Seller
    66  
Laserscope France
    3  
Laserscope UK
    3  
Law
    66  
Leased Real Property
    19  
Liabilities
    66  
Liability
    66  
LIBOR
    66  
License Agreement
    12  
Liens
    2  

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Loan Agreement
    50  
Material Adverse Effect
    66  
Maximum Amount
    60  
Medical Delivery Device
    46  
NOL Threshold
    31  
Non-Paying Party
    41  
Parent
    1  
Pelvic Health
    46  
Permitted Changes
    42  
Permitted Liens
    67  
Person
    67  
Personal Property Leases
    3  
Post-Closing Adjustment
    7  
Pre-Closing Hazardous Substance Activities
    67  
Pre-Closing Transactions
    4  
Pre-Existing Contamination
    67  
Prepaid Expenses
    3  
Proceedings
    22  
Product Supply Agreement
    12  
Product Warranty Claims
    67  
Property Taxes
    41  
Proposed Closing Balance Sheet Item Statement
    9  
Proposed Subsidiary Closing Balance Sheet
    9  
Purchase Price
    7  
Purchased Assets
    2  
Purchaser
    1  
Purchaser Disclosure Schedule
    35  
Purchaser Indemnified Party
    58  
Purchaser Rep Loss
    60  
Purchaser’s Knowledge
    66  
Purchaser’s Savings Plan
    52  
Real Estate Leases
    19  
Recipient
    39  
Registrable Securities
    48  
Required Consents
    11  
Restricted Laser Products
    46  
Retained Employees
    6  
Retained Liabilities
    6  
Returns
    30  
Scheduled Contracts
    23  
Securities Act
    34  
Seller
    1  
Seller Product
    67  
Seller’s Knowledge
    66  
Seller’s Retained Environmental Liabilities
    67  
Seller’s Welfare Benefit Plans
    52  

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Service Parts
    3  
Significant Supplier
    34  
Solvent
    68  
Stock Consideration
    7  
Straddle Period
    41  
Straddle Period Taxes
    41  
Subsidiaries
    3  
Subsidiary Balance Sheet Date
    17  
Subsidiary Balance Sheets
    17  
Subsidiary Closing Balance Sheet
    8  
Subsidiary Financial Statements
    17  
Tax
    31  
Tax Return
    32  
Taxes
    31  
Termination Date
    55  
Third Party Claim
    59  
Transfer Taxes
    40  
Transferred Employees
    51  
Transferred Equity Interests
    3  
Transferred Intellectual Property
    2  

ARTICLE 11
MISCELLANEOUS

11.1   Notices. All notices, requests, demands, claims and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given (a) if personally delivered,
when so delivered, (b) if given by facsimile, once such notice or other
communication is transmitted to the facsimile number specified below and
electronic confirmation is received; or (c) if sent through an overnight
delivery service in circumstances in which such service guarantees next day
delivery, the day following being so sent:

          If to Seller:

         
 
  To:   American Medical Systems, Inc.

 
      10700 Bren Road West

 
      Minnetonka, Minnesota 55343

 
      Attn: Chief Executive Officer

 
      Fax: (612) 930-6695

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With a copy to:
Oppenheimer Wolff & Donnelly LLP
3300 Plaza VII
45 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Thomas A. Letscher, Esq.
Fax: (612) 607-7100
If to Purchaser:

  To:   Iridex Corporation

1212 Terra Bella Avenue
Mountain View, CA 94043
Attn: Chief Executive Officer
Fax: (650) 940-4710
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Fax: (650) 493-6811
Attn: David J. Segre, Esq.
     Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.

11.2   Amendments; No Waivers.

  (a)   Subject to Applicable Law, any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by all parties hereto, or in the case of a
waiver, by the party against whom the waiver is to be effective.     (b)   No
waiver by a party of any default, misrepresentation or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent occurrence. No failure or delay by a party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.

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11.3   Expenses. Except as otherwise provided herein, all costs, fees and
expenses incurred in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and in closing and carrying out the
transactions contemplated hereby shall be paid by the party incurring such cost
or expense. This Section 11.3 shall survive the termination of this Agreement.

11.4   Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. No party hereto may assign either this Agreement or any of its rights,
interests or obligations hereunder, by operation of law or otherwise, without
the prior written approval of the other party.

11.5   Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of New York
(regardless of the laws that might otherwise govern under applicable principles
of conflicts of law).

11.6   Counterparts; Effectiveness. This Agreement may be signed in any number
of counterparts and the signatures delivered by facsimile, each of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement shall become effective when each
party hereto shall have received a counterpart hereof signed by the other
parties hereto.

11.7   Entire Agreement. This Agreement (including the Disclosure Schedule, all
Exhibits and Schedules and all other agreements referred to herein or therein
which are hereby incorporated by reference and the other agreements executed
simultaneously herewith) constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements,
understandings and negotiations, both written and oral, between the parties with
respect to the subject matter of this Agreement.

11.8   Captions. The captions herein are included for convenience of reference
only and shall be ignored in the construction or interpretation hereof. All
references to an Article or Section include all subparts thereof.

11.9   Severability. If any provision of this Agreement, or the application
thereof to any Person, place or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the remainder of
this Agreement and such provisions as applied to other Persons, places and
circumstances shall remain in full force and effect and the parties hereto shall
use diligent efforts to agree upon a substitute provision that is valid and
enforceable that reflects the original intent of the parties as nearly as
possible.

11.10   Construction. The parties hereto intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.

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11.11   Cumulative Remedies. Except to the extent expressly provided herein, the
rights, remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.

11.12   Third Party Beneficiaries. No provision of this Agreement shall create
any third party beneficiary rights in any Person, including any employee of
Purchaser or employee of Seller or any Affiliate thereof (including any
beneficiary or dependent thereof).

[Remainder of Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

            AMERICAN MEDICAL SYSTEMS, INC.
      By:   /s/ John Nealon         Name:   John Nealon        Title:   Senior
Vice President of Business Development        LASERSCOPE
      By:   /s/ John Nealon         Name:   John Nealon        Title:   Senior
Vice President of Business Development        IRIDEX CORPORATION
      By:   /s/ Barry G. Caldwell         Name:   Barry G. Caldwell       
Title:   President and CEO     

SIGNATURE PAGE
ASSET PURCHASE AGREEMENT

 

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EXHIBIT AND SCHEDULE INDEX

     
Exhibits
   
Exhibit 1.1(a)
  Equipment
Exhibit 1.1(c)
  Assigned Contracts
Exhibit 1.1(d)
  Transferred Intellectual Property
Exhibit 1.1(f)
  Governmental Permits
Exhibit 1.1(g)
  Personal Property Leases
Exhibit 1.3(a)(v)
  Assumed Service Contracts
Exhibit 1.7(a)(iii)
  License Agreement
Exhibit 1.7(a)(iv)
  Assignment and Assumption Agreement
Exhibit 1.7(a)(v)(A)
  Product Supply Agreement
Exhibit 1.7(a)(v)(B)
  Administrative Services Agreement
Exhibit 1.7(a)(vi)
  Consents
Exhibit 1.7(a)(vii)
  Form of Letter of Resignation
Exhibit 2.6(a)
  Unaudited Statement of Balance Sheet Items
Exhibit 2.6(b)
  Subsidiary Balance Sheets
 
   
Schedules
   
Schedule 1.1
  Transferred Subsidiary Assets
Schedule 1.5(a)
  Calculation of Balance Sheet Item Amount
Schedule 1.6
  Allocation of Purchase Price
Schedule 6.2
  List of Employees
Schedule 6.2(d)
  Vacation Balances for Transferred Employees
Schedule 8.2
  Specifically Indemnified Matters by Parent and Seller