EXHIBIT 10.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN MEDICAL SYSTEMS, INC.
XENON MERGER CORP.
SOLARANT MEDICAL, INC.
AND
THE OTHER PARTIES HERETO
DATED AS OF MAY 8, 2006

 

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AGREEMENT AND PLAN OF MERGER
     THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of May 8,
2006, is entered into by and among American Medical Systems, Inc., a Delaware
corporation (“Parent”), Xenon Merger Corp., a Delaware corporation and a wholly
owned subsidiary of Parent (“Merger Subsidiary”), Solarant Medical, Inc., a
Delaware corporation (“Company”), and Warburg Pincus Equity Partners, L.P. as
Stockholders’ Representative (“Stockholders’ Representative”).
     WHEREAS, the Board of Directors of each of the Company, Parent and Merger
Subsidiary have (i) determined that the Merger (as defined below) is fair and in
the best interests of their respective stockholders and (ii) approved the Merger
of Merger Subsidiary with and into the Company, with the Company surviving, in
accordance with the terms and conditions of this Agreement.
     WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
     NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Parent, Merger Subsidiary, and the
Stockholders’ Representative hereby agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES

1.1   The Merger. At the Effective Time (as defined below) and upon the terms
and subject to the conditions of this Agreement and in accordance with the
Delaware General Corporation Law (the “DGCL”), Merger Subsidiary shall be merged
with and into the Company, and, following the merger, the Company shall continue
as the surviving corporation (the “Surviving Corporation”), the separate
corporate existence of Merger Subsidiary shall cease and the Surviving
Corporation shall continue to be governed by the laws of the State of Delaware
(the “Merger”).   1.2   Effective Time. Subject to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined below) the Company and
Merger Subsidiary will file, or cause to be filed, with the Secretary of State
of the State of Delaware a Certificate of Merger, in the form as required by,
and executed and acknowledged in accordance with, the applicable provisions of
the DGCL, and substantially in the form attached hereto as Exhibit A (the
“Certificate of Merger”). The Merger shall become effective at 3:00 p.m. Central
Standard Time on the date the Certificate of Merger is filed or, if agreed to by
the Parent and the Company, such later date or time set forth in the Certificate
of Merger (the “Effective Time”).

 

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1.3   Closing of the Merger.

  (a)   The closing of the Merger (the “Closing”) will take place on the date
hereof (the “Closing Date”), at 10:00 a.m., local time, at the offices of
Oppenheimer, Wolff & Donnelly LLP, 45 South Seventh Street, Suite 3300,
Minneapolis, Minnesota 55402, unless another time, date, place or manner (e.g.,
by facsimile exchange of signature pages with originals to follow by overnight
delivery) is agreed to in writing by the parties hereto.     (b)   At the
Closing:

  (i)   Parent shall deliver the Net Initial Merger Consideration, if any, to
the Paying Agent and the Escrow Funds to the Escrow Agent.     (ii)   The
Company shall deliver to Parent copies of the Amended and Restated Certificate
of Incorporation of the Company certified by the Secretary of State of the State
of Delaware; and Certificates of Good Standing (or their equivalent) from the
Secretary of State of each other state in which the Company is required to be
qualified to do business.     (iii)   Parent, the Company, the Stockholders’
Representative and Escrow Agent shall execute and deliver the Escrow Agreement,
in substantially the form attached hereto as Exhibit B (the “Escrow Agreement”).
    (iv)   Parent, the Stockholders’ Representative and Payment Agent shall
execute and deliver the Payment Agreement, in substantially the form attached
hereto as Exhibit C (the “Payment Agreement”).     (v)   The Company shall
deliver to Parent an opinion from Cooley Godward LLP, counsel to the Company,
dated the Closing Date, in substantially the form attached hereto as Exhibit D.
    (vi)   The Company shall deliver to Parent an opinion from Willkie Farr &
Gallagher LLP, counsel to Warburg Pincus Equity Partners, L.P., dated the
Closing Date, in substantially the form attached hereto as Exhibit E.     (vii)
  Parent shall deliver to the Company an opinion from Oppenheimer Wolff &
Donnelly LLP, counsel to Parent, dated the Closing Date, in substantially the
form of Exhibit F.     (viii)   The Company shall deliver to Parent the
resolutions of the Company’s Board of Directors and the Stockholders authorizing
the execution, delivery and performance of this Agreement and the Company
Documents, and the transactions contemplated hereby and thereby, certified by an
officer of the Company and dated as of the Closing Date.     (ix)   The Company
shall deliver copies of all approvals, consents, waivers of third parties, or
any notices thereto, set forth on Schedule 1.3(b).

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  (x)   Parent and Merger Subsidiary shall deliver to the Company the
resolutions of their respective Boards of Directors and the resolutions of
Parent, as the sole stockholder of Merger Subsidiary, authorizing the execution,
delivery and performance by them of this Agreement and the Parent Documents, and
the transactions contemplated hereby and thereby, each certified by an officer
of Parent and Merger Subsidiary, respectively, and dated as of the Closing Date.
    (xi)   Each officer and director of the Company shall deliver to Parent
Letters of Resignation and Release of Claims, in substantially the form attached
hereto as Exhibit G, dated effective as of the Effective Time.     (xii)   Each
of Ed Luttich, Oren Mosher, Abdul Tayeb and Bee Pongbandith shall have accepted
Parent’s offers of employment and executed Parent’s standard agreement for
at-will employees regarding confidentiality, assignment of inventions and
non-competition.     (xiii)   Mike Gandy shall execute and deliver to Parent a
consulting agreement with the Company, in substantially the form attached hereto
as Exhibit H.     (xiv)   Each of Terry Spraker, Cheryl Shimek and Mike Gandy
(collectively, the “Terminated Employees”), shall execute and deliver
documentation reasonably satisfactory to Parent terminating their respective
employment with the Company, effective as of the Closing Date.

1.4   Effects of the Merger. The Merger shall have the effects set forth in the
DGCL. Without limiting the generality of the foregoing and subject thereto, at
the Effective Time all the properties, rights, privileges, powers and franchises
of the Company and Merger Subsidiary shall vest in the Surviving Corporation and
all debts, liabilities and duties of the Company and Merger Subsidiary shall
become the debts, liabilities and duties of the Surviving Corporation.   1.5  
Certificate of Incorporation of the Surviving Corporation. The form of
Certificate of Incorporation of Merger Subsidiary, as amended, attached hereto
as Exhibit I, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter further amended in accordance with Applicable Law,
except that the name of the Surviving Corporation shall be Solarant Medical,
Inc.   1.6   Bylaws of the Surviving Corporation. The Bylaws of Merger
Subsidiary as in effect immediately prior to the Effective Time shall be the
Bylaws of the Surviving Corporation until thereafter amended in accordance with
Applicable Law, except that the name of the Surviving Corporation shall be
Solarant Medical, Inc.   1.7   Directors and Officers of the Surviving
Corporation. The directors and officers of Merger Subsidiary immediately prior
to the Effective Time shall be the directors and officers respectively, of the
Surviving Corporation until their respective successors shall be duly elected
and qualified.

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1.8   Initial Merger Consideration. Subject to Section 1.11 (Dissenting Shares)
and Section 5.6 (Right of Set-Off), Parent shall pay as consideration for the
Merger the amounts set forth in this Section 1.8 and Section 1.9.

  (a)   At Closing, Parent shall pay One Million Dollars ($1,000,000) (the
“Initial Payment”) minus (i) the amount of all Liabilities of the Company
(exclusive, however, of the Lease Liabilities and any liabilities set forth on
Schedule 1.8(a)) outstanding as of the Closing (including, without limitation,
any and all Transaction Expenses) (the “Company Liabilities”), and (ii) the
amount of consideration that would have been payable to Dissenting Stockholders
who would be entitled to receive a portion of the Initial Payment if they have
perfected their rights as Dissenting Stockholders as of the Closing Date (the
Initial Payment as so adjusted, the “Initial Merger Consideration”), which shall
be paid by Parent to the Persons and in the amounts as follows: (x) One Hundred
Thousand Dollars ($100,000) (the “Escrow Funds”) to the Escrow Agent to be held
in escrow to secure any indemnification obligation of the Stockholders under
Section 5.2; and (y) the balance of the Initial Merger Consideration to the
Payment Agent for distribution in accordance with Schedule 1.8(b) and the terms
of the Payment Agreement (any portion of the Initial Merger Consideration in
excess of the Escrow Funds payable to the Stockholders is sometimes referred to
herein as the “Net Initial Merger Consideration”). Prior to the Closing, the
Company shall prepare and deliver to Parent a balance sheet of the Company dated
as of the Closing Date which discloses all the Company Liabilities (the “Closing
Date Balance Sheet”), a copy of which is attached hereto as Schedule 1.8(c). The
Closing Date Balance Sheet shall be prepared in accordance with GAAP (subject to
the absence of footnote disclosures and changes resulting from normal year-end
adjustments, but including supporting account detail for all balance sheet
accounts) and consistent with and using the same methods, procedures,
assumptions and adjustments employed on the Latest Balance Sheet.     (b)   The
Escrow Funds shall not be distributed until six (6) months after the Effective
Time and shall only be distributed in accordance with the terms and conditions
of the Escrow Agreement. In the event that Parent shall have timely given a
notice of a claim for indemnification pursuant to Article 5, prior to the
expiration of such six-month period, the Stockholders’ Representative and the
Parent shall endeavor in good faith to determine a reasonable estimate of the
maximum amount of such claim and shall instruct the Escrow Agent to deliver any
excess amount of Escrow Funds to the Payment Agent for distribution in
accordance with the Escrow Agreement.

1.9   Contingent Merger Consideration. As additional consideration for the
Merger and subject to the conditions set forth in this Section 1.9, Section 1.11
(Dissenting Shares) and Section 5.6 (Right of Set-Off), Parent shall make the
following additional payments (collectively, the “Contingent Merger
Consideration” and, together with the Initial Merger Consideration, the “Merger
Consideration”) to the Payment Agent for distribution in accordance with
Schedule 1.8(b):

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  (a)   Milestone Payments.

  (i)   If Parent achieves the Hospital CPT Code Milestone, Parent shall pay, in
accordance with Schedule 1.8(b), an additional Two Million Dollars ($2,000,000)
within 45 days after the achievement of the Hospital CPT Code Milestone (the
“Hospital CPT Code Milestone Payment”).     (ii)   If Parent achieves the Office
CPT Code Milestone, Parent shall pay, in accordance with Schedule 1.8(b), an
additional Four Million Dollars ($4,000,000) within 45 days after the
achievement of the Office CPT Code Milestone (the “Office CPT Code Milestone
Payment”).     (iii)   Parent shall pay, in accordance with Schedule 1.8(b), an
amount equal to the difference between Six Million Dollars ($6,000,000), minus
the amount of any Hospital CPT Code Milestone Payment or Office CPT Code
Milestone Payment already paid if: (A) the Product has been approved for
marketing or sale in the United States by the FDA; and (B) an Office CPT code
that covers the Product has been issued; and (C) Parent has elected to
commercialize the Product (the “Commercialization Milestone Payment” and
together with the Hospital CPT Code Milestone Payment and the Office CPT Code
Milestone Payment, the “Milestone Payments”).     (iv)   In no event shall the
aggregate amount payable by Parent in accordance with Section 1.9(a)(i),
Section 1.9(a)(ii) and Section 1.9(a)(iii) exceed six million dollars
($6,000,000).

  (b)   Revenue Payments.

  (i)   Upon the earlier to occur of: (A) the achievement of either: (1) the
Commercialization Milestone Payment; or (2) the Hospital CPT Code Milestone
Payment and the Office CPT Code Milestone Payment, or (B) the date of written
notice from the Stockholders’ Representative that it would like the revenue
payments to commence (the “Revenue Payment Commencement Date”), Parent shall
make the following additional payments:

(1) An amount equal to the excess, if any, of Net Sales during the first
calendar year following the calendar year in which the Revenue Payment
Commencement Date occurs (“Year One”) over Net Sales during the calendar year in
which the Revenue Payment Commencement Date occurs (“Year Zero”) (the “First
Revenue Payment”);
(2) An amount equal to one-half (1/2) times the excess, if any, of Net Sales
during the calendar year following Year One (“Year

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Two”) over Net Sales in Year One (the “Second Revenue Payment”); and
(3) An amount equal to one-half (1/2) times the excess, if any, of Net Sales
during the calendar year following Year Two (“Year Three”) over Net Sales in
Year Two (the “Third Revenue Payment” and, together with the First Revenue
Payment and the Second Revenue Payment, the “Revenue Payments”).

  (ii)   Parent shall deliver to the Stockholders’ Representative, no later than
sixty (60) days following the last day of each of Year Zero, Year One, Year Two
and Year Three a statement, with reasonable detail and accompanied by detailed
schedules and work papers providing reasonable support for such determination,
reflecting Parent’s calculation of Net Sales during such applicable twelve-month
period (each a “Revenue Calculation”). The Stockholders’ Representative shall
not distribute these statements to any Person. Each Revenue Calculation will be
deemed to be accepted by the Stockholders’ Representative and shall be
conclusive for purposes of determining the applicable Revenue Calculation,
unless the Stockholders’ Representative shall have delivered to Parent within
fifteen (15) days following delivery of a Revenue Calculation a written
statement objecting to any of the information contained in the applicable
Revenue Calculation, specifying in reasonable detail the amount in dispute and
accompanied by detailed schedules and work papers providing reasonable support
for such determination.     (iii)   The Stockholders’ Representative may cause
an audit to be made of those books and records of Parent that are necessary to
review and audit the statements delivered pursuant to Section 1.9(b)(ii) and
created in connection with each applicable Revenue Calculation. Any such audit
shall be conducted only by an independent certified accountant selected by the
Stockholders’ Representative and reasonably acceptable to Parent, after prior
written notice to Parent, and shall be conducted during regular business hours
at Parent’s offices and in such a manner so as not to interfere with Parent’s
normal business activities. Parent agrees to permit such accountant, during
normal business hours, to have reasonable access to, and to examine and make
copies of, those books and records of Parent that such accountant, in his or her
sole discretion, deems necessary to review and audit the applicable Revenue
Calculation. Neither the Stockholders’ Representative nor such accountant will
have the right to review or audit any other books and records of Parent. In no
event shall more than one audit be conducted, nor shall the records supporting
any statements be audited more than once for the same purpose. In the event any
such audit reveals any discrepancy less than five percent

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      (5%) of the Net Sales for the period audited, the Stockholders shall pay
for the reasonable third party costs and expenses of such audit. In the event
any such audit reveals any discrepancy greater than or equal to five percent
(5%) of the Net Sales for the period audited, Parent shall pay for the
reasonable third party costs and expenses of such audit.     (iv)   Subject to
Section 5.6 (Right of Set-Off), within fifteen (15) days following final
determination of the applicable Revenue Calculation pursuant to
Section 1.9(b)(iii), Parent shall pay the applicable Revenue Payment, if any,
owed hereunder to the Payment Agent for distribution in accordance with
Schedule 1.8(b).     (v)   Not more than two (2) times per any twelve month
period prior to the Revenue Commencement Date, Stockholders’ Representative may
deliver written notice to Parent requesting documentation regarding the status
of Parent’s then current efforts, if any, to commercialize the Product.

  (c)   Development Period Contingency Payment. In the event that (i) Parent
achieves the Office CPT Code Milestone, and (ii) the Parent and its Affiliates
incur Product Development Expenses during the Development Period (as defined
below) less than Fourteen Million Dollars ($14,000,000), then Parent shall pay
an amount equal to fifty percent (50%) of the difference between Sixteen Million
Dollars ($16,000,000) and the aggregate amount of Product Development Expenses
paid by the Parent and its Affiliates during the Development Period (the
“Development Period Contingency Payment”), in accordance with Schedule 1.8(b).
For the avoidance of doubt, no Development Period Contingency Payment shall be
made if (i) Parent does not achieve the Office CPT Code Milestone or (ii) Parent
and its Affiliates spend more than Fourteen Million Dollars ($14,000,000) on
Product Development Expenses during the Development Period. For purposes
hereunder, “Development Period” shall mean the period from Closing Date through
the end of the calendar year in which the Parent achieves the Office CPT Code
Milestone.     (d)   Contingent Payments Not Certain. Each of Parent, the
Company, the Principal Stockholders, and the Stockholders’ Representative hereby
acknowledges that (i) the achievement of either or both of the Milestones and
the amount of Net Sales, if any, that Parent and its Affiliates may generate is
uncertain, (ii) Parent and its Affiliates may elect not to pursue either or both
of the Milestones, may not achieve either or both of the Milestones and may not
generate any Net Sales, and (iii) it is therefore not assured that Parent will
be required to make any Milestone Payments or Revenue Payments for any
particular year, or at all. Each of Parent, the Company, the Principal
Stockholders, and the Stockholders’ Representative further acknowledges that
Parent will not be required to make any Milestone Payments if Parent elects not
to pursue the Milestones and the AMA subsequently issues a Hospital CPT Code or
an Office CPT Code as a result of the efforts of third parties that could be
used to seek reimbursement for procedures using the Products. Parent shall
notify the Stockholders’ Representative in writing if Parent elects not to
pursue the Milestones.     (e)   Sale of Product. If during the period from the
Effective Time and ending on the earlier of (i) five (5) years following the
Effective Time or (ii) the payment of the

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      first Milestone Payment, Parent shall sell all or substantially all of the
rights related to the Product (including the Intellectual Property related to
the Product) to a Person other than an Affiliate of Parent, then Parent shall
pay the Stockholders in accordance with Schedule 1.8(b) an amount equal to fifty
percent (50%) of (x) the amount of all cash proceeds received by Parent from the
sale of such rights minus (y) all fees and expenses incurred by or on behalf of
Parent in connection with the negotiation and consummation of such sale that are
payable to a third party (including, without limitation, all legal, accounting,
financial advisory, investment banking, consulting and all other fees and
expenses of third parties); provided, however, the foregoing shall not apply in
case of a Change in Control of American Medical Systems Holdings, Inc., a
Delaware corporation and the parent corporation of Parent (“AMS Holdings”), or
the sale of a product line of Parent or an Affiliate of Parent that includes the
rights to the Product, such that the acquiring entity assumes all of the
Parent’s obligations under this Section 1.9 of the Agreement.

1.10   Cancellation and Conversion of Company Securities at the Effective Time.
As of the Effective Time, by virtue of the Merger and without any action on the
part of any holder of any share of capital stock of the Company or Merger
Subsidiary:

  (a)   Subject to the terms and conditions hereof, each share of Company Common
Stock, Series A-1 Stock, Series A-2 Stock, Series A-3 Stock, Series B Stock,
Series C Stock, Series D Stock, Company Stock Options and Company Warrants
(collectively, the “Junior Company Securities”), issued and outstanding
immediately prior to the Effective Time (other than (i) Junior Company
Securities held in the Company’s treasury, (ii) Junior Company Securities held
by Parent, Merger Subsidiary or any other Subsidiary of Parent, and
(iii) Dissenting Shares) shall receive $0.00 for each such share of Junior
Company Securities and shall be cancelled without consideration therefore.    
(b)   Subject to the terms and conditions hereof, each share of Series E-1
Preferred Stock, Series F-1 Preferred Stock and Series G-1 Preferred Stock
(collectively, the “Senior Stock”), issued and outstanding immediately prior to
the Effective Time (other than (i) Senior Stock held in the Company’s treasury,
(ii) Senior Stock held by Parent, Merger Subsidiary or any other Subsidiary of
Parent, and (iii) Dissenting Shares) shall automatically be converted into the
right to receive the amounts set forth on Schedule 1.8(b).     (c)   Each share
of the common stock, par value $.01 per share, of Merger Subsidiary (“Merger
Subsidiary Common Stock”), issued and outstanding at the Effective Time of the
Merger shall be converted into one (1) share of common stock, par value $.01 per
share, of the Surviving Corporation (“Surviving Corporation Common Stock”).    
(d)   Each share of Junior Company Securities and Senior Stock held in the
treasury of the Company and each share of Junior Company Securities and Senior
Stock held by Parent, Merger Subsidiary or any Subsidiary of Parent, Merger
Subsidiary or

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      the Company immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of Merger Subsidiary, the Company or
the holder thereof, be canceled, retired and cease to exist without payment of
any consideration therefore and without any conversion thereof.

1.11   Dissenting Shares.

  (a)   Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Capital Stock issued and outstanding immediately prior to the
Effective Time that are held by any holder of shares of Company Capital Stock
that has not voted in favor of the Merger (if entitled to vote) and has properly
exercised and perfected appraisal rights in accordance with either Section 262
et. Seq. of DGCL or Section 1300 et. Seq. of the California Corporations Code
(the “CCC”) (such holders are referred to as “Dissenting Stockholders” and such
shares are referred to as “Dissenting Shares”) will not be converted into the
right to receive the Merger Consideration, but will become entitled to the right
to receive such consideration as may be determined to be due to the holders of
such Dissenting Shares pursuant to the DGCL or CCC; provided, however, that any
holder of Dissenting Shares who will have failed to perfect or who effectively
will have withdrawn or lost such rights of appraisal under the DGCL or CCC will
forfeit the right to appraisal of such shares of Company Capital Stock, and such
shares of Company Capital Stock will no longer be Dissenting Shares and, as of
the later of the Effective Time or the loss of such status, will be deemed to
have been converted into the right to receive the Merger Consideration.     (b)
  The Company will give Parent and Merger Subsidiary prompt notice of any
written demands for appraisal, withdrawals of demands for appraisal and any
other related instruments received by the Company and Parent will have the right
to participate in all negotiations and proceedings with respect to such demands.
Prior to the Effective Time, the Company will not, except with the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such demands other than by operation of law or pursuant to a final
order of a court of competent jurisdiction. Notwithstanding anything to the
contrary in this Section 1.11 if (i) the Merger is terminated, rescinded or
abandoned or (ii) if the Stockholders revoke the authority to effect the Merger,
then the right of any Stockholder to be paid the fair value of such
Stockholder’s shares of Company Capital Stock will cease. The Surviving
Corporation will comply with all obligations of the DGCL or CCC with respect to
Dissenting Stockholders.

1.12   Escrow Procedure; Exchange of Certificates.

  (a)   The Company, the Stockholders’ Representative, Parent and the Payment
Agent shall enter into the Payment Agreement, and Parent, Stockholders’
Representative and the Escrow Agent shall enter into the Escrow Agreement, for
the benefit of the holders of Senior Stock for the purpose of paying the Merger
Consideration upon surrender of certificates which immediately prior to the
Effective Time

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      represented Senior Stock (in either case, the “Certificates”) and for the
purpose of securing any indemnification obligation of the Stockholders under
Section 5.2.     (b)   At the Closing, Parent shall deposit, or shall cause to
be deposited, with the Payment Agent pursuant to the Payment Agreement, for the
benefit of the Stockholders, cash in U.S. dollars in an amount equal to the Net
Initial Merger Consideration.     (c)   To the extent that sums are released by
the Payment Agent or the Escrow Agent to the Stockholders or the Parent in
accordance with this Agreement, the Escrow Agreement or the Payment Agreement,
any accumulated interest shall be distributed in accordance with the Payment
Agreement or the Escrow Agreement, as the case may be.     (d)   As soon as
reasonably practicable after the Effective Time, the Payment Agent shall mail to
each holder of record of Certificates: (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Payment
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for a cash payment of the proper
Merger Consideration when and if it becomes payable under this Agreement, the
Payment Agreement or the Escrow Agreement. Upon surrender of a Certificate for
cancellation to the Payment Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange therfor
by check or wire transfer, as the case may be, an amount equal to the proper
Merger Consideration when and if it becomes payable under this Agreement, the
Payment Agreement or the Escrow Agreement, and the Certificate so surrendered
shall forthwith be canceled. No interest shall be paid or accrued on any Merger
Consideration upon the surrender of any Certificates. In the event of a transfer
of ownership of Senior Stock which is not registered in the transfer records of
the Company, payment of the proper Merger Consideration when and if it becomes
payable under this Agreement may be paid to a transferee if the Certificate
representing such Senior Stock, as applicable, is presented to the Payment
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer or other taxes
required as a result of such payment to a Person other than the registered
holder of such shares have been paid. Until surrendered and exchanged as
contemplated by this Section 1.12, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender an amount equal to the proper Merger Consideration when and if it
becomes payable under this Agreement, the Payment Agreement or the Escrow
Agreement.     (e)   In the event that any Certificate shall have been lost,
stolen or destroyed, the Payment Agent will, upon the making of an affidavit of
that fact by the holder claiming such Certificate to have been lost, stolen or
destroyed, pay the proper

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      Merger Consideration as would be required pursuant to this Agreement but
for the failure to deliver such Certificate to the Payment Agent; provided,
however, that the Surviving Corporation may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificate to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against the
Surviving Corporation with respect to the Certificate alleged to have been lost,
stolen or destroyed.     (f)   The Merger Consideration paid upon the surrender
of Certificates for exchange of Senior Stock in accordance with the terms hereof
shall be deemed to have been paid in full satisfaction of all rights pertaining
to such Senior Stock. After the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the Company Common Stock or Company Preferred Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 1, except as
otherwise provided by Applicable Law.     (g)   Notwithstanding Section 1.12(d),
neither the Surviving Corporation nor Parent shall be liable to any holder of
Senior Stock for any Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.     (h)  
To the extent permitted by Applicable Law, any amounts of Merger Consideration,
including any Escrow Funds and any set-off amounts pursuant to Section 5.6,
remaining unclaimed by any holder of Senior Stock at the time the Escrow
Agreement and Payment Agreement are terminated in accordance with their
respective terms (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any governmental
entity) shall be delivered to Parent and shall become the property of the
Parent, subject to the rights of any such Stockholder to claim such amounts from
Parent.

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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
     As a material inducement to Parent and Merger Subsidiary to enter into this
Agreement, with the understanding that Parent and Merger Subsidiary will be
relying thereon in consummating the transactions contemplated hereunder, the
Company hereby represents and warrants to Parent and Merger Subsidiary that,
except as set forth in the Disclosure Schedule delivered by the Company to
Parent and Merger Subsidiary on the date hereof (the “Disclosure Schedule”), the
statements contained in this Article 2 are true and correct. The Disclosure
Schedule is arranged in sections corresponding to the sections and subsections
of this Article 2, and disclosure in one section of the Disclosure Schedule
shall constitute disclosure for all sections of the Disclosure Schedule as
though fully set forth in such other sections (whether or not specific
cross-references are made) only to the extent to which the applicability of such
disclosure is reasonably apparent.

2.1   Corporate Organization and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction 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 the Company as now owned, leased and operated. The Company 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 the Company or the nature of
the business conducted by the Company 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 on the Company. The Company has heretofore delivered to
Parent complete and accurate copies of its Certificate of Incorporation and
Bylaws, as currently in effect. The Disclosure Schedule contains a list of all
jurisdictions in which the Company is qualified or licensed to do business.  
2.2   Subsidiaries. The Company does not have and has never had any
Subsidiaries. The Company does not, directly or indirectly, own or control, or
have any capital, equity, partnership, participation or other ownership interest
in, any corporation, partnership, joint venture or other business association or
entity.   2.3   Authorization. The Company has the full corporate power and
authority to enter into this Agreement and each other agreement, document,
instrument or certificate contemplated by this Agreement or to be executed by
the Company in connection with the consummation of the transactions contemplated
by this Agreement (the “Company Documents”), and subject to obtaining the
necessary approval of its stockholders with respect to the Merger, to carry out
the transactions contemplated herein. The Board of Directors and Stockholders of
the Company have taken all action required by law, the Company’s Amended and
Restated Certificate of Incorporation and Bylaws and otherwise to duly and
validly authorize and approve the execution, delivery and performance by the
Company of this Agreement and the Company Documents and the consummation by the
Company of the transactions contemplated herein and therein and

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    no other corporate proceedings on the part of the Company are, or will be,
necessary to authorize this Agreement or the Company Documents or to consummate
the transactions contemplated hereby or thereby. The affirmative vote of holders
of at least: (i) a majority of the outstanding shares of Company Capital Stock,
voting together as a class; (ii) a majority of the outstanding shares of
Series D Stock, voting separately as a class, (iii) a majority of the
outstanding shares of Series E-1 Stock, voting separately as a class, (iv) a
majority of the outstanding shares of Series F-1 Stock, voting separately as a
class, (v) a majority of the outstanding shares of Series G-1 Stock, voting
separately as a class, and (vi) a majority of the outstanding shares of Company
Common Stock, voting separately as a class, are the only votes of the holders of
any class or series of the Company’s Capital Stock necessary to approve and
adopt this Agreement and the Company Documents and to consummate the Merger.
This Agreement and each of the Company Documents has been, duly and validly
executed and delivered by the Company and constitutes the legal, valid and
binding obligations of the Company, 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.   2.4  
Capitalization of the Company. The Company has authorized 110,000,000 shares of
capital stock, which consists of (a) 75,000,000 shares of Company Common Stock,
3,648,448 shares of which are issued and outstanding; and (b) 35,000,000 shares
of Company Preferred Stock, which is designated as follows: (i) 3,000,000 shares
of Series A-1 Stock, 2,537,500 shares of which are issued and outstanding,
(ii) 2,500,000 shares of Series A-2 Stock, 2,196,666 shares of which are issued
and outstanding, (iii) 1,500,000 shares of Series A-3 Stock, 1,042,778 shares of
which are issued and outstanding, (iv) 5,500,000 shares of Series B Stock,
4,911,294 shares of which are issued and outstanding, (v) 2,500,000 shares of
Series C Stock, 2,046,979 shares of which are issued and outstanding,
(vi) 11,000,000 shares of Series D Stock, 10,416,666 shares of which are issued
and outstanding, (vii) 115,000 shares of Series E-1 Stock, 121,587.7367 shares
of which are issued and outstanding, (viii) 70,000 shares of Series F-1 Stock,
68,250.8509 shares of which are issued and outstanding, (ix) 40,000 shares of
Series G-1 Stock, 33,598.8781 shares of which are issued and outstanding and
(x) 8,775,000 shares of which are undesignated and not outstanding. All of the
issued and outstanding shares of Company Capital Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. All
issued and outstanding shares of Company Capital Stock are owned (of record)
solely by the Stockholders in the exact amounts as set forth in the Disclosure
Schedule. There are 1,498,731 shares of Company Common Stock reserved for future
issuance pursuant to (y) Company Stock Option Plans, 2,772,646 shares subject to
outstanding Company Stock Options and 0 shares subject to Company Restricted
Stock and (z) 8,264,390 shares of Company Common Stock subject to outstanding
Company Warrants and 377,952 shares of Series B Stock subject to outstanding
Company Warrants. There are no other outstanding Company Securities. There are
no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any Company Securities. There are no stockholder agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of the Company.

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2.5   Non-Contravention. None of the execution, delivery and performance by the
Company of this Agreement or the Company Documents or the consummation of the
transactions contemplated herein or therein will (i) contravene or conflict with
the Amended and Restated Certificate of Incorporation or Bylaws of the Company,
(ii) contravene or conflict with or constitute a violation of any provision of
any Applicable Law binding upon or applicable to the Company or any of the
Company’s assets, (iii) result in the creation or imposition of any Lien on any
of the Company’s assets, other than Permitted Liens, (iv) 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 material 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 (including, without limitation, the Coopers Agreement),
franchise, permit, instrument or other agreement or obligation to which the
Company is a party, or by which any of their respective properties or assets may
be bound, or (v) conflict with, or result in any violation of, any order,
injunction, judgment, decree, ruling, writ, assessment or arbitration award of
any Governmental Authority applicable to the Company or by which any of the
properties or assets of the Company are bound, other than, in the case of
clauses (ii), (iii), (iv) or (v), where such conflicts or other occurrences
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.   2.6   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 Governmental Authority, is required in connection with the execution,
delivery or performance of this Agreement or the Company Documents by the
Company or the consummation by the Company of the transactions contemplated
herein, other than the requirements of the DGCL for filing of appropriate
documents to effect the Merger. The Company is the “acquired person” within the
meaning of Rule 801.2(b) promulgated pursuant to the HSR Act and does not within
the meaning of Rule 801.1 of the HSR Act directly or indirectly control (as
defined in Rule 801.1(b)) any entities, trusts, partnerships or other business
organizations. The Company had total assets as of the date of its last regularly
prepared balance sheet (as determined in accordance with Rule 801.11 of the HSR
Act) of less than Eleven Million Three Hundred Thousand Dollars ($11,300,000)
and annual net sales for its most recent fiscal year (as determined in
accordance with Rule 801.11 of the HSR Act) of less than Eleven Million Three
Hundred Thousand Dollars ($11,300,000). There are no facts relating to the
identity or circumstances of the Company that would prevent or materially delay
obtaining any of the Consents.   2.7   Financial Statements; Undisclosed
Liabilities.

  (a)   The Company has delivered to Parent copies of (i) the unaudited
consolidated balance sheet, as of March 31, 2006 of the Company (the “Latest
Balance Sheet”) and the unaudited consolidated statements of income and cash
flows of the Company for the three-month period ended March 31, 2006 (such
statements of income and cash flows and the Latest Balance Sheet being herein
referred to as

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      the “Latest Financial Statements”), (ii) the audited consolidated balance
sheet, as of December 31, 2003, of the Company and the audited consolidated
statements of income and cash flows of the Company for each of the year ended
December 31, 2003 (collectively, the “Audited Annual Financial Statements”), and
(iii) the unaudited consolidated balance sheet as of December 31, 2004 and 2005
of the Company and the unaudited consolidated statements of income and cash
flows of the Company for the years ended December 31, 2004 and 2005
(collectively, the “Unaudited Annual Financial Statements” and together with the
Audited Annual Financial Statements, the “Annual Financial Statements”). The
Latest Financial Statements and the Annual Financial Statements are based upon
the information contained in the books and records of the Company and fairly
present the financial condition of the Company as of the dates thereof and
results of operations for the periods referred to therein. The Annual Financial
Statements have been prepared in accordance with GAAP, consistently applied. The
Latest Financial Statements have been prepared in accordance with GAAP
applicable to unaudited interim financial statements (and thus may not contain
all notes and may not contain prior period comparative data which are required
for compliance with GAAP), consistently with the Annual Financial Statements,
and reflect all adjustments necessary to a fair statement of the financial
condition and results of operations for the interim periods presented. The
Company’s internal controls and procedures are sufficient to ensure, and have in
fact ensured, that the Latest Financial Statements, the Annual Financial
Statements and the Closing Balance Sheet are accurate in all material respects.
    (b)   All accounts, books and ledgers related to the business of the Company
are properly kept, are complete in all material respects, and there are no
material inaccuracies or discrepancies contained or reflected therein. The
Company does not have any of its records, systems, controls, data, or
information recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership (excluding
licensed software programs) and direct control of the Company.     (c)   Except
as and to the extent reflected in the Closing Balance Sheet, the Company does
not have any Liabilities of any nature (whether accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due, whether known or
unknown, and regardless of when asserted) arising out of transactions or events
heretofore entered into, or any action or inaction, or any state of facts
existing, with respect to or based upon transactions or events heretofore
occurring, including, without limitation, any Liabilities arising out of or
related to the Coopers Agreement.

2.8   Absence of Certain Changes. Except as otherwise authorized by this
Agreement, since December 31, 2005, the Company has owned and operated its
assets, properties and businesses in the Ordinary Course of Business and there
has not been:

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  (a)   any change, effect, event, occurrence, state of facts or development
that individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect;     (b)   failure to pay or perform, or delay
in payment or performance of, any material obligation by the Company (other than
an obligation being contested or which the Company intends to contest in good
faith by appropriate proceedings, in either event, for which the Company has
established adequate reserves which are reflected in the Latest Financial
Statements);     (c)   any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company, or any repurchase, redemption or other acquisition by the Company of
any outstanding shares of capital stock or other equity or debt securities of,
or other ownership interests in, the Company;     (d)   any split, combination
or reclassification of any of its capital stock;     (e)   any amendment of any
provision of the Amended and Restated Certificate of Incorporation, Bylaws or
other governing documents of, or of any material term of any outstanding
security issued by, the Company;     (f)   any incurrence, assumption or
guarantee by the Company of any indebtedness for borrowed money;     (g)   any
change in any method of accounting or accounting practice by the Company, except
for any such change required by reason of a change in GAAP and concurred with by
the Company’s independent public accountants;     (h)   issuance of any equity
or debt securities of the Company other than pursuant to the Company Stock
Option Plans, Company Stock Options or Company Warrants in the Ordinary Course
of Business;     (i)   acquisition or disposition of assets material to the
Company, taken as a whole, except for sales of inventory in the Ordinary Course
of Business, any acquisition or disposition of capital stock of any third party,
or any merger or consolidation with any third party, by the Company;     (j)  
any creation or assumption by the Company of any Lien;     (k)   any individual
capital expenditure (or series of related capital expenditures) either involving
more than Ten Thousand Dollars ($10,000) or outside the Ordinary Course of
Business;     (l)   any material damage, destruction or loss (whether or not
covered by insurance) from fire or other casualty to its tangible property;

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  (m)   any material increase in the base salary of any officer or employee of
the Company;     (n)   adoption, amendment, modification, or termination any
bonus, profit-sharing, incentive, severance, retirement or other similar plan
for the benefit of any of its directors, officers or employees;     (o)   making
or revocation of any material Tax election or any settlement or compromise of
any material Tax liability or application for any change in a material Tax
accounting method;     (p)   entry by the Company into any joint venture,
partnership or similar agreement with any Person; or     (q)   any authorization
of, or commitment or agreement to take any of, the foregoing actions except as
otherwise permitted by this Agreement.

2.9   Assets and Properties. The Company does not own, and has never owned, any
real property. The Company has good and valid right, title and interest in and
to or, in the case of leased properties or properties held under license, good
and valid leasehold or license interests in, all of its assets and properties,
including, but not limited to, all of the machinery, equipment, terminals,
computers, vehicles, and all other assets and properties (real, personal or
mixed, tangible or intangible) reflected in the Latest Balance Sheet and all of
the assets purchased or otherwise acquired since the date of the Latest Balance
Sheet, except those assets and properties disposed of in the Ordinary Course of
Business after the date of the Latest Balance Sheet. The Company holds title to
each such property and asset free and clear of all Liens, except Permitted
Liens.   2.10   Manufacturing and Marketing Matters. Prior to the effectiveness
of the Coopers Agreement, all products previously manufactured and sold by the
Company were designed, manufactured, labeled, packaged and sold in accordance
with all Applicable Laws pertaining to medical devices including, but not
limited to, in the case of products falling under the jurisdiction of the FDA,
the U.S. Food, Drug and Cosmetic Act (the “FDC Act”) and the regulations
promulgated thereunder, and the Good Manufacturing Practices/Quality System
Regulations (“GMP/QSR Regulations”) promulgated under the FDC Act. All of the
manufacturing facilities of the Company are in compliance with all GMP/QSR
Regulations and ISO 9001, 9002, EN 29001, 46001 requirements. The Company has
not granted rights to manufacture, produce, assemble, license, market, or sell
the Product to any other Person and is not bound by any agreement that affects
the Company’s exclusive right to develop, manufacture, assemble, distribute,
market or sell the Product.   2.11   FDA and Regulatory Matters.

  (a)   The Company has obtained all necessary and applicable approvals,
clearances, authorizations, licenses and registrations required by United States
or foreign governments or government agencies, to permit the design,
development, pre-clinical and clinical testing, manufacture, labeling, sale,
distribution and

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      promotion of its products in jurisdictions where it currently conducts
such activities with respect to each product (collectively, the “Company
Licenses”). The Company is in compliance in all material respects with the terms
and conditions of each Company License. The Company is in compliance in all
material respects with all Applicable Laws regarding registration, license,
certification for each site at which a product is manufactured, labeled, sold,
or distributed. To the extent any product has been exported from the United
States, the Company has exported such product in compliance in all material
respects with Applicable Laws. All manufacturing operations performed by or on
behalf of the Company have been and are being conducted in all material respects
in compliance with the Quality Systems regulations of the FDA. All non-clinical
laboratory studies of products sponsored by the Company and intended to be used
to support regulatory clearance or approval, have been and are being conducted
in compliance in all material respects with the FDA’s good laboratory practice
for non-clinical studies regulations (21 CFR Part 58) in the United States and,
to the extent applicable to the Company, counterpart regulations in the European
Union and all other countries. The Company is in compliance in all material
respects with all applicable reporting requirements for all Company Licenses or
plant registrations including, but not limited to, applicable adverse event
reporting requirements in the United States and outside of the United States
under Applicable Law. The Disclosure Schedule sets forth a list of all Company
Licenses.     (b)   The Company is in compliance in all material respects with
all FDA and non-United States equivalent agencies and other Applicable Laws
relating to the maintenance, compilation and filing of reports, including
medical device reports, with regard to the Company’s Products. The Disclosure
Schedule sets forth a list of all applicable adverse event reports related to
the Products, including any Medical Device Reports (as defined in 21 CFR 803).
The Disclosure Schedule sets forth a list of all complaint review and analysis
reports of the Company, including information regarding complaints by product
and root cause analysis of closed complaints, which reports are correct in all
material respects.     (c)   The Company has not received any written notice or
other written communication from the FDA or any other Governmental Authority
(i) contesting the pre-market clearance or approval of, the uses of or the
labeling and promotion of the Products or (ii) otherwise alleging any violation
of Applicable Law by the Company in connection with development or marketing of
the Product.     (d)   There have been no recalls, field notifications or
seizures ordered or adverse regulatory actions taken or, to the Company’s
Knowledge, threatened by the FDA or any other Governmental Authority with
respect to the Product, including any facilities where the Product is produced,
processed, packaged or stored, and the Company has not, within the last three
years, either voluntarily or at the request of any Governmental Authority,
initiated or participated in a recall of the Product or provided post-sale
warnings regarding the Product.

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  (e)   The Company has conducted all of its clinical trials with reasonable
care and in all material respects in accordance with all Applicable Laws and the
stated protocols for such clinical trials.     (f)   All filings with and
submissions to the FDA and any corollary entity in any other jurisdiction made
by the Company with regard to the Company’s products, whether oral, written or
electronically delivered, were true, accurate and complete in all material
respects as of the date made, and, to the extent required to be updated, as so
updated remain true, accurate and complete in all material respects as of the
date hereof, and do not materially misstate any of the statements or information
included therein, or omit to state a material fact necessary to make the
statements therein not misleading.

2.12   Compliance with Applicable Laws. The Company has not violated or
infringed, nor is it in violation or infringement of, any Applicable Law or any
order, writ, injunction or decree of any Governmental Authority in connection
with its activities. The Company, and each of its officers, directors, agents
and employees, has complied with all Applicable Laws. No claims have been filed
against the Company alleging a violation of any Applicable Law. The Company is
not a “covered entity” or a “business associate” within the meaning of the HIPAA
Privacy, Security and other Administrative Simplification Regulations.   2.13  
Compliance Program. The Company has made available to Parent a copy of the
Company’s current compliance program materials, including all program
descriptions, compliance officer and committee descriptions, ethics and risk
area policy materials, training and education materials, auditing and monitoring
protocols, reporting mechanisms, and disciplinary policies. The Company (i) is
not a party to a Corporate Integrity Agreement with the Office of the Inspector
General of the Department of Health and Human Services, (ii) has no reporting
obligations pursuant to any settlement agreement entered into with any
Governmental Authority, (iii) to its Knowledge, has not been the subject of any
investigation conducted by any Governmental Authority, (iv) has not been a
defendant in any qui tam/False Claims Act litigation (other than by reason of an
unsealed complaint of which the Company has no Knowledge), and (v) has not been
served with or received any search warrant, subpoena, civil investigation
demand, contact letter, or to the Company’s Knowledge, telephone or personal
contact by or from any Governmental Authority. For purposes of this Agreement
the term “compliance program” refers to programs of the type described in the
compliance guidance published by the Office of the Inspector General of the
Department of Health and Human Services.   2.14   Permits. The Disclosure
Schedule sets forth all approvals, authorizations, certificates, consents,
licenses, orders and permits and other similar authorizations of all
Governmental Authorities (and all other Persons) necessary for the Company to
conduct its business and own and operate its properties (collectively, the
“Permits”). Each Permit is valid and in full force and effect and none of the
Permits has been terminated, revoked, modified or become terminable or impaired
in any respect for any reason, except as would not have a Material Adverse
Effect. The Company has conducted its business in

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    compliance with all material terms and conditions of the Permits. The term
Permits shall not include any Company License as defined in Section 2.11.   2.15
  Litigation. There are no (a) actions, suits, claims, hearings, arbitrations,
proceedings (public or private) or governmental investigations that have been
brought by or against any Governmental Authority or any other Person
(collectively, “Proceedings”), nor any investigations or reviews by any
Governmental Authority against the Company, pending or, to the Company’s
Knowledge, threatened, against or by the Company or any of its assets or which
seek to enjoin or rescind the transactions contemplated by this Agreement or the
Company Documents; and (b) existing orders, judgments or decrees of any
Governmental Authority naming the Company as an affected party or otherwise
affecting any of the assets or the business of the Company.   2.16   Contracts.

  (a)   The Disclosure Schedule lists the following Contracts of the Company
(collectively, the “Scheduled Contracts”):

  (i)   Each Contract providing for the lease of real property by the Company or
which is used by Company in connection with the operation of its business.    
(ii)   Each Contract relating to all machinery, tools, equipment, motor
vehicles, rolling stock and other tangible personal property (other than
inventory and supplies) owned, leased or used by the Company, except for
Contracts that have a value of less than $10,000 which do not, in the aggregate,
have a total value of more than $25,000 or have a remaining term of longer than
six (6) months or that are not cancelable by the Company in its discretion and
without penalty upon notice of sixty (60) days or less.     (iii)   Each
Contract to which the Company is a party that would reasonably be expected to
involve payments by or to the Company in excess of $25,000, or would have a
Material Adverse Effect.     (iv)   All Contracts relating to, or evidences of,
or guarantees of, or providing security for, indebtedness or the deferred
purchase price of property (whether incurred, assumed, guaranteed or secured by
any asset).     (v)   Each independent sales representative or distribution
agreement, supply agreement or similar Contracts relating to or providing for
the marketing or manufacturing of the Company’s products.     (vi)   Each
consulting, development, joint development, research and development or similar
Contracts relating to development of the Company’s products or Intellectual
Property and each Contract under which the Company has granted or obtained a
license to Intellectual Property, other than commercial software licenses.

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  (vii)   All acquisition, partnership, joint venture, teaming arrangements or
other similar Contracts.     (viii)   Any Contract under which the Company has
agreed not to compete or has granted to a third party an exclusive right that
restricts or otherwise adversely affects the ability of the Company to conduct
its business.     (ix)   All Benefit Plans.     (x)   All Contracts with any
“disqualified individual” (as defined in Section 280GI of the Code) which
contains any severance or termination pay liabilities which would result in a
disallowance of the deduction for any “excess parachute payment” (as defined in
Section 280G(b)(l) of the Code) under Section 280G of the Code.     (xi)   Every
Contract between the Company and any of the Company’s officers, directors or
more than 5% stockholders, or any entity in which any of the Company’s officers,
directors or more than 5% stockholders has a greater than 2% equity interest.  
  (xii)   All Contracts giving any party the right to renegotiate or require a
reduction in price or refund of payments previously made in connection with the
business of the Company.     (xiii)   Contracts with any labor union or
association representing any employee of the Company.     (xiv)   Any voting
trust agreements, investor rights agreement or stockholder agreements to which
the Company is a party.     (xv)   All Contracts for clinical or marketing
trials relating to the Company’s products and all Contracts with physicians,
hospitals or other healthcare providers, or other scientific or medical
advisors.     (xvi)   All Contracts not identified in clause (xv) which relate
to the Company’s compliance with or obligation to comply with the requirements
of the HIPAA Privacy Regulations, including without limitation all business
associate agreements, subcontractor agreements, confidentiality agreements and
similar contracts.

  (b)   The Company has delivered to Parent true and correct copies (or
summaries, in the case of any oral Contracts) of all such Scheduled Contracts.
No notice of default or indemnification arising under any Scheduled Contract has
been delivered to or by the Company. Each Scheduled Contract is a legal, valid
and binding obligation of the Company, and each other party thereto, enforceable
against each such party thereto 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

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of equity, and neither the Company nor the other party thereto is in breach,
violation or default thereunder.

2.17   Benefit Plans.

  (a)   Neither the Company nor any other ERISA Affiliate sponsors, maintains,
contributes to, is required to contribute to or has or could have any liability
of any nature, whether known or unknown, direct or indirect, fixed or
contingent, with respect to, any Pension Plan, including, without limitation,
any such plan that is excluded from coverage by Section 4 of ERISA or is a
“Multiemployer Plan” within the meaning of Section 3(37) or 4001(a)(3) of ERISA.
Each such Pension Plan that is a Multiemployer Plan has been operated in all
material respects in accordance with its terms and is in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
Applicable Law. Each such other Pension Plan has been operated in all material
respects in accordance with its terms and in compliance in all material respects
with the applicable provisions of ERISA, the Code and all other Applicable Law.
All Pension Plans which the Company operates as plans that are qualified under
the provisions of Section 401(a) of the Code satisfy in form and operation all
applicable qualification requirements and has not received in the preceding
seven (7) years or committed to receive a transfer of assets and/or liabilities
or spin-off from another plan, except transfers, which qualify as transfers from
eligible rollover distributions within the meaning of Code Section 402(c)(4).
Neither the Company nor any other ERISA Affiliate has sponsored, maintained or
contributed to any Pension Plan which, during the preceding seven (7) years, has
been terminated, including by way of merger with or into another Pension Plan.  
  (b)   No Pension Plan is now nor has ever been “top-heavy” pursuant to
Section 416 of the Code.     (c)   The Disclosure Schedule sets forth the name
of each ERISA Affiliate.     (d)   Neither the Company nor any other ERISA
Affiliate has or could have any liability of any nature, whether known or
unknown, direct or indirect, fixed or contingent, to any Pension Plan, the
Pension Benefit Guaranty Corporation or any other Person, arising directly or
indirectly under Title IV of ERISA other than liability pursuant to Section 4007
for premiums which are not yet due (without regard to any waiver). No
“reportable event,” within the meaning of Section 4043 of ERISA, has occurred
with respect to any Pension Plan subject to Title IV of ERISA. Neither the
Company nor any other ERISA Affiliate has ceased operations at any facility or
withdrawn from any Company Pension Plan in a manner which could subject the
Company or any other ERISA Affiliate to liability under Section 4062(e), 4063 or
4064 of ERISA. Neither the Company nor any other ERISA Affiliate maintains,
contributes to or has participated in or agreed to participate in any Pension
Plan that is a Multiemployer Plan. Neither the Company nor any other ERISA
Affiliate has been a party to a sale of assets to which Section 4204 of ERISA
applied with respect to which it could incur any

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      withdrawal liability (including any contingent or secondary withdrawal
liability) to any Multiemployer Plan. Neither the Company nor any other ERISA
Affiliate has incurred, or has experienced an event that will, within the
ensuing 12 months, result in, a “complete withdrawal” or “partial withdrawal,”
as such terms are defined respectively in Sections 4203 and 4205 of ERISA, with
respect to a Pension Plan which is a Multiemployer Plan, and nothing has
occurred that could result in such a complete or partial withdrawal. Neither the
Company nor any other ERISA Affiliate has incurred a decline in contributions to
any Multiemployer Plan such that, if the current rate of contributions
continues, a 70 percent decline in contributions (as defined in Section 4205 of
ERISA) will occur within the next three plan years.     (e)   Neither the
Company nor any other ERISA Affiliate sponsors, maintains, contributes to, is
required to contribute to, or has or could have any liability of any nature,
whether known or unknown, direct or indirect, fixed or contingent, with respect
to any Welfare Plan, whether insured or otherwise, including, without
limitation, any such plan that is a Multiemployer Plan within the meaning of
Section 3(37) of ERISA. Each such Welfare Plan that is a Multiemployer Plan has
been operated in all material respects in accordance with its terms and in
compliance in all material respects with applicable provisions of ERISA, the
Code, and other Applicable Law. Each such other Welfare Plan has been operated
in all material respects in accordance with its terms and in compliance in all
material respects with the applicable provisions of ERISA, the Code, HIPAA and
corresponding regulations, including the HIPAA Portability Regulations and the
HIPAA Privacy, Security and other Administrative Simplification Regulations and
all other Applicable Law. Benefits under each Welfare Plan are fully insured by
an insurance company unrelated to the Company or any other ERISA Affiliate. No
insurance policy or contract requires or permits retroactive increase in
premiums or payments due thereunder. Neither the Company nor any other ERISA
Affiliate has established or contributed to, is required to contribute to or has
or could have any liability of any nature, whether known or unknown, direct or
indirect, fixed or contingent, with respect to any “voluntary employees’
beneficiary association” within the meaning of Section 501I(9) of the Code,
“welfare benefit fund” within the meaning of Section 419 of the Code, “qualified
asset account” within the meaning of Section 419A of the Code or “multiple
employer welfare arrangement” within the meaning of Section 3(40) of ERISA. No
Welfare Plan that is a Multiemployer Plan imposes any post-withdrawal liability
or contribution obligations upon the Company or any ERISA Affiliate. Neither the
Company nor any other ERISA Affiliate maintains, contributes to or has or could
have any liability of any nature, whether known or unknown, direct or indirect,
fixed or contingent, with respect to retiree medical coverage or other medical,
health, life or other welfare benefits for present or future terminated
employees or their spouses or dependents other than as required by Part 6 of
Subtitle B of Title I of ERISA or any comparable state law.     (f)   Neither
the Company nor any other ERISA Affiliate is a party to, maintains, contributes
to, is required to contribute to or has or could have any liability of any

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      nature, whether known or unknown, direct or indirect, fixed or contingent,
with respect to any Compensation Plan. Each Compensation Plan has been operated
in all material respects in accordance with its terms and in compliance with
Applicable Law.     (g)   There are no facts or circumstances which could,
directly or indirectly, subject the Company or any other ERISA Affiliate to any
(i) excise tax or other liability under Chapters 43, 46 or 47 of Subtitle D of
the Code, (ii) penalty tax or other liability under Chapter 68 of Subtitle F of
the Code or (iii) civil penalty, damages or other liabilities arising under
Section 502 of ERISA.     (h)   Full payment has been made of all amounts which
the Company or any other ERISA Affiliate is required, under Applicable Law, the
terms of any Benefit Plan, or any agreement relating to any Benefit Plan, to
have paid as a contribution, premium or other remittance thereto or benefit
thereunder. Each Pension Plan that is subject to the minimum funding standards
of Section 412 of the Code and/or Section 302 of ERISA meets those standards and
has not incurred any accumulated funding deficiency within the meaning of
Section 412 or 418B of the Code or Section 302 of ERISA and no waiver of any
minimum funding requirements has been applied for or obtained with respect to
any Pension Plan. The Company and each other ERISA Affiliate has made adequate
provisions for reserves or accruals in accordance with GAAP to meet
contribution, benefit or funding obligations arising under Applicable Law or the
terms of any Benefit Plan or related agreement.     (i)   The Company and each
other ERISA Affiliate has timely complied in all material respects with all
reporting and disclosure obligations with respect to the Benefit Plans imposed
by the Code, ERISA or other Applicable Law.     (j)   There are no pending or,
to the Company’s Knowledge, threatened audits, investigations, claims, suits,
grievances or other proceedings, and there are no facts that could give rise
thereto, involving, directly or indirectly, any Benefit Plan, or any rights or
benefits thereunder, other than the ordinary and usual claims for benefits by
participants, dependents or beneficiaries.     (k)   The transactions
contemplated herein do not result in any payment (whether of severance pay or
otherwise), forgiveness of debt, distribution, increase in benefits, obligation
to fund, or the acceleration of accrual, vesting, funding or payment of any
contribution or benefit under any Benefit Plan. Except to the extent
specifically disclosed on the Disclosure Schedule, no amount that could be
received (whether in cash or property or the vesting of property) as a result of
any of the transactions contemplated by this Agreement by any employee, officer,
or director of the Company or any ERISA Affiliate who is a “disqualified
individual” (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any Benefit Plan currently in effect would be
an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of
the Code).

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  (l)   No employer other than the Company and/or an ERISA Affiliate is
permitted to participate or participates in the Benefit Plans. No leased
employees (as defined in Section 414(n) of the Code) or independent contractors
are eligible for, or participate in, any Benefit Plans.     (m)   No action or
omission of the Company or any other ERISA Affiliate or any director, officer,
employee, or agent thereof in any way restricts, impairs or prohibits the
Parent, the Company, any other ERISA Affiliate or any successor from amending,
merging, or terminating any Benefit Plan in accordance with the express terms of
any such plan and Applicable Law.     (n)   The Disclosure Schedule lists the
name of each Benefit Plan. The Company has delivered to the Parent true and
complete copies of all Benefit Plan documents and related trust agreements or
other agreements or contracts evidencing any funding vehicle with respect
thereto, including all amendments. The Company has delivered to the Parent true
and complete copies of: (i) the three most recent annual reports on Treasury
Form 5500, including all schedules and attachments thereto, with respect to any
Benefit Plan for which such a report is required; (ii) the three most recent
actuarial reports with respect to any Pension Plan that is a “defined benefit
plan” within the meaning of Section 414(j) of the Code; (iii) the form of
summary plan description, including any summary of material modifications
thereto or other modifications communicated to participants, currently in effect
with respect to each Benefit Plan; (iv) ) true and correct copies of the Welfare
Plan documents establishing compliance with HIPAA requirements, including
required plan document and summary plan description language, certificates of
creditable coverage, appointment of privacy and security officials, notice of
privacy practices, privacy and security policies and procedures, business
associate agreements and amendments, security risk analysis evaluation
documents, the privacy and security group health plan document amendment and the
privacy certification of amendment; (v) the most recent determination letter
with respect to each Pension Plan intended to qualify under Section 401(a) of
the Code and the full and complete application therefore submitted to the
Internal Revenue Service; and (vi) all professional opinions, material internal
memoranda, material correspondence with regulatory authorities and
administrative policies, manuals, interpretations and the like with respect to
each Benefit Plan.     (o)   The Disclosure Schedule lists each Benefit Plan
that is or may be, in whole or in part, subject to Section 409A of the Code
(each such plan or part thereof, a “Section 409A Benefit Plan”). Except as set
forth in the Disclosure Schedule, (i) each Section 409A Benefit Plan complies in
form with Section 409A of the Code, and (ii) no service provider under any
Section 409A Benefit Plan is subject to the additional income tax under
Section 409A of the Code.     (p)   The Disclosure Schedule lists and the
Company has delivered to the Parent true and correct copies of the Welfare Plan
documents establishing compliance with the HIPAA Privacy Regulations, including
appointment of a privacy official, its

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      Notice of HIPAA Privacy Practices, privacy policies and procedures, and
the plan administrator’s group health plan document amendment certification.    
(q)   The Company has properly determined and timely collected and reported all
Federal Insurance Contribution Act (“FICA”) taxes imposed under Sections 3101
and 3111 of the Code on remuneration for employment that constitutes “wages”
within the meaning of Section 3121(a) of the Code, including amounts deferred
under nonqualified deferred compensation plans, agreements or arrangements.    
(r)   As of the date hereof the Company has ceased contributions to and/or taken
the necessary actions in order to terminate certain of the Company Benefit
Plans, each such plan separately listed on the Disclosure Schedule as
“Terminated Company Benefit Plans.” In connection with the termination of the
Company 401(k) Plan, the Company has provided copies to the Parent of
(a) resolutions adopted by the Company’s Board to terminate such Company 401(k)
Plan and to fully (100%) vest all participants under said Company 401(k) Plan,
such termination and vesting effective as of April 14, 2006, (b) a signed plan
amendment and (c) notice of the Company 401(k) Plan termination to participants
and any trustees and custodians of the Company 401(k) Plan and/or its assets.
With respect to any other Terminated Company Benefit Plan, the Company has
provided copies to the Parent of (a) resolutions adopted by the Company’s Board
to terminate such Company Benefit Plan, (b) signed plan amendments and
(c) notices of the termination of such Company Benefit Plans to participants,
insurance companies, third-party administrators and other vendors.

2.18   Labor and Employment Matters.

  (a)   The Disclosure Schedule sets forth a list showing the name, title, hire
date, employment status (such as active or on leave of absence, full-time,
part-time or temporary), salary or wage, commission percentage, cash incentives
(such as bonus) and vacation or paid-time-off balance of each individual who is
employed by the Company (each an “Employee”). All employees of the Company are
employed on an “at-will” basis.

  (i)   Information Regarding Employees on Leave of Absence. With respect to any
Employee who is on a leave of absence, the Disclosure Schedule contains a true
and complete list showing the name of each individual and a description of the
leave of absence (such as the type of leave of absence, the date the leave
commenced, the expected date the leave of absence will end, the type of benefit
(if any) such Employee is receiving (such as short-term disability, long-term
disability or workers compensation benefits)).     (ii)   List of Independent
Contractors, Consultants and Leased Employees. The Disclosure Schedule contains
a true and complete list showing the name and identifying the contract,
agreement or other arrangement between the Company and any independent
contractor, consultant, leased employee or other individual (other than an
Employee) in effect as of the date hereof.

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      The Seller has provided copies of each such contract or agreement to
Parent.

  (b)   The Company is and has been in compliance in all material respects with
all Applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including, without limitation, any
such Applicable Laws respecting employment discrimination and occupational
safety and health requirements, and has not and is not engaged in any unfair
labor practice. There is no unfair labor practice complaint against the Company
pending or, to the Company’s Knowledge, threatened before the National Labor
Relations Board or any other comparable Governmental Authority. There is no
labor strike, dispute, slowdown or stoppage actually pending or, to the
Company’s Knowledge, threatened against or directly affecting the Company. No
labor representation question exists respecting the employees of the Company and
there is not pending or, to the Company’s Knowledge, threatened any activity
intended or likely to result in a labor representation vote respecting the
employees of the Company. No grievance or any arbitration proceeding arising out
of or under collective bargaining agreements is pending and no claims therefore
exist or, to the Company’s Knowledge, have been threatened. No collective
bargaining agreement is binding and in force against the Company or currently
being negotiated by the Company. The Company has not experienced any significant
work stoppage or other significant labor difficulty. The Company is not
delinquent in payments to any Persons for any wages, salaries, commissions,
bonuses or other direct or indirect compensation for any services performed by
them or amounts required to be reimbursed to such Persons, including without
limitation any amounts due under any Benefit Plan. Upon termination of the
employment of any Person, neither the Company, Parent nor any subsidiary of
Parent will, by reason of any agreement or understanding to which the Company is
a party, be liable to any of such Persons for so-called “severance pay” or any
other payments. Within the twelve-month period prior to the date hereof there
has not been any expression of intention to the Company by any officer or key
employee to terminate such employment.     (c)   All individuals who are
performing or have performed services for the Company or any of its Affiliates
and who are or were classified by the Company or any of its Affiliates as
“independent contractors” qualify for such classification under Section 530 of
the Revenue Act of 1978 or Section 1706 of the Tax Reform Act of 1986, as
applicable, and such individuals are not entitled to any benefits under the
Benefit Plans maintained by the Company.

2.19   Intellectual Property.

  (a)   The Disclosure Schedule lists all Intellectual Property that is
registered with, has been applied for, or has been issued by the U.S. Patent and
Trademark Office or a corresponding foreign governmental or public authority and
all Intellectual Property that: (i) is owned by, licensed to or otherwise
controlled by the Company; (ii) is used in, developed for use in, or necessary
to the conduct of its

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      business as now conducted or presently planned to be conducted; or
(iii) has been licensed to or from third parties (other than subcontractors
retained by Company in the Ordinary Course of Business), including a description
of each license agreement, the name and address of the licensee or licensor, as
the case may be, and the date and term of the agreement. The Company has
delivered or made available to Parent complete and accurate copies of
correspondence, litigation documents, agreements, file histories and office
actions relating to the patents and patent applications listed in the Disclosure
Schedule. Each item of Intellectual Property owned or used by the Company
immediately prior to the Effective Time hereunder will be owned or available for
use by Parent or any subsidiary of Parent on identical terms and conditions
immediately after the Effective Time.     (b)   The Company owns, free and clear
of any Lien, and possesses all right, title and interest, or holds a valid
license, in and to all Intellectual Property subject to the license agreements
referenced in Section 2.19(a)(iii) above that grant licenses to third parties
and any restrictions set forth therein. All patents included in the Intellectual
Property are valid and enforceable. The Intellectual Property owned or licensed
by the Company constitutes all the intellectual property necessary to the
conduct of the business of the Company as it is currently conducted. There are
no royalties, fees, honoraria or other payments payable by the Company to any
Person by reason of the ownership, development, modification, use, license,
sublicense, sale, distribution or other disposition of the Intellectual Property
other than salaries and sales commissions paid to employees and sales agents in
the Ordinary Course of Business and other than as set forth in the license
agreements referenced in Section 2.19(a)(iii). The Company has taken all
reasonable security measures to protect the value and the secrecy and
confidentiality of trade secrets in the Intellectual Property.     (c)   The
Disclosure Schedule lists the trademarks and Internet domain names included in
the Intellectual Property. The Company is the registrant and sole legal and
beneficial owner of the trademarks and Internet domain names included in the
Intellectual Property, free and clear of all Liens. The Company is the
registered owner of the trademarks underlying each of the domain names included
in the Intellectual Property. The Company is not aware of any pending or
threatened actions, suits, claims, litigation or proceedings relating to the
trademarks or domain names included in the Intellectual Property. The Company
has operated the websites identified in the Disclosure Schedule.     (d)   All
personnel, including employees, agents, consultants and contractors, who have
contributed to or participated in the conception or development, or both, of the
Intellectual Property on behalf of the Company and all officers and technical
employees of the Company either (i) have been a party to “work-for-hire”
arrangements or agreements with the Company in accordance with applicable
federal and state law that has accorded the Company 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
the Company as assignee that have conveyed to the Company effective, sole and

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      exclusive ownership of all tangible and intangible property arising
thereby, to the extent permissible under Applicable Law.     (e)   The conduct
of the Company’s business has not infringed, misappropriated or conflicted with
and does not infringe, misappropriate or conflict with any intellectual property
right of any other Person, nor has the Company received any notice from any
third party of any infringement, misappropriation or violation by the Company of
any intellectual property right of any third party and no notice has been
received by any third party challenging the Company’s ownership to any of the
Intellectual Property. No claim by any third party contesting the validity of
any Intellectual Property has been made, is currently outstanding or, to the
Knowledge of the Company, is threatened or reasonably expected to arise. To the
Knowledge of the Company, no third party is infringing any Intellectual Property
right of the Company.

2.20   Environmental Compliance.

  (a)   The Company has not engaged in or permitted, direct or indirect,
operations or activities upon, or any use or occupancy of the Properties, or any
portion thereof, for the purpose of or in any way involving the handling,
manufacture, treatment, storage, use, generation, emission, release, discharge,
refining, dumping or disposal of any Environmentally Regulated Materials
(whether legal or illegal, accidental or intentional, direct or indirect) on,
under, in or about the Properties, or transported any Environmentally Regulated
Materials to, from or across the Properties, nor are any Environmentally
Regulated Materials presently constructed, deposited, stored, placed or
otherwise located on, under, in or about the Properties, nor have any
Environmentally Regulated Materials migrated from the Properties upon or beneath
other properties, nor have any Environmentally Regulated Materials migrated or
threatened to migrate from other properties upon, about or beneath the
Properties. The Properties do not contain any: (i) underground or aboveground
storage tanks; (ii) asbestos; (iii) equipment containing polychlorinated
biphenyls (“PCBs”); (iv) underground injection wells; or (v) septic tanks in
which process waste water or any Environmentally Regulated Materials have been
disposed.     (b)   The Company is in material compliance with applicable
Environmental, Safety and Health Laws and has obtained all Permits required
under applicable Environmental, Safety and Health Laws.     (c)   No
enforcement, investigation, cleanup, removal, remediation or response or other
governmental or regulatory actions have been asserted or, to the Company’s
Knowledge, threatened with respect to operations conducted on the Properties by
the Company or against the Company with respect to or regarding the Properties
pursuant to any Environmental, Safety and Health Laws.     (d)   To the
Company’s Knowledge, there are no past or present events, conditions,
circumstances, incidents, actions or omissions relating to or affecting the

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      Company or its business or assets that violate, or would reasonably be
expected to violate after the Closing, any Environmental, Safety and Health
Laws, or that would reasonably be expected to give rise to any Environmental
Liability.     (e)   The Company is not aware of any past or present events,
conditions, circumstances, activities, practices, incidents, actions or plans
with respect to or of the Company which may reasonably be expected to interfere
with or prevent compliance or continued compliance with Environmental, Safety
and Health Laws.     (f)   All machinery, tools, devices and equipment operated
by the Company on the Properties have been operated in compliance with all
Environmental, Safety and Health Laws, and all such equipment currently is
operational and in good condition.     (g)   The Company has delivered to Parent
all environmental documents, studies and reports in its possession or under its
control relating to: (i) any facilities or real property ever owned, operated or
leased by the Company; or (ii) any actual Environmental Liability of the
Company.

2.21   Insurance. The Disclosure Schedule contains an accurate and complete list
of all insurance policies owned or held by the Company, including, but not
limited to, fire and other casualty, general liability, theft, life, workers’
compensation, health, directors and officers, business interruption and other
forms of insurance owned or held by the Company, 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. The
Company has not been denied any form of insurance and no policy of insurance has
been revoked or rescinded during the past five (5) years.

2.22   Tax Matters.

  (a)   The Company and any combined or unitary group of which the Company is or
was a member, has prepared and filed or will timely prepare and file all
material Tax Returns which any of them is required to file (taking into account
any extensions) on or prior to the Closing Date. As of the time of filing, such
Tax Returns were or will be accurate and correct in all material respects and
did not or will not contain a disclosure statement under Section 6662 of the
Code (or any predecessor provision or comparable provision of state, local or
foreign law). The Company has made or will make all such Tax Returns available
to Parent, with copies of such Tax Returns filed after the effective date of
this Agreement provided to Parent at least three (3) Business Days prior to
filing such Tax Return.     (b)   The Company has paid or adequately provided
for (on its Latest Financial Statements in accordance with GAAP (exclusive of
any reserves for deferred taxes established to reflect timing differences
between book and taxable income pursuant to Statement of Financial Accounting
Standards No. 109) all Taxes

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      (whether or not shown on any Tax Return) that are due and owing with
respect to all taxable periods (or portions thereof) ending on or before the
Closing Date.     (c)   No claim for assessment or collection of Taxes is
presently being asserted against the Company, and the Company is not a party to
any pending action, proceeding, or investigation by any Governmental Authority,
nor has any such action, proceeding or investigation been threatened in a
writing delivered to the Company. No claim has been made in any jurisdiction
where the Company does not file Tax Returns that the Company may be subject to
Tax by that jurisdiction.     (d)   The Company is not a party to any agreement,
contract, arrangement or plan that (i) has resulted or would result, separately
or in the aggregate, in connection with this Agreement or any change of control
of the Company, in the payment of any “excess parachute payments” within the
meaning of Section 280G of the Code; or (ii) would obligate the Company to
provide “gross-up” benefits with respect to any excise tax due on any “excess
parachute payments” within the meaning of Section 280G of the Code.     (e)  
All deficiencies and assessments of Taxes of the Company resulting from an
examination of any Tax Returns by any Governmental Authority on or before the
Closing Date have been or will be paid and there are no pending examinations
currently being made by any Governmental Authority nor has there been any
written or oral notification to the Company of any intention to make an
examination of any Tax Returns by any Governmental Authority. There are no
outstanding agreements or waivers extending the statutory period of limitations
applicable to any Tax Return for any period.     (f)   For purposes of computing
Taxes and the filing of Tax Returns, the Company has not failed to treat as
“employees” any individual providing services to the Company who reasonably
would be expected to be classified as an “employee” under the applicable rules
or regulations of any Governmental Authority with respect to such
classification.     (g)   The Company has complied with all Applicable Laws
relating to the withholding of Taxes and the payment thereof (including, without
limitation, withholding of Taxes under Sections 1441 and 1442 of the Code, or
similar provisions under any foreign laws), and timely and properly withheld
from individual employee wages and paid over to the proper Governmental
Authority all amounts required to be so withheld and paid over under all
Applicable Laws.     (h)   The Company is not involved in, subject to, or a
party to any joint venture, partnership, contract or other arrangement that is
treated as a “partnership” for federal, state, local or foreign income Tax
purposes. The Company does not own any interest in an entity that is classified
as an entity that is “disregarded as an entity separate from its owner” under
Treasury Regulations Section 301.7701-3(b).

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  (i)   The Company has not requested any extension of time within which to file
any Tax Return, which Tax Return has not since been filed.     (j)   The Company
is not required to include in income any adjustment under Section 481(a) of the
Code by reason of a voluntary change in accounting method initiated by the
Company.     (k)   The Company has not made an election under Section 341(f) of
the Code for any taxable years not yet closed for statute of limitation
purposes.     (l)   The Company is, and at all times has been, a corporation or
association taxable as a corporation for U.S. income tax purposes.     (m)   The
Company is not, nor has it been at any time, a U.S. real property holding
corporation within the meaning of Section 897I(2) of the Code.     (n)   The
Company is not a party to or bound by any obligations under any Tax sharing, Tax
allocation, Tax indemnity or similar agreement or arrangement.     (o)   The
Company has not, within three (3) years preceding the date hereof, been either a
“distributing” or “controlled” corporation (as such terms are defined in
Section 355(a)(1) of the Code) in a transaction structured to qualify as a
tax-free distribution under Section 355 of the Code.     (p)   The Company has
not received any written ruling related to Taxes, entered into any agreement
with a taxing authority relating to Taxes or authorized any Person to represent
them before a taxing authority pursuant to a power of attorney or otherwise.    
(q)   There are no liens for Taxes upon any of the assets or properties of the
Company other than liens for Taxes not yet due and payable. There is no
outstanding closing agreement, ruling request, request to consent to change a
method of accounting, subpoena or request for information with or by a
Governmental Authority with respect to the Company, its income, assets,
properties, payroll, operation or business.     (r)   The Company is not, and
has not been, a party to any transaction where a deferred intercompany gain was
generated under Section 1502 of the Code and the Treasury Regulations
promulgated thereunder.     (s)   Prior to the transaction contemplated by this
Agreement, the Company has not been subject to an “ownership change” with the
meaning of Section 382(g) of the Code and no “Section 382 limitation” within the
meaning of Section 382 of the Code applies to limit the Company’s ability to
utilize its net operating losses or other Tax attributes.

2.23   Bank Accounts; Powers of Attorney. The Disclosure Schedule sets forth:
(i) the names of all financial institutions, investment banking and brokerage
houses, and other similar

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    institutions at which the Company maintains accounts, deposits, safe deposit
boxes of any nature, and the names of all persons authorized to draw thereon or
make withdrawals therefrom and a description of such accounts; and (ii) the
names of all Persons holding general or special powers of attorney from the
Company and copies thereof.   2.24   Orders, Commitments and Returns. All
accepted and unfulfilled orders for the sale of products and the performance of
services entered into by the Company and all outstanding contracts or
commitments for the purchase of supplies, materials and services by or from the
Company were made in bona fide transactions in the Ordinary Course of Business.
There are no material claims against the Company to return products by reason of
alleged over-shipments, defective products or otherwise, or of products in the
hands of customers, retailers or distributors under an understanding that such
products would be returnable.   2.25   Product Liability Claims. The Company has
never received a claim, or incurred any uninsured or insured liability, for or
based upon failure to warn, California Proposition 65, breach of product
warranty (other than warranty service and repair claims incurred in the Ordinary
Course of Business and expensed as warranty expense on the Latest Financial
Statements for the period in which incurred), strict liability in tort, general
negligence, negligent manufacture of product, negligent provision of services or
any other allegation of liability, including or resulting in, but not limited
to, product recalls, arising from the materials, design, testing, manufacture,
packaging, labeling (including instructions for use) or sale of its products or
from the provision of services (“Product Liability Claim”). The Company has
disclosed to Parent each Product Liability Claim received by the Company.   2.26
  Warranties. The Product has never been used except in connection with clinical
trials sponsored by the Company. The Company has never sold or received any
consideration for providing the Product to clinical sites or health care
providers in connection with clinical trials sponsored by the Company. The
Company has never extended any warranties in connection with the Product.   2.27
  Prior Divestitures of the Company. The Company does not have any actual or
potential Liabilities or obligations to make payments, contingent or otherwise,
arising out of any prior divestiture of its business or assets (a “Prior
Divestiture”). No Person has (i) made any claim or, to the Knowledge of the
Company, has any basis to make a claim against the Company as a result of any
Prior Divestiture, or (ii) received any indemnification payment from the Company
as a result of any damages or losses incurred or sustained as a result of any
Prior Divestiture.   2.28   Relations with Suppliers and Customers. No material
current supplier of the Company has canceled any contract or order for provision
of, and there has been no threat by any such supplier not to provide, raw
materials, products, supplies or services to the business of the Company either
prior to or following the Effective Time. The Disclosure Schedule lists each
supplier to the Company that is the source of a particular raw material,
product, supply or service with respect to which locating and qualifying a
replacement source would involve significant cost or delay.

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2.29   Reimbursement/Billing. The Company has not sold any Products, has not
sought reimbursement for any Product and has not made any billing applicable to
the Product.   2.30   Indemnification Obligations. Except as set forth on the
Disclosure Schedule, the Company is not a party to any Contract that contains
any provisions requiring the Company to indemnify any Person (excluding
indemnities contained in the Company’s standard terms and conditions of sale,
copies of which have been provided to Parent), including, without limitation,
the Coopers Agreement. There is no event, circumstance or other basis that would
reasonably be expected to give rise to any indemnification obligation of the
Company to its officers and directors under their Amended and Restated
Certificate of Incorporation, Bylaws, similar governing documents or any
Contract between the Company and any of its officers or directors or to any
other Person under any Contract.   2.31   Absence of Certain Business Practices.
Neither the Company nor any director, officer, employee or agent of the Company,
nor any other Person acting on behalf of the Company, has, directly or
indirectly, given or agreed to give any gift or similar benefit or agreed to
make or made any payment to any customer, supplier, governmental employee or
other Person who is or may be in a position to help or hinder the business of
the Company, taken as a whole (or assist it in connection with any actual or
proposed transaction) which (i) would reasonably be expected to subject the
Company, Parent or Merger Subsidiary to any damage or penalty in any civil,
criminal or governmental litigation proceeding, or (ii) violated or violates any
Applicable Law.   2.32   Brokers. Neither the Company 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.
  2.33   Minute Books. The minute books of the Company, as previously made
available to Parent and its representatives, contain, in all material respects,
complete and accurate records of all meetings of and corporate actions or
written consents by the stockholders, Boards of Directors, and committees of the
Boards of Directors of the Company.   2.34   State Takeover Statutes. No “fair
price,” “moratorium,” “control share acquisition,” “business combination,” or
other state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, the Company, the Merger Subsidiary or Parent or
to this Agreement.   2.35   Disclosure. No representation or warranty by Company
in this Agreement and no statement contained or to be contained in any document,
certificate or other writing furnished or to be furnished by the Company to the
Parent or Merger Subsidiary, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. There is no fact that has not been
disclosed to Parent of which any officer or director of the Company is aware
which has or could reasonably be expected to have a Material Adverse Effect.

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2.36   Investigation by Parent. Notwithstanding anything to the contrary in this
Agreement, (i) no investigation by Parent shall affect the representations and
warranties of the Company under this Agreement or contained in any other writing
to be furnished to Parent in connection with the transactions contemplated
hereunder and (ii) such representations and warranties shall not be affected or
deemed waived by reason of the fact that Parent knew or should have known that
any of the same is or might be inaccurate in any respect.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUBSIDIARY
          As a material inducement to the Company to enter into this Agreement,
with the understanding that the Company will be relying thereon in consummating
the transactions contemplated hereunder, Parent and Merger Subsidiary hereby,
jointly and severally, represent and warrant to the Company that the statements
contained in this Article 3 are true and correct.

3.1   Corporate Existence and Power. Parent and Merger Subsidiary are
corporations duly organized, validly existing and in good standing under the
laws of their respective states of incorporation and each has all requisite
corporate power and authority required to own, operate and lease their
respective assets and properties as now owned, leased and operated and to carry
on their respective businesses as now being conducted. Parent and Merger
Subsidiary are each duly qualified or licensed to do business as a foreign
corporation and are in good standing in every jurisdiction in which the
character or location of their properties and assets owned, leased or operated
by them or the nature of their business require such licensing or qualification,
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 on Parent or Merger Subsidiary. Merger Subsidiary is a
recently formed Delaware corporation that has not conducted, and prior to the
Effective Time will not conduct, any activities other than those incident to its
formation and in connection with the consummation of the Merger.   3.2  
Authorization. Parent and Merger Subsidiary have the requisite corporate power
and authority to enter into this Agreement and each other agreement, document,
instrument or certificate contemplated by this Agreement or to be executed by
the Parent and Merger Subsidiary in connection with the consummation of the
transactions contemplated by this Agreement (the “Parent Documents”) and to
carry out the transactions contemplated hereunder and thereunder. The Boards of
Directors of Parent and Merger Subsidiary and Parent, as the sole stockholder of
Merger Subsidiary, have taken all action required by law, their respective
Certificates of Incorporation and Bylaws and otherwise to duly and validly
authorize and approve the execution, delivery and performance by Parent and
Merger Subsidiary of this Agreement and the Parent Documents and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
herein and therein and no other corporate proceedings on the part of Parent or
Merger Subsidiary are, or will be, necessary to authorize this Agreement or the
Parent Documents or to consummate the transactions contemplated hereby or
thereby. This Agreement and each of the Parent Documents has been duly and
validly executed and delivered by each of them and,

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    assuming the due authorization, execution and delivery by the Company of
this Agreement and the Parent Documents, constitutes the legal, valid and
binding obligations of Parent and Merger Subsidiary enforceable against each of
them in accordance with its 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.   3.3   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 Parent Documents by Parent and Merger
Subsidiary or the consummation by Parent and Merger Subsidiary of the
transactions contemplated herein or therein, other than (i) requirements of the
DGCL for filing of appropriate documents to effect the Merger, or (ii) 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 Merger or
would not otherwise prevent Parent or Merger Subsidiary from performing their
respective obligations under this Agreement or the Parent Documents.   3.4  
Disclosure. No representation or warranty by Parent or Merger Subsidiary in this
Agreement and no statement contained or to be contained in any document,
certificate or other writing furnished or to be furnished by either Parent or
Merger Subsidiary to the Company in connection with the transactions
contemplated by this Agreement, contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.   3.5   Non-Contravention. None of the
execution, delivery and performance by Parent or Merger Subsidiary of this
Agreement or the Parent Documents or the consummation of the transactions
contemplated herein or therein will (i) contravene or conflict with the
respective Certificate of Incorporation or Bylaws of Parent and Merger
Subsidiary, (ii) contravene or conflict with or constitute a violation of any
provision of any Applicable Law binding upon or applicable to Parent or Merger
Subsidiary or any of the Parent’s or Merger Subsidiary’s assets, (iii) result in
the creation or imposition of any Lien on any of Parent’s or Merger Subsidiary’s
assets, other than Permitted Liens or (iv) 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 material 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 Parent
or Merger Subsidiary is a party, or by which any of their respective properties
or assets may be bound, except in the cases of clause (ii) where such conflicts
or other occurrences would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.   3.6   Brokers. Neither Parent nor
Merger Subsidiary, nor any of their respective 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.

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ARTICLE 4
COVENANTS

4.1   Confidentiality. Each of the parties hereto agrees that it will not use,
or permit the use of, any of the information relating to any other party hereto
furnished or made available to it in connection with the transactions
contemplated herein (“Information”) for any purpose or in any manner other than
solely in connection with its evaluation or consummation of the transactions
contemplated by this Agreement in a manner that the disclosing party has
approved and shall in no event use or permit the use of any of such Information
in a manner or for a purpose detrimental to such other party, and that they will
not disclose, divulge, provide or make accessible (collectively, “Disclose” or
“Disclosure”), or permit the Disclosure of, any of the Information to any
Person, other than solely to their respective directors, officers, employees,
investment advisors, accountants, counsel and other authorized representatives
and agents (collectively, the “Representatives”) who have a “need to know” to
carry out the purposes of this Agreement, except as may be required by judicial
or administrative process or, in the opinion of such party’s regular counsel, by
other requirements of Applicable Law; provided, however, that prior to any
Disclosure of any Information permitted hereunder, the disclosing party shall
first obtain the recipients’ undertaking to comply with the provisions of this
subsection with respect to such Information. Each party shall instruct its
Representatives to observe the terms of this Agreement and shall be responsible
for any breach of this Agreement by any of its Representatives. The term
“Information” as used herein shall not include any information relating to a
party which the party receiving such information can show to: (i) have been
rightfully in its possession prior to its receipt from another party hereto;
(ii) be now or to later become generally available to the public through no
fault of the receiving party; (iii) have been received separately by the
receiving party in an unrestricted manner from a Person entitled to disclose
such information; or (iv) have been developed independently by the receiving
party without regard to any Information received in connection with this
transaction. Each party hereto also agrees to promptly return to the party from
whom it originally received all original and duplicate copies of materials
containing Information and to destroy any summaries, analyses or extracts
thereof or based thereon (whether in hard copy form or intangible media) should
the transactions contemplated herein not occur. A party hereto shall be deemed
to have satisfied its obligations to hold the Information confidential if it
exercises the same care as it takes with respect to its own similar information,
which shall in no event be less than reasonable care. The provisions of this
Section 4.1 shall survive indefinitely any termination of this Agreement.   4.2
  Further Assurances; Notification. Each party hereto shall 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.   4.3   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. The
parties shall maintain this Agreement and the terms hereof in strict confidence,
and neither party shall disclose this Agreement or any of its terms to any third
party unless

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    specifically ordered to do so by a court of competent jurisdiction after
consulting with the other party or unless required by Applicable Law or
regulation including, but not limited to, the rules and regulation of the
Securities and Exchange Commission and the NASDAQ Stock Market. 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.  
4.4   Cancellation and Forgiveness of Certain Indebtedness of the Company.
Immediately prior to the Closing, Parent shall assume the following indebtedness
of the Company (collectively, the “Company Indebtedness”): (i) any and all
indebtedness owed by the Company pursuant to that certain Loan Agreement, dated
December 7, 2005, by and between Parent and the Company (the “Loan Agreement”),
and (ii) the Two Hundred Thousand Dollars ($200,000) loaned to the Company by
the Parent pursuant to the Letter of Intent.   4.5   Conduct of Business after
Closing Date. Parent shall, and to the extent applicable, shall cause its
Affiliates to, use commercially reasonable efforts to complete a feasibility
study to evaluate the use of local anesthesia for treatment with the Product in
physician offices. Parent shall have sole discretion over all matters relating
to the Products after the Closing Date, including, but not limited to, whether
or not to pursue the Milestones and any development, manufacturing, clinical,
regulatory, reimbursement, marketing, and sales decisions relating to the
Products.

ARTICLE 5
SURVIVAL AND INDEMNIFICATION

5.1   Survival. The representations and warranties of each party contained in
this Agreement, and the indemnification obligations of the Stockholders with
respect thereto, shall survive the Closing and shall expire twelve (12) months
after the Closing Date. Notwithstanding the preceding sentence, (i) the
representations and warranties contained in Sections 2.17 (Benefit Plans) and
2.22 (Tax Matters), and the indemnification obligations of the Company and the
Stockholders with respect thereto, shall survive the Closing for a period of six
(6) months after all applicable statutes of limitations with respect to any
claims governing the respective matters set froth therein have expired, and
(ii) the representations and warranties contained in Section 2.19 (the
“Intellectual Property Representations”) and the indemnification obligations of
the Company and the Stockholders with respect thereto, shall survive the Closing
for a period of six (6) months following Year Three. Notwithstanding the
foregoing, any representation or warranty that would otherwise terminate in
accordance with this Section 5.1 shall continue to survive, if a notice of a
claim pursuant to this Article 5 shall have been timely given under Section 5.4
on or prior to such respective termination date, until the related claim has
been satisfied or otherwise resolved as provided herein. The covenants set forth
in this Agreement shall survive the Closing indefinitely. The right to
indemnification or any other remedy based on representations, warranties,
covenants and obligations in this Agreement will not be affected by any
investigation conducted with respect to, or any

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    knowledge acquired (or capable of being acquired) at any time, whether
before or after the Closing Date, with respect to the accuracy or inaccuracy of
or compliance with, any such representation, warranty, covenant or obligation.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification or any other remedy
based on such representations, warranties, covenants and obligations.   5.2  
Indemnification by Stockholders. Subject to Section 5.5, the Stockholders agree
to indemnify, defend and hold harmless Parent and Merger Subsidiary, and their
respective directors, officers, employees, agents and Affiliates, from and
against any and all Damages asserted against, relating to, imposed upon,
suffered or incurred by Parent, Merger Subsidiary, or their respective officers,
directors, employees, agents and Affiliates, in connection with enforcing their
indemnification rights pursuant to this Section 5.2 by reason of or resulting
from (i) any untrue representation of, or breach of warranty by, the Company in
any part of this Agreement, and (ii) any non-fulfillment of any covenant,
agreement or undertaking of the Company in any part of this Agreement, (iii) any
Product Liability Claim or other third party claim relating to the Company,
whether presently in existence or arising hereafter from acts, events,
conditions or circumstances existing or occurring on or before the Effective
Time, regardless of whether such Product Liability Claim or third party claim
arises out of or constitutes a breach of any representation, warranty or
covenant in this Agreement, (iv) any Liabilities for Taxes of the Company or any
respective predecessor in interest with respect to any Tax period or portion
thereof ending on or before the Effective Time, regardless of whether such
Liabilities for Taxes arise out of or constitute a breach of any representation,
warranty or covenant in this Agreement, (v) any incremental compensation
Liabilities that are owed to employees, consultants or other representatives and
agents of the Company that arise out of or are related to any of the Contingent
Merger Consideration, (vi) any Liabilities directly or indirectly arising out
of, resulting from or in connection with the Company’s Severance Benefit Plan
and Retention Plan, (vii) any payments made to Dissenting Stockholders pursuant
to the DGCL or CCC in excess of the Merger Consideration per share of Senior
Stock held by Dissenting Stockholders, and (viii) any tax, fee, or other like
obligation in excess of USD $2,500.00 imposed by the hospital located in
Guadalajara, Mexico that was used in the Company’s clinical trials as such is
further described in Section 2.7.c of the Disclosure Schedules to this
Agreement.   5.3   Indemnification by Parent. Subject to Section 5.5, Parent
agrees to indemnify, defend and hold harmless each of the Stockholders from and
against any and all Damages asserted against, relating to, imposed upon,
suffered or incurred by the Stockholders in connection with enforcing their
indemnification rights pursuant to this Section 5.3 by reason of or resulting
from (i) any untrue representation of, or breach of warranty by, Parent or
Merger Subsidiary in any part of this Agreement, (ii) any non-fulfillment of any
covenant, agreement or undertaking of Parent or Merger Subsidiary in any part of
this Agreement, (iii) any liability of the Company arising out of the operation
of the Company or its business after the Effective Time, (iv) any Liabilities
for Taxes of the Company or its predecessor in interest with respect to any Tax
period or part thereof beginning after the Effective Time, and (v) any Product
Liability Claim or other third party claim relating

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    to the Company, arising from acts, events, conditions or circumstances
existing or occurring after the Effective Time.   5.4   Claims for
Indemnification.

  (a)   Subject to Section 5.1, whenever any claim arises for indemnification
hereunder 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. In the event that the Stockholders are seeking indemnification as the
Indemnified Party hereunder, or indemnification is sought against the
Stockholders as an Indemnifying Party hereunder, then in either such case, the
Stockholders’ Representative shall be entitled to act on behalf of, and receive
notice on behalf of, the Stockholders for any and all purposes stated therein.
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
thirty (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 of the claim. The Indemnified Party shall also have the
right and upon delivery of advance written notice to such effect to the
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.

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  (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, within ten
(10) Business Days after the receipt of such notice, 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. If the Indemnifying Party filed
timely written notice of objection to any claim for indemnification, the
validity and amount of such claim will be determined by arbitration pursuant to
Article 6. If timely notice of objection is not delivered or if a claim by an
Indemnified Party is admitted in writing by an Indemnifying Party or if an
arbitration award is made in favor of an Indemnified Party, the Indemnified
Party, as a non-exclusive remedy, will have the right to set-off the amount of
such claim or award against any amount yet owed, whether due or to become due,
by the Indemnified Party or any subsidiary thereof to any Indemnifying Party by
reason of this Agreement or any agreement or arrangement or contract to be
entered into at the Closing.

5.5   Indemnification Limits.

  (a)   Except for claims based on fraud or breach of the Intellectual Property
Representations, the maximum aggregate liability of each Stockholder under this
Agreement shall be limited to an amount equal to ten percent (10%) of the Merger
Consideration actually paid to such Stockholder. Except for claims based on
fraud, the maximum aggregate liability for each Stockholder for breaches of the
Intellectual Property Representations shall be limited to an amount equal to
thirty percent (30%) of the Merger Consideration actually paid to such
Stockholder. Except for claims based on fraud or related to Parent’s failure to
make any payment due under Sections 1.8 or 1.9, the maximum aggregate liability
of Parent and the Surviving Corporation under this Agreement shall be limited to
an amount equal to ten percent (10%) of the Merger Consideration actually paid
to the Stockholders.     (b)   Except as expressly provided otherwise herein,
and subject to the provisions of Section 5.4, neither the Stockholders nor the
Parent, as the case may be, will be entitled to indemnification for any Damages
under this Agreement (unless the aggregate of all Damages is more than Ten
Thousand Dollars ($10,000) (the “Basket Amount”), provided that when the Basket
Amount is exceeded, the Parent will be entitled to full indemnification of all
claims, including the Ten Thousand Dollars ($10,000) that amounted to the Basket
Amount. The parties hereto agree that the Basket Amount is not a deductible
amount and that the Basket Amount will not be deemed to be a definition of
“material” for any purpose in this Agreement.

5.6   Right of Set-Off.

  (a)   Parent shall be entitled to set-off any amounts to which Parent is
entitled based on a claim for indemnification by Parent under this Article 5
(except for a claim for indemnification by Parent for a breach of any of the
Intellectual Property

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      Representations, which is provided in subsection (b) below) against any
amounts otherwise payable by Parent to the Stockholders under this Agreement
(including, without limitation, the Contingent Merger Consideration); provided,
however, that (i) Parent deposits any such set-off amounts in an escrow account
to be held by the Escrow Agent pending resolution of any such claim, and
(ii) Parent may not exercise its right of set-off under this Section 5.6(a)
unless the Escrow Funds at the time of exercise that is not subject to
outstanding good faith claims is equal to $0. Neither the exercise of, nor the
failure to exercise, such right of set-off will constitute an election of
remedies or limit Parent in any manner in the enforcement of any other remedies
that may be available to it.     (b)   Parent shall be entitled to set-off any
amounts to which Parent is entitled based a claim for indemnification by Parent
for breach of any of the Intellectual Property Representations against any
Milestone Payments that may become payable by Parent to the Stockholders;
provided, however, that (i) Parent deposits any such set-off amounts in an
escrow account to be held by the Escrow Agent pending resolution of such claim
(the “IP Escrow Fund”); and (ii) Parent may not exercise its right of set-off
under this Section 5.6(b) unless the IP Escrow Fund, if any, at the time of
exercise that is not subject to outstanding good faith claims is equal to $0.
Neither the exercise of, nor the failure to exercise, such right of set-off will
constitute an election of remedies or limit Parent in any manner in the
enforcement of any other remedies that may be available to it.

5.7   Escrow Funds. The Escrow Funds will be held in an interest-bearing escrow
account as established pursuant to the Escrow Agreement for the purpose of
satisfying claims by an Indemnified Party for indemnification under this
Article 5 and will be released to an Indemnified Party only in accordance with
the terms of the Escrow Agreement. Subject to, and in accordance with, the terms
and conditions set forth in the Escrow Agreement, the Escrow Agent shall deliver
or cause to be delivered to the Stockholders the balance, if any, of the Escrow
Funds.   5.8   Expenses of Stockholders’ Representative. The reasonable
out-of-pocket costs and expenses of the Stockholders’ Representative incurred on
the Stockholders’ behalf in connection with this Agreement or the Escrow
Agreement (including legal and other fees incurred in connection with the
defense of claims under Article 5) shall be paid out of the Escrow Funds;
provided, however, that in the event the Escrow Funds are insufficient or have
been released pursuant to the terms of the Escrow Agreement, such costs and
expenses shall be paid out of the Contingent Merger Consideration, if any.   5.9
  Exclusive Remedy; Exceptions. From and after the Closing Date, the provisions
of this Article 5 shall be the sole and exclusive remedy for monetary damages
arising out of or resulting from the breach of any representations, warranties
or covenants made pursuant to this Agreement, except for intentional breach,
intentional misrepresentation or fraud by the Company or the Stockholders
against Parent or Merger Subsidiary in connection with this Agreement and the
Merger. In the event of intentional breach, intentional misrepresentation or
fraud by the Company or Stockholders against Parent or Merger

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    Subsidiary in connection with this Agreement and the Merger, none of the
limitations set forth in this Article 5 shall apply.

ARTICLE 6
ARBITRATION

6.1   Dispute. Except for any controversy, claim or dispute arising out of the
failure by any party to this Agreement to consummate the Merger and the
transactions contemplated by this Agreement and subject to the last sentence of
this Section 6.1, any controversy, claim or dispute of whatever nature arising
between the parties under this Agreement, the Payment Agreement or the Escrow
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 or thereof, 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 6 shall continue in full force and effect despite the
expiration, rescission or termination of this Agreement. Notwithstanding the
foregoing, prior to Closing either party may seek injunctive relief with respect
to any controversy or claim arising out of or relating to any provision of this
Agreement in any court of competent jurisdiction.   6.2   Mediation. 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. The parties shall
attempt in good faith to resolve the Dispute by mediation under the CPR
Institute for Dispute Resolution (“CPR”) Model Mediation Procedure for Business
Disputes (the “CPR Procedure”) in effect at the time of the Dispute. If the
parties cannot agree on the selection of a mediator within twenty (20) days
after receipt of the Dispute Notice, the mediator will be selected in accordance
with the CPR Procedure.   6.3   Arbitration.

  (a)   If the Dispute has not been resolved by mediation within sixty (60) 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 Minneapolis, Minnesota. 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 (1) arbitrator, except that if the Dispute involves an amount
in excess of One Million Dollars ($1,000,000), exclusive of interest and costs,
three (3) arbitrators shall be appointed as follows: one arbitrator shall be
selected by Parent, one arbitrator shall be selected by the Stockholders’
Representative and one arbitrator shall be selected by the first two
arbitrators. Persons eligible to serve as arbitrators shall be members of the
AAA Large, Complex Case Panel or a CPR Panel of Distinguished Neutrals, or
persons who have professional credentials similar to those persons listed on
such AAA or CPR panels. The award shall be

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      in writing and include the findings of fact and conclusions of law upon
which it is based.     (b)   The arbitration shall be governed by the
substantive laws of the State of Minnesota, without regard to conflicts-of-law
rules, and by the arbitration law of the 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(s) 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. 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.

ARTICLE 7
DEFINITIONS

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

  (a)   “AAA” shall have the meaning set forth in Section 6.3(a).     (b)  
“Affiliate” means, with respect to any Person, (i) 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, or
(ii) any Person who may be deemed to be an “affiliate” under Rule 145 of the
Securities Act.     (c)   “Agreement” shall have the meaning set forth in the
first paragraph.     (d)   “AMS Holdings” shall have the meaning set forth in
Section 1.9(e).     (e)   “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 (including any
Environmental, Safety and Health Laws) applicable to such Person or any of its
Affiliates or Plan 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 or Plan Affiliates).     (f)   “Annual
Financial Statements” shall have the meaning set forth in Section 2.7(a).

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  (g)   “Audited Annual Financial Statements” shall have the meaning set forth
in Section 2.7(a).     (h)   “Basket Amount” shall have the meaning set forth in
Section 5.5(b).     (i)   “Benefit Plan” means all Pension Plans, Welfare Plans
and Compensation Plans.     (j)   “Bundled Product” means the Product and other
products that are not the Product sold in a bundle of products that are priced
together.     (k)   “Business Day” means a day other than a Saturday, Sunday or
other day on which commercial banks in Minneapolis, Minnesota are authorized or
required by law to close.     (l)   “CCC” shall have the meaning set forth in
Section 1.11(a).     (m)   “Certificate of Merger” shall have the meaning set
forth in Section 1.2.     (n)   “Certificates” shall have the meaning set forth
in Section 1.12(a).     (o)   A “Change in Control” shall be deemed to have
occurred if:

(i) any one Person, or more than one Person acting as a group, acquires
ownership of stock of AMS Holdings constituting more than fifty percent (50%) of
the total voting power of AMS Holdings;
(ii) a merger or consolidation where the holders of the voting stock of AMS
Holdings immediately prior to the effective date of such merger or consolidation
own less than fifty percent (50%) of the voting stock of either entity surviving
such merger or consolidation; or
(iii) any one Person or more than one Person acting as a group, acquires assets
from AMS Holdings that have a total fair market value greater than fifty percent
(50%) of the total fair market value of all of AMS Holdings’ assets respectively
immediately before the acquisition or acquisitions; provided, however, that
transfers of assets which otherwise would satisfy the requirements of this
subsection (iii) will not be treated as an acquisition of such assets if the
assets are transferred to:
(A) any Person, fifty percent (50%) or more of the total value or voting power
of which is owned, directly or indirectly by AMS Holdings; or
(B) any Person, or more than one Person acting as a group, that owns, directly
or indirectly, fifty percent (50%) or more of the total value or voting power of
all of the outstanding stock of AMS Holdings.

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     Notwithstanding the foregoing, a Change in Control shall not be deemed to
have occurred solely as a result of any transaction or reorganization undertaken
for the primary purpose of implementing a change in jurisdiction or charter of
AMS Holdings.

  (p)   “Closing” shall have the meaning set forth in Section 1.3.     (q)  
“Closing Date” shall have the meaning set forth in Section 1.3.     (r)  
“Closing Date Balance Sheet” shall have the meaning set forth in Section 1.8(a).
    (s)   “Code” means the Internal Revenue Code of 1986, as amended, and the
regulations or other binding pronouncements promulgated thereunder.     (t)  
“Commercialization Milestone Payment” shall have the meaning set forth in
Section 1.9(a)(iii).     (u)   “Company” shall have the meaning set forth in the
first paragraph.     (v)   “Company 401(k) Plan” means each Company Pension Plan
qualified under Code Section 401(k).     (w)   “Company Capital Stock” means
Company Common Stock and Company Preferred Stock.     (x)   “Company Common
Stock” means the common stock, $.001 par value, of the Company.     (y)  
“Company Documents” shall have the meaning set forth in Section 2.3.     (z)  
"Company Indebtedness” shall have the meaning set forth in Section 4.4.     (aa)
  “Company Liabilities” shall have the meaning set forth in Section 1.8(a).    
(bb)   “Company Licenses” shall have the meaning set forth in Section 2.11(a).  
  (cc)   “Company Preferred Stock” means, collectively, the Series A-1 Stock,
the Series A-2 Stock, the Series A-3 Stock, the Series B Stock, the Series C
Stock, the Series D Stock, the Series E-1 Stock, the Series F-1 Stock, the
Series G-1 Stock of the Company.     (dd)   “Company Securities” means any and
all (i) Company Common Stock, (ii) Company Preferred Stock, (iii) Company Stock
Options, (iv) Company Warrants, (v) shares of capital stock or other voting
securities of the Company, (vi) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(vii) options, warrants, conversion privileges, contracts, understandings,
agreements or other rights to purchase or acquire from the Company, or
obligations of the Company to issue,

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      any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (viii)
equity equivalent interests in the ownership or earnings of the Company or other
similar rights.     (ee)   “Company Stock Option” means an option to purchase a
share of the Company’s Common Stock granted pursuant to the Company Stock Option
Plans.     (ff)   “Company Stock Option Plans” means the Company’s 1996 Stock
Option Plan.     (gg)   “Company Warrants” means warrants issued by the Company
and outstanding from time to time to purchase either Company Common Stock or
Company Preferred Stock.     (hh)   “Compensation Plan” means any material
benefit or arrangement that is not either a Pension Plan or a Welfare Plan,
including, without limitation, (i) each employment or consulting agreement,
(ii) each arrangement providing for insurance coverage or workers’ compensation
benefits, (iii) each bonus, incentive bonus or deferred bonus arrangement,
(iv) each arrangement providing termination allowance, severance or similar
benefits, (v) each equity compensation plan, (vi) each current or deferred
compensation agreement, arrangement or policy, (vii) each compensation policy
and practice maintained by the Company or any ERISA Affiliate of the Company
covering the employees, former employees, directors and former directors of the
Company and the beneficiaries of any of them, and (viii) each agreement,
arrangement or plan that provides for the payment of compensation to any person
who provides services to the Company and who is not an employee, former
employee, director or former director of the Company.     (ii)   “Contingent
Merger Consideration” shall have the meaning set forth in Section 1.9.     (jj)
  “Consent” or “Consents” shall have the meaning set forth in Section 2.6.    
(kk)   “Contracts” means all contracts, agreements, options, leases, licenses,
sales and accepted purchase orders, commitments and other instruments of any
kind, whether written or oral, to which the Company is a party on the Closing
Date, including the Scheduled Contracts.     (ll)   "Coopers Agreement” means
the Asset Purchase Agreement, dated November 26, 2003, between CooperSurgical
Acquisition Corp. and SURx, Inc (now known as Solarant Medical, Inc.).     (mm)
  “CPR” shall have the meaning set forth in Section 6.2.     (nn)   “CPR
Procedure” shall have the meaning set forth in Section 6.2.     (oo)   “Damages”
means all losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement,

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      without giving effect to any qualifications as to materiality of Material
Adverse Effect contained in any representation or warranty contained herein,
including, but not limited to, (i) interest on cash disbursements in respect of
any of the foregoing at the “prime rate” as published in the Wall Street
Journal, from time to time from the date each such cash disbursement is made
until the Person incurring the same shall have been indemnified in respect
thereof, and (ii) reasonable costs, fees and expenses of attorneys, accountants,
bankers and other agents of the Person incurring such expenses.     (pp)  
“Development Period” shall have the meaning set forth in Section 1.9(c).    
(qq)   “Development Period Contingency Payment” shall have the meaning set forth
in Section 1.9(c).     (rr)   “DGCL” shall have the meaning set forth in
Section 1.1.     (ss)   “Disclose” or “Disclosure” shall have the meaning set
forth in Section 4.1     (tt)   “Disclosure Schedule” shall have the meaning set
forth in Article 2.     (uu)   “Dispute” shall have the meaning set forth in
Section 6.1.     (vv)   “Dispute Notice” shall have the meaning set forth in
Section 6.2.     (ww)   “Dissenting Shares” shall have the meaning set forth in
Section 1.11(a).     (xx)   “Dissenting Stockholders” shall have the meaning set
forth in Section 1.11(a).     (yy)   “Effective Time” shall have the meaning set
forth in Section 1.2.     (zz)   “Employee” shall have the meaning set forth in
Section 2.18(a).     (aaa)   “Environmental, Safety and Health Laws” means all
Applicable Laws in any way relating to Environmentally Regulated Materials,
toxic torts, occupational health and safety, or the environment, including,
without limitation, the Safe Drinking Water and Toxic Enforcement Act
(“Proposition 65”), the Federal Resource Conservation and Recovery Act, the
Federal Comprehensive Environmental Response Compensation and Liability Act, the
Federal Clean Air Act, the Federal Water Pollution Control Act, the Federal Safe
Drinking Water Act, the Federal Toxic Substances Control Act, the Federal
National Environmental Policy Act, the Federal Insecticide Fungicide and
Rodenticide Act, the Federal Emergency Planning and Community Right to Know Act,
the Federal Hazard Communication Act, the Federal Occupational Safety and Health
Act, any requirements promulgated pursuant to these Applicable Laws, amendments,
or restatements thereof or similar enactments thereof, as is now in effect, or
any analogous foreign, state or local Applicable Laws.

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  (bbb)   “Environmental Liabilities” means all Liabilities of a Person (whether
such Liabilities are owed by such Person to Governmental Authorities, third
parties, or otherwise) currently in existence which arise under or relate to any
Environmental Law.     (ccc)   “Environmentally Regulated Material” means any
element, compound, waste, pollutant, contaminant, substance, material or any
mixture thereof: (i) the presence of which requires investigation or remediation
under any Applicable Law; (ii) that is defined as a “hazardous waste” or
“hazardous substance,” or chemicals known to cause cancer or reproductive
toxicity under any Applicable Law; (iii) that is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic or mutagenic or otherwise
hazardous and is regulated by any Governmental Authority having or asserting
jurisdiction over the Company; (iv) the presence of which causes a nuisance,
trespass or other tortious condition; (v) the presence of which poses a hazard
to the health or safety of Persons; (vi) without limitation, that contains
gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated biphenyls
(PCBs), or asbestos, (vii) that gives rise to any exposure prohibition or
warning requirement under any Environmental Law; or (viii) that is otherwise
regulated in any way under any Environmental Law.     (ddd)   “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.     (eee)   “ERISA
Affiliate” means any “person,” within the meaning of Section 7701(a)(1) of the
Code, that together with the Company is considered a single employer pursuant to
Section 414(b), (c), (m) or (o) of the Code or Section 3(5) or 4001(b)(1) of
ERISA.     (fff)   “Escrow Agent” means U.S. Bank National Association, or such
other bank as the parties may agree upon.     (ggg)   “Escrow Agreement” shall
have the meaning set forth in Section 1.3(b)(iii).     (hhh)   “Escrow Funds”
shall have the meaning set forth in Section 1.8(a).     (iii)   “FDA” means the
U.S. Food and Drug Administration.     (jjj)   “FDC Act” shall have the meaning
set forth in Section 2.10.     (kkk)   “FICA” shall have the meaning set forth
in Section 2.17(q).     (lll)   “First Revenue Payment” shall have the meaning
set forth in Section 1.9(b)(i)(1).     (mmm)   “GAAP” means generally accepted
accounting principles in the United States.     (nnn)   “GMP/QSR Regulations”
shall have the meaning set forth in Section 2.10.

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  (ooo)   “Government Programs” shall have the meaning set forth in
Section 2.12(a).     (ppp)   “Governmental Authority” means any foreign,
domestic, federal, territorial, state or local governmental or regulatory
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.     (qqq)   “Group
Health Plan” means any group health plan, as defined in Section 5000(b)(1) of
the Code.     (rrr)   “HIPAA” means the Health Insurance Portability and
Accountability Act of 1996, Public Law 104-191 as codified in the Code and
ERISA.     (sss)   “HIPAA Portability Regulations” means the regulations issued
by the Department of Treasury (Title 26, Part 54, of the Code of Federal
Regulations) and the Department of Labor (Title 29, Part 2590, of the Code of
Federal Regulations) pursuant to HIPAA, including the regulations governing
pre-existing condition exclusions, special enrollment rights and
non-discrimination on the basis of health status.”     (ttt)   “HIPAA Privacy,
Security and“other Administrative Simplification Regulations” means the
regulations (Title 45, Parts 160 through 164, of the Code of Federal
Regulations) issued by the U.S. Department of Health and Human Services pursuant
to HIPAA.     (uuu)   "Hospital CPT Code” means a current procedural terminology
code with physician work values established via the AMA RBRVS (Resource Based
Relative Value Scale) update committee process.     (vvv)   “Hospital CPT Code
Milestone” shall mean (i) the AMA’s issuance of the Hospital CPT Code for the
Product and (ii) Parent’s receipt of FDA approval and clearance to market the
Product.     (www)   “Hospital CPT Code Milestone Payment” shall have the
meaning set forth in Section 1.9(a)(i).     (xxx)   “HSR Act” means the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.     (yyy)  
“Indemnified Party” shall have the meaning set forth in Section 5.4(a).    
(zzz)   “Indemnifying Party” shall have the meaning set forth in Section 5.4(a).
    (aaaa)   “Information” shall have the meaning set forth in Section 4.1.    
(bbbb)   “Initial Merger Consideration” shall have the meaning set forth in
Section 1.8(a).

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  (cccc)   “Initial Payment” shall have the meaning set forth in Section 1.8(a).
    (dddd)   “Intellectual Property” shall mean all rights in patents, patent
applications, 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, Internet domain name applications, corporate names, copyright
applications, registered copyrighted works, technology, software, trade secrets,
know-how, technical documentation, specifications, data and designs, other than
off-the-shelf computer programs, used in or necessary to the conduct of the
business of the Company.     (eeee)   "Intellectual Property Representations”
shall have the meaning set forth in Section 5.1.     (ffff)   “IP Escrow Fund”
shall have the meaning set forth in Section 5.6(b).     (gggg)   “Junior Company
Securities” shall have the meaning set forth in Section 1.10(a).     (hhhh)  
“Knowledge of the Company” or “Company’s Knowledge” means the knowledge actually
possessed, or which, upon the exercise of reasonable due diligence could be
possessed by Mike Gandy, Ed Luttich, Cheryl Shimek and Terry Spraker.     (iiii)
  “Latest Balance Sheet” shall have the meaning set forth in Section 2.7(a).    
(jjjj)   “Latest Financial Statements” shall have the meaning set forth in
Section 2.7(a).     (kkkk)   “Letter of Intent” means the Preliminary Summary of
Terms and Conditions, dated March 13, 2006, signed by the Company and Parent.  
  (llll)   “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,
including without limitation any foreign or domestic tax liabilities or deferred
tax liabilities incurred in respect of or measured by the Company’s income, 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 which occurred or existed on or before the date hereof,
whether or not known, due or payable, whether or not the same is required to be
accrued on the financial statements or is disclosed on the Disclosure Schedule.
    (mmmm)   “Lien” means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance, adverse claim or charge of any kind in respect of such
asset.     (nnnn)   "Loan Agreement” shall have the meaning set forth in
Section 4.4.

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  (oooo)   “Material Adverse Effect” means, with respect to the Company or
Parent, in either case as applicable, an individual or cumulative adverse change
in or effect on the business, operations, working capital condition (financial
or otherwise), assets, properties or liabilities of such party which (i) is
reasonably expected to be materially adverse to the business, operations,
properties, working capital condition (financial or otherwise), assets or
liabilities of such party or its Subsidiaries taken as a whole; or (ii) would
prevent such party from consummating the transactions contemplated hereby:
provided, however, that none of the following shall be deemed, either alone or
in combination, to constitute, and none of the following shall be taken into
account in determining whether there has been or will be, a Material Adverse
Effect: any adverse effect arising from or attributable or relating to (1) the
announcement of any of the transactions contemplated by this Agreement, (2) the
taking of any action required by this Agreement, or (3) the taking of any action
by any party approved or consented to in writing by each of the other parties to
this Agreement.     (pppp)   “Merger” shall have the meaning set forth in
Section 1.1.     (qqqq)   “Merger Consideration” shall have the meaning set
forth in Section 1.9.     (rrrr)   “Merger Subsidiary” shall have the meaning
set forth in the first paragraph.     (ssss)   “Merger Subsidiary Common Stock”
shall have the meaning set forth in Section 1.10(c).     (tttt)   “Milestone
Payments” shall have the meaning set forth in Section 1.9(a)(iii).     (uuuu)  
“Milestones” shall mean the Hospital CPT Code Milestone and the Office CPT Code
Milestone.     (vvvv)   “Net Initial Merger Consideration” shall have the
meaning set forth in Section 1.8(a).     (wwww)   “Net Sales” means Parent’s
properly recognized consolidated aggregate net sales of the Products, calculated
in accordance with GAAP consistently applied by Parent in accordance with its
audited revenue recognition policies. Whenever a Product is sold as part of a
Bundled Product, the “Net Sales” for the Product resulting from such sale of
such Bundled Product shall be the product of (X) the net revenues reported by
Parent or its Affiliate, whichever is applicable, for such Bundled Product
multiplied by (Y) a fraction, the numerator of which is the per unit average
selling price of such Product and the denominator of which is the sum of the
aggregate per unit average selling prices of all products, including the
Product, included in such Bundled Product.     (xxxx)   "Office CPT Code” means
a current procedural terminology code that recognizes the site of service
differential with appropriate payment for the office setting. Appropriate
payment is defined as greater than or equal to $1,600.

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  (yyyy)   “Office CPT Code Milestone” shall mean (i) the AMA’s issuance of the
Office CPT Code for the Product and (ii) Parent’s receipt of FDA approval and
clearance to market the Product.     (zzzz)   “Office CPT Code Milestone
Payment” shall have the meaning set forth in Section 1.9(a)(ii).     (aaaaa)  
“Ordinary Course of Business” means any action taken by a Person that is (i)
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person and (ii) not required
to be specifically authorized by the Board of Directors of such Person (or by
any Person or group of Persons exercising similar authority).     (bbbbb)  
“Parent” shall have the meaning set forth in the first paragraph.     (ccccc)  
“Parent Documents” shall have the meaning set forth in Section 3.2.     (ddddd)
  “Payment Agent” means U.S. Bank National Association, or such other bank as
the parties may agree upon.     (eeeee)   “Payment Agreement” shall have the
meaning set forth in Section 1.3(b)(iv).     (fffff)   “PCBs” shall have the
meaning set forth in Section 2.20(a).     (ggggg)   “Pension Plan” means an
“employee pension benefit plan” as such term is defined in Section 3(2) of
ERISA.     (hhhhh)   “Permits” shall have the meaning set forth in Section 2.14.
    (iiiii)   “Permitted Liens” means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings (and which contested Taxes are described on the Disclosure
Schedule); (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and other Liens
imposed by Applicable Law incurred in the Ordinary Course of Business for sums
not yet delinquent or being contested in good faith; (iii) Liens relating to
deposits made in the Ordinary Course of Business in connection with workers’
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar agreements;
(iv) Liens and Encumbrances specifically identified in the Latest Balance Sheet;
(v) Liens securing executory obligations under any lease that constitutes an
“operating lease” under GAAP; and (vi) other Liens set forth on the Disclosure
Schedule; provided, however, that, with respect to each of clauses (i) through
(v), to the extent that any such Lien on any of the Company’s assets arose prior
to the date of the Latest Balance Sheet and relates to, or secures the payment
of, a Liability that is required to be accrued for under GAAP, such Lien shall
not be a Permitted Lien unless all such Liabilities have been fully accrued or
otherwise reflected on the Latest Balance Sheet.

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      Notwithstanding the foregoing, no Lien arising under the Code or ERISA
with respect to the operation, termination, restoration or funding of any
Benefit Plan sponsored by, maintained by or contributed to by the Company or any
of its ERISA Affiliates or arising in connection with any excise tax or penalty
tax with respect to such Benefit Plan shall be a Permitted Lien.     (jjjjj)  
“Person” means an individual, corporation, partnership, limited liability
company, association, trust, estate or other entity or organization, including a
Governmental Authority.     (kkkkk)   “Plan Affiliate” means, with respect to
any Person, any Benefit Plan sponsored by, maintained by or contributed to by
such Person, and with respect to any Benefit Plan, any Person sponsoring,
maintaining or contributing to such plan or arrangement.     (lllll)   “Prior
Divestiture” shall have the meaning set forth in Section 2.27.     (mmmmm)  
“Proceedings” shall have the meaning set forth in Section 2.15.     (nnnnn)  
“Product” or “Products” means the Solarant 2 System, which consists of: (i) a
hand-held applicator used to apply RF energy and cooling to the tissue from
inside the vagina; (ii) a console that generates RF energy, provides liquid
coolant and cooling power, controls the Solarant 2 System through software and
provides a user interface screen; and (iii) a urethral measurement assembly
which is inserted into the urethra, to help correctly position the applicator
relative to the individual patient’s anatomy.     (ooooo)   "Product Development
Expenses” means all internal and external expenses incurred by Parent and its
Affiliates related to research and development, clinical, regulatory, marketing
and operation activities for the Product.     (ppppp)   “Product Liability
Claim” shall have the meaning set forth in Section 2.25.     (qqqqq)  
“Properties” means any real property owned or leased by or to the Company.    
(rrrrr)   “Representatives” shall have the meaning set forth in Section 4.1.    
(sssss)   “Revenue Calculation” shall have the meaning set forth in
Section 1.9(b)(ii).     (ttttt)   “Revenue Payment Commencement Date” shall have
the meaning set forth in Section 1.9(b).     (uuuuu)   “Revenue Payments” shall
have the meaning set forth in Section 1.9(b)(i)(3).     (vvvvv)   “Scheduled
Contracts” shall have the meaning set forth in Section 2.16(a).

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  (wwwww)   “Second Revenue Payment” shall have the meaning set forth in
Section 1.9(b)(i)(2).     (xxxxx)   “Section 409A Benefit Plan” shall have the
meaning set forth in Section 2.17(o).     (yyyyy)   “Securities Act” means the
Securities Act of 1933, as amended.     (zzzzz)   “Senior Stock” shall have the
meaning set forth in Section 1.10(b).     (aaaaaa)   “Series A-1 Stock” means
the Series A-1 Preferred Stock, $.001 par value, of the Company.     (bbbbbb)  
“Series A-2 Stock” means the Series A-2 Preferred Stock, $.001 par value, of the
Company.     (cccccc)   “Series A-3 Stock” means the Series A-3 Preferred Stock,
$.001 par value, of the Company.     (dddddd)   “Series B Stock” means the
Series B Preferred Stock, $.001 par value, of the Company.     (eeeeee)  
“Series C Stock” means the Series C Preferred Stock, $.001 par value, of the
Company.     (ffffff)   “Series D Stock” means the Series D Preferred Stock,
$.001 par value, of the Company.     (gggggg)   “Series E-1 Stock” means the
Series E-1 Preferred Stock, $.001 par value, of the Company.     (hhhhhh)  
“Series F-1 Stock” means the Series F-1 Preferred Stock, $.001 par value, of the
Company.     (iiiiii)   “Series G-1 Stock” means the Series A-1 Preferred Stock,
$.001 par value, of the Company.     (jjjjjj)   “Stockholder Expenses” mean
expenses to be borne by the Stockholders pursuant to Section 8.3 or otherwise as
authorized and approved by the Stockholders’ Representatives.     (kkkkkk)  
“Stockholders” mean the Persons who hold of record immediately prior to the
Effective Time shares of Company Common Stock or Company Preferred Stock.    
(llllll)   “Stockholders’ Representative” shall have the meaning set forth in
the first paragraph.     (mmmmmm)   “Subsidiary” or “Subsidiaries” mean each
corporation or other legal entity as to which more than 50% of the outstanding
equity securities having

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ordinary voting rights or power at the time of determination is being made is
owned or controlled, directly or indirectly, by the Company.

  (nnnnnn)   “Surviving Corporation” shall have the meaning set forth in
Section 1.1.     (oooooo)   “Surviving Corporation Common Stock” shall have the
meaning set forth in Section 1.10(c).     (pppppp)   “Tax” or “Taxes” means all
taxes imposed of any nature including federal, state, local or foreign net
income tax, alternative or add-on minimum tax, profits or excess profits tax,
franchise tax, gross income, adjusted gross income or gross receipts tax,
employment related tax (including employee withholding or employer payroll tax,
FICA or FUTA), real or personal property tax or ad valorem tax, sales or use
tax, excise tax, stamp tax or duty, any withholding or back up withholding tax,
value added tax, severance tax, prohibited transaction tax, premiums tax,
environmental tax, intangibles tax or occupation tax, together with any interest
or any penalty, addition to tax or additional amount imposed by any Governmental
Authority (domestic or foreign) responsible for the imposition of any such tax.
The term Tax shall also include any Liability of the Company for the Taxes of
any other Person under U.S. Treasury Regulations Section 1.1502-6 (or similar
provisions of state, local or foreign law), as a transferee or successor by
contract or otherwise.     (qqqqqq)   “Tax Return” means all returns,
declarations, reports, estimates, forms, information returns and statements or
other information required to be filed with respect to any Tax.     (rrrrrr)  
“Terminated Employees” shall have the meaning set forth in Section 1.3(b)(xiii).
    (ssssss)   “Third Party Claim” shall have the meaning set forth in
Section 5.4(a).     (tttttt)   "Third Revenue Payment” shall have the meaning
set forth in Section 1.9(b)(i)(3).     (uuuuuu)   “Transaction Expenses” means
all fees and expenses incurred by or on behalf of the Company payable to a third
party (including, without limitation, all legal, accounting, financial advisory,
investment banking, consulting and all other fees and expenses of third parties)
incurred in connection with the negotiation and preparation of this Agreement
and the transactions contemplated hereby.     (vvvvvv)   “Unaudited Annual
Financial Statements” shall have the meaning set forth in Section 2.7(a).    
(wwwwww)   “Welfare Plan” means an “employee welfare benefit plan” as such term
is defined in Section 3(1) of ERISA (including without limitation a plan
excluded from coverage by Section 4 of ERISA).     (xxxxxx)   “Year One” shall
have the meaning set forth in Section 1.9(b)(i)(1).

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  (yyyyyy)   “Year Three” shall have the meaning set forth in
Section 1.9(b)(i)(3).     (zzzzzz)   “Year Two” shall have the meaning set forth
in Section 1.9(b)(i)(2).     (aaaaaaa)   “Year Zero” shall have the meaning set
forth in Section 1.9(b)(i)(1).

ARTICLE 8
MISCELLANEOUS

8.1   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 mailed, two (2) Business Days after having been sent
by registered or certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below, (c) if given by
facsimile, once such notice or other communication is transmitted to the
facsimile number specified below and electronic confirmation is received;
provided, however, that such notice or other communication is promptly
thereafter mailed in accordance with the provisions of clause (b) above, or
(d) if sent through an overnight delivery service in circumstances to which such
service guarantees next day delivery, the day following being so sent:       If
to the Company after Closing or to the Parent or Merger Subsidiary:

             
 
  To:   American Medical Systems, Inc.    
 
      10700 Bren Road West    
 
      Minnetonka, Minnesota 55343    
 
      Attn: Chief Executive Officer    
 
      Fax: (612) 930-6695    
 
                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    
 
      E-mail: TLetscher@Oppenheimer.com    
 
            If to the Stockholders’ Representative:    
 
           
 
      Warburg Pincus Equity Partners, L.P.    
 
      466 Lexington Ave    
 
      11th Floor    
 
      New York, NY 10017    
 
      Attn: Timothy Curt    

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      Fax (212) 878-9361    
 
                With a copy to:    
 
           
 
      Cooley Godward LLP    
 
      3175 Hanover Street    
 
      Palo Alto, CA 94304-1130    
 
      Attn: James F. Fulton, Jr., Esq.    
 
      Fax: 650-849-7400    
 
      E-mail: fultonjf@cooley.com    

          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.

8.2   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.

8.3   Expenses. 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 (which in the case of the
Company, shall be deducted from the Merger Consideration). This Section 8.3
shall survive the termination of this Agreement.   8.4   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 without the prior written approval of each other party.

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8.5   Governing Law. This Agreement shall be governed by, construed and enforced
in accordance with the internal laws of the State of Delaware (regardless of the
laws that might otherwise govern under applicable principles of conflicts of
law).   8.6   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.   8.7   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, including, without limitation, the Letter of Intent. Neither this
Agreement nor any provision hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.   8.8   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.   8.9   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 only if, after excluding the portion deemed to be unenforceable, the
remaining terms shall provide for the consummation of the transactions
contemplated hereby in substantially the same manner as originally set forth at
the later of the date this Agreement was executed or last amended.   8.10  
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.   8.11   Cumulative Remedies. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.   8.12   Third Party
Beneficiaries. No provision of this Agreement shall create any third party
beneficiary rights in any Person, including any employee of Parent or Merger
Subsidiary

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or employee or former employee of the Company or any Affiliate thereof
(including any beneficiary or dependent thereof).

8.13   Appointment of Stockholders’ Representative; Enforcement of Rights,
Benefits and Remedies.

  (a)   By adopting this Agreement, the Stockholders hereby irrevocably
constitute and appoint Kathleen Regan as the Stockholders’ Representative,
effective as of the Effective Time, for the purpose of performing and
consummating the transactions contemplated by this Agreement, the Escrow
Agreement and the Payment Agreement. The appointment of such Stockholders’
Representative is coupled with an interest and all authority hereby conferred
shall be irrevocable and such Stockholders’ Representative is hereby authorized
and directed to perform and consummate all of the transactions contemplated by
this Agreement. Not by way of limiting the authority of the Stockholders’
Representative, each and all of the Stockholders, by their adoption of this
Agreement, for themselves and their respective heirs, executors, administrators,
successors and assigns hereby authorize the Stockholders’ Representative to:

  (i)   effect any amendment to this Agreement, the Payment Agreement or the
Escrow Agreement which the Stockholders’ Representative deems necessary or
desirable,     (ii)   execute and deliver on their behalf all documents and
instruments which may be executed and delivered pursuant to this Agreement, the
Payment Agreement or the Escrow Agreement, except that all stock powers and
letters of transmittal with respect to the transfer of the Company Common Stock
or Company Preferred Stock shall be personally executed by the Stockholders,    
(iii)   make and receive notices and other communications pursuant to this
Agreement, the Payment Agreement or the Escrow Agreement and service of process
in any legal action or other proceeding arising out of or related to this
Agreement, the Payment Agreement or the Escrow Agreement or any of the
transactions hereunder or thereunder,     (iv)   settle any dispute, claim,
action, suit or proceeding arising out of or related to this Agreement, the
Payment Agreement or the Escrow Agreement or any of the transactions hereunder
or thereunder, including, without limitation, the calculation of the Merger
Consideration or the defense, settlement or compromise of any claim, action or
proceeding for which Parent or Merger Subsidiary may be entitled to
indemnification,     (v)   receive and distribute the Initial Merger
Consideration, Contingent Merger Consideration and any Escrow Funds,     (vi)  
appoint or provide for successor agents, and

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  (vii)   pay expenses incurred or which may be incurred by or on behalf of the
Stockholders (and to be reimbursed by the Stockholders for their pro rata share
of such expenses out of the sums held by the Escrow Agent pursuant to the Escrow
Agreement) in connection with this Agreement, the Payment Agreement and the
Escrow Agreement.

In the event of the death or disability of the Stockholders’ Representative, a
majority of the remaining Stockholders shall promptly appoint a replacement. No
person serving as the Stockholders’ Representative under this Agreement shall
have any personal liability to any Stockholder or its permitted assigns with
respect to any action taken, suffered or omitted by him hereunder as a
Stockholders’ Representative while acting in good faith and in the absence of
gross negligence or willful misconduct, and any act done, suffered or omitted
pursuant to the advice of counsel shall be deemed hereunder to have been done in
good faith, except to the extent that such person may have liability as a
Stockholder hereunder. The Stockholders shall severally and not jointly
indemnify the Stockholders’ Representative and hold him harmless against any
loss, liability or expense incurred without bad faith or gross negligence on the
part of the Stockholders’ Representative and arising out of or in connection
with the acceptance or administration of their duties hereunder.

  (b)   Any claim, action, suit, or other proceeding, whether in law or equity,
to enforce any right, benefit or remedy granted to Stockholders under this
Agreement, the Payment Agreement or the Escrow Agreement shall be asserted,
brought, prosecuted or maintained only by the Stockholders’ Representative. With
respect to any matter contemplated by this Section 11.13, the Stockholders shall
be bound by any determination in favor of or against the Stockholders’
Representative or the terms of any settlement or release to which the
Stockholders’ Representative shall become a party.     (c)   Any notice given
the Stockholders’ Representative will constitute notice to each and all of the
Stockholders at the time the notice is given to the Stockholders’
Representative. Any action taken by, or instruction received from, the
Stockholders’ Representative will be deemed to be action be, or notice or
instruction from, each and all of the Stockholders. Parent may, and the Escrow
Agent will, disregard any notice or instruction received directly from any of
the Stockholders other than the Stockholders’ Representative.     (d)   At any
time during the term of the Escrow Agreement, holders of a majority in interest
of the Escrow Funds can remove and replace the Stockholders’ Representative by
sending notice and a copy of the written consent appointing such new individual
or individuals signed by holders of a majority in interest of the Escrow Funds
to Parent and the Escrow Agent.

[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.

          PARENT:   AMERICAN MEDICAL SYSTEMS, INC.
 
       
 
  By:    
 
       
 
  Name:    
 
  Title:    
 
        MERGER SUBSIDIARY:   XENON MERGER CORP.
 
       
 
  By:    
 
       
 
  Name:    
 
  Title:    
 
        COMPANY:   SOLARANT MEDICAL, INC.
 
  By:    
 
       
 
  Name:    
 
  Title:    
 
       
STOCKHOLDERS’
       
REPRESENTATIVE:
       
 
       
 
  By:    
 
       
 
  Name:    
 
  Title:    

SIGNATURE PAGE
AGREEMENT AND PLAN OF MERGER

 

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EXHIBIT INDEX

     
EXHIBIT A
  Form of Certificate of Merger
 
   
EXHIBIT B
  Form of Escrow Agreement
 
   
EXHIBIT C
  Form of Payment Agreement
 
   
EXHIBIT D
  Form of Opinion of Cooley Godward LLP
 
   
EXHIBIT E
  Form of Opinion of Willkie Farr & Gallagher LLP
 
   
EXHIBIT F
  Form of Opinion of Oppenheimer Wolff & Donnelly LLP
 
   
EXHIBIT G
  Form of Letters of Resignation and Release of Claims
 
   
EXHIBIT H
  Form of Consulting Agreement
 
   
EXHIBIT I
  Form of Certificate of Incorporation of Merger Subsidiary
 
   
SCHEDULE 1.3(b)
  Approvals, Consents, and Waivers of Third Parties
 
   
SCHEDULE 1.8(a)
  Liabilities Excluded From Company Liabilities
 
   
SCHEDULE 1.8(b)
  Distribution of Merger Consideration
 
   
SCHEDULE 1.8(c)
  Closing Date Balance Sheet

 

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Table of Contents

                                      Page ARTICLE 1 THE MERGER; CONVERSION OF
SHARES     1  
 
    1.1     The Merger     1  
 
    1.2     Effective Time     1  
 
    1.3     Closing of the Merger     2  
 
    1.4     Effects of the Merger     3  
 
    1.5     Certificate of Incorporation of the Surviving Corporation     3  
 
    1.6     Bylaws of the Surviving Corporation     3  
 
    1.7     Directors and Officers of the Surviving Corporation     3  
 
    1.8     Initial Merger Consideration     4  
 
    1.9     Contingent Merger Consideration     4  
 
    1.10     Cancellation and Conversion of Company Securities at the Effective
Time     7  
 
    1.11     Dissenting Shares     9  
 
    1.12     Escrow Procedure; Exchange of Certificates     9   ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY     12  
 
    2.1     Corporate Organization and Power     12  
 
    2.2     Subsidiaries     12  
 
    2.3     Authorization     12  
 
    2.4     Capitalization of the Company     13  
 
    2.5     Non-Contravention     14  
 
    2.6     Consents and Approvals     14  
 
    2.7     Financial Statements; Undisclosed Liabilities     14  
 
    2.8     Absence of Certain Changes     15  
 
    2.9     Assets and Properties     17  
 
    2.10     Manufacturing and Marketing Matters     17  
 
    2.11     FDA and Regulatory Matters     17  
 
    2.12     Compliance with Applicable Laws     19  
 
    2.13     Compliance Program     19  
 
    2.14     Permits     19  
 
    2.15     Litigation     20  
 
    2.16     Contracts     20  

 

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Table of Contents
(continued)

                                      Page
 
    2.17     Benefit Plans     22  
 
    2.18     Labor and Employment Matters     26  
 
    2.19     Intellectual Property     27  
 
    2.20     Environmental Compliance     29  
 
    2.21     Insurance     30  
 
    2.22     Tax Matters     30  
 
    2.23     Bank Accounts; Powers of Attorney     32  
 
    2.24     Orders, Commitments and Returns     33  
 
    2.25     Product Liability Claims     33  
 
    2.26     Warranties     33  
 
    2.27     Prior Divestitures of the Company     33  
 
    2.28     Relations with Suppliers and Customers     33  
 
    2.29     Reimbursement/Billing     34  
 
    2.30     Indemnification Obligations     34  
 
    2.31     Absence of Certain Business Practices     34  
 
    2.32     Brokers     34  
 
    2.33     Minute Books     34  
 
    2.34     State Takeover Statutes     34  
 
    2.35     Disclosure     34  
 
    2.36     Investigation by Parent     35   ARTICLE 3 REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUBSIDIARY     35  
 
    3.1     Corporate Existence and Power     35  
 
    3.2     Authorization     35  
 
    3.3     Consents and Approvals     36  
 
    3.4     Disclosure     36  
 
    3.5     Non-Contravention     36  
 
    3.6     Brokers     36   ARTICLE 4 COVENANTS     37  
 
    4.1     Confidentiality     37  

 

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Table of Contents
(continued)

                                      Page
 
    4.2     Further Assurances; Notification     37  
 
    4.3     Public Announcements     37  
 
    4.4     Cancellation and Forgiveness of Certain Indebtedness of the Company
    38  
 
    4.5     Conduct of Business after Closing Date     38   ARTICLE 5 SURVIVAL
AND INDEMNIFICATION     38  
 
    5.1     Survival     38  
 
    5.2     Indemnification by Stockholders     39  
 
    5.3     Indemnification by Parent     39  
 
    5.4     Claims for Indemnification     40  
 
    5.5     Indemnification Limits     41  
 
    5.6     Right of Set-Off     41  
 
    5.7     Escrow Funds     42  
 
    5.8     Expenses of Stockholders’ Representative     42   ARTICLE 6
ARBITRATION     43  
 
    6.1     Dispute     43  
 
    6.2     Mediation     43  
 
    6.3     Arbitration     43   ARTICLE 7 DEFINITION     44  
 
    7.1     Definitions     44   ARTICLE 8 MISCELLANEOUS     57  
 
    8.1     Notices     57  
 
    8.2     Amendments; No Waivers     58  
 
    8.3     Expenses     58  
 
    8.4     Successors and Assigns     58  
 
    8.5     Governing Law     59  
 
    8.6     Counterparts; Effectiveness     59  
 
    8.7     Entire Agreement     59  
 
    8.8     Captions     59  
 
    8.9     Severability     59  
 
    8.10     Construction     59  

 

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Table of Contents
(continued)

                                      Page
 
    8.11     Cumulative Remedies     59  
 
    8.12     Third Party Beneficiaries     59  
 
    8.13     Appointment of Stockholders’ Representative; Enforcement of Rights,
Benefits and Remedies     60