<PAGE>   1
                                                                  EXHIBIT 10.107



                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                     [LOGO]


                       LICENSE AND DISTRIBUTION AGREEMENT

        This License and Distribution Agreement (the "Agreement") effective as
of January 27, 1999 (the "Effective Date") is entered into by and between
ArthroCare Corporation, on its own behalf and on behalf of its Affiliates
("ArthroCare"), a Delaware corporation having an address at 595 North Pastoria
Avenue, Sunnyvale, California 94086, and Collagen Aesthetics, Inc., on its own
behalf and on behalf of its Affiliates ("Collagen"), a Delaware corporation
having an address at 1850 Embarcadero Road, Palo Alto, California 94303.


                                   BACKGROUND

        A. ArthroCare owns certain Patent Rights (as defined in Article 1.21)
relating to radio frequency ("RF") energy;

        B. Collagen is a worldwide leader in marketing products for dermatology,
facial plastic surgery, cosmetic and aesthetic surgery;

        C. Collagen desires to obtain a license under the Patent Rights in order
to commercialize Licensed Products in the Field, and ArthroCare desires to grant
such a license to Collagen, all on the terms and conditions set forth herein;
and

        D. ArthroCare shall be Collagen's exclusive third party contract
manufacturer for certain Licensed Products and/or components of such Licensed
Products, all on the terms and conditions set forth herein.

        NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained herein, the parties agree as follows:


                                    ARTICLE 1

                                   DEFINITIONS

        1.1    *

        1.2 "Affiliate" means any corporation or other entity which is directly
or indirectly controlling, controlled by or under the common control with a
party hereto. For the purpose of


                                      -1-
<PAGE>   2
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


this Agreement, "control" shall mean the direct or indirect ownership of at
least 50% of the outstanding shares or other voting rights of the subject entity
to elect directors, or if not meeting the preceding definition, any entity owned
or controlled by or owning or controlling at the maximum control or ownership
right permitted in the country where such entity exists.

        1.3    *

        1.4    *

        1.5    *

        1.6 "Co-exclusive ENT License Rights" shall mean a co-exclusive,
non-transferable, worldwide license under the Patent Rights and the Trademark
Rights, with the right to use, market, sell and distribute Licensed Products in
the "ENT Field". The term "co-exclusive" shall mean that only Collagen and one
other party (which may include ArthroCare) shall have such rights.

        1.7 "Competent Authority" shall mean an EU Member States' public officer
with jurisdiction to appoint a body to test or audit medical devices for
conformity to EU registration laws.

        1.8 "Confidential Information" shall mean any: (i) information or
material in tangible form disclosed hereunder that is marked as "Confidential"
at the time it is delivered to the receiving party; or (ii) information
disclosed orally hereunder which is identified as confidential or proprietary
when disclosed.

        1.9 "Controller(s)" shall mean an RF power supply.

        1.10 "Disposable Wand(s)" shall mean medical instruments and components
of such medical instruments certain of which may have one or more electrode(s)
and electrical connection(s) for coupling the electrode(s) to a Controller

        1.11 "ENT" shall mean ear, nose and throat.

        1.12   *

        1.13 "Exclusive ENT License Rights" shall mean an exclusive,
non-transferable, worldwide license under the Patent Rights and the Trademark
Rights, with the right to use, market, sell and distribute Licensed Products in
the ENT Field.

        1.14      "FDA" shall mean the U.S. Food and Drug Administration.

        1.15   *



                                      -2-
<PAGE>   3
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


        1.16   *

        1.17 "Marketing Authorizations" shall mean any regulatory approvals or
authorizations required by the FDA, Competent Authority or other regulatory
bodies to comply with the laws and regulations of any country or other
jurisdiction for sale, marketing and distribution of the Licensed Products.

        1.18   *

        1.19 "Net Sales" shall mean the invoice price of Licensed Products sold
by Collagen to unaffiliated third parties (including sales made in connection
with clinical trials), less, to the extent included in such invoice price the
total of: (1) ordinary and customary trade discounts actually allowed; (2)
credits, rebates and returns (including, but not limited to, wholesaler and
retailer returns); (3) freight, postage, insurance and duties paid for and
separately identified on the invoice or other documentation maintained in the
ordinary course of business, and (4) excise taxes, other consumption taxes,
customs duties and compulsory payments to governmental authorities actually paid
and separately identified on the invoice or other documentation maintained in
the ordinary course of business. Net Sales shall also include the fair market
value of all other consideration received by Collagen in respect of Licensed
Products, whether such consideration is in cash, payment in kind, exchange or
another form.

        1.20 "Notified Body" shall mean that body appointed by a Competent
Authority to test or audit medical devices for conformity with EU registration
laws.

        1.21 "Patent Rights" shall mean all patents and patent applications in
the Field owned by or licensed to ArthroCare, including, but not limited to, the
patent applications and patents listed on Exhibit A hereto; all priority
applications, divisionals, continuations, continuations-in-part, and
substitutions thereof; all patent applications and patents relating to
improvements thereof; all foreign patent applications corresponding to the
preceding applications; and all U.S. and foreign patents issuing on any of the
preceding applications, including extensions, reissues, and re-examinations. In
addition, the term "Patent Rights" includes any and all, inventions,
discoveries, know-how, trade secrets, data, information, technology, processes,
formulas, drawings, designs, computer programs, and licenses of ArthroCare which
are necessary or useful for designing, developing, manufacturing, using or
selling Licensed Products within the Field, and all amendments, modifications,
and improvements to any of the foregoing *

        1.22 *


        1.23 "RF" shall mean radiofrequency.

        1.24 "Trademark Rights" shall mean all registered trademarks, trademark
applications, common law trademarks, domestic or foreign, to the marks listed in
Exhibit E, all foreign 



                                      -3-
<PAGE>   4
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


trademark applications or registrations corresponding to the preceding
applications, and all marks similar thereto.

        1.25 *


                                    ARTICLE 2

                                     LICENSE

        2.1 Exclusive License Grant. Subject to the terms and conditions of this
Agreement, ArthroCare and its Affiliates hereby grant to Collagen and its
Affiliates an exclusive, non-transferable, worldwide license under the Patent
Rights, to import, have imported, use, offer for sale and sell Licensed Products
in the Field. ArthroCare hereby grants to Collagen and its Affiliates an
exclusive, non-transferable, worldwide license under the Trademark Rights to use
marks and tradenames within the Trademark Rights in connection with the sale of
Licensed Products in the Field. *

        2.2 No Implied Rights. Only the licenses granted pursuant to the express
terms of this Agreement shall be of any legal force or effect. No other license
rights shall be granted or created by implication, estoppel or otherwise.

        2.3 Exclusive to ArthroCare. Under the exclusive license granted by
ArthroCare to Collagen in section 2.1, ArthroCare shall not have the right to
import, have imported, use, offer for sale or sell Licensed Products in the
Field during the Term of this Agreement and any renewals thereof; *

        2.4 *



                                    ARTICLE 3

                      APPOINTMENT AND AUTHORITY OF COLLAGEN

        3.1 Exclusive Distributor. Subject to the terms and conditions herein,
ArthroCare hereby appoints Collagen as ArthroCare's authorized exclusive
worldwide sales distributor for the Licensed Products in the Field, and Collagen
hereby accepts such appointment. Collagen's sole authority shall be to purchase
Licensed Products from ArthroCare and to promote, market and resell such
Licensed Products in the Field in accordance with the terms of this Agreement.

        3.2 *



                                      -4-
<PAGE>   5
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


        3.3 Reservation of Rights; No Rights Beyond Licensed Products. Except as
expressly provided in this Article 3, and by the license granted in Article 2,
no right, title, or interest is granted, whether express or implied, by
ArthroCare to Collagen, and nothing in this Agreement shall be deemed to grant
to Collagen rights in any Licensed Products or technology other than the
Licensed Products, nor shall any provision of this Agreement be deemed to
restrict ArthroCare's rights to exploit technology, know-how, patents or any
other intellectual property rights relating to the Licensed Products outside of
the Field.

        3.4 Sale Conveys No Right to Manufacture or Copy. The Licensed Products
are offered for sale and are sold by ArthroCare subject in every case to the
condition that such sale does not convey any license, expressly or by
implication, to manufacture, duplicate or otherwise copy or reproduce any of the
Licensed Products.

        3.5 *

        3.6 *


                                    ARTICLE 4

                                   ENT RIGHTS

        4.1 Exclusive ENT License Rights. In addition to the above rights and
licenses, if ArthroCare is able to, ArthroCare will offer the "Exclusive ENT
License Rights" to Collagen. In such event, Collagen will accept such rights *

If ArthroCare offers and Collagen accepts the Exclusive ENT License Rights,
Collagen will have, in combination with the rights granted in section 2, an
exclusive, non-transferable, worldwide license under the Patent Rights and the
Trademark Rights, with the right to use, market, sell and distribute Licensed
Products to all physicians in the Field and the ENT Field.

In addition, if ArthroCare offers and Collagen accepts the Exclusive ENT License
Rights, Collagen's minimum annual royalty payments for Disposable Wands and
minimum purchase requirements for the Licensed Products will be increased
pursuant to sections 5.3(b) and 7.5(b), respectively.

        4.2 Co-exclusive ENT License Rights. In addition to the above rights and
licenses, if ArthroCare is able to, ArthroCare will offer the "Co-exclusive ENT
License Rights" to Collagen. In such event, Collagen will accept such rights *

In addition, if ArthroCare offers and Collagen accepts the Co-exclusive ENT
License Rights, Collagen's minimum annual royalty payments for Disposable Wands
and minimum purchase requirements for the Licensed Products will be increased
pursuant to sections 5.3(c) and 7.5(c), respectively.



                                      -5-
<PAGE>   6
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                    ARTICLE 5

                                  CONSIDERATION

        5.1 License Fee. In partial consideration for the license granted
herein, Collagen shall pay ArthroCare a license fee of * in accordance with the
schedule set forth in Section 5.1(b).

               (a) The parties hereto acknowledge and agree that Collagen has
paid and ArthroCare has accepted * of such license fee.

               (b) License Payment Schedule. Within three (3) days following the
Effective Date of this Agreement, Collagen shall make a payment to ArthroCare of
*. In addition, within thirty (30) days following the achievement by ArthroCare
of each of the following milestones, Collagen shall pay to ArthroCare the
applicable payments below:

*

        5.2 Royalties. As additional consideration for the rights and licenses
granted by ArthroCare to Collagen herein, Collagen shall pay to ArthroCare
running royalties on *

(a)     *

        5.3 Minimum Royalties.

        (a) If ArthroCare does not offer to Collagen either the Exclusive ENT
License Rights or the Co-exclusive ENT License Rights pursuant to sections 4.1
and 4.2, respectively, then, in addition to the license payments made by
Collagen pursuant to Section 5.1, Collagen's minimum annual royalty payments for
the Licensed Products *

        (b) If ArthroCare offers to Collagen, and Collagen accepts, the
Exclusive ENT License Rights pursuant to section 4.1, then, in addition to the
license payments made by Collagen pursuant to Section 5.1, Collagen's minimum
annual royalty payments for the Licensed Products *

        (c) If ArthroCare offers to Collagen, and Collagen accepts, the
Co-exclusive ENT License Rights pursuant to section 4.2, then, in addition to
the license payments made by Collagen pursuant to Section 5.1, Collagen's
minimum annual royalty payments for the Licensed Products *

        (d) *

        (e) In the event the Agreement is renewed pursuant to Section 18.1, the
minimum annual royalty for each renewal year will be mutually agreed upon in
writing by the parties. If 



                                      -6-
<PAGE>   7
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


the new minimums cannot be agreed upon by the parties, an arbitrator will be
appointed by the parties to determine the new minimums according to Article 21.

        (f) *


                                    ARTICLE 6

*


                                    ARTICLE 7

                   MANUFACTURE; PURCHASE OF LICENSED PRODUCTS

        7.1 Product Manufacture. ArthroCare shall manufacture and sell to
Collagen, and Collagen agrees to exclusively purchase from ArthroCare,
Collagen's requirements for Licensed Products in the Field. ArthroCare will
manufacture Licensed Products in accordance with ISO 9000 Standards, EN 46000
Standards, FDA Quality Systems Regulations (including Current Good Manufacturing
Practices), and requirements of the Medical Device Directives ("MDD") and the
then-current product specifications, as may be modified from time to time by the
mutual written consent of the parties hereto.

        7.2 Product Development. During the Term of this Agreement, ArthroCare,
at its expense and initiative, will continue to pursue clinical studies and
product development efforts in collaboration with Collagen. ArthroCare shall
supply Collagen with any improvements and upgrades to the Licensed Products
developed by ArthroCare for use in the Field. ArthroCare agrees that any
substantial change to the Licensed Products during the Term shall be subject to
Collagen's prior written approval, which shall not be unreasonably withheld. *

        ArthroCare agrees to supply Collagen documentation or information as
requested for such changes to the Licensed Products in meeting regulatory
compliances.

        7.3 Terms and Conditions. All product purchases hereunder shall be
subject to the terms and conditions of this Agreement. Unless otherwise agreed
in writing, nothing contained in any purchase order or other document submitted
pursuant to this Agreement shall in any way modify or add to the terms and
conditions contained in this Agreement.

        7.4 Order and Acceptance. All orders shall be by means of signed written
purchase orders, sent to ArthroCare at ArthroCare's address for notice hereunder
and requesting a delivery date that is consistent with the Forecasts and not
less than thirty (30) days after ArthroCare's receipt of such purchase order.
Orders may initially be placed by telephone or telecopy, provided that a signed
written confirming purchase order is received by ArthroCare within ten (10) days
after such telephonic or telegraphic order. ArthroCare shall use reasonable best
efforts to fulfill purchase orders submitted in accordance with ArthroCare's
lead times, it being understood that 



                                      -7-
<PAGE>   8
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


no purchase order shall be binding upon ArthroCare until accepted by ArthroCare
by telecopy or in writing, and ArthroCare shall have no liability to Collagen
with respect to purchase orders that are not accepted. ArthroCare shall
acknowledge each Order in writing within 10 business days of receipt. By written
notice given within such 10-day period, ArthroCare may reject any Order, but
only to the extent that the Order exceeds the applicable, then-current Forecast,
consistent with Section 8.1. Notice of rejection must be given within 10 days to
Collagen by telex or fax, followed by notification in writing. Once an Order is
accepted by ArthroCare, Collagen may cancel or reschedule such Order only with
approval of ArthroCare.


        7.5    Minimum Purchase Requirements.

        (a) If ArthroCare does not offer to Collagen either the Exclusive ENT
License Rights or the Co-exclusive ENT License Rights pursuant to sections 4.1
and 4.2, respectively, then, in addition to the minimum royalty payments made by
Collagen pursuant to Section 5.3, Collagen's minimum annual purchase
requirements for the Licensed Products *

        (b) If ArthroCare offers to Collagen, and Collagen accepts, the
Exclusive ENT License Rights pursuant to section 4.1, then, in addition to the
minimum royalty payments made by Collagen pursuant to Section 5.3, Collagen's
minimum annual purchase requirements for the Licensed Products *

        (c) If ArthroCare offers to Collagen, and Collagen accepts, the
Co-exclusive ENT License Rights pursuant to section 4.2, then, in addition to
the minimum royalty payments made by Collagen pursuant to Section 5.3,
Collagen's minimum annual purchase requirements for the Licensed Products *

        (d)    *

        (e) In the event the Agreement is renewed pursuant to Section 18.1, the
minimum annual purchase requirements for each renewal year will be mutually
agreed upon in writing by the parties. If the new minimums cannot be agreed upon
by the parties, an arbitrator will be appointed by the parties to determine the
new minimums according to Article 21.

        (f)    *


        7.6    *



                                      -8-
<PAGE>   9
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                            FORECASTS; NO BACKORDERS



        8.1 Forecasts. Commencing no later than thirty (30) days after the
achievement by ArthroCare of milestone one (1) in section 5.1(b), Collagen shall
furnish ArthroCare a 6-month Forecast with estimated purchase dates and
quantities of Licensed Products, and shall deliver an updated forecast on a
rolling basis on the first day of each month. Such forecasts shall include
monthly delivery schedules. Based on the then current Forecast, ArthroCare will
maintain its production capability and adequate materials and labor to meet the
forecasted monthly delivery schedule for Licensed Products. ArthroCare shall
release Licensed Products in accordance with the delivery schedule set forth on
the then current Forecast; *


        8.2 *

        8.3 *


                                    ARTICLE 9

                                    PAYMENTS

        9.1 Prices. All prices shall be F.C.A. ArthroCare's facility currently
located at the address listed for ArthroCare at the beginning of this Agreement
("F.C.A. Point"). ArthroCare may, upon thirty (30) days' notice to Collagen,
designate another facility as the F.C.A. Point. The difference between
Collagen's purchase price and Collagen's price to its Customers shall be
Collagen's sole remuneration for the sale of the Licensed Products. The initial
price to Collagen for each Licensed Product shall be as set forth in Exhibit B
attached hereto. Collagen's sales prices to its customers shall be subject to
Collagen's sole discretion.

        9.2 Taxes. Collagen's purchase price shall not include any government
taxes (including, without limitation, sales, use, excise, withholding, and
value-added taxes) or duties imposed by any governmental agency that are
applicable to the export, import, license or purchase of the Licensed Products
(other than taxes on the income of ArthroCare), and Collagen shall bear all such
taxes and duties. When ArthroCare has the legal obligation to collect and/or pay
such taxes, the appropriate amount shall be added to Collagen's invoice and paid
by Collagen, unless Collagen provides ArthroCare with a valid tax exemption
certificate authorized by the appropriate taxing authority.

        9.3 Invoicing. ArthroCare shall submit an invoice to Collagen upon
shipment of each Licensed Product ordered by Collagen. Each such invoice shall
state Collagen's aggregate and unit purchase price for Licensed Products in a
given shipment, plus any freight, taxes or other costs incident to the purchase
or shipment initially paid by ArthroCare but to be borne by Collagen hereunder.



                                      -9-
<PAGE>   10
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


        9.4 Payment and Terms. Collagen shall make payments to ArthroCare under
this Agreement by wire transfer or check in United States dollars in immediately
available funds to a bank designated by ArthroCare. Payment shall be *

        9.5 Shipping. All Licensed Products delivered pursuant to the terms of
this Agreement shall be suitably packed for shipment in ArthroCare's standard
shipping cartons, marked for shipment at Collagen's address set forth above
(unless otherwise agreed in writing by both parties), and delivered to Collagen
or its carrier agent at the F.C.A. Point, at which time risk of loss shall pass
to Collagen. The Licensed Products will be produced to the final saleable form
with Collagen's trade address, tradenames, and all language compliant labeling,
instructions for use and carton labeling affixed by ArthroCare. Unless otherwise
instructed in writing by Collagen, ArthroCare shall select the carrier. Collagen
agrees to undertake all import formalities required to import the Licensed
Products into the territory. All customs, freight, insurance, and other shipping
expenses, as well as any special packing expense, shall be paid by Collagen.
Collagen shall also bear all applicable taxes, duties, and similar charges that
may be assessed against the Licensed Products after delivery to the carrier at
the F.C.A. Point. All shipments and freight charges shall be deemed correct
unless ArthroCare receives from Collagen * after the shipping date of a given
shipment, a written notice specifying the shipment, the purchase order number,
and the exact nature of the discrepancy between the order and shipment or
discrepancy in the freight cost, as applicable.

        9.6 Records; Audit. Collagen shall keep complete, true and accurate
books of account and records for the purpose of determining the amounts payable
under Article 5 and Exhibit B. Such books and records shall be kept at
Collagen's principal place of business for at least three (3) years following
the end of the calendar quarter to which they pertain. Such records will be open
for inspection during such three (3)-year period by a representative or agent of
ArthroCare for the purpose of auditing sales and inventory records and for
verifying the amounts payable under Article 5. Upon prior written notice,
Collagen shall provide reasonable access to such records during normal business
hours at Collagen's business locations, no more than twice each calendar year.

        9.7 Returns. Except as set forth in Section 10.3, Collagen may return
Licensed Products only with ArthroCare's prior written approval. Licensed
Products returned to ArthroCare other than under Section 10.3 shall be returned
F.C.A. the destination point designated by ArthroCare *



                                   ARTICLE 10

                                    WARRANTY

        10.1 Standard Limited Warranty. ArthroCare warrants to Collagen that,
subject to the exclusions set forth in Section 10.2 below, at the time of
shipment, the Licensed Products *



                                      -10-
<PAGE>   11
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


          Collagen's exclusive remedy and ArthroCare's sole liability for breach
of the foregoing warranty shall be the remedy set forth in Section 10.3. All
defective Licensed Products shall be returned to ArthroCare in accordance with
Section 10.3. Collagen shall not pass on to its Customers a warranty or
limitation of liability which is more protective of such Customers than the
warranty (including the limited remedy and exclusions) set forth in this Article
10 and the limitation of liability set forth in Article 19.

        10.2 Warranty Limitations. The warranties in Section 10.1 are contingent
upon *

        10.3 Return of Defective Product. In the event that any Licensed Product
purchased by Collagen from ArthroCare fails to conform to the warranty set forth
in Section 10.1, ArthroCare's sole and exclusive liability and Collagen's
exclusive remedy shall be, *

        10.4 Exclusion of Other Warranties. Except for the limited warranty
provided in section 10.1 above, ArthroCare grants no other warranties or
conditions, express or implied, by statute, in any communication with Collagen
or the customer, or otherwise, regarding the Licensed Products, their fitness
for any purpose, their quality or their merchantability.


                                   ARTICLE 11

                       ADDITIONAL OBLIGATIONS OF COLLAGEN

        11.1   Registrations, Licenses and Permits.

               *


        11.2   Product Complaints.

               (a) Collagen will receive locally, and promptly investigate and
monitor, all Customer complaints and/or correspondence concerning the use of the
Licensed Products worldwide. Collagen will maintain complaint files during the
course of this Agreement, its extensions and for a period of *

               (b) Collagen shall advise ArthroCare of all complaints relating
to the Licensed Products as promptly as possible but not more than * following
the date Collagen receives such complaint. In addition, within * following the
date Collagen receives such complaint, Collagen shall also provide ArthroCare
with a written or electronic report of such complaint. Upon ArthroCare's
request, Collagen shall either: (1) investigate and gather any reasonable
additional information regarding such complaints that is requested by
ArthroCare; or (2) provide ArthroCare with the relevant Customer names, phone
numbers and/or addresses so that ArthroCare may gather this information. Any
notice to ArthroCare under this Section 11.2 shall be sent via facsimile and
overnight delivery service to the attention of ArthroCare's Vice



                                      -11-
<PAGE>   12
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


President of Quality and Regulatory Affairs at (408) 736-0224 or to such other
address or person as ArthroCare may designate by notice. Collagen shall also
provide to ArthroCare a written quarterly listing of Customer and/or regulatory
complaints received by Collagen during the previous quarter.

               (c)    *

        11.3 Corrections, Withdrawals, and Alert Notices. In the event that
ArthroCare is required by any regulatory agency to recall the Licensed Products
or if ArthroCare voluntarily initiates a correction, withdrawal of alert notice
for the Licensed Products, Collagen shall, at ArthroCare's expense, cooperate
with and assist ArthroCare in locating and retrieving, if necessary, the
recalled Licensed Products from the Customers. ArthroCare shall give prompt
notice to Collagen of any such correction, withdrawal or alert notice, along
with details of the concern and instructions for the recall. Except as required
by applicable law, Collagen shall not initiate any correction, withdrawal or
alert notice without the prior written consent of ArthroCare.

        11.4   Materials.

               *

        11.5   Product Packaging and Labeling.

In addition, except for the addition of information required by applicable laws
and regulations, Collagen shall not relabel Licensed Products supplied to
Collagen by ArthroCare hereunder without the prior written consent of
ArthroCare. *

        11.6 Proprietary Notices. Collagen shall not remove, alter, cover or
obfuscate any logo, trademark notice or other proprietary rights notices placed
or embedded by ArthroCare on or in any package or any of the items contained
therein.

        11.7 Reporting Requirements. Pursuant to the FDA's medical device
reporting (MDR) Regulations, ArthroCare may be required to report to the FDA
information that reasonably suggests that a Licensed Product may have caused or
contributed to death or serious injury or has malfunctioned and that the device
would be likely to cause or contribute to a death or serious injury if the
malfunction were to recur. The parties hereto agree to supply to the other any
such information twenty-four (24) hours after becoming aware of it so that each
can comply with governmental reporting requirements. In the event that
ArthroCare is required by any regulatory agency to correct or withdraw the
Licensed Products or if ArthroCare voluntarily initiates such correction or
withdrawal, Collagen shall cooperate with and assist ArthroCare in locating and
retrieving if necessary, the recalled Products from Collagen's customers.
Collagen shall maintain all records of Licensed Products sales to customer by
lot number, and/or serial number in the event of a Licensed Product recall or
other quality related issue. Collagen shall only be required to make such sales
records available to ArthroCare in the event of a Product correction,
withdrawal, alert notice or other quality related issue.



                                      -12-
<PAGE>   13
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                   ARTICLE 12

                      ADDITIONAL OBLIGATIONS OF ARTHROCARE

        12.1 Promotional Materials. ArthroCare shall make available to Collagen
English language samples of promotional support materials, in quantities deemed
reasonable by ArthroCare, at ArthroCare's standard charges to distributors for
such items. Such materials shall include, without limitation, marketing and
technical information concerning the Licensed Products, brochures, advertising
literature, and other product data.

        12.2 Telephone Marketing and Technical Support. ArthroCare shall provide
a reasonable level of telephone marketing and technical support to employees of
Collagen who have been trained by ArthroCare and/or customers of Collagen to
answer Collagen's questions related to Licensed Products. *

        12.3 Books and Records. ArthroCare agrees to keep documented records of
all repairs and servicing provided by ArthroCare by product number, serial
number, and description of each Licensed Product and to identify the type of
repair or service completed on the Licensed Product, inclusive of the name of
the individual servicing, the date of the service/repair, and test and
inspection data as required by 21 C.F.R. Section 820.200. During the Term *

        12.4 Registrations, Licenses and Permits.

               (a) ArthroCare shall maintain all regulatory approvals in
ArthroCare's name for the marketing of the Licensed Products for the Term of
this Agreement.

               (b) ArthroCare will maintain the "Technical File" required by MDD
93/42 EEC (Medical Device Directives), design history records, device master
records, and history records, and the quality system records for the Licensed
Products for the period of time required by the directives of its Notified Body
and other regulatory agencies requirements.

               (c) ArthroCare will maintain for the period of this Agreement and
its extensions a certified quality system in compliance with and maintain
certifications with its Notified Body for valid standing to CE conformity of its
manufacturing facility and the Licensed Products. ArthroCare shall use best
efforts to supply to Collagen the information necessary to fulfill any request
by the EC Competent Authority or Notified Body to Collagen for information
contained in the records within the requested time period. Changes in
Specifications, manufacturing, including change of sterilization process or
provider, labeling, or packaging agreed to by Collagen and ArthroCare may result
in amendments to the Technical File. ArthroCare will provide to Collagen a copy
of any FDA or other regulatory agency correspondence within seven (7) days of
receipt that is directly relating to the Licensed Products 



                                      -13-
<PAGE>   14
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


which are reasonably necessary to Collagen's performance under this Agreement or
which could adversely affect Collagen or its Customers.

               (d) ArthroCare understands that Collagen or any government
regulatory agency or third party observers may send representatives to
ArthroCare's facility to observe, inspect and audit the production facilities
related to the Licensed Products. ArthroCare will allow such representatives
reasonable access to all manufacturing facilities and records for the Licensed
Products so as to ensure applicable regulations are in compliance. Collagen will
provide at least ten (10) days advance notice of such observation and provide
the names, meeting agenda and provide proper identification of such
representatives. ArthroCare will use reasonable commercial efforts to correct
any material non-compliance brought to its attention as a result of such
inspections and audits. * Collagen understands that ArthroCare or any government
regulatory agency or third party observers may send representatives to
Collagen's facility to observe, inspect and audit promotional, advertising and
educational materials and programs, and other literature relating to the sales
and marketing to the Licensed Products. Collagen will allow such representatives
reasonable access to all such promotional literature for the Licensed Products
so as to ensure applicable regulations are in compliance. ArthroCare will
provide at least ten (10) days advance notice of such observation and provide
the names, meeting agenda and provide proper identification of such
representatives. Collagen will use reasonable commercial efforts to correct any
material non-compliance brought to its attention as a result of such inspections
and audits.



                                   ARTICLE 13

                       ADDITIONAL COVENANTS OF ARTHROCARE

        13.1 Financial Statements. From time to time as requested by Collagen
(but not more frequently than once per calendar year), ArthroCare will provide
Collagen with copies of audited financial statements and such other information
reasonably requested by Collagen to demonstrate ArthroCare's financial ability
to perform under this Agreement. From time to time as requested by ArthroCare
(but not more frequently than once per calendar year), Collagen will provide
ArthroCare with copies of audited financial statements and such other
information reasonably requested by ArthroCare to demonstrate Collagen's
financial ability to perform under this Agreement. All information provided to
either party under this Section 13.1 will be treated confidentially, unless such
information is otherwise publicly available.

        13.2 Exclusivity. Unless otherwise agreed by the parties, during the
term of this Agreement, ArthroCare shall not be involved with the design,
manufacture and/or sale, to or on behalf of any other person or entity, of any
Licensed Products intended for use in procedures in the Field.

        13.3 ArthroCare's Assets. With the exception of standard financing
mechanisms, ArthroCare shall not sell, transfer, assign, pledge, grant a
security interest in, or otherwise 



                                      -14-
<PAGE>   15
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


encumber or allow any third party to obtain an interest in, any prints, designs,
tools, fixtures, raw materials, moldings or other equipment used or useful in
manufacturing and/or supplying the Products without giving Collagen at least
sixty (60) days prior written notice.


                                   ARTICLE 14

                              INTELLECTUAL PROPERTY

        14.1 Enforcement. In the event that any Patent Right necessary for use
and sale of a Licensed Product is infringed or misappropriated by a third party
in any country or is subject to a declaratory judgment action arising from such
infringement or misappropriation in such country, or is the subject of an
interference, re-examination, reissue or opposition proceeding, the party
becoming aware thereof shall promptly notify the other party hereto. *

        14.2   *

        14.3 ArthroCare Trademarks. During the Term of this Agreement, Collagen
shall have the right to advertise and promote the Licensed Products under
ArthroCare's trademarks and tradenames initially identified in Exhibit E
("ArthroCare Marks"). ArthroCare reserves the right to modify the ArthroCare
Marks or substitute alternative marks for any or all of the ArthroCare Marks at
any time upon thirty (30) days prior written notice. Collagen shall have the
right to use any marketing materials in its possession to depletion. The rights
granted under this Section 14.3 shall automatically terminate on termination or
expiration of this Agreement. *

        14.4 Limitations. Except as set forth in this Agreement, nothing
contained in this Agreement shall grant to Collagen any right, title, or
interest in or to the ArthroCare Marks, whether or not specifically recognized
or perfected under applicable laws, and Collagen irrevocably assigns to
ArthroCare all such right, title, and interest, if any, in any ArthroCare Marks
that are used in conjunction with the Licensed Products (other than Collagen
Marks). At no time during or after the Term of this Agreement shall Collagen
challenge or assist others to challenge ArthroCare Marks or the registration
thereof or attempt to register any trademarks, marks, or trade names confusingly
similar to ArthroCare Marks. All representations of ArthroCare Marks that
Collagen intends to use shall first be submitted to ArthroCare for approval
(which shall not be unreasonably withheld) of design, color, and other details,
or shall be exact copies of those used by ArthroCare. In addition, Collagen
shall fully comply with all reasonable guidelines, if any, communicated by
ArthroCare concerning the use of ArthroCare Marks.

        14.5 Collagen Trademarks. During the Term of this Agreement, subject to
the limitations in section 14.3, * (the "Collagen Marks"). Nothing in this
Agreement shall be deemed to grant to ArthroCare any right, title, or interest
in or to Collagen Marks. At no time during or after the Term of this Agreement
shall ArthroCare challenge or assist others to 



                                      -15-
<PAGE>   16
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


        challenge Collagen Marks or the registration thereof or attempt to
        register any trademarks, marks, or tradenames confusingly similar to
        Collagen Marks.

        14.6 *


        14.7 *



                                   ARTICLE 15

        *


                                   ARTICLE 16

                                 CONFIDENTIALITY

        16.1 Confidential Information. Except as expressly provided herein, the
parties agree that, for the term of this Agreement and for five years
thereafter, the receiving party shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose except for the
purposes contemplated by this Agreement any Confidential Information furnished
to it by the disclosing party hereto, except that to the extent that it can be
established by the receiving party by written proof that such Confidential
Information:

        (i)    was already known to the receiving party, other than under an
               obligation of confidentiality, at the time of disclosure;

        (ii)   was available to the public or otherwise part of the public
               domain at the time of its disclosure to the receiving party;

        (iii)  became available to the public or otherwise part of the public
               domain after its disclosure and other than through any act or
               omission of the receiving party in breach of this Agreement;

        (iv)   was subsequently lawfully disclosed to the receiving party by a
               person other than a party hereto; or

        (v)    was independently developed by a person having no knowledge of or
               access to any of the other party's Confidential Information.

        16.2 Permitted Use and Disclosures. Each party hereto may use or
disclose information disclosed to it by the other party to the extent such use
or disclosure is reasonably necessary in complying with applicable law or
governmental regulations, conducting clinical trials, or exercising its rights
hereunder to develop or commercialize Licensed Products, provided



                                      -16-
<PAGE>   17
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


that if a party is required to make any such disclosure of another party's
confidential information, other than pursuant to a confidentiality agreement, it
will give reasonable advance notice to the latter party of such disclosure and,
will use its best efforts to secure confidential treatment of such information
prior to its disclosure (whether through protective orders or otherwise).

        16.3 Confidential Terms. Except as expressly provided herein, each party
agrees not to disclose any terms of this Agreement to any third party without
the consent of the other party; provided, disclosures may be made as required by
securities or other applicable laws, or to Affiliates, or to a party's
accountants, attorneys and other professional advisors provided that such
accountants, attorneys and other professional advisors are bound to retain the
terms of this Agreement as confidential. Disclosure to prospective corporate
partners or Affiliates is prohibited absent written consent from the
non-disclosing party. Neither party shall issue a press release or other public
announcement concerning this Agreement, the transactions contemplated herein or
the relationship between Collagen and ArthroCare without the prior written
consent of an authorized representative of the other party.


                                   ARTICLE 17

                                 INDEMNIFICATION

        17.1 Indemnification of Collagen.

        (a) ArthroCare shall indemnify, defend, and hold harmless Collagen, and
its affiliates and their respective directors, officers, employees, and agents,
and the successors and assigns of any of the foregoing (the "Collagen
Indemnitees") from and against all claims, losses, costs, and liabilities
(including, without limitation, payment of reasonable attorneys' fees and other
expenses of litigation), and shall pay any damages (including settlement
amounts) finally awarded with respect to claims, suits, or proceedings (any of
the foregoing, a "Claim") brought by third parties against a Collagen
Indemnitee, caused by (i) *

        (b)    *

        17.2 Indemnification of ArthroCare. Collagen shall indemnify, defend,
and hold harmless ArthroCare, and its Affiliates and their respective directors,
officers, employees and agents, and the successors, and assigns of any of the
foregoing (the "ArthroCare Indemnitees") from and against all claims, losses,
costs, and liabilities (including, without limitation, payment of reasonable
attorneys' fees and other expenses of litigation), and shall pay any damages
(including settlement amounts) finally awarded with respect to a Claim brought
by third parties against an ArthroCare Indemnitee, arising out of or relating to
*

        17.3 Indemnification Procedures. A party (the "Indemnitee") that intends
to claim indemnification under this Article 17 shall promptly notify the other
party (the "Indemnitor") in writing of any claim in respect of which the
Indemnitee or any of its directors, officers,




                                      -17-
<PAGE>   18
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


employees, agents, licensors, successors, or assigns intends to claim such
indemnification. The parties will then determine whether complete or partial
indemnification is appropriate in such event. If the parties are unable to
mutually agree on whether the Indemnitee should be completely or partially
indemnified by the Indemnitor, the parties shall appoint an arbitrator to make a
binding ruling on this issue. The arbitrator will be appointed according to
Section 21.

If the parties or the arbitrator determine that indemnification is appropriate,
the Indemnitor shall have sole control of the defense and/or settlement thereof,
provided that the indemnified party may participate in any such proceeding with
counsel of its choice at its own expense. The indemnity agreement in this
Article 17 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver written notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article 17, but the
omission to so deliver written notice to the Indemnitor shall not relieve the
Indemnitor of any liability that it may otherwise have to any Indemnitee than
under this Article 17. The Indemnitee under this Article 17, its employees and
agents, shall cooperate fully with the Indemnitor and its legal representatives
and provide full information in the investigation of any Claim covered by this
indemnification. Notwithstanding anything to the contrary contained in this
Article 17, neither party shall be liable for any costs or expenses incurred
without its prior written authorization.

        17.4   *



                                   ARTICLE 18

                        TERM, CONVERSION AND TERMINATION

        18.1 Term. The initial Term of this Agreement shall commence on the
Effective Date and continue in force until *

        18.2 Termination for Cause. Either ArthroCare or Collagen may terminate
this Agreement by written notice stating each party's intent to terminate in the
event the other shall have breached or defaulted in the performance of any of
its material obligations hereunder, * and such default shall have continued for
sixty (60) days after written notice thereof was provided to the breaching party
by the non-breaching party.

        18.3 Termination for Bankruptcy. Either party may terminate this
Agreement effective upon written notice to the other party in the event the
other party declares bankruptcy or becomes the subject of any voluntary or
involuntary proceeding under the U.S. Bankruptcy Code or any state insolvency
proceeding, and such proceeding is not terminated within one hundred twenty
(120) days of its commencement.



                                      -18-
<PAGE>   19
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


        18.4   Effect of Termination.

        (a) Accrued Obligations. Termination shall not relieve either party of
obligations incurred prior to the effective date of such termination.

        (b) Return of Materials. All trademarks, marks, trade names, patents,
copyrights, designs, drawings, formulas or other data, photographs, samples,
literature, and sales and promotional aids of every kind shall remain the
property of ArthroCare. Within thirty (30) days after the termination or
expiration of this Agreement, Collagen shall destroy all tangible items bearing,
containing, or contained in, any of the foregoing, in its possession or control
and provide written certification of such destruction, or prepare such tangible
items for shipment to ArthroCare, as ArthroCare may direct, at ArthroCare's
expense. Collagen shall not make or retain any copies of any confidential items
or information which may have been entrusted to it. Effective upon the
termination of this Agreement, Collagen shall cease to use all trademarks and
trade names of ArthroCare and ArthroCare shall cease to use all trademarks and
trade names of Collagen with the limited exception of repurchased Licensed
Products pursuant to Section 18.4(c). During the Term and after any termination
or expiration of this Agreement, ArthroCare shall have the right to continue to
use and disclose for any purpose Customer lists, Customer data and other
Customer information and any and all clinical trial results and other data
relating to the Licensed Products and provided by Collagen to ArthroCare during
the Term.

        (c) Limitation on Liability. In the event of termination by either party
in accordance with any of the provisions of this Agreement, neither party shall
be liable to the other, because of such termination, for compensation,
reimbursement or damages on account of the loss of prospective profits or
anticipated sales or on account of expenditures, investments, leases, inventory
or commitments in connection with the business or goodwill of ArthroCare or
Collagen.

        (d) Transition. Upon termination of this Agreement, Collagen shall
diligently cooperate with ArthroCare to effect a smooth and orderly transition
in the sale of the Licensed Products. From the time that a notice of termination
is received by either party until the effective termination date, Collagen shall
refer all Product inquiries to ArthroCare, shall support ArthroCare's existing
Customers (but shall not sell them new Licensed Products), and shall cooperate
fully with any newly appointed distributors.

        (f) Survival. The provisions of Sections 3.5, 9.4, 9.6, 9.7, 11.1, 11.2,
11.3, 12.3, 14.4, 14.5, 18.4 and 22.1 and Articles 10, 16, 17, 19 and 21 shall
survive the expiration or termination of this Agreement for any reason. All
other rights and obligations of the parties shall cease upon termination of this
Agreement.

18.6    *



                                      -19-
<PAGE>   20
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                   ARTICLE 19

                    LIMITED LIABILITY TO COLLAGEN AND OTHERS

WITH THE SOLE EXCEPTION OF ARTICLE 17 AND NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT, ARTHROCARE'S LIABILITY ARISING OUT OF THIS AGREEMENT AND/OR SALE
OF THE LICENSED PRODUCTS SHALL BE LIMITED TO THE AMOUNT PAID BY COLLAGEN FOR THE
PRODUCT. IN NO EVENT SHALL ARTHROCARE BE LIABLE TO COLLAGEN OR ANY OTHER ENTITY
FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS, LOST PROFITS, OR ANY OTHER
SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY
OF LIABILITY ARISING OUT OF THIS AGREEMENT WHETHER BASED IN CONTRACT, TORT
(INCLUDING NEGLIGENCE), OR OTHERWISE. THESE LIMITATIONS SHALL APPLY WHETHER OR
NOT ARTHROCARE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED
HEREIN OR IN THE WARRANTY FOUND IN THE LICENSED PRODUCTS.



                                   ARTICLE 20

                         REPRESENTATIONS AND WARRANTIES

        20.1 Representations and Warranties. ArthroCare represents and warrants,
to the best of its knowledge, that: *

        20.2 Disclaimer. Except as expressly provided in this Agreement, nothing
in this Agreement is or shall be construed as: (i) a warranty or representation
by ArthroCare as to the validity or scope of any claim or patent within the
Patent Rights; (ii) a warranty or representation that anything made, used, sold,
or otherwise disposed of under any license granted in this Agreement is or will
be free from infringement of any patent rights or other intellectual property
right of any third party; or (iii) granting by implication, estoppel, or
otherwise any licenses or rights under patents or other rights of ArthroCare or
third parties, regardless of whether such patents or other rights are dominant
or subordinate to any patent within the Patent Rights.



                                      -20-
<PAGE>   21
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                   ARTICLE 21

                                   ARBITRATION

        (a) If a dispute arises between the parties relating to the
interpretation or performances of this Agreement or the grounds for the
termination thereof, representatives of the parties with decision-making
authority shall meet to attempt in good faith to negotiate a resolution of the
dispute prior to pursuing other available remedies. If within sixty (60) days
after such meeting the parties have not succeeded in negotiating a resolution of
the dispute, such dispute shall be submitted to final and binding arbitration
under the then current Commercial Arbitration Rules of the American Arbitration
Association ("AAA"), by one (1) arbitrator in Santa Clara County, California;
provided, however, California Code of Civil Procedure Section 1283.05 shall
apply to any such proceeding. Such arbitrator shall be selected by the mutual
agreement of the parties or, failing such agreement, shall be selected according
to the AAA rules. The parties shall bear the costs of arbitration equally and
shall bear their own expenses, including professional fees. The decision of the
arbitrator shall be final and non-appealable and may be enforced in any court of
competent jurisdiction.

        *



                                   ARTICLE 22

                            MISCELLANEOUS PROVISIONS


        22.1 Governing Law; Venue. This Agreement and any dispute, including
without limitation any arbitration, arising from the performance or breach
hereof shall be governed by and construed and enforced in accordance with the
laws of the state of California, without reference to conflicts of laws
principles.

        22.2   *

        22.3 Waiver. No waiver of any rights, shall be effective unless
consented to in writing by the party to be charged and the waiver of any breach
of default shall not constitute a waiver of any other right hereunder or any
subsequent breach or default.

        22.4 Severability. In the event that any provisions of this Agreement
are determined to be invalid or unenforceable by a court of competent
jurisdiction, the remainder of this Agreement shall remain in full force and
effect without said provision.



                                      -21-
<PAGE>   22

        22.5 Notices. All notices, requests and other communications hereunder
shall be in writing and shall be personally delivered or sent by telecopy or
other electronic facsimile transmission or by certified mail-return receipt
requested, postage prepaid, or delivered by a nationally recognized courier who
guarantees next-day delivery in each case to the respective address specified
below, or such other address as may be specified in writing to the other parties
hereto:

               Collagen:     Collagen Aesthetics, Inc.
                             1850 Embarcadero Road
                             Palo Alto, California  94303
                             Attn: Gary S. Petersmeyer
                             Fax: (650) 354-4375

                             with a copy to:

                             Charlene A. Friedman, Esq.
                             Collagen Aesthetics, Inc.
                             1850 Embarcadero Road
                             Palo Alto, California  94303
                             Fax: (650) 354-4751


               ArthroCare:   ArthroCare Corporation
                             595 North Pastoria Avenue
                             Sunnyvale, California 94086
                             Attn:  Michael A. Baker
                             Fax:  (408) 732-2752

                             with a copy to:

                             John T. Raffle, Esq.
                             ArthroCare Corporation
                             595 North Pastoria Avenue
                             Sunnyvale, California 94086
                             Fax:  (408) 530-9143


        22.6 Independent Contractors. Both parties are independent contractors
under this Agreement. Nothing contained in this Agreement is intended nor is to
be construed so as to constitute ArthroCare or Collagen as partners or joint
venturers with respect to this Agreement. Neither party shall have any express
or implied right or authority to assume or create any obligations on behalf of
or in the name of the other party or to bind the other party to any other
contract, agreement, or undertaking with any third party.



                                      -22-
<PAGE>   23

        22.7 Patent Marking. Collagen agrees to mark (or give directions to
ArthroCare to mark) all Licensed Products sold pursuant to this Agreement in
accordance with the applicable statute or regulations relating to patent marking
in the country or countries of manufacture and sale thereof.

        22.8 Compliance with Laws. In performing their respective obligations
under this Agreement, the parties shall fully comply in all material respects
with the requirements of any and all applicable laws, regulations, rules and
orders of any governmental body having jurisdiction over the exercise of rights
under this Agreement.

        22.9 Use of Name. Other than as expressly set forth in this Agreement or
the License Agreement, neither party shall use the name or trademarks of the
other party without the prior written consent of such other party.

        22.10 Entire Agreement; Amendment. This Agreement constitutes the entire
and exclusive Agreement between the parties with respect to the subject matter
hereof and supersedes and cancels all previous discussions, agreements,
commitments and writings in respect thereof except for the License Agreement. No
amendment or addition to this Agreement shall be effective unless reduced to
writing and executed by the authorized representatives of the parties.

        22.11 Counterparts. This Agreement may be executed in any number of
counterparts and on separate signature pages by each party, each copy of which
shall for all purposes be deemed an original.

        22.12 Force Majeure. Neither party shall be liable for any failure to
perform or delay in performance hereunder where such failure or delay is
occasioned by circumstances beyond the party's control, including, without
limitation, fire, explosion, storms, interruption of utility services, strikes
or labor disputes, water, acts of God, war, civil disturbances, acts of civil or
military authorities, inability to secure raw materials or transportation
facilities, fuel or energy shortages, acts or omissions of communications
carriers, or other causes beyond the party's control whether or not similar to
the foregoing.


        IN WITNESS WHEREOF, ArthroCare and Collagen have executed this Agreement
in duplicate originals by duly authorized officers.


ARTHROCARE CORPORATION                       COLLAGEN AESTHETICS INC.



                                      -23-
<PAGE>   24

By:________________________________          By:________________________________

Print Name:________________________          Print Name:________________________

Title:_____________________________          Title:_____________________________



                                      -24-
<PAGE>   25
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                    EXHIBIT A

        *



                                      -25-
<PAGE>   26
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                    EXHIBIT B

                                 PRODUCT PRICES

Licensed Product                                                 Price Per Unit




Disposable Wand Transfer Price:

-------------------------------------------------------------------------------
             TYPE OF DISPOSABLE                            PRICE
-------------------------------------------------------------------------------
*                                             *
-------------------------------------------------------------------------------
*                                             *
-------------------------------------------------------------------------------
*                                             *
-------------------------------------------------------------------------------
                                             
                                    



                                      -26-
<PAGE>   27
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                    EXHIBIT C

                                WARRANTY PERIODS


PRODUCT                                          PERIOD

Controller                                         *
Cable/Handpiece                                    *
Disposable Wands                                   *
Adaptors                                           *



                                      -27-
<PAGE>   28
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                    EXHIBIT D

        *



                                      -28-
<PAGE>   29
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                    EXHIBIT E

                              U.S. TRADEMARK RIGHTS



                      Trademark                    Application No.

                      *                            *
                      *                            *
                      *                            *
                      *                            *
                      *                            *

                      Trademark                    Registration No.

                      *                            *



                                      -29-
<PAGE>   30
                                                  Application for an order
                                                  granting confidential
                                                  treatment pursuant to Rule
                                                  24-b-2 of the Securities
                                                  Exchange Act of 1934 has been
                                                  or be timely made.
                                                  Confidential portions of this
                                                  document have been redacted
                                                  and marked with an [*] and
                                                  have been filed with the
                                                  Securities and Exchange
                                                  Commission separately with an
                                                  application.


                                    EXHIBIT F

        *



                                      -30-