exv10w10



 





Exhibit 10.10




Execution Copy




Share Purchase And Redemption Agreement




By and among




Alma Lasers Ltd.,




The Shareholders named herein




and




The Buyer and the Funds named herein




Dated as of February 15, 2006














 








INDEX




	 	 	 	 	 
	 	 	Page
	1. Purchase and Sale of Shares; Redemption
	 	 	3	 
	1.1 Description of Securities
	 	 	3	 
	1.2 Articles; Debt and Other Pre-Closing Activities
	 	 	3	 
	1.3 Sale and Purchase of Purchased Shares
	 	 	4	 
	1.4 Redemption of Shareholders’ Shares
	 	 	4	 
	1.5 Optionholder Trust
	 	 	4	 
	1.6 Shareholder Warrants
	 	 	5	 
	1.7 Closing
	 	 	5	 
	1.8 Escrow
	 	 	5	 
	1.9 Contingent Payment
	 	 	5	 
	1.10 Redemption Tax Payments
	 	 	7	 
	1.11 Transfer Taxes
	 	 	8	 
	1.12 Further Assurances
	 	 	8	 
	1.13 Certain Terms Defined
	 	 	8	 
	 
	 	 	 	 
	2. Representations and Warranties of the Company
	 	 	11	 
	2.1 Organization and Corporate Power
	 	 	11	 
	2.2 Authorization and Non-Contravention
	 	 	12	 
	2.3 Corporate Records
	 	 	13	 
	2.4 Capitalization
	 	 	13	 
	2.5 Subsidiaries; Investments
	 	 	14	 
	2.6 Financial Statements
	 	 	14	 
	2.7 Absence of Undisclosed Liabilities
	 	 	15	 
	2.8 Absence of Certain Developments
	 	 	16	 
	2.9 Accounts Receivable; Accounts Payable.
	 	 	17	 
	2.10 Transactions with Affiliates
	 	 	18	 
	2.11 Properties
	 	 	18	 
	2.12 Tax Matters
	 	 	19	 
	2.13 Certain Contracts and Arrangements
	 	 	20	 
	2.14 Intellectual Property
	 	 	22	 
	2.15 Litigation
	 	 	24	 
	2.16 Labor Matters
	 	 	24	 
	2.17 Licenses; Compliance with Laws; Regulatory Matters
	 	 	25	 
	2.18 Employee Benefit Programs
	 	 	27	 
	2.19 Insurance Coverage
	 	 	28	 
	2.20 Investment Banking; Brokerage
	 	 	28	 
	2.21 Environmental Matters
	 	 	29	 
	2.22 Customers, Distributors and Partners
	 	 	29	 
	2.23 Suppliers
	 	 	29	 
	2.24 Warranty and Related Matters
	 	 	29	 
	2.25 Illegal Payments
	 	 	30	 






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	 	 	Page
	2.26 Solvency
	 	 	30	 
	2.27 Privacy of Customer Information
	 	 	30	 
	2.28 Backlog
	 	 	30	 
	2.29 Disclosure
	 	 	30	 
	 
	 	 	 	 
	2A. Representations and Warranties of the Shareholders
	 	 	31	 
	 
	 	 	 	 
	3. Representations and Warranties of the Buyer
	 	 	32	 
	3.1 Organization and Corporate Power
	 	 	32	 
	3.2 Authority and Non-Contravention
	 	 	32	 
	3.3 Investment Status
	 	 	33	 
	3.4 Experience
	 	 	33	 
	3.5 Investment
	 	 	33	 
	3.6 Rule 144 and Rule 144A
	 	 	33	 
	3.7 No Public Market
	 	 	34	 
	 
	 	 	 	 
	4. Covenants
	 	 	34	 
	4.1 Interim Operations of the Company
	 	 	34	 
	4.2 Access; Confidentiality
	 	 	34	 
	4.3 Closing Efforts
	 	 	35	 
	4.4 Financial Information
	 	 	35	 
	4.5 Consents
	 	 	35	 
	4.6 Exclusivity
	 	 	35	 
	4.7 Covenants of the Buyer
	 	 	36	 
	4.8 Non-Competition; Non-Solicitation; Confidentiality
	 	 	36	 
	 
	 	 	 	 
	5. Closing Conditions and Deliveries
	 	 	37	 
	5.1 Conditions to Each Party’s Obligation to Effect the Closing
	 	 	37	 
	5.2 Conditions to Obligations of the Buyer to Effect the Closing
	 	 	37	 
	5.3 Conditions to Obligations of the Company and Shareholders
	 	 	39	 
	 
	 	 	 	 
	6. Termination
	 	 	40	 
	6.1 Termination
	 	 	40	 
	6.2 Effect of Termination
	 	 	41	 
	6.3 Right to Proceed
	 	 	41	 
	 
	 	 	 	 
	7. Survival Of Representations And Warranties; Transaction Related Indemnification
	 	 	42	 
	7.1 Survival of Representations, Warranties and Covenants
	 	 	42	 
	7.2 Transaction Related Indemnification
	 	 	42	 
	7.3 Limitations on Transaction Related Indemnification
	 	 	43	 
	7.4 Notice; Payment of Losses; Defense of Third-Party Claims
	 	 	44	 
	7.5 Limitation on Contribution and Certain Other Rights
	 	 	46	 
	7.6 Sole Remedy
	 	 	46	 
	7.7 Setoff; Order of Application
	 	 	46	 
	7.8 Appointment of Shareholders’ Representative
	 	 	46	 






ii









 






	 	 	 	 	 
	 	 	Page
	8. General
	 	 	47	 
	8.1 Waivers and Consents; Amendments
	 	 	47	 
	8.2 Legend on Securities
	 	 	48	 
	8.3 Governing Law
	 	 	48	 
	8.4 Section Headings; Construction
	 	 	48	 
	8.5 Counterparts
	 	 	48	 
	8.6 Notices and Demands
	 	 	48	 
	8.7 Dispute Resolution
	 	 	50	 
	8.8 Consent to Jurisdiction
	 	 	51	 
	8.9 Remedies; Severability
	 	 	51	 
	8.10 Integration
	 	 	51	 
	8.11 Assignability; Binding Agreement
	 	 	51	 
	8.12 Expenses
	 	 	52	 
	8.13 Publicity
	 	 	52	 






	 	 	 	 	 
	EXHIBITS
	 	 	 	 
	Exhibit A
	 	—	 	Schedule of Shareholders
	Exhibit B
	 	—	 	Schedule of Redemptions and Purchases
	Exhibit C-1
	 	—	 	Form of 1X Shareholder Warrant
	Exhibit C-2
	 	—	 	Form of 1.5X Shareholder Warrant
	Exhibit D
	 	—	 	Form of Articles of Organization
	Exhibit E
	 	—	 	Form of Shareholders’ Agreement
	Exhibit F
	 	—	 	Form of Share Transfer Deed
	Exhibit G
	 	—	 	Form of Escrow Agreement
	Exhibit H
	 	—	 	“Accredited Investor”
	Exhibit I
	 	—	 	Form of Management Rights Letter
	Exhibit J
	 	—	 	Form of Opinion of Counsel
	Exhibit K
	 	—	 	Form of Director Indemnification Agreement
	Exhibit L
	 	—	 	Senior Commitment Letter







iii











 





Share Purchase And Redemption Agreement




     THIS STOCK PURCHASE AND REDEMPTION AGREEMENT (the “Agreement”) is made and entered into as of
February 15, 2006, by and among (i) Alma Lasers Ltd. (formerly known as MSQ Ltd.), a corporation
organized under Israeli law (the “Company”), (ii) the shareholders of the Company named in
Exhibit A attached hereto (the “Initial Shareholders,” and each individually, an “Initial
Shareholder”), (iii) Aesthetic Acquisition B.V., an entity organized under Netherlands law (the
“Buyer”), (iv) the investment partnerships listed on the signature pages hereto under the heading
“Funds” (the “Funds”), (v) each holder of vested options to purchase Ordinary Shares (as defined
below) of the Company (“Options”) who has become a party to this Agreement by executing a joinder
agreement in form and substance reasonably acceptable to Buyer (“Joinder Agreement”) to become a
party to this Agreement in connection with its exercise of Options (each, an “Optionholder”), and
(vi) solely for purposes of Section 4.8 hereof, each of the Persons (as defined below) listed on
the signature pages hereto under the heading “Non-Compete Parties” (each, a “Non-Compete Party”).



     WHEREAS, as of the date hereof all of the issued and outstanding shares of share capital of
the Company are owned beneficially and of record by the Shareholders (as defined below) as set
forth on Exhibit A attached hereto (including, in the case of Optionholders, the number of
shares of share capital of the Company anticipated to be owned beneficially and of record thereby
following the exercise of Options as of immediately prior to the Closing);



     WHEREAS, immediately prior to the Closing, the rights of the Series A Preferred Shares and
Series B Preferred Shares (“Preferred Shares”) will be amended such that the Preferred Shares shall
have the same rights as the Ordinary Shares and immediately thereafter thereafter will be converted
into Ordinary Shares (“Conversion”);



     WHEREAS, immediately after the Conversion and prior to the Pre-Closing Bonus Shares (as
defined below), each Optionholder will exercise the Options held thereby as set forth on
Exhibit A attached hereto and execute and deliver a Joinder Agreement (such exercises,
collectively, the “Option Exercise Transaction”);



     WHEREAS, immediately after the Option Exercise Transaction and prior to the Closing, (a) the
Company shall declare and effect the issuance of a bonus shares (with such term having the meaning
ascribed thereto under the Israeli Companies Law) dividend of 757,688,353 Ordinary Shares (as
defined below) (collectively, the “Pre-Closing Bonus Shares”), and then (b) the Company shall
declare and pay cash dividends in respect of its share capital then outstanding, and cash payments
to Optionholders in respect of their vested options to purchase Ordinary Shares as of the Closing
Date but which will not be exercised in connection with the Option Exercise Transaction, in the
aggregate amount of $8,142,000 (collectively, the “Pre-Closing Dividends”), and then (c)
377,172,000 of the Company’s issued and outstanding ordinary shares, par value NIS 0.01 per share,
of the Company (“Ordinary Shares”), will be reclassified into an aggregate of 377,172,000 Series
A-1 Convertible Preferred Shares, par value NIS 0.01 per share, of the Company (“Series A-1
Preferred Shares”) (the “Reclassification”);



1









 





     WHEREAS, immediately prior to or contemporaneously with the Closing, Buyer will lend to the
Company an amount equal to $14,998,037 pursuant to the terms of a Note Purchase Agreement (the
“Note Purchase Agreement”) in return for (i) subordinated notes (collectively, the “Subordinated
Notes”) and (ii) 12,468,000 Ordinary Shares (the “Sub-Debt Equity Shares”) to be issued by the
Company at the Closing;



     WHEREAS, immediately prior to or contemporaneously with the Closing, Bank Hapoalim B.M. (the
“Senior Lenders” and, together with Buyer (but solely in respect of the Subordinated Notes), the
“Lenders”) will lend to the Company an amount equal to $20,000,000 pursuant to the terms of a
senior secured loan agreement (or other similar agreement) (the “Senior Credit Agreement”) in
return for senior secured promissory notes (collectively, the “Senior Notes” and, together with the
Subordinated Notes, the “Notes”);



     WHEREAS, at the Closing, the Buyer will purchase from the Shareholders, and the Shareholders
will sell to the Buyer, a total of 377,172,000 Series A-1 Preferred Shares (the “Purchased Shares”)
for an aggregate purchase price of $55,000,478 (subject to adjustment pursuant to Section 1.9 and
subject to the escrow obligations set forth in Section 1.8) (the “Cross Purchase”), which Purchased
Shares represent all of the issued and outstanding Series A-1 Preferred Shares;



     WHEREAS, at the Closing, the Company will use, among other things, a portion of the proceeds
from the purchase and sale of the Notes to repurchase from the Shareholders, and the Shareholders
shall sell to the Company (the “Redemption”), a total of 240,003,000 Ordinary Shares (the “Redeemed
Shares”) for an aggregate repurchase price of $26,856,037 (subject to adjustment pursuant to
Section 1.9), with the number of Redeemed Shares to be repurchased from each such Shareholder as
set forth on Exhibit B attached hereto and with each such Redeemed Share to be immediately
cancelled by the Company immediately following its repurchase;



     WHEREAS, in connection with the Redemption, the Company will issue to the Shareholders (i)
warrants to purchase 33,310,505 Ordinary Shares, each in substantially the form attached hereto as
Exhibit C-1 (collectively, the “1X Shareholder Warrants”) and (ii) warrants to purchase
33,310,491 Ordinary Shares, each in substantially the form attached hereto as Exhibit C-2
(collectively, the “1.5X Shareholder Warrants” and, together with the 1X Shareholder Warrants, the
“Shareholder Warrants”);



     WHEREAS, immediately following the Reclassification, Cross Purchase, Loan Transaction, and
Redemption, (i) the Buyer will hold a total of (A) 377,172,000 Series A-1 Preferred Shares, which
Series A-1 Preferred Shares of will have an aggregate liquidation/sale preference of $55,000,478
(subject to adjustment) and will be convertible into an aggregate of 377,172,000 Ordinary Shares
(subject to adjustment), and (B) 12,468,000 Ordinary Shares, and (ii) the Shareholders will hold
(A) 140,766,000 Ordinary Shares and (B) Shareholder Warrants representing the right to purchase up
to an additional 66,620,996 Ordinary Shares; and



     WHEREAS, in connection with and as a condition precedent to the consummation of the
transactions contemplated hereby, among other things (i) the Company shall have adopted amended and
restated articles of association in the form attached hereto as Exhibit D (the



2









 




“Articles”), (ii) the Company shall have reserved for issuance under its current 2005 Share
Option Plan (the “Current Share Option Plan”), as may be amended or revised, and any additional
share option plan, as may be adopted in the future (together with the Current Share Option Plan,
collectively, the “Share Option Plans”) 143,013,000 Ordinary Shares, and (iii) the Company, the
Shareholders and the Buyer shall have entered into a Shareholders Agreement in the form attached
hereto as Exhibit F (the “Shareholders Agreement” and, together with this Agreement, Note
Purchase Agreement and the Subordinated Notes, the “Transaction Documents”).




     NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
hereinafter set forth, the parties hereto agree as follows:



1. Purchase and Sale of Shares; Redemption




     1.1 Description of Securities. For purposes of this Agreement, the Series A-1 Preferred Shares to
be acquired by the Buyer from the Shareholders hereunder in the Cross Purchase are sometimes
referred to as the “Acquired Series A-1 Preferred Shares,” the Ordinary Shares issuable upon
conversion of the Series A-1 Preferred Shares are referred to as the “Ordinary Conversion Shares,”
and the Acquired Series A-1 Preferred Shares and the Ordinary Conversion Shares are sometimes
referred to herein as the “Securities.” The Securities shall have the rights, privileges and
preferences contained in the Articles.



     1.2 Articles; Debt and Other Pre-Closing Activities.



          (a) As of immediately prior to the Closing, the Option Exercise Transaction shall have been
consummated, the Pre-Closing Bonus Shares shall have been issued, the Pre-Closing Dividends shall
have been declared and paid, the Reclassification shall have been consummated. Immediately prior to
or contemporaneously with the Closing, the Company shall have (a) adopted the Articles, and the
same shall have become effective in accordance with Israeli law, and (b) received proceeds of the
Notes in the aggregate amount of approximately $35,000,000. As soon as practicable following the
Closing, but in event not more than two (2) business days following the Closing Date, the Company
shall file the Articles with the Israeli Companies Registrar and shall make all filings necessary
with the Israeli Companies Registrar to reflect that the capitalization of the Company as of
immediately following the Closing is as set forth on Section 2.4(h) of the Disclosure
Schedules.



          (b) Notwithstanding anything in this Agreement to the contrary, in the event that, as of
immediately prior to the Closing (but following the consummation of the Option Exercise
Transaction), any Optionholder has (i) declined to, or otherwise failed to, exercise the Options
anticipated on the date hereof to be exercised thereby prior to the Closing (as the number of
Options anticipated to be exercised is reflected on Exhibit A attached hereto opposite the
name of such Optionholder), or (ii) failed to deliver a Joinder Agreement in connection with the
Option Exercise Transaction, then Exhibits A and B attached hereto shall be amended
(without
the need for any consent or waiver other than the Buyer’s) to (A) remove the name of such
Optionholder therefrom (but solely to the extent of any Options held thereby not being exercised),
and (B) to appropriately adjust the number of Purchased Shares and Redeemed Shares purchased from
each Shareholder, the consideration payable to each Shareholder in



3









 







respect thereof (including
appropriately adjusting the amount of any escrow or trust obligation applicable to such
Shareholder), the number of any Shareholder Warrants issuable to such Shareholder, and such
Shareholder’s Pro Rata Percentage, each in a manner reasonably satisfactory to Buyer, the Company,
and the Shareholders’ Representative.



     1.3 Sale and Purchase of Purchased Shares. Upon the terms and subject to the conditions herein,
and in reliance on the representations and warranties made by the Company and the Shareholders,
respectively, herein, the Buyer hereby agrees to purchase from the Shareholders, and each of the
Shareholders hereby agrees to sell to the Buyer, the number of Series A-1 Preferred Shares set
forth opposite the name of each such Shareholder on Exhibit B hereto (subject to
adjustment, if at all, pursuant to Section 1.2(b)), or an aggregate of 377,172,000 Purchased
Shares, free and clear of any and all liens, claims, options, charges, pledges, security interests,
deeds of trust, voting agreements, voting trusts, encumbrances, rights or restrictions of any
nature (“Claims”), in each case for the purchase price set forth opposite such Shareholder’s name
on Exhibit B attached hereto (subject to adjustment, if at all, pursuant to Section 1.2(b))
under the heading “Cross Purchase”, or an aggregate purchase price of $55,000,478, such amounts to
be subject to adjustment as set forth in Section 1.9 below and subject to the Shareholders’ escrow
obligations pursuant to Section 1.8 below and, in the case of the Optionholders, the Optionholders
obligations to deposit certain funds into trust pursuant to Section 1.5 below. At the Closing,
each Shareholder shall deliver to the Buyer a share transfer deed substantially in the form
attached hereto as Exhibit F (each, a “Share Transfer Deed”) evidencing its transfer of the
Purchased Shares sold thereby to the Buyer pursuant to this Section 1.3.



     1.4 Redemption of Shareholders’ Shares. At the Closing, and immediately following the issuance of
the Notes and the purchase and sale of the Purchased Shares as provided herein, upon the terms and
subject to the conditions herein, and in reliance on the representations and warranties made by the
Shareholders to the Company herein, the Company hereby agrees to apply a portion of the proceeds
from the issuance and sale of the Notes to repurchase from the Shareholders, and the Shareholders,
severally but not jointly, hereby agree to sell, transfer and convey to the Company, the number of
Redeemed Shares set forth opposite the name of such Shareholder on Exhibit B attached
hereto (subject to adjustment, if at all, pursuant to Section 1.2(b)), or an aggregate of
240,003,000 Redeemed Shares, free and clear of all Claims, in each case for the repurchase price
set forth opposite such Shareholder’s name on Exhibit B attached hereto (subject to
adjustment, if at all, pursuant to Section 1.2(b)) under the heading “Redemption”, or an aggregate
repurchase price of $26,856,037 (the “Redemption Price”), such amount to be subject to adjustment
as set forth in Section 1.9 below. At the Closing, each Shareholder shall deliver to the Company a
Share Transfer Deed evidencing its transfer of the Redeemed Shares sold thereby to the Company
pursuant to this Section 1.4. Immediately following the repurchase of each Redeemed Share, the
Company shall cancel and
retire such Redeemed Share so that each such Redeemed Share is no longer issued or outstanding
(whether as a dormant share or otherwise).



     1.5 Optionholder Trust. Prior to the Closing, the Company, the Optionholders who have executed
Joinder Agreements and Employees Remuneration Trust Company (the “Trustee”), as trustee, will
establish a trust for the benefit of the Optionholders who have executed Joinder Agreements (the
“Optionholder Trust”). At the Closing, the Buyer and the



4









 







Company will deposit in the Optionholder
Trust for the benefit of each Optionholder the amount set forth on Exhibit B attached
hereto (subject to adjustment, if at all, pursuant to Section 1.2(b)) under the heading “Trust”
opposite its name, representing the aggregate consideration to be received by such Optionholder in
respect of the shares of share capital issuable upon exercise of the Options and purchased by the
Buyer or the Company in accordance with the terms and conditions hereof.



     1.6 Shareholder Warrants. At the Closing, and concurrently with the Redemption, upon the terms and
subject to the conditions herein, and in reliance on the representations and warranties made by the
Shareholders herein, the Company shall issue to each Shareholder (a) a 1X Shareholder Warrant
entitling such Shareholder to purchase up to that number of Ordinary Shares as set forth on
Exhibit B attached hereto (subject to adjustment, if at all, pursuant to Section 1.2(b))
under the heading “1X Warrant Shares” opposite such Shareholder’s (as applicable) name, and (b) a
1.5X Shareholder Warrant entitling such Shareholder to purchase up to that number of Ordinary
Shares as set forth on Exhibit B attached hereto (subject to adjustment, if at all,
pursuant to Section 1.2(b)) under the heading “1.5X Warrant Shares” opposite such Shareholder’s
name.



     1.7 Closing. Subject to Section 6.1 below, the closing of the transactions contemplated by this
Agreement (herein called the “Closing”) shall be held at the offices of Goodwin Procter LLP,
Exchange Place, Boston, Massachusetts 02109, at 10:00 a.m., Boston time, as soon as possible, but
in no event later than three (3) business days, following the satisfaction or waiver of each of the
conditions to the Closing set forth in Section 5 (the “Closing Date”).



     1.8 Escrow. At the Closing, the Company, the Buyer, the Shareholders and Mellon Trust of New
England, N.A. (the “Escrow Agent”), as escrow agent, will execute an Escrow Agreement,
substantially in the form of Exhibit G hereto (the “Escrow Agreement”), in accordance with
which each Shareholders will deposit in escrow with the Escrow Agent the amount set forth on
Exhibit B attached hereto (subject to adjustment, if at all, pursuant to Section 1.2(b))
under the heading “Escrow” opposite its name, representing an aggregate amount of $13,500,000 (the
“Escrow Amount”), with (a) $11,000,000 of such Escrow Amount to be held in escrow pursuant to the
Escrow Agreement until December 31, 2007 (the “Indemnification Escrow Amount”), and (b) $2,500,000
of such Escrow Amount to be held in escrow until such time as the Company has satisfied its
obligations to pay the Redemption Tax Payment Amount (as defined below) pursuant to Section 1.10
(the “Tax Redemption Escrow Amount”), all as more fully set forth in


(and subject to the terms of) the Escrow Agreement. The Escrow Amount shall be subject to claims
by Buyer for indemnification under Section 7.2, shall be subject to release in accordance with the
provisions of Section 1.10, shall be subject to the procedures specified in the Escrow Agreement
and to release in accordance with the provisions thereof.



     1.9 Contingent Payment.



          (a) In addition to the payments to the Shareholders otherwise set forth in this Agreement, the
Shareholders shall be entitled to additional payments pursuant to the following terms and
conditions and in the following amounts (any such payment, a “Contingent Payment”):




5









 









          (i) Subject to the first sentence of Section 1.9(c), for every one dollar ($1.00) by
which the Company’s consolidated aggregate revenues for the fiscal year ended December 31,
2006 as set forth in the Company’s audited financial statements for the year then ended (the
“2006 Revenues”) exceed $40,350,000 (the “2006 Revenue Threshold”), if at all, each
Shareholder shall be entitled to be paid an amount equal to (each a “Revenue Contingent
Payment”) the product of (x) $0.8401487, and (y) the percentage set forth on Exhibit
B attached hereto (subject to adjustment, if at all, pursuant to Section 1.2(b))
opposite such Shareholder’s name (each such percentage, a “Pro Rata Percentage”);
provided, however, that the aggregate amount of Revenue Contingent Payments
payable to the Shareholders under this Section 1.9(a)(i) (without giving effect to any
adjustment or increase pursuant to the first sentence of Section 1.9(c)) shall not exceed
$11,300,000.




          (ii) Subject to the first sentence of Section 1.9(c), for every one dollar ($1.00) by
which the Company’s consolidated aggregate operating profits for the fiscal year ended
December 31, 2006 as set forth in the Company’s audited financial statements for the year
then ended (the “2006 Operating Profits”) exceed $15,825,000 (the “2006 Operating Profits
Threshold”), if at all, each Shareholder shall be entitled to be paid an amount equal to
(each a “Profits Contingent Payment”) the product of (x) $1.5436696, and (y) such
Shareholder’s Pro Rata Percentage; provided, however, that the aggregate
amount of Profits Contingent Payments payable to the Shareholders under this Section
1.9(a)(ii) (without giving effect to any adjustment or increase pursuant to the first
sentence of Section 1.9(c)) shall not exceed $5,700,000.




          (iii) Notwithstanding anything in this Agreement to the contrary, in the event of a
breach by any Shareholder of any non-competition, non-solicitation or confidentiality
obligations to the Company, including, without limitation pursuant to Section 4.8 or
pursuant to any Employee Agreement (as defined below), no Contingent Payment shall be due or
payable to such Shareholder pursuant to Sections 1.9(a)(i) or (ii); provided,
however, that the Company and the Buyer shall have given such Shareholder written
notice of their intentions not to make such payments under Section 1.9(b) at least ten (10)
days prior to the date such payment is due; provided further, that the number of
days of such notice shall be reduced in the event that, and to the extent that, such
breach occurs less than ten (10) days prior to the date such payment is due.




          (iv) The Company’s 2006 Operating Profits and 2006 Revenues shall be calculated, by the
Company (subject to approval by the Board of Directors) on or prior to June 30, 2007, based
on the Company’s audited financial statements for the fiscal year ended December 31, 2006
prepared in a manner consistent with the Company’s past practice but excluding, for the
purposes of such calculations, the effects of (or any impairments, write-offs, expenses or
costs made directly in connection with) (i) any one time or other extraordinary events
occurring outside the Company’s ordinary course of business (but including any one-time bona
fide, arms-length sales of any Products to the Company’s or its Subsidiaries’ customers),
(ii) the transactions contemplated hereby, (iii) the grants of options to purchase Ordinary
Shares under the Share Option Plans, or (iv) the Company’s acquisition of Alma Lasers, Inc.
(but including the effects of the operations of Alma Lasers, Inc. as a wholly-owned
subsidiary of the Company). For



6









 







purposes of calculating any Contingent Payment due
hereunder, the 2006 Revenue Threshold, the 2006 Operating Profits Threshold and the figures
set forth in clause (x) of each of Sections 1.9(a)(i) and (ii) above shall be appropriately
adjusted in connection with any spin-off transaction, merger, consolidation, other business
combination or divestiture transaction or any other acquisition, sale or divestiture of any
material line of business consummated in the fiscal year ended December 31, 2006.



          (b) In the event that any Contingent Payments are payable to the Shareholders pursuant to
Section 1.9(a), such payments shall be made by the Buyer and the Company in accordance with the
following:




          (i) The Company shall pay to each Shareholder the aggregate amount of all Contingent
Payments due to such Shareholder pursuant to Section 1.9(a); provided,
however, that the amount payable by the Company to all Shareholders pursuant to this
Section 1.9(b)(i) (without giving effect to any adjustment or increase pursuant to the first
sentence of Section 1.9(c)) shall not exceed $10,000,000 in the aggregate.




          (ii) In the event that the aggregate Contingent Payments payable to the Shareholders
pursuant to Section 1.9(a) exceed $10,000,000, the Buyer shall pay to the Shareholder the
excess of the aggregate amount of such Contingent Payments over $10,000,000, with each
Shareholder being paid an amount equal to the product of (x) such excess, and (y) such
Shareholder’s Pro Rata Percentage; provided, however, that the amount
payable by the Buyer to all Shareholders pursuant to this Section 1.9(b)(ii) (without giving
effect to any adjustment or increase pursuant to the first sentence of Section 1.9(c)) shall
not exceed $7,000,000 in the aggregate. The Funds hereby, jointly and severally, guarantee
the Buyer’s obligations (if any) to make payments pursuant to this Section 1.9(b)(ii).



          (c) Each Contingent Payment shall be deemed to bear interest at an annual rate of 5.570%, with
such interest commencing to accrue on the Closing Date and accruing until the date which is two (2)
business days prior to the date such Contingent Payment is actually made. The amount of any
Contingent Payment payable pursuant to Section 1.9(a) (together with
interest thereon in accordance with this Section 1.9(b)) shall be paid by Buyer and the
Company within sixty (60) days of the completion of an audit by the Company’s independent auditors
at such time of the Company’s financial statements for the fiscal year ended December 31, 2006.
Each such payment shall be made in immediately available funds via wire transfer to an account
designated in writing by the Shareholder entitled to receive such payment.



          (d) Any amounts paid by Buyer to any Shareholder pursuant to this Section 1.9 shall constitute
an increase to the purchase price paid by Buyer in respect of the Purchased Shares. Any amounts
paid by the Company to any Shareholder pursuant to this Section 1.9 shall constitute an increase to
the Redemption Price paid by the Company in respect of the Redeemed Shares.



     1.10 Redemption Tax Payments. The Company shall pay all Taxes (as defined below) incurred by the
Company as a result of the Redemption (the aggregate amount thereof, the “Redemption Tax Payment
Amount”) when due and payable (if at all). The Company shall



7









 







provide the Buyer with five (5)
business days prior written notice of its intention to pay the Redemption Tax Payment Amount. Upon
payment by the Company of the Redemption Tax Payment Amount, an amount equal to sixty-five percent
(65%) of the Redemption Tax Payment Amount (the “Buyer Redemption Tax Portion”) shall be
distributed by the Escrow Agent out of the Tax Redemption Escrow Amount to the Buyer, which shall
be the Buyer’s sole and exclusive remedy from the Shareholders or the Company with respect to the
Redemption Tax Payment Amount; provided that in the event that the Buyer Redemption Tax
Portion is less than $2,500,000 then an amount equal to the excess of $2,500,000 over the Buyer
Redemption Tax Portion shall be distributed by the Escrow Agent out of the Tax Redemption Escrow
Amount to the Shareholders.



     1.11 Transfer Taxes. All transfer taxes, fees and duties under applicable law incurred in
connection with the sale and transfer of the Purchased Shares, the sale, issuance or transfer of
the Shareholder Warrants, the Reclassification or the Redemption, under this Agreement will be
borne and paid by the Company and it shall promptly reimburse the Buyer and Shareholders for any
such tax, fee or duty which any of them is required to pay under applicable law.



     1.12 Further Assurances. The Company, the Shareholders and the Buyer from time to time after the
Closing at the request of any other party hereto and without further consideration shall execute
and deliver further instruments of transfer and assignment and take such other action as a party
may reasonably require to more effectively transfer and assign to, and vest in, the Buyer, the
Securities and all rights thereto, and to fully implement the provisions of this Agreement.



     1.13 Certain Terms Defined. The following terms, as used in this Agreement, have the meaning set
forth in this Section:



     “Affiliate” of a Person means (i) with respect to a Person, any member of such Person’s family
(including any child, step-child, parent, step-parent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law); (ii) with respect to
an entity, any officer, director, shareholder, partner or investor in such entity or of or in any
affiliate of such entity; and (iii) with respect to a Person or entity, any Person or entity which
directly or indirectly controls, is controlled by, or is under common control with such Person or
entity.



     “Approval Date” means the first date on which the Company has received the Redemption
Approval.



     “Business” means the business of the Company and its Subsidiaries as currently conducted but
including the Company’s and its Subsidiaries’ currently proposed sales of (i) RF Products (as
defined below) in the United States and (ii) the Company’s and its Subsidiaries’ skin-tightening
products anywhere in the world.



     “business day” means a day except a Saturday, a Sunday or other day on which the SEC or banks
in the City of Boston, Massachusetts are authorized or required under any Legal Requirement to be
closed.



     “Company Intellectual Property Assets” means all Intellectual Property Assets owned by the
Company or any of its Subsidiaries or used in the Business. “Company Intellectual Property



8









 







Assets”
includes, without limitation, any Patents, Marks, Copyrights or Trade Secrets owned by the Company
or any of its Subsidiaries.



     “Consents” means all licenses, permits, authorizations, certifications, accreditations, or
similar approvals of Governmental Authorities and other third parties necessary to permit the
Transaction to be consummated lawfully in accordance with this Agreement, without forfeiture or
material impairment of any Contract or any other License, including any such consent, permit, or
approval required to be obtained after the Closing and including those listed on Section 2.2 of
the Disclosure Schedule.



     “Control” (including the terms “controlled by” and “under common control with”) means the
possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the
direction of the management policies of a Person, whether through the ownership of shares, as
trustee or executor, by contract or credit arrangement or otherwise;



     “Copyrights” means copyrights in both published and unpublished works, including, without
limitation, all curricula, program materials, compilations, databases and computer programs,
manuals and other documentation and all copyright registrations and applications, and all
derivatives, translations, adaptations and combinations of the above.



     “Governmental Authority” means any federal, state, local, municipal, foreign, tribal, or other
governmental or regulatory authority of any nature and of any jurisdiction (including Israel, the
United States, and the European Union) or supranational organization (which organization has the
authority to make and enforce, or cause the enforcement of, rules and regulations), including any
governmental agency, branch, bureau, commission, ministry, department, official, or entity and any
court or other tribunal (including the FDA, as defined below, and all other
regulatory and other authorities in which the Company markets its Products or otherwise
conducts Business.



     “Intellectual Property Assets” means Patents, Marks, Copyrights, Trade Secrets, other
intellectual property rights and/or proprietary rights relating to any of the foregoing and
goodwill, franchises, licenses, permits, consents, approvals, and claims of infringement against
third parties.



     “Legal Requirement” means applicable common law and any applicable law, statute, regulation,
rule, ordinance, order, administrative order, treaty, standard, decree, or judgment duly enacted,
adopted, or promulgated by any Governmental Authority and having the force and effect of law or
constituting the published policy of a Governmental Authority.



     “Loan Transactions” means, collectively, the transactions contemplated by the Note Purchase
Agreement and the Senior Credit Commitment Letter, including, without limitation, the issuance of
the Notes thereunder.



     “Marks” means trade names, trade dress, logos, packaging design, slogans, Internet domain
names, registered and unregistered trademarks and service marks and related registrations and
applications for registration and all common law rights relating thereto.



9









 





     “Patents” means patents, patent applications, patent rights, foreign counterparts,
divisionals, continuations, continuations-in-part, reissues, reexaminations, and continuing
prosecution applications (whether or not patented).



     “Person” means an individual, a corporation, a joint venture, a trust, an unincorporated
organization, a limited liability company or partnership, any other legal entity, a government and
any agency or political subdivision thereof.



     “Products” means those products and/or services and related documentation researched,
designed, developed, manufactured, marketed, performed, licensed, sold and/or distributed by the
Company and/or any of its Subsidiaries; provided, however, that with respect to Sections 2.17 and
2.24, the term Products shall only include those Products actually manufactured, marketed,
licensed, sold and/or distributed by the Company and/or any of its Subsidiaries.



     “Public Software” means any software that (i) contains, or is derived in any manner (in whole
or in part) from, any software that is distributed as free software, open source software (e.g.,
Linux) or (ii) requires as a condition of its use, modification or distribution that it be
disclosed or distributed in source code form or made available at no charge. Public Software
includes without limitation software licensed under the GNU’s General Public License (GPL) or
Lesser/Library GPL, the Mozilla Public License, the Netscape Public License, the Sun Community
Source License, the Sun Industry Standards License, the BSD License, and the Apache License.



     “Qualifying Exit Event” means (i) any Liquidation Event or Change of Control Event (as each
such term is defined in the Articles), in connection with which the Buyer (x) receives cash
proceeds totaling at the time of such Liquidation Event or Change of Control Event, and/or (y) is
issued securities freely tradable without restriction (other than pursuant to a contractual
provision
or pursuant to applicable law) entered into by the Buyer with an aggregate value at the time
of such Liquidation Event or Change of Control Event (or, in the case of such freely tradable
securities, at the earlier of (m) any time after a Loss Payment is to be made in respect of an
Infringement Indemnity Claim, and (n) the time at which the Buyer sells any such freely tradeable
securities (but only the value of such sold securities), of, or (ii) the initial public offering of
the Company’s Ordinary Shares, pursuant to which the Buyer is holding securities or securities
convertible into securities freely tradable without restriction (other than pursuant to a
contractual provision or pursuant to applicable law) with an aggregate value at the earlier of (m)
any time after a Loss Payment is to be made in respect of an Infringement Indemnity Claim, and (n)
the time at which the Buyer sells any freely tradeable securities (but only the value of such sold
securities), of, (a) if such event occurs on or prior to the second (2nd) anniversary of
the Closing Date, an amount equal to two (2) times the product of (A) 377,172,000 and (B) the
Series A-1 Original Purchase Price (as such term is defined in the Articles), and (b) if such event
occurs following the second (2nd) anniversary of the Closing Date, an amount equal to
two and one-half (2.5) times the product of (A) 377,172,000 and (B) the Series A-1 Original
Purchase Price.



     “Redemption Approval” means a final order, writ or other approval from an Israeli court
permitting the Company to effect the Redemption at the Closing under Section 303 of the Israeli
companies law.



10









 





     “Regulatory Authorizations” means any and all approvals, licenses, registrations, clearances
or authorizations of any Governmental Authority, including any supplements or amendments thereto,
necessary to distribute, sell, or market the Products commercially.



     “Shareholder” means any Initial Shareholder or, effective immediately following its exercise
of Options, any Optionholder; provided, however, that unless explicitly stated
otherwise herein, an Optionholder shall constitute a Shareholder for all purposes of Sections 2-8
hereof; provided further, that for purposes of this Agreement, an Optionholder
shall be deemed to be an Initial Shareholder for purposes of any representations and warranties
made by it pursuant to Section 2A hereof effective as of the time of its exercise of Options (but
contingent upon the occurrence of the Closing).



     “Subsidiary” of a Person means any corporation more than fifty (50%) percent of whose
outstanding voting securities, or any partnership, limited liability company joint venture or other
entity more than fifty percent (50%) of whose total equity interest, is directly or indirectly
owned by such Person; provided, however, that each of Optunix, Inc. and T.L.M. – Advanced Laser
Technology Ltd. shall constitute a Subsidiary for purposes of this Agreement.



     “Trade Secrets” means know-how, trade secrets, confidential or proprietary information,
research in progress, algorithms, data, designs, processes, formulae, drawings, schematics,
blueprints, flow charts, models, strategies, prototypes, techniques, Beta testing procedures and
Beta testing results.



     “Transaction” means, collectively, the transactions contemplated by this Agreement and by the
other Transaction Documents.



     “U.S. Subsidiaries” means each of the Company’s Subsidiary which are incorporated or otherwise
organized under the laws of a state of the United States, including, without limitation, Alma
Lasers, Inc.; provided, however, that any reference to “the U.S. Subsidiary” shall mean Alma
Lasers, Inc.



2. Representations and Warranties of the Company 




     In order to induce the Buyer to enter into this Agreement and consummate the Transaction, the
Company hereby makes to the Buyer the representations and warranties contained in this Section 2.
Such representations and warranties are subject to the qualifications and exceptions set forth in
the disclosure schedule delivered to the Buyer pursuant to this Agreement (the “Disclosure
Schedule”). References herein to the “knowledge” or “awareness” of the Company are deemed to mean
the actual knowledge of Ziv Karni or Yaron Suher and any other officers of the Company and/or Alma
Lasers, Inc., in each case, after reasonable inquiry (except as otherwise indicated), if
applicable; provided, however, that, solely for purposes of Section 2.14, the term
“knowledge” shall also mean the knowledge of Yoav Avni, Nadav Bayer, Yariv Matzliach and Hillel
Bachrach.



     2.1 Organization and Corporate Power. The Company is a corporation duly organized, validly
existing under the laws of State of Israel, and is duly qualified or registered to do business as a
foreign corporation (a) in each jurisdiction listed in Section 2.1 of the Disclosure



11









 







Schedule and (b) in each jurisdiction in which the failure to be so duly qualified or
registered has had, or could be reasonably expected to have, a material adverse effect on the
Business or the assets (whether tangible or intangible), liabilities, condition (financial or
other), results of operations of the Company or any of its Subsidiaries (a “Material Adverse
Effect”). Except as set forth in Section 2.1 of the Disclosure Schedule, each Subsidiary
of the Company is a corporation duly organized, validly existing and in good standing under the
laws of Delaware, and is duly qualified or registered to do business as a foreign corporation (a)
in each jurisdiction listed in Section 2.1 of the Disclosure Schedule and (b) in each
jurisdiction in which the failure to be so duly qualified or registered has had, or could be
reasonably expected to have, a Material Adverse Effect. The Company and each of its Subsidiaries,
as applicable, has all required corporate power and authority to carry on its business as presently
conducted, to enter into and perform this Agreement and the agreements contemplated hereby to which
it is a party and to carry out the transactions contemplated hereby and thereby, including the
issuance of the Securities. The copies of the Articles, as amended as of the Closing Date, the
Company’s other organizational documents, (each as amended as of the Closing Date), each of the
Company’s Subsidiaries’ organizational documents, (each as amended as of the Closing Date)
(collectively, together with the Articles, the “Company Organizational Documents”), have been
furnished to the Buyer by the Company, are correct and complete as of the date hereof, and neither
the Company nor any Subsidiary of the Company is in violation of any term of the Company
Organizational Documents applicable to it.



     2.2 Authorization and Non-Contravention. This Agreement and all agreements, documents and
instruments executed and delivered by the Company pursuant hereto are valid and binding obligations
of the Company, enforceable against
the Company in accordance with their respective terms, except as such enforceability may be limited
by (i) bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally; and (ii) limitations on the enforcement of the remedy
of specific performance and other equitable remedies. The execution, delivery and performance of
this Agreement and all agreements, documents and instruments executed and delivered by the Company
pursuant hereto, the Reclassification, the Redemption, the sale and issuance of the Shareholder
Warrants, the sale, transfer and delivery of the Purchased Shares and, upon conversion of the
Acquired Series A-1 Preferred Shares, the issuance and delivery of the Ordinary Conversion Shares,
and all other transactions contemplated by this Agreement have been duly authorized by all
necessary corporate or other action of the Company, except for filing with the Israeli Companies
Registrar, which will be made in a timely manner. Except as set forth on Section 2.2(a) of the
Disclosure Schedule, the execution and delivery of this Agreement and all agreements, documents
and instruments executed and delivered by the Company or any of its Subsidiaries, if applicable,
pursuant hereto, the Reclassification, the Redemption, the sale and issuance of the Shareholder
Warrants, the sale, transfer and delivery of the Purchased Shares and, upon conversion of the
Acquired Series A-1 Preferred Shares, the issuance and delivery of the Ordinary Conversion Shares,
and all other transactions contemplated by this Agreement and such other agreements, documents and
instruments, do not and will not: (i) violate or result in a violation of, conflict with or
constitute or result in a violation of or default (whether after the giving of notice, lapse of
time or both) or loss of benefit under any provision of any Company Organizational Documents (other
than strictly of the result of any changes to the Company’s articles of association from time to
time to effect the Reclassification or to adopt the Articles), or cause the creation of any Claim
upon any of the assets of the Company or any of its Subsidiaries;



12









 







(ii) violate, conflict with or
result in a violation of, or constitute a default (whether after the giving of notice, lapse of
time or both) under, any Legal Requirement applicable to the Company or any of its Subsidiaries;
(iii) require from the Company or any of its Subsidiaries any notice to, declaration or filing
with, or consent or approval of any Governmental Authority or other third party; or (iv) violate or
result in a violation of, or conflict with or constitute or result in a violation of or default
(whether after the giving of notice, lapse of time or both) under, accelerate any obligation under,
or give rise to a right of termination or loss of, any contract, agreement, permit, license,
authorization, Regulatory Authorization or other obligation (including, without limitation, the
Company’s status as a “Beneficial Enterprise”) issued to the Company or any of its Subsidiaries by
any Governmental Authority or other third party, to which the Company or any of its Subsidiaries is
a party or by which the Company, any of its Subsidiaries, or their assets are bound (collectively,
the “Licenses” and each, a “License”).



     2.3 Corporate Records. The corporate record books of the Company and of each of its Subsidiaries
accurately reflect all corporate actions taken by its shareholders and board of directors and
committees. The copies of the corporate records of the Company and of each of its Subsidiaries, as
delivered to the Buyer, are true and complete copies of the originals of such documents.



     2.4 Capitalization.



          (a) The authorized share capital of the Company immediately prior to the Reclassification,
Pre-Closing Bonus Shares, and Option Exercise Transaction consist of (i) 3,685,120 Ordinary Shares,
of which 139,922 shares are issued and outstanding, but of which 7,948 are dormant, (ii) 61,160
Series A Preferred Shares, all of which shares are issued and outstanding, (iii) 42,840 Series B
Preferred Shares, all of which shares are issued and outstanding, but of which 5,100 are dormant,
(iv) 10,880 Series C Preferred Shares, none of which are issued and outstanding.



          (b) As of the Closing and after giving effect to the Reclassification, Pre-Closing Bonus
Shares, and the Option Exercise Transaction (but assuming no Optionholder has declined to exercise
its Options), and the other transactions contemplated hereby, the authorized share capital of the
Company will consist of (i) 1,022,828,000 Ordinary Shares, of which 153,234,000 shares will be
issued and outstanding, and (ii) 377,172,000 Series A-1 Preferred Shares, all of which shares will
be issued and outstanding.


          (c) As of the Closing, and after giving effect to the transactions contemplated hereby, all of
the outstanding shares of share capital of the Company will have been duly and validly authorized
and issued, and are fully paid and non-assessable, and will have been offered, issued, sold and
delivered in compliance with applicable securities laws and other Legal Requirements without giving
rise to preemptive rights of any kind.



          (d) As of the Closing, the relative rights, preferences and other provisions relating to the
Acquired Series A-1 Preferred Shares and the Ordinary Shares will be as set forth in the Articles,
and such rights and preferences will be valid and enforceable in accordance with their terms under
Israeli law.



13









 






          (e) Except for the Shareholder Warrants, pursuant to the Current Share Option Plan or as
otherwise contemplated by the Transaction Documents, there are no outstanding subscriptions,
options, warrants, commitments, preemptive rights, agreements, arrangements or commitments of any
kind (whether in writing or otherwise) relating to the issuance or sale of, or outstanding
securities convertible into or exercisable or exchangeable for, any shares of share capital of any
class or other equity interests of the Company or any of its Subsidiaries. Except as provided
herein and as set forth in Section 2.4 of the Disclosure Schedule, neither the Company nor
any of its Subsidiaries has any obligation to purchase, repurchase, redeem, or otherwise acquire
any of its share capital or any interests therein, and has not repurchased or redeemed any shares
of its share capital in the past three (3) years.



          (f) As of the Closing, the Company has duly and validly authorized and reserved (i)
143,013,000 Ordinary Shares for issuance in connection with awards (whether written or oral) to be
granted or exercised under the Share Option Plans, (ii)  377,172,000 Ordinary Shares, for issuance
upon conversion of the Series A-1 Preferred Shares, and (iii)  66,620,996 Ordinary Shares for
issuance upon exercise of the Shareholder Warrants, and the shares of share capital so issued will,
upon such grant, exercise or conversion, be validly issued, fully paid and non-assessable.



          (g) As of the Closing and after giving effect to the transactions contemplated hereby, other
than rights set forth herein or in Section 2.4 of the Disclosure Schedule or in the
Articles or the Shareholders’ Agreement, there are (i) no preemptive rights, rights of first
refusal, put or call rights or obligations or anti-dilution rights with respect to the issuance,
sale or redemption of the Company’s share capital or any interests therein, (ii) no rights to have
the Company’s share capital registered for sale to the public in connection with the laws of any
jurisdiction, and (iii) no documents, instruments or agreements relating to the voting of the
Company’s voting securities or restrictions on the transfer of the Company’s share capital.



          (h) As of the Closing and after giving effect to the transactions contemplated hereby, the
Ordinary Shares and the Series A-1 Preferred Stock will be held as set forth on Section 2.4(h)
of the Disclosure Schedule free and clear of any Claims (other than restrictions imposed by
securities laws applicable to unregistered securities generally and the Shareholders Agreement).



     2.5 Subsidiaries; Investments. The Company does not own or control, directly or indirectly, any
interest in any other corporation, partnership, limited liability company, association or other
business entity, except as set forth in Section 2.5 of the Disclosure Schedule. Neither
the Company nor any of its Subsidiaries has made any investment and does not hold any interest in
or have any outstanding loan or advance to or from, any person, including, without limitation, any
officer, director or shareholder of the Company or any of its Subsidiaries. Each Subsidiary is
wholly owned by the Company and the Company is the sole record and beneficial owner of all equity
interests or shares of capital stock thereof.



     2.6 Financial Statements.



     (a) The Company has previously furnished to the Buyer and attached hereto on Section 2.6
of the Disclosure Schedule copies of the Company’s (i) audited balance sheets for



14









 







the fiscal
years ended December 31, 2004 and 2003 and the related audited statements of income, retained
earnings and cash flows for the fiscal years then ended, with a report thereon by the independent
certified public accountants of the Company, (ii) unaudited balance sheet for the nine (9)-month
fiscal period ended September 30, 2005 and the related unaudited statement of income for the fiscal
period then ended, and (iii) unaudited balance sheet and related statement of income for the nine
(9)-month fiscal period ended September 30, 2005, with such financial statements prepared on a pro
forma consolidated basis giving effect to any mergers, business combination transaction,
acquisitions and divestitures consummated by the Company on or prior to September 30, 2005 (such
unaudited balance sheet of the Company as of September 30, 2005 being referred to herein as the
“Base Balance Sheet”) (the financial statements described in clauses (i), (ii) and (iii) above
collectively, the “Financial Statements”). The Financial Statements were prepared in conformity
with generally accepted accounting principles of the United States applied on a consistent basis,
are consistent in all material respects with the books and records of the Company and its
Subsidiaries and fairly present the financial position and sales of the Company and its
Subsidiaries (as applicable) as of the dates thereof and the results of operations and cash flows
of the Company and its Subsidiaries for the periods shown therein. Neither the Company nor any of
its Subsidiaries has entered into any transactions involving the
factoring of receivables, synthetic leases, off balance sheet research and development
arrangements or the use of special purpose entities for any off balance sheet activity. The
Company’s and its Subsidiaries’ revenue recognition policies and the application of those policies
is in compliance with applicable standards under generally accepted accounting principles of the
United States applied on a consistent basis. Nothing has come to the attention of the Company or
any of its Subsidiaries since such respective dates that would indicate that the Financial
Statements are not true and correct in all material respects as of the date thereof.



     (b) For the fiscal year ended December 31, 2005, the Company estimates earnings before
interest, taxes, depreciation and amortization of $13.25, excluding the effects of any
extraordinary events occurring outside the Company’s ordinary course of business. Such estimates
represent good faith estimates of the performance of the Company and its Subsidiaries for such
fiscal year based upon all available data and based upon assumptions which were believed in good
faith to be reasonable when made and continue to be reasonable as of the date hereof. During the
fiscal quarter ended December 31, 2005, the Company estimates that the Company and its Subsidiaries
issued invoices to customers in an aggregate value of $10.8 million.



     (c) As of immediately prior to the Closing and prior to giving effect to the transactions
contemplated hereby or the payment of any transaction-related expenses payable by the Company
hereunder, the Company has cash and cash equivalents of not less than $14 million (as determined in
accordance with generally accepted accounting principles of the United States applied on a
consistent basis).



     2.7 Absence of Undisclosed Liabilities. Neither the Company nor any of its Subsidiaries has any
material liabilities or obligations of any nature, whether accrued, absolute, contingent, asserted,
unasserted or otherwise, except liabilities or obligations (i) stated or adequately reserved
against in the Base Balance Sheet, (ii) incurred as a result of or arising out of the transactions
contemplated under this Agreement, (iii) incurred in the ordinary course of



15









 







business since the date
of the Base Balance Sheet, or (iv) as set forth in Section 2.7 of the Disclosure Schedule.



     2.8 Absence of Certain Developments. Since the date of the Base Balance Sheet, each of the Company
and each of its Subsidiaries has conducted its business in the ordinary course consistent with past
practice and, except as explicitly set forth in Section 2.8 of the Disclosure Schedule or
the Financial Statements, there has not been:



          (a) any change in the Business or assets, liabilities, condition (financial or other),
properties or operations of the Company or any of its Subsidiaries, which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary course of business,
has had or could be reasonably expected to have a Material Adverse Effect;



          (b) any mortgage, charge, lien or other Claim placed on any of the properties of the Company
or any of its Subsidiaries, other than purchase money liens and liens for taxes
not yet due and payable and liens that arise in the ordinary course of business and do not
materially impair the Company’s ownership or use of such property or assets;



          (c) any purchase, sale or other disposition, or any agreement or other arrangement for the
purchase, sale or other disposition, of any properties or assets by the Company or any of its
Subsidiaries, including any of its Intellectual Property Assets (as defined below), involving the
payment or receipt of more than $100,000;



          (d) any damage, destruction or loss, whether or not covered by insurance, that has had or
could be reasonably expected to have a Material Adverse Effect;



          (e) except for the Redemption and/or the payment of the Pre-Closing Dividends and/or the
issuance of the Pre-Closing Bonus Shares, any declaration, setting aside or payment of any dividend
by the Company or any of its Subsidiaries, or the making of any other distribution in respect of
the share capital of the Company or any of its Subsidiaries, any direct or indirect redemption,
purchase or other acquisition by the Company of its own share capital; or any bonus payments made
to or with any officers or employees of the Company or any of its Subsidiaries;



          (f) any labor trouble or claim of unfair labor practices involving the Company or any of its
Subsidiaries, any change in the compensation payable or to become payable by the Company or any of
its Subsidiaries to any of its officers or employees other than normal merit increases to employees
in accordance with its usual practices, or any bonus arrangements made to or with any of such
officers or employees or any establishment or creation of any employment, deferred compensation or
severance arrangement or employee benefit plan (other than the Current Share Option Plan) with
respect to such persons, or the amendment of any of the foregoing;



          (g) any resignation, termination or removal of any officer or key employee of the Company or
any of its Subsidiaries, or material loss of personnel of the Company or any of its Subsidiaries,
or material change in the terms and conditions of the employment of the Company’s or any of its
Subsidiaries’ officers or key personnel;



16









 





          (h) any payment or discharge of a material lien or liability of the Company or any of its
Subsidiaries which was not shown on the Base Balance Sheet or incurred in the ordinary course of
business thereafter;



          (i) any contingent liability incurred by the Company or any of its Subsidiaries as guarantor
or otherwise with respect to the obligations of others or any cancellation of any material debt or
claim owing to, or waiver of any material right of, the Company or any of its Subsidiaries,
including any write-off or compromise of any accounts receivable other than in the ordinary course
of business consistent with past practices;



          (j) any obligation or liability incurred by the Company or any of its Subsidiaries to any of
its officers, directors, shareholders or employees, or any loans or advances made by the Company or
any of its Subsidiaries to any of its officers, directors, shareholders or employees, except normal
compensation and expense allowances payable to officers or employees in the ordinary course of
business;



          (k) any change in accounting methods or practices, collection policies, pricing policies,
discount policies, sales incentive policies or payment policies of the Company or any of its
Subsidiaries;



          (l) any loss or, to the knowledge of the Company, any development that could reasonably be
expected to result in a loss, of any significant supplier, customer, distributor or account of the
Company or any of its Subsidiaries;



          (m) any amendment, modification, renewal or termination of, or waiver of any material right
under, any material contract or agreement to which the Company and/or any of its Subsidiaries is a
party or by which it is bound;



          (n) any arrangements relating to any royalty or similar payment based on the revenues, profits
or sales volume of the Company or any of its Subsidiaries, whether as part of the terms of the
Company’s share capital or by any separate agreement;



          (o) any transaction or agreement involving fixed price terms or fixed volume arrangements;



          (p) any other transaction entered into by the Company and/or any of its Subsidiaries other
than transactions in the ordinary course of business; or



          (q) any agreement or understanding whether in writing or otherwise, for the Company and/or any
of its Subsidiaries to take any of the actions specified in clauses (a) through (p) above.



     2.9 Accounts Receivable; Accounts Payable.



          (a) Except as set forth in Section 2.9 of the Disclosure Schedule, all of the accounts
receivable of the Company and each of its Subsidiaries are valid and, to the knowledge of the
Company, enforceable claims, are subject to no set-off or counterclaim, and are fully collectible
in the normal course of business, after deducting the reserve for doubtful accounts



17









 







stated in the
Base Balance Sheet, which reserve is in accordance with generally accepted accounting principles of
the United States. Since the date of the Base Balance Sheet, each of the Company and each of its
Subsidiaries has collected its accounts receivable in the ordinary course of its business and in a
manner which is consistent with its past practices and has not accelerated any such collections.
Except as set forth in Section 2.9 of the Disclosure Schedule, neither the Company nor any
of its Subsidiaries has any accounts receivable or loans receivable from any person which is
affiliated with it or any of its directors, officers, employees or shareholders.



          (b) Except as set forth in Section 2.9 of the Disclosure Schedule, all accounts
payable and notes payable of the Company and each of its Subsidiaries arose in bona fide arm’s
length transactions in the ordinary course of business and, to the knowledge of the Company, no
such account payable or note payable is delinquent in its payment. Since the date of the Base
Balance Sheet, the Company and each of its Subsidiaries has paid its accounts payable in the
ordinary course of its business and in a manner which is consistent with its past practices.
Except as set forth in Section 2.9 of the Disclosure Schedule, neither Company nor any of
its
Subsidiaries has any account payable to any person which is affiliated with it or any of its
directors, officers, employees or shareholders.



     2.10 Transactions with Affiliates. Except as set forth in Section 2.10 of the Disclosure
Schedule, there are no loans, leases or other agreements or transactions between the Company or
any of its Subsidiaries or any present or former shareholder, director, officer or employee of the
Company or any of its Subsidiaries or, to the knowledge of the Company (without any inquiry), any
member of such officer’s, director’s, employee’s or shareholder’s immediate family, or any person
controlled by such officer, director, employee or shareholder or his or her immediate family.
Except as set forth in Section 2.10 of the Disclosure Schedule, to the knowledge of the
Company (without any inquiry), no shareholder, director, officer or employee of the Company or any
of its Subsidiaries or, any of their respective spouses or family members, owns directly or
indirectly, on an individual or joint basis, any interest in, or serves as an officer or director
or in another similar capacity of, any competitor, customer or supplier of the Company and/or any
of its Subsidiaries, or any organization which has a material contract or arrangement with the
Company or any of its Subsidiaries.



     2.11 Properties. Each of the Company and each of its Subsidiaries have good, valid and (if
applicable) marketable title to all assets material to its business and to those assets reflected
on the Base Balance Sheet or acquired by it after the date thereof (except for properties disposed
of since that date in the ordinary course of business), free and clear of Claims, except for liens
for Taxes (as hereinafter defined) not yet due and payable, and minor liens and encumbrances that
do not materially detract from the value of the property subject thereto or impair the operations
of the Company and/or any of its Subsidiaries. All equipment included in such properties which is
necessary to the Business is in good condition and repair (ordinary wear and tear excepted) and all
leases of real or personal property to which the Company and/or each of its Subsidiaries is a party
are fully effective and afford the Company and/or each of its Subsidiaries peaceful and undisturbed
possession of the subject matter to the lease. The property and assets of the Company and its
Subsidiaries are sufficient for the conduct of its business as presently conducted.




18












 





     2.12 Tax Matters.



          (a) The Company and each of its Subsidiaries has timely and properly filed all United States
federal, state and local, Israeli and other foreign Tax Returns (as defined below) required to be
filed by it through the date hereof, and all such Tax Returns filed by the Company and/or any of
its Subsidiaries are true, correct and complete in all material respects. In this Agreement, “Tax
Return” means any return, declaration, report, claim for refund, or information return or statement
relating to Taxes (as defined below), including any schedule or attachment thereto, and including
any amendment thereof. Except as set forth in Section 2.12 of the Disclosure Schedule,
each of its Subsidiaries has paid or caused to be paid all United States
federal, state and local taxes, Israeli taxes, other foreign taxes and other taxes, including
without limitation, income taxes, taxes imposed under Section 1374 of the Code, estimated taxes,
alternative or add-on minimum taxes, excise taxes, sales taxes, franchise taxes, employment and
payroll related taxes, withholding taxes, transfer taxes, gross receipts taxes, license taxes,
severance taxes, stamp taxes, occupation taxes, premium taxes, windfall profits taxes,
environmental taxes (including taxes under Section 59A of the Code), customs duties taxes, capital
stock taxes, profits taxes, social security (or similar) taxes, unemployment taxes, disability
taxes, real property taxes, personal property taxes, registration taxes, value added taxes or other
taxes of any kind whatsoever and all deficiencies, or other additions to tax, interest, fines and
penalties owed by it, and including any obligation to indemnify or otherwise assume or succeed to
the tax liability of any other person or entity (collectively, “Taxes”), required to be paid by it
(whether or not shown on any Tax Return) through the date hereof whether disputed or not, except
Taxes which have not yet accrued or otherwise become due. The reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Base Balance Sheet (rather than any notes thereto) is
sufficient as of its date for the payment of any accrued and unpaid Taxes of any nature of the
Company or any of its Subsidiaries and since the date of the Base Balance Sheet neither the Company
nor any of its Subsidiaries has incurred any Taxes other than in the ordinary course of its
business. All Taxes and other assessments and levies which the Company or any of its Subsidiaries
was or is required to withhold or collect have been withheld and collected and have been paid over
to the proper governmental authorities. There are no liens for Taxes (other than Taxes not yet due
and payable) upon any of the assets of the Company or any of its Subsidiaries. Except as set forth
in Section 2.12 of the Disclosure Schedule, the Company has delivered to the Buyer correct
and complete copies of all annual Tax Returns, examination reports, and statements of deficiencies
filed by, assessed against, or agreed to by the Company and/or any of its Subsidiaries since its
inception. The Company and each of its Subsidiaries has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax payment, assessment,
deficiency or collection. Except as set forth in Section 2.12 of the Disclosure Schedule:
(i) neither the Company nor any of its Subsidiaries has ever received notice of any audit or of any
proposed deficiencies from the United States Internal Revenue Service (the “IRS”), the Israeli
Taxing Authority (the “ITA”) or any other taxing authority; (ii) there are in effect no waivers of
applicable statutes of limitations with respect to any Taxes owed by the Company or any of its
Subsidiaries for any year; (iii) neither the IRS, the ITA nor any other taxing authority is now
asserting or, to the knowledge of the Company, threatening to assert against the Company or any of
its Subsidiaries any deficiency or claim for additional Taxes or interest thereon or penalties in
connection therewith; and (iv) neither the Company nor any of its Subsidiaries has ever been a
member of an affiliated group of




19









 







corporations within the meaning of Section 1504(a) of the Code
filing a combined United States federal income Tax Return nor does the Company nor any of its
Subsidiaries have any liability for Taxes of any other Person under Treasury Regulations § 1.1502-6
(or any similar provision of foreign, state or local law) or otherwise. Neither the Company nor
any of its Subsidiaries is a party to any Tax allocation or sharing arrangement. Neither the
Company nor any of its Subsidiaries is a party to any contract, agreement, plan or arrangement
covering any employee or former employee thereof, that, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant to Section 280G or Section
162 of the Code.




          (b) The taxable year of the Company and of each of its Subsidiaries for Israeli, United States
federal and state income tax purposes is the fiscal year ended December 31st.




          (c) The Company has never been a “passive foreign investment company” (as defined in the
Code).




          (d) Neither the Company nor any of its Subsidiaries will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing as a result of any (i) “closing agreement” as described in
Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign
income Tax law) executed on or prior to the Closing; (ii) installment sale or open transaction
disposition made on or prior to the Closing; or (iii) prepaid amount received on or prior to the
Closing.




          (e) The Company and each of its Subsidiaries has withheld and paid all Taxes required to have
been withheld and paid in connection with any amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party, and all Forms W-2 and 1099 (and comparable
Israeli forms) required with respect thereto have been properly completed and timely filed.




          (f) Neither the Company nor any of its Subsidiaries will be required to include any adjustment
under Section 481(c) of the Code (or any corresponding provision of state, local or foreign law) in
taxable income for any Tax period ending after the Closing as a result of a change in accounting
method for a Tax period beginning on or before the Closing.




          (g) The U.S. Subsidiary has used an accrual method of accounting within the meaning of Section
446(c) of the Code at all times during its existence.




          (h) Neither the Company nor any of its Subsidiaries has distributed stock of another entity,
and has not had its stock distributed by another entity, in a transaction that was purported or
intended to be governed in whole or in part by Section 355 or 361 of the Code.




          (i) The Company and each of its Subsidiaries has maintained any transfer pricing information,
analyses and records with respect to its inter-company transactions required to be so maintained
for Unites States Tax purposes.




     2.13 Certain Contracts and Arrangements. Except as set forth in Section 2.13 of the Disclosure
Schedule (with, to the extent written, true and correct copies of, and, to the extent



20









 




oral, true and correct descriptions of, each agreement referred to therein provided to the Buyer),
neither the Company nor any of its Subsidiaries is a party or subject to or bound by:




          (a) any contract or agreement involving a potential commitment or payment by the Company
and/or any of its Subsidiaries in excess of $100,000;




          (b) any contract, lease or agreement which is not cancelable by the Company and/or any of its
Subsidiaries without penalty on not less than ninety (90) days notice;




          (c) any contract containing covenants directly or explicitly limiting in any respect the
freedom of the Company and/or any of its Subsidiaries to compete in any line of business or with
any person or entity;




          (d) any contract or agreement relating to the licensing, distribution, development, purchase
or sale of any of its Intellectual Property Assets;




          (e) any indenture, mortgage, promissory note, loan agreement, guaranty or other agreement or
commitment for borrowing or any pledge or security arrangement;




          (f) any share redemption or purchase agreements or other agreements affecting or relating to
the share capital of the Company and/or any of its Subsidiaries, including, without limitation, any
agreement with any shareholder of the Company or any of its Subsidiaries which includes
anti-dilution rights, registration rights, voting arrangements, operating covenants or similar
provisions;




          (g) any pension, profit sharing, retirement or share option plans;




          (h) any royalty, dividend or similar arrangement based on the revenues or profits of the
Company or any of its Subsidiaries or any contract or agreement involving fixed price or fixed
volume arrangements;




          (i) any joint venture, partnership, manufacturer, development or supply agreement or other
agreement which involves a sharing of revenues, profits, losses, costs or liabilities by the
Company or any of its Subsidiaries with any other Person or the payment of commissions by the
Company;




          (j) any acquisition, merger or similar agreement;




          (k) any collective bargaining agreement or other agreement with any labor union or other
employee representative of a group of employees;




          (l) any contract with any Governmental Authority, including any quasi-governmental entity;




          (m) any contract not executed in the ordinary course of business; or




          (n) any other material contract.




21









 








     All such contracts, agreements, leases and instruments are valid and are in full force and
effect and constitute legal, valid and binding obligations of the Company and/or any of its
Subsidiaries and, to the knowledge of the Company (without any inquiry), of the other parties
thereto, and are enforceable in accordance with their respective terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting the enforcement of creditors’ rights generally; and (ii) limitations on the
enforcement of the remedy of specific performance and other equitable remedies. The Company
has no knowledge of any notice or threat to terminate any such contracts, agreements, leases or
instruments, which termination has had, or could reasonably be expected to have, a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
other party is in default in complying with any provisions of any such contract, agreement, lease
or instrument, or any other contract, agreement, lease or instrument, the breach of which has had,
or could reasonably be expected to have, a Material Adverse Effect, and no condition or event or
fact exists which, with notice, lapse of time or both, could constitute a default thereunder on the
part of the Company or any of its Subsidiaries, except for any such default, condition, event or
fact that, individually or in the aggregate, that has had, or could not reasonably be expected to
have, a Material Adverse Effect.



     2.14 Intellectual Property. Section 2.14 of the Disclosure Schedule contains a complete
and accurate list of all Patents owned by the Company or any of its Subsidiaries or otherwise used
in the Business (“Company Patents”), Marks owned by the Company or any of its Subsidiaries or
otherwise used in the Business (“Company Marks”) and Copyrights owned by the Company or any of its
Subsidiaries or otherwise used in and, in either case, material to the Business (“Company
Copyrights”). Except as set forth on Section 2.14 of the Disclosure Schedule:



          (a) the Company and its Subsidiaries exclusively own or possess adequate and enforceable
rights to use, except as such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting the enforcement of creditors’ rights
generally; and (ii) limitations on the enforcement of the remedy of specific performance and other
equitable remedies, without payment to a third party, all of the Intellectual Property Assets
necessary for the operation of the Business, free and clear of all Claims;




          (b) all Company Intellectual Property Assets of the Company or any of its Subsidiaries are
valid and, to the knowledge of the Company, enforceable, and all Company Patents, Company Marks and
Company Copyrights which are issued by or registered with, as applicable, the United States Patent
and Trademark Office, the United States Copyright Office or in any similar office or agency
anywhere in the world are currently in compliance with formal legal requirements (including without
limitation, as applicable, payment of filing, examination and maintenance fees, proofs of working
or use, timely post-registration filing of affidavits of use and incontestability and renewal
applications);




          (c) there are no pending, or, to the knowledge of the Company, threatened (written or
unwritten) claims against the Company or any of its Subsidiaries or any of their respective
employees alleging that any of the operation of the Business, any activity by the Company, or
manufacture, sale and/or use of any Product infringes on or violates (or in the past




22









 







infringed on or violated) or, the rights of any third party in or to any Intellectual Property Assets (“Third
Party IP Assets”) or constitutes a misappropriation of (or in the past constituted a
misappropriation of) any Intellectual Property Assets of any person or entity or that any of the
Company Intellectual Property Assets is invalid or unenforceable;




          (d) to the knowledge of the Company (without any inquiry), neither the operation of the
Business, nor any activity, manufacture, use and/or sale by the Company or any of its Subsidiaries
of any Product infringes on or violates (or in the past infringed on or violated) any Third Party
IP Asset or constitutes a misappropriation of (or in the past constituted a misappropriation of)
any Third Party IP Asset;




          (e) all current employees and consultants of the Company or any of its Subsidiaries have
executed written instruments with the Company and/or with any of its Subsidiaries that assign to
the Company or any of its Subsidiaries all rights, title and interest in and to any and all (A)
inventions, improvements, discoveries, writings and other works of authorship, and information
relating to the Business or any of the products or services being researched, developed,
manufactured or sold by the Company and/or any of its Subsidiaries or that may be used with any
such products or services and (B) Intellectual Property Assets relating thereto;




          (f) to the knowledge of the Company (without any inquiry), (A) there is no, nor has there been
any, infringement or violation by any person or entity of any of the Company Intellectual Property
Assets or the Company’s or any of its Subsidiaries’ rights therein or thereto and (B) there is no,
nor has there been any, misappropriation by any person or entity of any of the Company Intellectual
Property Assets;




          (g) each of the Company and each of its Subsidiaries has taken all commercially reasonable
security measures to protect the secrecy, confidentiality and value of all Trade Secrets owned by
the Company or any of its Subsidiaries or used or held for use by the Company or any of its
Subsidiaries in the Business (the “Company Trade Secrets”), including, without limitation,
requiring each Company and/or Subsidiary employee and consultant and any other person with access
to Company Trade Secrets to execute a binding confidentiality agreement, copies or forms of which
have been provided to the Buyer and, to the Company’s knowledge (without any inquiry), there has
not been any breach by any party to such confidentiality agreements;




          (h) the Company Intellectual Property Assets are not subject to any license granted by the
Company or any of its Subsidiaries to any person or entity;




          (i) to the Company’s knowledge (without any inquiry), all inventors listed on the Company
Patents are under no obligation to assign their rights in the Company Patents to a former employer,
person, or entity, nor is the validity of the Company Patents affected by the prior employment of
any inventor;




          (j) to the Company’s knowledge (without any inquiry), each Intellectual Property Asset license
to which the Company is a party is valid and enforceable, and the Company is not in breach or
default thereunder;




23









 








          (k) no software incorporated in any Products or covered by or embodying any Company
Intellectual Property Assets owned or purported to be owned by the Company and/or any of its
Subsidiaries has been sold in whole or in part or used, or is being used in conjunction
with any Public Software in a manner which would require that such software be disclosed or
distributed in source code form or made available for free.




     2.15 Litigation. There is no claim, legal action, counterclaim, suit, arbitration, litigation or
other governmental or administrative proceeding or, to the knowledge of the Company, investigation
pending or, threatened against the Company or any of its Subsidiaries or affecting the properties
or assets of the Company or any of its Subsidiaries, or, as to matters related to the Company or
any of its Subsidiaries, to the knowledge of the Company (without any inquiry), against any officer
or director of the Company or any of its Subsidiaries in their respective capacities in such
positions, nor, to the knowledge of the Company, has there occurred any event nor does there exist
any condition on the basis of which any such claim may be asserted. Section 2.15 of the
Disclosure Schedule includes a description of all such litigation, claims, legal actions,
counterclaims, suits, arbitrations, proceedings or, to the knowledge of the Company, investigations
involving the Company or any of its Subsidiaries or any of their respective officers or directors
in connection with the Business occurring, arising or existing as of the date hereof. In addition,
except as set forth on Section 2.15 of the Disclosure Schedule, in the last two years,
neither the Company nor any of its Subsidiaries has not entered into or been subject to any
judgment, consent decree, compliance order or administrative order of any Governmental Authority
with respect to the Business. To the knowledge of the Company (without any inquiry), neither the
Company, nor any of its Subsidiaries nor any officer, director, shareholder or key employee of the
Company or any of its Subsidiaries in their respective capacities in such positions has received or
been the subject of any legal demand letter, administrative inquiry or formal or informal complaint
or legal claim from, or under the jurisdiction of, any Governmental Authority or other third party
that include any allegations alleging any violation of any Legal Requirement or any improper
business practice of the Company or any of its Subsidiaries.



     2.16 Labor Matters. The Company and its Subsidiaries employ approximately 56 full-time and no
part-time employees and generally enjoy good employer-employee relationships. Neither the Company
nor any of its Subsidiaries is delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services performed for the
Company and/or any of its Subsidiaries as of the date hereof or amounts required to be reimbursed
to such employees. Neither the Company nor any of its Subsidiaries is subject to, nor is the
Company or any of its Subsidiaries aware that it is bound by, any contract, commitment or
arrangement with any labor union Each of the Company and each of its Subsidiaries is and
heretofore has been in compliance in all material respects with all applicable Legal Requirements,
laws and regulations respecting labor, employment, fair employment practices, terms and conditions
of employment, occupational safety and health, and wages and hours. Neither the Company nor any of
its Subsidiaries is liable for the payment of any compensation, damages, taxes, fines, penalties,
or other amounts, however designated, for failure to comply with any of the foregoing Legal
Requirements, or the like. There are no charges of employment discrimination or unfair labor
practices or strikes, slowdowns, stoppages of work, or any other concerted interference with normal
operations existing, pending or, to the knowledge of the Company, threatened against or involving
the Company or any of its



24









 




Subsidiaries. Each U.S. Subsidiary is, and at all times has been, in compliance in all material respects with the
requirements of the United States Immigration Reform Control Act of 1986 (to the extent applicable)
applicable to it. There are no changes pending or, to the knowledge of the Company, threatened
with respect to (including, without limitation, the resignation of) the senior management or key
supervisory personnel or key independent contractors of the Company or any of its Subsidiaries nor
has the Company or any of its Subsidiaries received any notice or information concerning any
prospective change with respect to such senior management or key supervisory personnel. No U.S.
Subsidiary of the Company has ever implemented any plant closing or mass layoff of employees as
those terms are defined in the United States Worker Adjustment Retraining and Notification Act of
1988, as amended (to the extent applicable to it), or any similar state or local Legal Requirement,
law or regulation, and no layoffs that could implicate such laws or regulations are currently
contemplated.




     2.17 Licenses; Compliance with Laws; Regulatory Matters .



          (a) Section 2.17 of the Disclosure Schedule includes a correct and complete list of
the Licenses. The Company delivered to the Buyer correct and complete copies of all Licenses
listed on Section 2.17 of the Disclosure Schedule (including any amendments, supplements
and other modifications thereto). All Licenses listed on Section 2.17 of the Disclosure
Schedule have been validly issued, and, as of the Closing, the Company and/or any of its
Subsidiaries is the authorized legal holder thereof. The Licenses listed on Section 2.17 of
the Disclosure Schedule comprise all of the licenses, permits, Regulatory Authorizations and
other authorizations required from any Governmental Authority for the lawful conduct of the
Business and none of the Licenses is subject to any unusual or special restriction or condition
that could reasonably be expected to limit the full operation of the Business. The Licenses are in
full force and effect, and the conduct of the Business is in accordance therewith, except with
respect to any non compliance that could not be reasonably be expected to have a Material Adverse
Effect. No License is subject to termination as a result of the execution of this Agreement or the
other Transaction Documents or the consummation of the transactions contemplated hereby or thereby.
The Company is now and has heretofore been in compliance in all material respects with all Legal
Requirements.




          (b) Except as set forth on Section 2.17 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries has received or been subject to or is aware of: (i) any FDA
notice of inspectional observations, or equivalent report by inspectors or officials from any other
Governmental Authority or Notified Body of any situation requiring attention or correction or of
conditions or circumstances that are objectionable or otherwise contrary to applicable Legal
Requirements, with respect to the Products, the Company or any of its Subsidiaries; (ii) any
warning letters, establishment inspection reports, untitled letters, or other written
correspondence or documents from the FDA or any other Governmental Authority or Notified Body in
which the FDA or such other Governmental Authority or Notified Body asserted that any Products or
any operations of the Company or any of its Subsidiaries were not in compliance with applicable
Legal Requirements.




          (c) Except as set forth on Section 2.17 of the Disclosure Schedule, there has not been
any occurrence of any Medical Device Report (“MDR”) concerning any Products; product recall, market
withdrawal, correction, or removal conducted by or on behalf of the




25









 







Company or any of its Subsidiaries concerning any Products; any product recall, market withdrawal, correction, or removal
conducted by or on behalf of any entity as a result of any alleged defect in any Products; or any
complaint, notice of alleged defect, or notice of alleged patient injury with respect to the
Products that has been received in writing by the Company or any of its Subsidiaries or that has
been orally transmitted to and recorded by the Company or any of its Subsidiaries.




          (d) Neither the Company nor any of its Subsidiaries, nor, to the Company’s knowledge (without
any inquiry), any of Company’s current employees has (i) been disbarred or received notice of
action or threat of action with respect to debarment under any applicable Legal Requirement,
including without limitation under section 306 of the Federal Food, Drug, and Cosmetic Act; (ii)
been subject to any other Governmental Authority enforcement action or proceeding, including
without limitation any suspension, consent decree, notice of criminal investigation, indictment,
sentencing memorandum, plea agreement, court order or target or no-target letter or similar action
by any Governmental Authority; or (iii) to the knowledge of the Company (without any inquiry), used
in any capacity the services of any person that has been subject to debarment or any other FDA
enforcement action or proceeding, including without limitation those actions or proceedings
expressly described in clauses (i) and (ii).




          (e) The Products (i) have been manufactured, processed, packaged, labeled, stored and shipped
in accordance with all applicable Legal Requirements, including without limitation Current
Manufacturing Practices, the Quality Systems Regulation, and all other manufacturing and quality
requirements of any Governmental Authority; and (ii) are not and have not been adulterated or
misbranded under the Federal Food, Drug, and Cosmetic Act, or defective or dangerous under any
other applicable Legal Requirements.




          (f) The Company and each of its Subsidiaries and, to the Company’s knowledge, the Company’s
and each of its Subsidiaries’ suppliers, and others with whom the Company or any of its
Subsidiaries enter into contracts for the specification development, manufacture, processing,
packaging, labeling, storage, shipment, distribution, promotion, or advertising of the Products
have maintained all Consents and Licenses required under applicable Legal Requirements.




          (g) Except as set forth on Section 2.17 of the Disclosure Schedule, the Products may
be lawfully introduced into interstate commerce in the United States pursuant to the Federal Food,
Drug, and Cosmetic Act, the European Union pursuant to the applicable Medical Device Directives,
and other countries and jurisdictions in which the Company and/or any of its Subsidiaries currently
market the Products.




          (h) For purposes of this Agreement: (i) “FDA” means the United States Food and Drug
Administration and any successor(s) thereto; (ii) “Federal Food, Drug, and Cosmetic Act” means 21
U.S.C. Sections 321 et seq., as amended; (iii) “Current Good Manufacturing
Practices” means the laws, regulations, practices, and requirements in force from time to time that
apply to the manufacture, processing, packaging, labeling, storage, and shipment of the
Products, including without limitation the requirements of the Federal Food, Drug, and
Cosmetic Act; the Medical Device Directives; and other Legal Requirements; (iv) “Quality Systems
Regulation” means the regulations, practices, requirements, guidelines and guidance in force




26









 







from time to time during the term of this Agreement that apply to quality management and organization,
device design, equipment, purchase and handling of components, production and process controls,
packaging and labeling control, device evaluation, distribution, installation, complaint handling,
servicing, and records, including without limitation the requirements of the Federal Food, Drug,
and Cosmetic Act; 21 Code Federal Regulations Part 820 — “Quality Systems Regulation”; the Medical
Device Directives, and other Legal Requirements; (v) “Medical Device Directive” means the European
Council Directive concerning Medical Devices, 93/42/EEC (OJ No L 169/1, July 12, 1993), as amended;
and (vi) “Notified Body” means the certification organization designated by the relevant national
authority of any member of the European Union, authorized to conduct conformity assessments in
accordance with the procedures listed in the Medical Device Directive.




     2.18 Employee Benefit Programs.



          (a) Neither Company nor any of its Subsidiaries maintains or contributes to and for the past
five (5) years has not maintained or contributed to, any employee benefit plan within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or any
Israeli law or regulation regulating employee benefit plans, any fringe benefit, shares option,
equity-based compensation, phantom stock, bonus, profit sharing, compensation, pension, severance,
savings, deferred compensation, insurance, welfare, medical, post-retirement health or welfare
benefit, medical reimbursement, health, life, option, share purchase, bonus or other plan,
agreement, policy, trust fund or arrangement, established, maintained, sponsored or contributed to
by the Company or any of its Subsidiaries on behalf of any employee, officer or director of the
Company or any of its Subsidiaries (whether current, former or retired) or their beneficiaries or
with respect to which the Company or any of its Subsidiaries has or has had any obligation on
behalf of any such employee, officer, director, or beneficiary (each, an “Employee Benefit
Program”), other than the Employee Benefit Programs identified and described in Section 2.18 of
the Disclosure Schedule attached hereto. The terms and operation of each such Employee Benefit
Program comply and have heretofore complied in all material respects with all applicable Legal
Requirements relating to each such Employee Benefit Program. The Company and each of its
Subsidiaries have performed all of their respective obligations under all Employee Benefit
Programs, and have made entries in their respective financial records and statements as required by
the GAAP for all obligations and liabilities under such Employee Benefit Programs. Each of the
Company and each of its Subsidiaries is in compliance with all applicable laws regarding such
Employee Benefit Programs, and no accumulated funding deficiency, whether or not waived, exists
with respect to any such Employee Benefit Programs. All filings required by applicable laws have
been timely filed, and all notices and disclosures to participants required by applicable laws have
been timely provided. All contributions and payments made or accrued with respect to the Employee
Benefit Programs maintained by the Company’s Subsidiaries are deductible under the applicable Tax
laws. There are no unfunded obligations of the Company or any of its Subsidiaries under any
Employee Benefit Program that have not been accrued unless such accrual is not necessary under
generally accepted accounting principles of the United States. Neither the Company nor any of
its Subsidiaries is required to make any payments or contributions to any Employee Benefit Program
pursuant to any collective bargaining agreement or, to the knowledge of the Company, any applicable
labor relations law, and all Employee Benefit Programs are terminable at the discretion of the
Company or any of its Subsidiaries without liability to the Company or any of




27









 







its Subsidiaries upon or following such termination, except for benefits accrued under the terms of such Employee Benefit
Programs.




          (b) Except as described in Section 2.18 of the Disclosure Schedule, no U.S. Subsidiary
has ever maintained or contributed to any Employee Benefit Program providing or promising any
health or other nonpension benefits to employees after their employment terminates other than as
required by part 6 of subtitle B of Title I of ERISA. With respect to any Employee Benefit Program
of any Subsidiary of the Company, to the knowledge of the Company, there has occurred no
“prohibited transaction,” as defined in Section 406 of ERISA or Section 4975 of the Code, or breach
of any duty under ERISA or other applicable law that could result, directly or indirectly, in any
Taxes, penalties or other liability to any of its Subsidiaries. No litigation, arbitration or
governmental administrative proceeding (or investigation) or other proceeding (other than those
relating to routine claims for benefits) is pending or, to the knowledge of the Company, threatened
with respect to any such Employee Benefit Program.




          (c) Each Employee Benefit Program that has ever been maintained by any U.S. Subsidiary and
that has been intended to qualify under Section 401(a) or 501(c)(9) of the Code has received a
favorable determination or approval letter from the IRS regarding its qualification under such
section or the time period for submitting a determination letter request and adopting retroactive
amendments under Code Section 401(b) and the corresponding regulations is open as of the Closing
Date and each such Employee Benefit Plan has, in fact, been qualified under the applicable section
of the Code from the effective date of such Employee Benefit Program through and including the
Closing Date (or, if earlier, the date that all of such Employee Benefit Program’s assets were
distributed). No event or omission has occurred which would cause any such Employee Benefit
Program to lose its qualification under the applicable Code section and each asset held under any
such Employee Benefit Program may be liquidated or terminated without the imposition of any
redemption for surrender charge or comparable liability. Except as set forth in Section 2.18 of
the Disclosure Schedule, no Subsidiary of the Company has ever maintained any Employee Benefit
Program which has been subject to Title IV of ERISA or Code Section 412, including, but not limited
to, any “multiemployer plan” (as defined in Section 3(37) or Section 4001(a)(3) of ERISA). Each
reference to “Company” or “any of its Subsidiaries” in Sections 2.18(b) and (c) also refers to any
other entity that is considered a single employer with the applicable Subsidiary of the Company
under ERISA Section 4001(b) or part of the same “Controlled Group” as the applicable Subsidiary of
the Company for purposes of ERISA Section 302(d)(8)(C).




     2.19 Insurance Coverage. Section 2.19 of the Disclosure Schedule contains an accurate
listing and summary of the insurance policies currently maintained by the Company or any of its
Subsidiaries. Except as set forth on Section 2.19 of the Disclosure Schedule, there are
currently no claims pending against the Company or any of its Subsidiaries under any insurance
policies currently in effect.



     2.20 Investment Banking; Brokerage. Except as set forth on Section 2.20 of the Disclosure
Schedule, there are no claims for investment banking fees, brokerage commissions, broker’s or
finder’s fees or similar compensation in connection with the transactions contemplated by this
Agreement payable by the Company or any of its Subsidiaries or based on any arrangement or
agreement made by or on behalf of the Company or any of its Subsidiaries.



28









 





     2.21 Environmental Matters. To the Company’s knowledge, no hazardous waste, substance or material,
and no oil, petroleum, petroleum product, asbestos, toxic substance, pollutant or contaminant
(collectively, “Hazardous Material”), has been generated, transported, used, handled, processed,
disposed, stored or treated on any real property owned, leased or operated by the Company or any of
its Subsidiaries. To the Company’s knowledge, no Hazardous Material has been spilled, released,
discharged, disposed, or transported from any real property owned, leased or operated by the
Company or any of its Subsidiaries, and no Hazardous Material is present in, on, or under any such
property. The Company and its Subsidiaries are, and at all times have been, in compliance in all
material respects with all applicable environmental, health and safety laws, rules, ordinances,
by-laws and regulations, and with all permits, registrations and approvals required under such
laws, rules, ordinances, by-laws and regulations (collectively, “Environmental Laws”). Neither the
Company nor any of its Subsidiaries is aware of any fact or circumstance that could involve the
Company or any of its Subsidiaries in any litigation, or impose upon the Company or any of its
Subsidiaries any liability, arising under any Environmental Laws.



     2.22 Customers, Distributors and Partners. Section 2.22 of the Disclosure Schedule sets
forth the name of each customer and distributor of the Company and/or any of its Subsidiaries for
the fiscal year ended December 31, 2004 and nine (9)-month fiscal period ended September 30, 2005
(the “Customers” and “Distributors”, respectively) together with the names of any Person with which
the Company and/or the U.S. Subsidiary has a material strategic partnership or similar relationship
(“Partners”). No Customer, Distributor or Partner of the Company and/or its U.S. Subsidiary who
accounted for more than five percent (5%) of the revenues of the Company and/or the U.S. Subsidiary
for any of the fiscal year ended December 31, 2004 and/or nine (9)-month fiscal period ended
September 30, 2005, has canceled or otherwise terminated its relationship with the Company or has
materially decreased its usage or purchase of the services or products of the Company. No
Customer, Distributor or Partner who accounted for more than five percent (5%) of the revenues of
the Company and/or the U.S. Subsidiary for any of the fiscal year ended December 31, 2004 and/or
the nine (9)-month fiscal period ended September 30, 2005 has, to the knowledge of the Company, any
plan or intention to terminate, cancel or otherwise materially and adversely modify its
relationship with the Company and/or the U.S. Subsidiary or to decrease materially or limit its
usage, purchase or distribution of the services or products of the Company and/or the U.S.
Subsidiary.



     2.23 Suppliers . The Company’s and each of its Subsidiaries’ relationships with its major suppliers are good
commercial working relationships, and, within the last twelve (12) months, no supplier that the
Company and/or its Subsidiaries has paid or is under contract to pay $100,000 or more has canceled,
materially modified, or otherwise terminated its relationship with the Company or any of its
Subsidiaries, or materially decreased its services, supplies or materials to the Company or any of
its Subsidiaries nor, to the knowledge of the Company (without any inquiry), does any supplier have
any plan or intention to do any of the foregoing.



     2.24 Warranty and Related Matters. Section 2.24 of the Disclosure Schedule sets forth a
complete list of all outstanding Products of the Company or any of its Subsidiaries. There are no
existing or, to the knowledge of the Company, threatened, claims against the Company or any of its
Subsidiaries relating to any work performed by the Company or any of its Subsidiaries, product
liability, warranty or other similar claims against the Company or any of its Subsidiaries



29









 




alleging that any Product is defective or fails to meet any product or service warranties. To the Company’s
knowledge, there are (a) no inherent design defects or systemic or chronic problems in any Product
and (b) no liabilities for warranty or other claims or returns with respect to any Product relating
to any such defects or problems which could reasonably be expected to have a Material Adverse
Effect.




     2.25 Illegal Payments. Neither the Company nor any of its Subsidiaries nor, to the knowledge of
the Company, any Person affiliated with the Company has ever offered, made or received on behalf of
the Company or any of its Subsidiaries any illegal payment or contribution of any kind, directly or
indirectly, including, without limitation, payments, gifts or gratuities, to any person, entity, or
United States or foreign national, state or local government officials, employees or agents or
candidates therefor or other persons.



     2.26 Solvency. Neither the Company nor any of its Subsidiaries has: (a) made a general assignment
for the benefit of creditors; (b) filed any voluntary petition in bankruptcy or suffered the filing
of any involuntary petition by its creditors; (c) suffered the appointment of a receiver to take
possession of all, or substantially all, of its assets; (d) suffered the attachment or other
judicial seizure of all, or substantially all, of its assets; (e) admitted in writing its inability
to pay its debts as they come due; or (f) made an offer of settlement, extension or composition to
its creditors generally.



     2.27 Privacy of Customer Information. Neither the Company nor any of its Subsidiaries has used and
does not currently use any of the customer information that it has received or currently receives
through its website, or in a manner that violates the Company’s or any of its Subsidiaries’ privacy
policy or the privacy rights of its customers. Neither the Company nor any of its Subsidiaries has
collected any customer information through its website in an unlawful manner or in violation of its
privacy policy. Each of the Company and each of its Subsidiaries has commercially reasonable
security measures in place to protect the customer information it receives through its website and
which it
stores in its computer systems from illegal use by third parties or use by third parties in a
manner that violates the rights of privacy of its customers.



     2.28 Backlog. The Company and its Subsidiaries have a backlog of firm orders for the sale of its
products and services as set forth in Section 2.28 of the Disclosure Schedule. None of such orders
has been cancelled or materially reduced, and each of such orders on backlog is at a price and on
terms (including margin) consistent with the Company’s or any of its Subsidiaries’ past practices
and the ordinary course of business.



     2.29 Disclosure.



     (a) The representations and warranties made or contained in this Agreement, the Disclosure
Schedule and exhibits hereto and the certificates executed and delivered in connection herewith,
when taken together, do not contain any untrue statement of a material fact and do not omit to
state a material fact required to be stated herein or therein or necessary in order to make such
representations, warranties or other material not misleading in the light of the circumstances in
which they were made or delivered.




30












 





          (b) No officer or director of the Company or any of its Subsidiaries has been: (i) subject to
voluntary or involuntary petition under U.S. federal bankruptcy laws, any U.S. state insolvency law
or any similar non-U.S. laws or the appointment of a receiver, fiscal agent or similar officer by a
court for his or her business or property or that of any partnership of which he or she was a
general partner or any corporation or business association of which he or she was an executive
officer; (ii) convicted in a criminal proceeding or named as a subject of a pending criminal
proceeding (excluding traffic violations and other minor offenses) or been otherwise accused of any
act of moral turpitude; (iii) the subject of any order, judgment, or decree (not subsequently
reversed, suspended or vacated) of any court of competent jurisdiction permanently or temporarily
enjoining him or her from, or otherwise imposing limits or conditions on his or her ability to
engage in any securities, investment advisory, banking, insurance or other type of business or
acting as an officer or director of a public company; (iv) found by a court of competent
jurisdiction in a civil action or by the United States Securities and Exchange Commission (“SEC”),
the United States Commodity Futures Trading Commission or any similar Governmental Authority to
have violated any commodities, securities or unfair trade practices law, which judgment or finding
has not been subsequently reversed, suspended, or vacated; or (v) has engaged in other conduct that
would be required to be disclosed in a prospectus under Item 401(f) of SEC Regulation S-K.




2A. Representations and Warranties of the Shareholders




     In order to induce the Buyer to enter into this Agreement and consummate the Transaction, each
Shareholder hereby, severally but not jointly, makes to the Buyer the representations and
warranties contained in this Section 2A. Such representations and warranties are subject to the
qualifications and exceptions set forth in the Disclosure Schedule.



     (a) Such Shareholder is the sole record and beneficial owner of the Ordinary Shares and Series
A-1 Preferred Shares set forth opposite such Shareholder’s name on Exhibit B attached
hereto (subject to adjustment, if at all, pursuant to Section 1.2(b)), in each case free and clear
of any Claims, including Claims of spouses, former spouses or other family members, or other
shareholders (or former shareholders) of the Company.



     (b) This Agreement and all agreements, documents and instruments executed and delivered by
such Shareholder pursuant hereto are valid and binding obligations of such Shareholder enforceable
in accordance with their respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting the enforcement
of creditors’ rights generally; and (ii) limitations on the enforcement of the remedy of specific
performance and other equitable remedies. Such Shareholder has full right, authority, power and
capacity to enter into this Agreement and all agreements, documents and instruments executed and
delivered by such Shareholder pursuant hereto and to carry out the transactions contemplated hereby
and thereby. Except as set forth on Section 2A(b) of the Disclosure Schedule, the
execution and delivery by each Shareholder of this Agreement and all agreements, documents and
instruments executed and delivered by such Shareholder pursuant hereto and the performance of the
transactions contemplated by this Agreement and such other agreements, documents and instruments do
not and will not: (i) violate or result in a violation of, conflict with or constitute or result in
a violation of or default (whether after the giving of notice, lapse of time or both) or loss of
benefit under any provision of such Shareholder’s organizational



31









 







or trust documents, if applicable, or cause the creation of any Claim upon any of the assets of the
Company or any of its Subsidiaries (including any Purchased Shares or Redeemed Shares held
thereby); (ii) violate or result in a violation of, or constitute a default (whether after the
giving of notice, lapse of time or both) under, any Legal Requirement applicable to the Company,
any of its Subsidiaries or to such Shareholder; (iii) require from the Company, any of its
Subsidiaries or such Shareholder any notice to, declaration or filing with, or consent or approval
of, any Governmental Authority or other third party, or (iv) violate or result in a violation of,
conflict with or constitute or result in a violation of or default (whether after the giving of
notice, lapse of time or both) under, accelerate any obligation under, or give rise to a right of
termination of, any Licenses, agreement, contract, permit, license, authorization or other
obligation to which such Shareholder is a party or by which such Shareholder or its assets are
bound.



     (c) As of each of the date hereof and the Closing Date, such Shareholder does not have any
claims, counterclaims, suits, causes of action, or demands (whether now known, suspected or claimed
to have) against the Company, any of its Subsidiaries, Buyer, the Funds or any of their respective
officers, directors, members, managers partners, employees, consultants or agents other than
arising out of the performance of this Agreement.



3. Representations and Warranties of the Buyer




     In order to induce the Company and the Shareholders to enter into this Agreement, each of the
Buyer, hereby makes to the Company and the Shareholders the representations and warranties
contained in this Section 3:



     3.1 Organization and Corporate Power. Each of the Buyer and each of the Funds is an entity duly
organized and validly existing under the laws of its jurisdiction of organization and has all
required power and authority to carry on its business as presently conducted, to enter into and
perform this Agreement and the agreements contemplated hereby to which it is a party and to carry
out the transactions contemplated hereby and thereby, including the purchase of the Securities.



     3.2 Authority and Non-Contravention. Each of the Buyer and each of the Funds has full right,
authority and power under its organizational documents to enter into this Agreement and all
agreements, documents and instruments executed thereby pursuant hereto and to carry out the
transactions contemplated hereby and thereby (to the extent it is a party to any such agreement,
document or instrument). This Agreement and all agreements, documents and instruments executed by
the Buyer pursuant hereto are valid and binding obligations of the Buyer enforceable against the
Buyer in accordance with their respective terms. The execution, delivery and performance of this
Agreement and all agreements, documents and instruments executed by the Buyer pursuant hereto have
been duly authorized by all necessary action under the Buyer’s organizational documents. The
execution, delivery and performance by the Buyer of this Agreement and all agreements, documents
and instruments to be executed and delivered by the Buyer pursuant hereto do not: (a) violate or
result in a violation of, conflict with or constitute or result in a violation of or default
(whether after the giving of notice, lapse of time or both) or loss of benefit under any provision
of the Buyer’s organizational documents; (b) violate, conflict with or result in a violation of, or
constitute a default (whether after the giving of notice, lapse of time or both) under, any
provision of any Legal Requirement applicable to the Buyer; (c) require from



32









 







the Buyer any notice to, declaration or filing with, or consent or approval of any Governmental
Authority or other third party; or (d) violate or result in a violation of, or conflict with or
constitute or result in a violation of or default (whether after the giving of notice, lapse of
time or both) under, accelerate any obligation under, or give rise to a right of termination of,
any material contract, agreement, permit, license, authorization or other obligation to which the
Buyer is a party or by which the Buyer or its assets are bound.



     3.3 Investment Status. The Buyer is purchasing the Securities for its own account, for investment
only and not with a view to, or any present intention of, effecting a distribution of such
Securities or any part thereof except pursuant to a registration or an available exemption under
applicable law. The Buyer acknowledges that the Securities have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of the State of
Israel and cannot be disposed of unless they are subsequently registered under the Securities Act
and any applicable Israeli securities law or an exemption from such registration is available.



     3.4 Experience.


Such Investor meets at least one of the criteria set forth in Exhibit J attached
hereto, and accordingly is an “accredited investor”, as such term is defined in Rule 501 under the
Securities Act. Such Investor is capable of evaluating the merits and risks of this investment.




     3.5 Investment.


The Buyer is acquiring its Securities for investment for its own account, not as a nominee or
agent, and the Securities are being and will be acquired by it for the purpose of investment and
not with a view to, or for resale in connection with, any distribution thereof, and it has no
present intention of selling or distributing the Securities, the Acquired Series A-1 Preferred
Shares, or Ordinary Conversion Shares issuable upon conversion thereof. Such Buyer understands
that: (i) neither the Series A-1 Preferred Shares, nor the Ordinary Conversion Shares issuable upon
the conversion thereof to be purchased by it have been registered under the Securities Act by
reason of a specific exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent as expressed herein; (ii)
the Series A-1 Preferred Shares and the Ordinary Conversion Shares issuable upon the conversion
thereof will bear a legend to such effect; and (iii) the Company will make a notation on its
transfer books to such effect. The Buyer also represents it has not been organized for the purpose
of acquiring the Securities. By executing this Agreement, the Buyer further represents that it
does not have at the time of the Closing, any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to any third person, with respect to any of
the Securities.




     3.6 Rule 144 and Rule 144A.


The Buyer acknowledges that, because the Securities have not been registered under the
Securities Act, the Shares and the Common Stock issuable upon the conversion thereof must be held
indefinitely unless subsequently registered under the Securities Act or an exemption from such
registration is available. The Buyer is aware of the provisions of Rule 144 and Rule 144A


33









 






promulgated under the Securities Act, which rules permit limited resale of securities purchased in
a private placement subject to the satisfaction of certain conditions.




     3.7 No Public Market.


The Buyer understands that no public market now exists for any of the securities issued by the
Company, and that it is uncertain whether a public market will ever exist for the Series A-1
Preferred Shares or the Ordinary Conversion Shares issuable upon the conversion thereof.




4. Covenants




     4.1 Interim Operations of the Company. Except as may be consented to in writing by the Buyer, the
Company hereby covenants to the Buyer and the Funds that, after the date hereof and prior to the
Closing Date:



          (a) The Business shall be conducted in the same manner as heretofore conducted and only in the
ordinary course of business and the Company and the Shareholders shall use all reasonable efforts
to preserve intact the Company’s present business organization, keep available the services of its
current officers and employees and preserve satisfactory relationships with customers, suppliers,
distributors and others having business dealings with it, and will take no action which would
materially and adversely affect the ability of the Company and the Shareholders to consummate the
transactions contemplated hereby;




          (b) The Company and the Shareholders shall not, and the Shareholders shall cause the Company
not to, take any action that, without the written consent of the Buyer, if taken prior to the date
hereof, would constitute a breach of Section 2.8 hereof or otherwise would be required to be listed
or described in Section 2.8 of the Disclosure Schedule;




          (c) The Company and the Shareholders shall not, and the Shareholders shall cause the Company
not to, take, or agree to or commit to take, any action that would result in any of the conditions
to the Closing set forth in Section 5 not being satisfied, or would make any representation or
warranty of the Company contained herein inaccurate in any material respect at, or as of any time
prior to, the Closing Date, or that would materially impair the ability of the Company, the
Shareholders, the Funds or the Buyer to consummate the Closing in accordance with the terms hereof
or materially delay such consummation;




          (d) The Company and the Shareholders shall not, and the Shareholders shall cause the Company
not to, enter into any agreement, contract, commitment or arrangement to do any of the foregoing;
and




          (e) Neither the Company shall cause or permit, by any act or failure to act, any material
License to expire or to be revoked, suspended, or modified, or take any action that could be
reasonably expected to cause any Governmental Authority to institute proceedings for the
suspension, revocation, or adverse modification of any material License.




     4.2 Access; Confidentiality Prior to the Closing, the Company shall (i) give the Buyer, the Funds
and their authorized representatives reasonable access to all books, records, personnel, offices
and other facilities and properties of the Company, (ii) permit the Buyer and



34









 







the Funds to make such copies and inspections thereof as may reasonably be requested, and
(iii) cause the officers of the Company to furnish the Buyer and the Funds with such financial and
operating data and other information with respect to the business and properties of the Company as
the Buyer or the Funds may from time to time reasonably request; provided that any such
access shall be conducted at the expense of the Buyer at reasonable times, under the supervision of
the Company’s personnel or representatives and in such a manner as to maintain the confidentiality
of this Agreement and the transactions contemplated hereby and not to interfere with the normal
operation of the Business. No investigation pursuant to this Section 4.2 shall effect any
representation or warranty in this Agreement of any party hereto or any conditions to the
obligations of the parties hereto.



          (a) Except as necessary for the consummation of the transaction contemplated by this
Agreement, and except as and to the extent required by any Legal Requirement, the provisions of the
Confidentiality Agreement between the Company and TA Associates, Inc., dated November ___, 2005
(the “Confidentiality Agreement”), shall remain binding and in full force and effect.




     4.3 Closing Efforts. Between the date of this Agreement and the Closing (the “Interim Period”),
each of Company, the Buyer, and each of the Shareholders shall use its best efforts to take all
actions and to do all things necessary, proper or advisable to consummate the transaction
contemplated hereby, including, without limitation, using its best efforts to ensure that (a) its
respective representations and warranties remain true and correct in all material respects through
the Closing and (b) the conditions to the obligations of the other party to consummate the
Transaction are satisfied.



     4.4 Financial Information. The Company shall furnish the Buyer and the Funds with such financial
information (including information on payables and receivables) as the Buyer or the Funds may
reasonably request.



     4.5 Consents.


The Company and the Shareholders will use their respective best efforts to obtain as
expeditiously as possible all Consents, including, without limitation, the Redemption Approval. No
such Consent shall include any condition or qualification that would result in or constitute an
adverse change in the terms of any License or other agreement that is the subject of the Consent,
unless otherwise agreed to by the Buyer or the Funds. Without the prior written consent of the
Buyer, no instrument evidencing any Consent to be obtained prior to Closing, including, without
limitation, the Redemption Approval, shall contain, or otherwise subject the Company or any of its
Subsidiaries’ to, any restrictions, limitations, or obligations which would adversely affect the
Company’s or any of its Subsidiaries’ operations on or following the Closing.




     4.6 Exclusivity. Prior to a valid termination of this Agreement, the Company and the Shareholders
will not, directly or indirectly, through any officer, director, employee, agent (including
financial advisors), partner or otherwise, and the Shareholders will cause the Company not to,
continue, solicit, initiate or participate in or encourage discussions or negotiations with, or the
submission of bids, offers or proposals by, any Person with respect to, whether directly or
indirectly, a financing of the Company or an acquisition of the Company, any



35









 







share capital or other interest of the Company or any assets of the Company, by any means
whatsoever, or enter into any agreement, arrangement or understanding regarding any of the
foregoing, and the Company shall, and the Shareholders shall cause the Company to, notify the Buyer
and the Funds immediately if any bids, offers or proposals are received, or any such negotiations
or discussions are sought. In addition, prior to a valid termination of this Agreement, the
Company will not, directly or indirectly, through any officer, director, employee, agent (including
financial advisors), partner or otherwise, and the Shareholders will cause the Company not to,
disclose any information not customarily disclosed to any Person (other than the Buyer or the
Funds) concerning the Company or offer to any such other Person access to the Company’s properties,
books or records.



     4.7 Covenants of the Buyer. The Buyer shall not take, or agree to or commit to take, any action
that would result in any of the conditions to the Closing set forth in Section 5 not being
satisfied, or would make any representation or warranty of the Buyer contained herein inaccurate in
any material respect at, or as of any time prior to, the Closing Date, or that would materially
impair the ability of the Buyer, the Company or the Shareholders to consummate the Closing in
accordance with the terms hereof or materially delay such consummation.



     4.8 Non-Competition; Non-Solicitation; Confidentiality.




          (a) Non Competition. From and after the Closing and until (i) in the case of
any Non-Compete Party, any Shareholder or Optionholder constituting an Affiliate of any of
them, and any other Shareholder or Optionholder entitled to payments totaling (together with
its Affiliates and without deducting any amounts subject to escrow pursuant to Section 1.8
or to be deposited in trust pursuant to Section 1.5) $10,000,000 or more pursuant to
Sections 1.3 and 1.4, the fifth (5th) anniversary thereof, and (ii) in the case of any
Shareholder or Optionholder not described in clause (i) who is entitled to payments totaling
(together with its Affiliates and without deducting any amounts subject to escrow pursuant
to Section 1.8 or to be deposited in trust pursuant to Section 1.5) $1,000,000 or more
pursuant to Sections 1.3 and 1.4, the third (3rd) anniversary thereof (each, a “Restricted
Period” and each Shareholder or other Person described in clauses (i) or (ii) of this
Section 4.8(a), a “Restricted Shareholder”), without the prior written consent of Buyer, no
Restricted Shareholder, nor any of its successors or assigns, shall, for any reason, whether
directly or indirectly, through any Subsidiary, Affiliate or otherwise, as shareholder,
member, manager, partner, employee, consultant, director or otherwise, engage, participate,
or invest (except as a holder of not more than 2.5% of the voting power of a publicly traded
company) in any business that engages or participates, in any activity anywhere in the world
that involves (i) any products, or the performance of any services, that are directly
competitive with the products offered by the Business (or any components thereof), or (ii)
any medical devices (or any components thereof) in the field aesthetic medicine; provided,
however, that with respect to the Company’s industrial laser Products described in clause
(i) above the restrictive period shall be two (2) years (any such business, a “Competing
Business”).




          (b) Non-Solicitation. During the Restricted Period, without the prior written
consent of Buyer, no Restricted Shareholder, nor any of its successors or assigns, shall,
for any reason, whether directly or indirectly, through any Subsidiary, Affiliate or



36









 







otherwise, as shareholder, member, manager, partner, employee, consultant, director or
otherwise, engage, participate, or invest in any business that engages or participates, in
(i) soliciting, hiring, employing, engaging, calling upon, or diverting whether as an
employee, officer, director, agent, consultant or independent contractor, any employee,
officer, director, agent, consultant, independent contractor, supplier or vendor of Buyer or
the Company, or (ii) soliciting, calling upon or diverting, any customer or client of the
Business, the Company or of Buyer.




          (c) Confidentiality. Each Shareholder agrees that it will not disclose to any
Person other than representatives of Buyer or the Company any information of a confidential
or proprietary nature relating to any products, properties, methods, designs, know-how,
inventions, improvements, trade secrets, suppliers, customers, or customers’ requirements
relating to the Business, the Company or to Buyer’s business.




          (d) Modification if Unenforceable. The parties hereto agree and acknowledge
that if any provision of this Section 4.8 is held to be invalid or unenforceable for any
reason, such provision shall, to the extent permitted by law, be adjusted (rather than
voided) to achieve the intent of the parties hereto to have the widest possible
non-competition or non-solicitation covenant with respect to the matters covered by such
provision.



5. Closing Conditions and Deliveries




     5.1 Conditions to Each Party’s Obligation to Effect the Closing. The respective obligations of
each of the parties to effect the Closing shall be subject to the satisfaction at or prior to the
Closing Date of each of the following conditions:



          (a) The Redemption Approval shall have been obtained;




          (b) No statute, rule or regulation shall have been enacted or promulgated by any Governmental
Authority which directly prohibits the consummation of the Closing; and




          (c) There shall be no order or injunction of a court of competent jurisdiction in effect
expressly precluding consummation of the transactions contemplated hereby, provided that
the parties shall use their commercially reasonable efforts to have any such order or injunction
vacated or lifted.




     5.2 Conditions to Obligations of the Buyer to Effect the Closing. The obligations of the Buyer to
consummate the Closing shall be subject to the satisfaction on or prior to the Closing Date of each
of the following conditions:



          (a) All of the representations and warranties of the Company and Shareholders set forth in
this Agreement that are qualified as to “materiality” or “Material Adverse Effect” shall be true
and complete in all respects and any such representations and warranties that are not so qualified
shall be true and complete in all material respects, in each case as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date (except to the extent such
representations and warranties expressly relate to an


37









 








earlier date, in which case such representations and warranties shall be true and correct as of
such date);




          (b) The Company and the Shareholders shall have performed in all material respects all
obligations and shall have complied in all material respects with all covenants to be performed or
complied with on or prior to the Closing by it under this Agreement;




          (c) The Buyer shall have received from the Company a certificate executed by the Chief
Executive Officer of the Company to the effect that the statements set forth in Sections 5.1(a) and
5.2(a), above, solely with respect to the Company, are true and correct;




          (d) No action or proceeding by or before any court, administrative body or other Governmental
Authority shall have been instituted against the Company which seeks to enjoin, restrain or
prohibit, or might result in material damages in respect of, this Agreement or consummation of the
Transaction.




          (e) The Buyer shall have received copies of all Consents in form and substance reasonably
satisfactory to the Buyer, including, without limitation, the Consents listed on Schedule
5.2(e) attached hereto;




          (f) The Reclassification shall have been consummated in a manner agreed upon by Buyer and the
Company on or prior to the date of this Agreement;




          (g) The Loan Transactions shall have been consummated in accordance with the terms reflected
in the Senior Secured Commitment Letter attached hereto as Exhibit L and the Note Purchase
Agreement;




          (h) The Company’s agreement, dated March 15, 2005, with William Blair & Company, L.L.C. and
Poalim Capital Markets Ltd. (the “William Blair Agreement”) shall have been terminated such that
the Company shall have no further obligations thereunder (other than an obligations to make a
payment for fees due at the Closing thereunder), which termination shall be in a manner
satisfactory to Buyer;




          (i) All amounts which would otherwise be deductible by the Company or any of its Subsidiaries
in connection with the consummation of the transactions contemplated hereby (and/or the
acceleration of any share options in connection therewith) but for the limits on deductibility set
forth under Sections 280G or 162 of the Code shall be deductible following the consummation of the
transactions contemplated hereby and the acceleration of such share options, including, without
limitation, any amounts which could be subject to the limitations of Sections 280G or 162 of the
Code in connection with Mauro Wjuniski’s employment with the U.S. Subsidiary;




          (j) The Company and the Shareholders shall have delivered, or shall have caused to be
delivered, to the Buyer, all in form and substance reasonably satisfactory to the Buyer, the
following:





          (i) The Shareholders Agreement executed by the Company and each Shareholder;



38









 






          (ii) The Escrow Agreement executed by the Company and the Escrow Agent;




          (iii) A management rights letter in the form attached hereto as Exhibit I;




          (iv) Certificates issued by the Secretary of State (or similar authority) of each
jurisdiction in which the Company and/or any of its Subsidiaries has qualified to do
business as a foreign corporation (or is required to be so qualified) as to such foreign
qualification;




          (v) A certificate executed by the Chief Financial Officer of the Company certifying
(A) the names of the officers of the Company authorized to sign this Agreement and the other
agreements, documents and instruments executed by the Company pursuant hereto, together with
the true signatures of such officers; (B) copies of consent actions taken by the Board of
Directors and shareholders of the Company authorizing the appropriate officers of the
Company to execute and deliver this Agreement and all agreements, documents and instruments
executed by the Company pursuant hereto, and to consummate the transactions contemplated
hereby and thereby; and (C) the effectiveness of, and setting forth a copy of, the Company
Organizational Documents;




          (vi) An opinion, dated as of the Closing Date, from Gross, Kleinhendler, Hodak,
Greenberg & Co. counsel to the Company and the Shareholders, in substantially the form
attached hereto as Exhibit J.




          (vii) Share Transfer Deeds reflecting the transfers to the Buyer of the Purchased
Shares;




          (viii) Copies of Share Transfer Deeds reflecting the transfers to the Company of the
Redeemed Shares;




          (ix) Director Indemnification Agreements executed by the Company in favor of David S.B.
Lang and Ajit Nedungadi, each in substantially the form attached hereto as
Exhibit K; and




          (x) Evidence, in form and substance reasonably satisfactory to the Buyer, that the
Company’s “Approved Enterprise” (“Mifaal Mehooshar”) status has been terminated.



     5.3 Conditions to Obligations of the Company and Shareholders. The obligations of the Company and
Shareholders to consummate the Closing shall be subject to, as applicable, the satisfaction on or
prior to the Closing Date of each of the following conditions:



          (a) All of the representations and warranties of the Buyer set forth in this Agreement that
are qualified as to “materiality” or “material adverse effect” shall be true and complete in all
respects and any such representations and warranties that are not so qualified shall be true and
complete in all material respects, in each case as of the date of this Agreement


39









 







and as of the Closing Date as though made on and as of the Closing Date (except to the extent such
representations and warranties expressly relate to an earlier date, in which case such
representations and warranties shall be true and correct as of such date);




          (b) The Buyer shall have performed in all material respects all material obligations and shall
have complied in any material respects with all covenants to be performed or complied with on or
prior to the Closing by the Buyer under this Agreement;




          (c) The Company shall have received, by wire transfer of immediately available funds, proceeds
from the Loan Transactions, in an aggregate amount of $35,000,000;




          (d) the Buyer shall have delivered, or shall have caused to be delivered, to the Company and
Shareholders, all in form and substance satisfactory to the Company and Shareholders, the
following:





          (i) A wire transfer of immediately available funds by the Buyer to (A) the Shareholders
in respect of the purchase price for the Purchased Shares in the aggregate amount of
$41,107,265, (B) the Trustee on behalf of the Optionholders in connection with their
obligations to deposit funds in trust pursuant to Section 1.5 in the aggregate amount of
$393,213, and (C) to the Escrow Agent on behalf of the Shareholders in connection with their
escrow obligations pursuant to Section 1.8 in the aggregate amount of $13,500,000; and




          (ii) The Shareholders Agreement executed by the Buyer.



          (e) The Shareholders shall have received the Shareholder Warrants; and




          (f) The Buyer shall have executed an undertaking instrument in a form satisfactory to the
Israel Office of Chief of Scientist.




6. Termination




     6.1 Termination. Notwithstanding anything to the contrary set forth in this Agreement, this
Agreement may be terminated or the transactions contemplated hereby may be abandoned at any time
prior to the Closing Date:



          (a) By the mutual written consent of the parties hereto;




          (b) By any party hereto if:





          (i) any Governmental Authority shall have issued an order, decree or ruling or taken
any other action which permanently restrains, enjoins or otherwise prohibits the
transactions contemplated hereby and such order, decree, ruling or other action shall have
become final and non-appealable, or




          (ii) the Redemption Approval is denied and no appeals of such denial are available;



40









 





          (c) By any party hereto if the Closing shall not have occurred on or prior to March 31, 2006
(the “Outside Date”); provided, that no party may terminate this Agreement pursuant to this
Section 6.1(c) if such party’s failure to fulfill any of its obligations under this Agreement or to
effect the satisfaction of any of the conditions set forth in Section 5 shall have caused the
Closing not to have occurred on or before said date.




          (d) By the Company and Shareholders if the Buyer shall have breached in any material respect
any of their respective representations, warranties, covenants or other agreements contained in
this Agreement which would give rise to the failure of a condition set forth in Section 5, which
breach has not been cured within twenty (20) days after the giving of written notice by the Company
and the Shareholders to the Buyer specifying such breach; provided, the Company and the
Shareholders may terminate this Agreement pursuant to this Section 6.1(d) only if none of the
Company or the Shareholders has breached (or continues to breach) in any material respect any of
its representations, warranties, covenants and agreements hereunder; or




          (e) By the Buyer if the Company or a Shareholder shall have breached any representation,
warranty, covenant or other agreement made by it contained in this Agreement which would give rise
to the failure of a condition set forth in Section 5 which breach has not been cured within twenty
(20) days after the giving of written notice by the Buyer to the Company or such Shareholder
specifying such breach; provided, the Buyer may terminate this Agreement pursuant to this
Section 6.1(e) only if none of the Buyer has breached (or continues to breach) in any material
respect any of their respective representations, warranties, covenants and agreements hereunder.




     6.2 Effect of Termination. In the event of the termination of this Agreement by any party hereto
pursuant to the terms of this Agreement, written notice thereof shall forthwith be given to the
other party or parties specifying the provision hereof pursuant to which such termination of this
Agreement is made, and this Agreement shall become void and of no further force and effect, except
for the provisions of (a) Section 4.2(b) relating to certain confidentiality obligations,
(b) Section 8.6 relating to notices, (c) Section 8.12 relating to expenses, (d) Section 8.14
relating to publicity, and (f) this Section 6. Subject to Section 7, nothing in this Section 6
shall be deemed to release any party from any liability for any material breach by such party of
the terms and provisions of this Agreement or to impair the right of any party to compel specific
performance by any other party of their respective obligations under this Agreement.



     6.3 Right to Proceed. Anything in this Agreement to the contrary notwithstanding, (a) if any of
the conditions specified in Section 5 hereof for the benefit of the Company and/or the Shareholders
have not been satisfied, the Company and/or the Shareholders shall have the right to proceed with
the transactions contemplated hereby without waiving any of its or their respective rights
hereunder, and (b) if any of the conditions specified in Section 5 hereof for the benefit of the
Buyer have not been satisfied, the Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of its or their respective rights hereunder.




41












 






	7.	 	Survival Of Representations And Warranties; Transaction Related Indemnification






	 	7.1	 	Survival of Representations, Warranties and Covenants.





          (a) All representations, warranties, covenants, and agreements of the Company, the
Shareholders and the Buyer made in this Agreement, in the Disclosure Schedule delivered to the
Buyer and all agreements, documents and instruments executed and delivered in connection herewith
(i) are material, shall be deemed to have been relied upon by the party or parties to whom they are
made, and shall survive the Closing regardless of any investigation on the part of such party or
its representatives, with all parties hereto reserving their respective rights hereunder, and (ii)
shall bind the parties’ successors and assigns (including, without limitation, any successor to the
Company by way of acquisition, merger or otherwise), whether so expressed or not, and, except as
otherwise provided in this Agreement, all such representations, warranties, covenants and
agreements shall inure to the benefit of the parties (subject to Section 8.11 below) and their
respective successors and assigns and to their transferees of Securities, whether so expressed or
not.




          (b) The representations and warranties of the Company and the Shareholders contained in
Sections 2 and 2A hereof shall expire and terminate and be of no further force and effect after the
date which is three (3) months following the Buyer’s receipt of the Company’s audited financial
statements as of and for the fiscal year ending December 31, 2006, except that any written claim
for breach thereof made prior to such expiration date and delivered to the party against whom such
claim is made shall survive thereafter and, as to any such claim, such applicable expiration will
not effect the rights to indemnification of the party making such claim; provided,
however, that any such written claim by the Buyer with respect to (A) a breach of the
representations and warranties of the Company or the Shareholders contained in Section 2.1, Section
2.2, Section 2.4, Section 2A herein or with respect to fraud, intentional misrepresentation, a
willful breach by the Company or the Shareholders may be given at any time, (B) a breach of the
representations and warranties of the Company or the Shareholders contained in Section 2.14 or an
Infringement Indemnity Claim (as defined below) may be given at any time on or prior to December
31, 2007, and (C) a breach of the representations or warranties contained in Section 2.12 or
Section 2.20, may be given at any time prior to the expiration of the applicable statute of
limitations.




     7.2 Transaction Related Indemnification. Each of the Company and the Shareholders acknowledges and
agrees that the Buyer and the Funds have relied on the representations, warranties, covenants and
other agreements of the Company and the Shareholders contained herein in connection with their
investment hereunder and their willingness to provide the funds necessary for the purchase of, or
to purchase, the Purchased Shares from the Shareholders. Accordingly, each of the Shareholders
severally and not jointly (on a pro rata basis calculated based on the amounts deposited thereby in
escrow pursuant to Section 1.8) on his, her or its own behalf and on behalf of his, her or its
successors, executors, administrators, estate, heirs and assigns (collectively, for the purposes of
this Section 7.2, the “Shareholder Indemnifying Parties”, and each individually, a “Shareholder
Indemnifying Party”) (or, at the sole option of the Buyer and the Funds with respect to any
matter subject to indemnification under this Section 7.2, the Company) agree to defend, indemnify
and hold the



42









 







Buyer, the Funds, their respective directors, officers, managers, employees and
agents, (collectively, the “Buyer Indemnified Parties” and, individually, a “Buyer Indemnified
Party”) harmless from and against any and all damages, liabilities, losses, claims, diminution in
value, obligations, liens, charges, assessments, judgments, fines, penalties, reasonable costs and
expenses (including, without limitation, reasonable fees of a single counsel representing the Buyer
Indemnified Parties), as the same are incurred, of any kind or nature whatsoever (whether or not
arising out of third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing and consequential damages) (“Losses”) which may be sustained or
suffered by any such Buyer Indemnified Party based upon, arising out of, or by reason of:



          (a) any breach of any representation or warranty made by the Company or any Shareholder in
this Agreement (including, without limitation, in the Disclosure Schedule) or in any certificate
delivered pursuant hereto,




          (b) any breach of any covenant or agreement made by the Company or any Shareholder in this
Agreement or in any certificate delivered pursuant hereto, except with respect to Section 1.10
herein; and




          (c) any (i) injunction in favor of Thermage, Inc., any of its Affiliates or any of its
successors in interest (collectively, “Thermage”), issued as a result of a claim or allegation by
Thermage that an RF Product (as defined below) infringes upon or violates (or its manufacture, sale
and /or use infringes upon or violates) any of Thermage’s U.S. Patents as of the date of the
Closing (including without limitation any divisionals, continuations, continuations-in-part thereof
or any Patents issuing from any patent applications claiming priority directly or indirectly to (i)
such Patents or (ii) any patents or patent applications from which the Patents claim direct or
indirect priority) (each, a “Thermage Patent”), which preclude the Company’s or any of its
Subsidiaries’ right to sell, manufacture, distribute or otherwise use, its Accent products, Accent
Pro products or any other radio frequency-based products (whether now existing or later developed,
collectively, the “RF Products”) in the United States, or (ii) any claim or allegation that the RF
Products infringe upon or violate (or their manufacture, sale and/or use infringes upon or
violates) any Thermage Patent, which results in commercially unreasonable royalty or similar
payment obligations by the Company or any of its Subsidiaries (each of (i) and (ii), an
“Infringement Indemnity Claim”).




     7.3 Limitations on Transaction Related Indemnification. Notwithstanding anything in Section 7.2 to
the contrary:



          (a) the Shareholder Indemnifying Parties shall not be obligated to provide indemnification for
Losses in respect of claims made by any Buyer Indemnified Party for indemnification under Section
7.2 above unless the total of all Losses in respect of claims made by the Buyer Indemnified Parties
for indemnification shall exceed $1,000,000 (the “Deductible”) in the aggregate, in which case only
the total amount of such Losses in excess of the Deductible shall be recoverable by the Buyer
Indemnified Parties in accordance with the terms hereof;




          (b) the maximum amount payable by the Shareholder Indemnifying Parties to all Buyer
Indemnified Parties for Losses in respect of claims made by the Buyer Indemnified Parties for
indemnification under Section 7.2 shall not exceed $11,000,000 (the “Cap”); and



43









 







          (c) in the event of a Qualifying Exit Event, then (i) the Shareholder Indemnifying Parties
shall not be obligated to provide indemnification for Losses in respect of any Infringement
Indemnity Claim, and (ii) any Loss Payment (as defined below) made by any Shareholder Indemnifying
Party (whether by release from escrow or otherwise) for Losses in respect of an Infringement
Indemnity Claim shall be repaid to such Shareholder Indemnifying Party by the Buyer Indemnified
Party that received such Loss Payment, if, but only if, such repayment does not cause the event
triggering such Qualifying Exit Event to fail to qualify as a Qualifying Exit Event;



provided, however, that the Buyer Indemnified Parties shall not be subject to the
limitations of the Deductible or the Cap and shall be entitled to recovery from a Shareholder
Indemnifying Party (or, at the sole option of the Buyer and the Funds with respect to any matter
subject to indemnification under Section 7.2, from the Company) in respect of claims for
indemnification from a Shareholder Indemnifying Party for all Losses in connection with (i) fraud,
intentional misrepresentation, a willful breach by a Shareholder or the Company of any of his, her
or its representations and warranties under this Agreement, or (ii) the breach by the Company or a
Shareholder of any of his, her or its representations or warranties contained in Section 2.1,
Section 2.2, Section 2.4, Section 2.6(c), Section 2.12, Section 2.20, and Section 2A (“Carve-Out
Claims”); provided further, however, that with respect to the breach by any
Shareholder of its representations and warranties contained in Section 2A, the Buyer Indemnified
Parties shall only be entitled to seek indemnification under Section 7.2 from such Shareholder or
his, her or its successors, executors, administrators, estate, heirs and assigns.




     7.4 Notice; Payment of Losses; Defense of Third-Party Claims.



          (a) A Buyer Indemnified Party shall give written notice of a claim for indemnification under
Section 7.2 to a Shareholder Indemnifying Party promptly after receipt of any written claim by any
third party and in any event not later than ten (10) business days after receipt of any such
written claim (or not later than five (5) business days after the receipt of any such written claim
in the event such written claim is in the form of a formal complaint filed with a court of
competent jurisdiction and served on the Buyer Indemnified Party), specifying in reasonable detail
the amount, nature and source of the claim, and including therewith copies of any notices or other
documents received from third parties with respect to such claim; provided,
however, that failure to give such notice shall not limit the right of a Buyer Indemnified
Party to recover indemnity or reimbursement except to the extent that the Shareholder Indemnifying
Party suffers any material prejudice or material harm with respect to such claim as a result of
such failure. The Buyer Indemnified Party shall also provide the Shareholder Indemnifying Party
with such further information concerning any such claims as the Shareholder Indemnifying Party may
reasonably request by written notice.




          (b) Within ten (10) business days after receiving notice of a claim for indemnification or
reimbursement, the Shareholder Indemnifying Party shall, by written notice to the Buyer Indemnified
Party, either (i) concede or deny liability for the claim in whole or in part, or (ii) in the case
of a claim asserted by a third party, advise that the matters set forth in the notice are, or will
be, subject to contest or legal proceedings not yet finally resolved. If the Shareholder
Indemnifying Party concedes liability in whole or in part, it shall, within thirty (30) business
days of such concession, pay the amount of the claim to the Buyer Indemnified Party to




44









 




the extent of the liability conceded. Any such payment shall be made in immediately available funds equal to
the amount of such claim so payable. If the Shareholder Indemnifying Party denies liability in
whole or in part or advises that the matters set forth in the notice are, or will be, subject to
contest or legal proceedings not yet finally resolved, then the Shareholder Indemnifying Party
shall make no payment (except for the amount of any conceded liability payable as set forth above)
until the matter is resolved in accordance with this Agreement.




          (c) In the case of any third party claim, if, within thirty (30) business days after receiving
the notice described in the preceding paragraph (a), the Shareholder Indemnifying Party gives
written notice to the Buyer Indemnified Party stating that the Shareholder Indemnifying Party would
be liable under the provisions hereof for indemnity in the amount of such claim if such claim were
valid and that the Shareholder Indemnifying Party disputes and intends to defend against such
claim, liability or expense at the Shareholder Indemnifying Party’s own cost and expense, then
counsel for the defense shall be selected by the Shareholder Indemnifying Party and such
Shareholder Indemnifying Party shall not be required to make any payment to such Buyer Indemnified
Party with respect to such claim, liability or expense as long as the Shareholder Indemnifying
Party is conducting a good faith and diligent defense at its own expense; provided,
however, that the assumption of defense of any such matters by the Shareholder Indemnifying
Party shall relate solely to the claim, liability or expense that is subject or potentially subject
to indemnification. If the Shareholder Indemnifying Party assumes such defense in accordance with
the preceding sentence, it shall have the right to settle all indemnifiable matters related to
claims by third parties which are susceptible to being settled provided the Shareholder
Indemnifying Party’s obligation to indemnify such Buyer Indemnified Party therefor will be fully
satisfied only by payment of money by the Shareholder Indemnifying Party pursuant to a settlement
which includes a complete release of such Buyer Indemnified Party. The Shareholder Indemnifying
Party shall keep such Buyer Indemnified Party apprised of the status of the claim, liability or
expense and any resulting suit, proceeding or enforcement action, shall furnish such Buyer
Indemnified Party with all documents and information that such Buyer Indemnified Party shall
reasonably request and shall consult with such Buyer Indemnified Party prior to acting on major
matters, including settlement discussions. Notwithstanding anything herein stated, such Buyer
Indemnified Party shall at all times have the right to fully participate in such defense at its own
expense directly or through counsel provided, however, if the named parties to the
action or proceeding include both the Shareholder Indemnifying Party and such Buyer Indemnified
Party and representation of both parties by the same counsel would be inappropriate under
applicable standards of professional conduct, the reasonable expense of separate counsel for such
Buyer Indemnified Party shall be paid by the Shareholder Indemnifying Party provided that such
Shareholder Indemnifying Party shall be obligated to pay for only one counsel for such Buyer
Indemnified Party in any jurisdiction. If no such notice of intent to dispute and defend is given
by the Shareholder Indemnifying Party, or if such diligent good faith defense is not being or
ceases to be conducted, such Buyer Indemnified Party may
undertake the defense of (with counsel selected by such Buyer Indemnified Party), and shall
have the right to compromise or settle, such claim, liability or expense (exercising reasonable
business judgment) with the consent of the Shareholder Indemnifying Party (which consent shall not
be unreasonable withheld). If such claim, liability or expense is one that by its nature cannot be
defended solely by the Shareholder Indemnifying Party, then such Buyer Indemnified Party shall make
available all information and assistance that the Shareholder Indemnifying Party may reasonably
request and shall cooperate with the Shareholder Indemnifying Party in such defense.




45









 





     7.5 Limitation on Contribution and Certain Other Rights. The Company and the Shareholders hereby
agree that if, following the Closing, any claim is made by any Shareholder, or otherwise becomes
due from any Shareholder, pursuant to this Section 7 in respect of any Losses (a “Loss Payment”),
such Shareholder shall have no rights against the Company, or any director, officer or employee
thereof (in their capacity as such), whether by reason of contribution, indemnification,
subrogation or otherwise, in respect of any such Loss Payment, and shall not take any action
against the Company or any such person with respect thereto, provided, however, that this Section
7.5, shall not limit any Shareholder’s rights against any other Shareholders of the Company, in
their capacity as such, whether by reason of contribution, indemnification, subrogation or
otherwise, in respect of any such Loss Payment resulting from such other Shareholder breach of its
representations and warranties under Section 2A.



     7.6 Sole Remedy. Following the Closing, the provisions of this Section 7 shall constitute the
exclusive remedy of the Buyer Indemnified Parties by the Company or the Shareholders for any
breaches of representations, warranties and covenants contained in this Agreement, other than in
respect of causes of action based on theories of fraud; provided, however, that
nothing in this Section 7.6 shall limit any Buyer Indemnified Parties to seek specific performance
or any other remedy at law or equitable remedy in connection with any breach of Sections 1.3, or
4.8.



     7.7 Setoff; Order of Application.



          (a) Notwithstanding anything to the contrary herein (but subject to Section 7.6), each Buyer
Indemnified Party shall be entitled to recover any indemnification payment for Losses hereunder,
subject to section 7.3, by collecting such amounts from the Indemnification Escrow Amount deposited
and held in escrow in accordance with Section 1.8 (the “Escrow Fund”) in accordance with the terms
of the Escrow Agreement.




          (b) In the event any portion of the Escrow Fund continues to be held in escrow, prior to
collecting any indemnification payment for Losses due hereunder directly from any Shareholder
Indemnified Party, the Buyer Indemnified Parties shall first exercise their rights to collect such
payment from the Escrow Fund pursuant to the terms of the Escrow Agreement; provided,
however, that with respect to collection of any indemnification payment for Losses due
hereunder, except for Losses resulting from Carve-Out Claims, the Buyer Indemnified Parties
may solely and exclusively collect indemnification for such Losses from the Escrow Fund and
not directly from any Shareholder Indemnified Party.




     7.8 Appointment of Shareholders’ Representative .



     For purposes of this Agreement, the Shareholders by their signature hereto hereby appoint Ziv
Karni as the representative and attorney-in-fact for and on behalf of the Shareholders (the
“Shareholders’ Representative”), and to the taking by the Shareholders’ Representative of any and
all actions and the making of any decisions required or permitted to be taken by him under this
Agreement or the Escrow Agreement, including, without limitation, entering into the Escrow
Agreement for the benefit of the Shareholders and the exercise of the power to (i) make any and all
decisions entitled to be made thereby under the Escrow Agreement, including without limitation, any
and all decisions about distribution of any amounts out of the Escrow



46









 







Fund, (ii) defend, settle,
administer and otherwise make any and all decisions in connection with any claims for
indemnification hereunder, (iii) agree to, negotiate, enter into settlements and compromises of and
comply with orders of courts and awards of arbitrators with respect to such claims for
indemnification, (iv) resolve any such claims for indemnification, and (v) take all actions
necessary in the judgment of the Shareholders’ Representative for the accomplishment of the
foregoing and all of the other terms, conditions and limitations of this Agreement and the Escrow
Agreement. Accordingly, the Shareholders’ Representative has unlimited authority and power to act
on behalf of each Shareholder with respect to the Escrow Agreement and the disposition, settlement
or other handling of all claims for indemnification hereunder. Each Shareholder will be bound by
all actions taken by the Shareholders’ Representative in connection with all claims for
indemnification made hereunder, and Buyer Indemnified Party shall be entitled to rely on any action
or decision of the Shareholders’ Representative. The Shareholders’ Representative will incur no
liability with respect to any action taken or suffered by him in reliance upon any notice,
direction, instruction, consent, statement or other document believed by him to be genuine and to
have been signed by the proper person (and shall have no responsibility to determine the
authenticity thereof), nor for any other action or inaction, except his own willful misconduct or
bad faith. In all questions arising under this Agreement or the Escrow Agreement, the
Shareholders’ Representative may rely on the advice of counsel, and the Shareholders’
Representative will not be liable to anyone for anything done, omitted or suffered in good faith by
the Shareholders’ Representative based on such advice. Except as expressly provided herein, the
Shareholders’ Representative will not be required to take any action involving any expense unless
the payment of such expense is made or provided for in a manner satisfactory to him. In the event
the Shareholders’ Representative shall cease to serve in such capacity for any reason, the
Shareholders having at such time a majority of the proportional interests of the Escrow Amount (out
of the aggregate proportional interests thereof of all such Shareholders) shall appoint a new
representative as the Shareholders’ Representative by sending notice of such appointment to the
Buyer and the Escrow Agent (and the provisions of this Section 7.8 shall apply with respect to such
newly appointed Shareholders’ Representative as if originally appointed by the Shareholders
hereunder). Such appointment will be effective upon the later of the date indicated in such notice
or the date such notice is received by the Buyer and the Escrow Agent.




	8.	 	General






	 	8.1	 	Waivers and Consents; Amendments.





          (a) For the purposes of this Agreement and all agreements, documents and instruments executed
pursuant hereto, no course of dealing between or among any of the parties hereto and no delay on
the part of any party hereto in exercising any rights hereunder or thereunder shall operate as a
waiver of the rights hereof and thereof. No covenant or provision hereof may be waived otherwise
than by a written instrument signed by the party or parties so waiving such covenant or other
provision as contemplated herein.




          (b) No amendment to this Agreement may be made without the written consent of the Company, a
majority in interest of the Shareholders (determined based on each Shareholder’s Pro Rata
Percentage as set forth on Exhibit B attached hereto (subject to adjustment, if at all,
pursuant to Section 1.2(b))) and the Buyer; provided, however, that no




47









 




consent (other than the Buyer’s) shall be required for any modification, adjustment or amendment of Exhibit
B attached hereto in accordance with Section 1.2(b).




     8.2 Legend on Securities. The Company and the Buyer acknowledge and agree that the following
legend shall be typed on each certificate evidencing any of the securities issued hereunder held at
any time by the Buyer and Shareholders:



     THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO
SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN OPINION OF COUNSEL
SATISFACTORY, IN FORM AND SUBSTANCE, TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT AND (3) IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS AND/OR FOREIGN LAW.



     8.3 Governing Law. This Agreement shall be deemed to be a contract made under, and shall be
construed in accordance with, the laws of the Commonwealth of Massachusetts, without giving effect
to conflict of laws principles thereof.



     8.4 Section Headings; Construction. The descriptive headings in this Agreement have been inserted
for convenience only and shall not be deemed to limit or otherwise affect the construction of any
provision thereof or hereof. The use in this Agreement of the masculine pronoun in reference to a
party hereto shall be deemed to include the feminine or neuter, and vice versa, as the context may
require. The parties
have participated jointly in the negotiation and drafting of this Agreement and the other
agreements, documents and instruments executed and delivered in connection herewith with counsel
sophisticated in investment transactions. In the event an ambiguity or question of intent or
interpretation arises, this Agreement and the agreements, documents and instruments executed and
delivered in connection herewith shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement and the agreements, documents and instruments
executed and delivered in connection herewith.



     8.5 Counterparts. This Agreement may be executed simultaneously in any number of counterparts,
each of which when so executed and delivered shall be taken to be an original; but such
counterparts shall together constitute but one and the same document.



     8.6 Notices and Demands. Any notice or demand which is required or provided to be given under this
Agreement shall be deemed to have been sufficiently given and received for all purposes when
delivered in writing by hand, telecopy, telex or other method of facsimile, or two (2) days after
being sent by overnight delivery providing receipt of delivery, to the following addresses:



48









 





     if to the Company:


Alma Lasers Ltd.

7 Haeshel Street P.O.B 3021

Caesarea Industrial Park

Caesarea, Israel 38900

Facsimile: 972-4-627-5368

Attention: Chief Executive Officer




          with a copy to:



Gross, Kleinhendler, Hodak, Halevy,

Greenberg & Co.

One Azrieli Center (Round Building)

Tel-Aviv 67021, Israel

Facsimile: 972-3-607-4433

Attention: Gene Kleinhendler, Adv.




     if to the Buyer:


c/o TA Associates, Inc.

125 High Street, Suite 2500

Boston, MA 02110

Facsimile: (617) 574-6728

Attention: David S.B. Lang




          with a copy to:



c/o TA Associates, Ltd.

25 Buckingham Gate

London SW1E 6LD, England

Facsimile: 44-20-7932-2109

Attention: Ajit Nedungadi




          with a copy to:



Goodwin Procter LLP

Exchange Place

Boston, MA 02109

Facsimile: (617) 523-1231

Attention: Jeffrey C. Hadden




     If to the Shareholders:



49









 




At
such Shareholder’s address for notice appearing on the signature pages hereto




          with a copy to:



Gross, Kleinhendler, Hodak, Halevy,

Greenberg & Co.

One Azrieli Center (Round Building)

Tel-Aviv 67021, Israel

Facsimile: 972-3-607-4433

Attention: Gene Kleinhendler, Adv.



or at any other address designated by a party to the other parties hereto in writing.




     8.7 Dispute Resolution



          (a) All disputes, claims, or controversies arising out of or relating to this Agreement or any
other Transaction Document or the negotiation, breach, validity, termination or performance hereof
and thereof or the transactions contemplated hereby and thereby, that are not resolved by mutual
agreement shall be resolved solely and exclusively by binding arbitration to be conducted before
J.A.M.S./Endispute, Inc. in Boston, Massachusetts before a single arbitrator (the “Arbitrator”).
The parties understand and agree that this arbitration shall apply equally to claims of fraud or
fraud in the inducement.




          (b) The parties covenant and agree that the arbitration shall commence within one hundred and
twenty (120) days of the date on which a written demand for arbitration is filed
by any party hereto (the “Filing Date”). In connection with the arbitration proceeding, the
Arbitrator shall have the power to order the production of documents by each party and any
third-party witnesses. In addition, each party may take up to three depositions as of right, and
the Arbitrator may in his or her discretion allow additional depositions upon good cause shown by
the moving party. However, the Arbitrator shall not have the power to order the answering of
interrogatories or the response to requests for admission. In connection with any arbitration,
each party shall provide to the other, no later than seven (7) business days before the date of the
arbitration, the identity of all persons that may testify at the arbitration and a copy of all
documents that may be introduced at the arbitration or considered or used by a party’s witnesses or
experts. The Arbitrator’s decision and award shall be made and delivered within one hundred and
eighty (180) days of the Filing Date. The Arbitrator’s decision shall set forth a reasoned basis
for any award of damages or finding of liability. The Arbitrator shall not have power to award
damages in excess of actual compensatory damages and shall not multiply actual damages or award
punitive damages or any other damages that are specifically excluded under this Agreement, and each
party hereby irrevocably waives any claim to such damages.




          (c) The parties covenant and agree that they will participate in the arbitration in good faith
and that they will, except as provided in Section 7.2 of this Agreement, (i) bear their own
attorneys’ fees, costs and expenses in connection with the arbitration, and (ii) share equally in
the fees and expenses charged by the Arbitrator. Any party unsuccessfully refusing to




50









 




comply with
an order of the Arbitrators shall be liable for costs and expenses, including attorneys’ fees,
incurred by the other party in enforcing the award. This Section 8.7 applies equally to requests
for temporary, preliminary or permanent injunctive relief, except that in the case of temporary or
preliminary injunctive relief any party may proceed in court without prior arbitration for the
purpose of avoiding immediate and irreparable harm or to enforce its rights under any
non-competition covenants.




     8.8 Consent to Jurisdiction. Except as provided in Section 8.7(c) and 8.9, each of the parties
hereto irrevocably and unconditionally consents to the jurisdiction of J.A.M.S./Endispute, Inc. to
resolve all disputes, claims or controversies arising out of or relating to this Agreement or any
other Transaction Document or the negotiation, breach, validity, termination or performance hereof
and thereof or the transactions contemplated hereby and thereby, and further consents to the sole
and exclusive jurisdiction of the courts of the Commonwealth of Massachusetts for the purposes of
enforcing the arbitration provisions of Section 8.7 of this Agreement. Each party further
irrevocably waives any objection to proceeding before the Arbitrator based upon lack of personal
jurisdiction or to the laying of venue and further irrevocably and unconditionally waives and
agrees not to make a claim in any court that arbitration before the Arbitrator has been brought in
an inconvenient forum. Each of the parties hereto hereby consents to service of process by
registered mail at the address to which notices are to be given. Each of the parties hereto agrees
that its or his submission to jurisdiction and its or his consent to service of process by mail is
made for the express benefit of the other parties hereto.



     8.9 Remedies; Severability. Notwithstanding Sections 8.7 and 8.8 above, subject to Section 7.6. above, it is specifically
understood and agreed that any breach of the provisions of this Agreement, any other Transaction
Documents, or any other agreement executed and delivered pursuant to this Agreement, or of the
provisions of the Articles, by any person subject hereto will result in irreparable injury to the
other parties hereto, that the remedy at law alone will be an inadequate remedy for such breach,
and that, in addition to any other remedies which they may have, such other parties may enforce
their respective rights by actions for specific performance (to the extent permitted by law).
Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, and such prohibition or invalidity shall not invalidate the
remainder of such provision or the other provisions of this Agreement.



     8.10 Integration. This Agreement, including the exhibits, documents and instruments referred to
herein or therein constitute the entire agreement, and supersede all other prior agreements and
understandings, both written and oral, among the parties with respect to the subject matter hereof
and thereof, including, without limitation, the provisions of the letter of intent between the
parties hereto in respect of the transactions contemplated herein, which provisions of the letter
of intent shall be completely superseded by the representations, warranties, covenants and
agreements of the Company contained herein.



     8.11 Assignability; Binding Agreement. The Buyer may assign any or all of its rights hereunder to
any transferee of its Securities. This Agreement may not otherwise be assigned by any party hereto
without the prior written consent of each other party hereto. This Agreement



51









 







(including, without
limitation, the provisions of Section 7) shall be binding upon and enforceable by, and shall inure
to the benefit of, the parties hereto and their respective successors, heirs, executors,
administrators and permitted assigns, and no others. Notwithstanding the foregoing and except as
provided in Section 7.2 hereof, nothing in this Agreement is intended to give any Person not named
herein the benefit of any legal or equitable right, remedy or claim under this Agreement, except as
expressly provided herein.



     8.12 Expenses. The parties hereby agree that promptly after the Closing, the Company shall
reimburse the Buyer for reasonable accounting, banking and legal fees and disbursements and other
out-of-pocket expenses incurred by them in connection with the transactions contemplated by this
Agreement (“Transaction Expenses”). All Transaction Expenses of the Company and/or the
Shareholders hereunder, including but not limited to any fees payable to William Blair & Company
shall be paid by the Company. Notwithstanding the foregoing, if this Agreement is terminated prior
to the Closing in accordance with Section 6.1(d), each party hereto shall be responsible for any
and all fees and expenses incurred by such party hereunder, including, with limitation, any
Transaction Expenses.



     8.13 Publicity. The initial press release with respect to the execution of this Agreement and the
consummation of the transactions contemplated hereby shall be a joint press release acceptable to
the Company, the Shareholders and the Buyer. Thereafter, the Company and the Shareholders shall
keep confidential and not disclose the terms of this Agreement and the transactions contemplated
thereby without prior consultation with the Buyer, except as may be required by law and then only
after the Buyer has been afforded a reasonable opportunity to review and comment on the same.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





52












 





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



	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Yaron Suher	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Yaron Suher	 	 
	 

	 	 	 	Title: CFO	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Ziv Karni	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Ziv Karni	 	 
	 
	 	 	 	 	 	 
	 	 	SHAREHOLDERS:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 






[Signature Page to Stock Purchase and Redemption Agreement]




 









 






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




	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name:	 	 
	 
	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	SHAREHOLDERS:	 	 
	 
	 	 	 	 	 	 
	 	 	Mauro Wjuniski	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/  Mauro Wjuniski	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name: Mauro Wjuniski	 	 
	 
	 	 	 	 	 	 






[Signature Page to Stock Purchase and Redemption Agreement]






 









 





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




	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name: 	 	 
	 
	 	 	 	Title: 	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ Nadav Bayer	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name: Nadav Bayer	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 






[Signature Page to Stock Purchase and Redemption Agreement]







 









 





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




	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name: 	 	 
	 
	 	 	 	Title: 	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ Evgeni Koudritski	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name: Evgeni Koudritski	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 







[Signature Page to Stock Purchase and Redemption Agreement]






 









 






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





	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name: 	 	 
	 
	 	 	 	Title: 	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ [ILLEGIBLE]	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name: Lahav, Ltbak, Abadl, Adv.	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 





[Signature Page to Stock Purchase and Redemption Agreement]






 









 





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




	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name: 	 	 
	 
	 	 	 	Title: 	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ Yoav Avni	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Yoav Avni	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 





[Signature Page to Stock Purchase and Redemption Agreement]





 









 





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



	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name:  	 	 
	 
	 	 	 	Title:  	 	 
	 
	 	 	 	 	 	 
	 	 	SHAREHOLDERS:	 	 
	 
	 	 	 	 	 	 
	 	 	GLOBAL HEALTHCARE SERVICES	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ HB	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ Antonio Saclemente Garcia	 	 
	 
	 	 	 	Name: Antonio Saclemente Garcia	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ Myriam Patricia Vinasco	 	 
	 
	 	 	 	Name: Myriam Patricia Vinasco	 	 
	 
	 	 	 	 	 	 






[Signature Page to Stock Purchase and Redemption Agreement]





 









 





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



	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: 	 	 
	 

	 	 	 	Title: 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Yariv Matzliach	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Yariv Matzliach	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 






[Signature Page to Stock Purchase and Redemption Agreement]





 









 





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



	 	 	 	 	 	 	 
	 	 	THE COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: 	 	 
	 

	 	 	 	Title: 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	SHAREHOLDERS:	 	 
	 
	 	 	 	 	 	 
	 	 	OXFORD INVESTMENT

OVERSEAS CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Amit Wjuniski	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Amit Wjuniski	 	 
	 

	 	 	 	Title: 	 	 
	 	 	 	 	 






[Signature Page to Stock Purchase and Redemption Agreement]




 









 





 



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



 



    THE COMPANY:



 



    ALMA LASERS LTD.



 


			
	 	    By: 
	
    






    Name:




    Title:



 


	 	 	 
	

    /s/  
Yaron
    Suber


	
 
	
    /s/  
Aris
    Orenstein

	
    
Yaron
    Suber
	
 
	
    
Aris
    Orenstein

	
 
	
 
	
 

	

    /s/  
Miruslave
    Lifebitz


	
 
	
    /s/  
Noga
    Karni

	
    
Miruslave
    Lifebitz
	
 
	
    
Noga
    Karni

	
 
	
 
	
 

	

    /s/  
Vladislav
    Rabinski


	
 
	
    /s/  
Yishak
    Tabib

	
    
Vladislav
    Rabinski
	
 
	
    
Yishak
    Tabib

	
 
	
 
	
 

	

    /s/  
Alex
    Bartiva


	
 
	
    /s/  
Andre
    Navier

	
    
Alex
    Bartiva
	
 
	
    
Andre
    Navier

	
 
	
 
	
 

	

    /s/  
Merav
    Havhial


	
 
	
    /s/  
Yair
    Ben-Ari

	
    
Merav
    Havhial
	
 
	
    
Yair
    Ben-Ari

	
 
	
 
	
 

	

    /s/  
Max
    Shamis


	
 
	
    /s/  
Pavel
    Yaprimov

	
    
Max
    Shamis
	
 
	
    
Pavel
    Yaprimov

	
 
	
 
	
 

	

    /s/  
Stanislav
    Vinbaum


	
 
	
    /s/  
Adward
    Bazerbie

	
    
Stanislav
    Vinbaum
	
 
	
    
Adward
    Bazerbie

	
 
	
 
	
 

	

    /s/  
Ithay
    Meir


	
 
	
    /s/  
Irit
    Moses

	
    
Ithay
    Meir
	
 
	
    
Irit
    Moses

	
 
	
 
	
 

	

    /s/  
Yossi
    Lebzetler


	
 
	
    /s/  
Simon
    Akerman

	
    
Yossi
    Lebzetler
	
 
	
    
Simon
    Akerman



















 







	 	 	 	 	 	 	 
	 	 	BUYER:	 	 
	 
	 	 	 	 	 	 
	 	 	AESTHETIC ACQUISITION, B.V.	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ Ajit Nedungadi	 	 
	 

	 	 	 	Name:   Ajit Nedungadi
	 
	 	 	 	 	 	 
	 
	 	and	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name:	 	 






[Signature Page to Stock Purchase and Redemption Agreement]




 









 







	 	 	 	 	 	 	 
	 	 	BUYER:	 	 
	 
	 	 	 	 	 	 
	 	 	AESTHETIC ACQUISITION, B.V.	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/
J.J. van Ginkel	 	 
	 

	 	 	 	Name:   J.J.
van Ginkel
	 
	 	 	 	 	 	 
	 
	 	and	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	Name:	 	 






[Signature Page to Stock Purchase and Redemption Agreement]




 









 





	 	 	 	 	 	 	 
	 	 	FUNDS:	 	 
	 
	 	 	 	 	 	 
	 	 	TA IX L.P.

By: TA Associates IX LLC, its General
Partner

By: TA Associates, Inc., its Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	Ajit Nedungadi	 	 
	 

	 	Name:  Ajit
Nedungadi
	 

	 	Its:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	TA/ATLANTIC AND PACIFIC IV L.P.

By: TA Associates AP IV L.P., its General
Partner

By: TA Associates, Inc., its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	Ajit Nedungadi	 	 
	 

	 	Name:  Ajit
Nedungadi
	 

	 	Its:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	TA STRATEGIC PARTNERS FUND A L.P.

By: TA Associates SPF L.P., its General
Partner

By: TA Associates, Inc., its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	Ajit Nedungadi	 	 
	 

	 	Name:  Ajit
Nedungadi
	 

	 	Its:	 	 	 	 






[Signature Page to Stock Purchase and Redemption Agreement]




 









 







	 	 	 	 	 	 	 
	 	 	TA STRATEGIC PARTNERS FUND B L.P.

By: TA Associates SPF L.P., its General Partner

By: TA Associates, Inc., its General Partner	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ Ajit Nedungadi 	 	 
	 
	 	 	 	 	 	 
	 
	 	Name:	 	Ajit Nedungadi 	 	 
	 
	 	Its:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	TA INVESTORS II, L.P.

By: TA Associates, Inc., its General Partner	 	 
	 
	 	 	 	 	 	 
	 
	 	By:	 	/s/ Ajit Nedungadi 	 	 
	 
	 	 	 	 	 	 
	 
	 	Name:	 	Ajit Nedungadi 	 	 
	 
	 	Its:	 	 	 	 






[Signature Page to Stock Purchase and Redemption Agreement]