Document:

exv10w1

 

Exhibit 10.1

ASSET PURCHASE AGREEMENT

dated November 30, 2006

by and among

AMERICAN MEDICAL SYSTEMS, INC.,

LASERSCOPE

and

IRIDEX CORPORATION

 

 

TABLE OF CONTENTS

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

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

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ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT, dated November 30, 2006 (this “Agreement”), is by and
among American Medical Systems, Inc., a Delaware corporation (“Parent”), Laserscope, a
California corporation and a wholly owned subsidiary of Parent (“Seller”), and Iridex
Corporation, a Delaware corporation (“Purchaser”). Capitalized terms used in this
Agreement have the meanings provided in, or in such other sections hereof as are cross-referenced
in, Article 10.

Recitals

     A. Seller is in the business of designing, developing, using, manufacturing, marketing,
promoting, selling and distributing lasers and other light-based treatment devices used or useful
in the Field of Use (collectively “Aesthetics Devices”). For purposes of this Agreement,
“Field of Use” means all cosmetic, therapeutic aesthetic and prophylactic aesthetic applications
and dermatology applications, including, without limitation (1) hair removal (e.g.,
pseudofolliculitis (shaving bumps) and hair growth prevention and reduction; (2) minimally invasive
and/or non-invasive skin resurfacing and rejuvenation (e.g., variable depth resurfacing for
conditions such as wrinkles and acne scars, treatment and prevention of pigmented and vascular
lesions, and collagen stimulation for conditions such as wrinkles), (3) treatment and prevention of
vascular lesions of all kinds including without limitation port wine stains, matter telangiectasia,
rosacea, cherry angiomas, spider angiomas, venous lake, red and blue spider leg veins and red and
blue facial veins; (4) treatment and prevention of pigmented lesions (e.g., solar lentigines, cafe
au lait stains, melasma, post-trauma hyperpigmentation); and (5) treatment and prevention of acne
but in all cases excluding, for the avoidance of doubt, applications in the fields of urology,
gynecology, colorectal disorders, sexual dysfunction and related pelvic disorders, and all internal
surgical treatments except for internal surgical treatments for dermatological or aesthetic
applications. For purposes of this Agreement, “Aesthetics Business” means Seller’s
business of designing, developing, using, manufacturing, marketing, promoting, selling and
distributing Aesthetics Devices in the Field of Use. 

     B. Seller has developed Intellectual Property related to the Aesthetics Devices, including
Intellectual Property applicable to laser or other light-based treatment devices generally, and
Intellectual Property that is uniquely applicable to Aesthetics Devices and the Aesthetics
Business.

     C. Purchaser wishes to purchase from Seller and Seller wishes to sell to Purchaser, certain of
Seller’s tangible and intangible assets and rights used by Seller in the conduct of the Aesthetics
Business and necessary for Buyer to conduct the Aesthetics Business following the Closing.

     D. Purchaser and Seller wish to grant certain exclusive, worldwide licenses (including in the
case of the grant by Seller, to certain of Seller’s Intellectual Property not uniquely applicable
to Aesthetics Devices for use exclusively within the Field of Use), as specified in the License
Agreement.

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Agreement

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

ARTICLE 1

PURCHASE AND SALE OF ASSETS

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

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

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

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

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

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

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

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

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

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

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

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

	1.3	 	Assumption and Retention of Liabilities.

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

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

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

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

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

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

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

	1.5	 	Post-Closing Adjustment.

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

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	 	(b)	 	As used herein:

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

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

8

 

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

9

 

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

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

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

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

10

 

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

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

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

11

 

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

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

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

12

 

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

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

     Parent and Seller hereby represent and warrant to Purchaser that, except as set forth in the
Disclosure Schedule delivered by Seller to Purchaser on the date hereof (the “Disclosure
Schedule”), and in all cases qualified by the effects of the Pre-Closing Transactions, on the
date hereof, and as of the Closing as though made at the Closing (subject, however, to the
provisions of Section 4.5 and 7.2(c)), the statements contained in this Article 2 are true and
correct. Each item disclosed in the Disclosure Schedule shall constitute an exception to the
representations and warranties given and shall be deemed to be disclosed with respect to each
section of the Disclosure Schedule (i) that is specifically identified (by cross
reference or otherwise) in the Disclosure Schedule as being qualified by such exception, or
(ii) with respect to which the relevance of such exception is reasonably apparent on the face of
the disclosure set forth in the Disclosure Schedule.

     With respect to any information disclosed by Parent and Seller in the Disclosure Schedule: (i)
such disclosure is not an admission by the Seller that the such information is material; and (ii)
no representation or warranty is made with respect to such information to the extent such
information is not required to be disclosed because it is clearly below specific dollar thresholds
specified in the representations and warranties contained in the Agreement. Furthermore, a
threshold of materiality being provided by Parent and Seller on a particular section of the
Disclosure Schedule is not intended to be an indication of the threshold of materiality for any
other section of the Disclosure Schedule or otherwise. Nothing in the Disclosure Schedule
constitutes an admission of any liability or obligation of Parent or Seller to any third party or
an admission against Parent’s or Seller’s interest

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

13

 

	2.2	 	Subsidiaries.

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

14

 

	2.3	 	Authorization.

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

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

15

 

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

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

16

 

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

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

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

17

 

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

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

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

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

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

18

 

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

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

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

19

 

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

20

 

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

21

 

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

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

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

	2.17	 	Contracts.

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

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

22

 

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

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

	2.18	 	Labor and Employment Matters Concerning the Employees.

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

	 	(i)	 	All Employee Plans and Employee Agreements;

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

23

 

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

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

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

24

 

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

25

 

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

26

 

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

	2.19	 	Aesthetics Business Intellectual Property.

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

27

 

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

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

28

 

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

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

	2.21	 	Tax Matters.

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

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

30

 

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

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

	2.23	 	Environmental Matters.

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

31

 

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

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

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

	2.25	 	 Customers and Suppliers

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

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

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

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

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

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

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF PURCHASER

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

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

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

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

35

 

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

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

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

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

	3.7	 	SEC Filings; No Material Adverse Change.

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

36

 

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

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

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

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

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ARTICLE 4

COVENANTS

	4.1	 	Confidentiality.

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

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

38

 

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

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

	4.2	 	Preparation of Tax Returns; Tax Matters.

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

39

 

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

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

	4.3	 	Pre-Closing Covenants.

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

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

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

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

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

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

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

	4.4	 	Post-Closing Covenants.

	 	(a)	 	Further Assurances.

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

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

	 	(b)	 	Non-Competition.

	 	(i)	 	From and after the Closing Date:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

49

 

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

ARTICLE 5

EMPLOYEE MATTERS

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

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

	 	(a)	 	Employment.

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

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

	 	(b)	 	Savings Plan.

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

	 	(c)	 	Employee Welfare Plans.

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

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

	 	(d)	 	Other Compensation Arrangements.

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

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

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

ARTICLE 6

TERMINATION

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

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

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

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

ARTICLE 7

CONDITIONS

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

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

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

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

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

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

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

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ARTICLE 8

SURVIVAL AND INDEMNIFICATION

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

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

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

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

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

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

	8.5	 	Indemnification Limits and Calculation of Damages.

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

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

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

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

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

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

ARTICLE 9

DISPUTE RESOLUTION

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

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

61

 

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

ARTICLE 10

DEFINITIONS

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

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

62

 

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

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

64

 

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

65

 

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

66

 

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

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

List of Defined Terms

	 	 	 	 	 
	AAA

	 	 	62	 
	Accounts Receivable

	 	 	2	 
	Acquisition Proposals

	 	 	43	 
	Adjusted Liabilities of the Subsidiaries

	 	 	8	 
	Adjusted Purchase Price

	 	 	9	 
	Administrative Services Agreement

	 	 	12	 
	Aesthetics Business

	 	 	1	 
	Aesthetics Devices

	 	 	1	 
	Agreement

	 	 	1	 
	Ancillary Agreements

	 	 	12	 
	Assigned Contracts

	 	 	2	 
	Assignment and Assumption Agreement

	 	 	12	 
	Assumed Liabilities

	 	 	6	 
	Assumed Service Contracts

	 	 	6	 
	Balance Sheet Items

	 	 	8	 
	Basket Amount

	 	 	60	 
	Benefit Plans

	 	 	25	 
	Business Customer

	 	 	34	 
	Cash of the Subsidiaries

	 	 	8	 
	Closing

	 	 	2	 

67

 

	 	 	 	 	 
	Closing Date

	 	 	2,11	 
	COBRA

	 	 	53	 
	Competing Product

	 	 	45	 
	Confidential Information

	 	 	39	 
	Consent

	 	 	16	 
	Consents

	 	 	16	 
	CPR

	 	 	62	 
	Disclosing Party

	 	 	39	 
	Disclosure Schedule

	 	 	13	 
	Dispute

	 	 	62	 
	Dispute Notice

	 	 	62	 
	Effective Time

	 	 	5	 
	Employee Agreement

	 	 	24	 
	Employee Plan

	 	 	24	 
	Employees

	 	 	51	 
	Environmental Laws

	 	 	32	 
	Environmental Permits

	 	 	32	 
	Equipment

	 	 	2	 
	Excluded Assets

	 	 	4	 
	Excluded Inventory

	 	 	4	 
	FDA

	 	 	20	 
	Final Closing Balance Sheet Item Amount

	 	 	7	 
	Final Closing Balance Sheet Item Statement

	 	 	10	 
	Final Subsidiary Closing Balance Sheet

	 	 	10	 
	Finished Goods Inventory

	 	 	2	 
	Firm

	 	 	9	 
	Former Real Property

	 	 	33	 
	Fraud Claims

	 	 	58	 
	Government Permits

	 	 	3	 
	Hazardous Substance Activities

	 	 	32	 
	Income Tax Liability of the Subsidiaries

	 	 	8	 
	Income Taxes

	 	 	32	 
	Indemnified Party

	 	 	59	 
	Indemnifying Party

	 	 	59	 
	Knowledge

	 	 	66	 
	Knowledge of Purchaser

	 	 	66	 
	Knowledge of Seller

	 	 	66	 
	Laserscope France

	 	 	3	 
	Laserscope UK

	 	 	3	 
	Law

	 	 	66	 
	Leased Real Property

	 	 	19	 
	Liabilities

	 	 	66	 
	Liability

	 	 	66	 
	LIBOR

	 	 	66	 
	License Agreement

	 	 	12	 
	Liens

	 	 	2	 

68

 

	 	 	 	 	 
	Loan Agreement

	 	 	50	 
	Material Adverse Effect

	 	 	66	 
	Maximum Amount

	 	 	60	 
	Medical Delivery Device

	 	 	46	 
	NOL Threshold

	 	 	31	 
	Non-Paying Party

	 	 	41	 
	Parent

	 	 	1	 
	Pelvic Health

	 	 	46	 
	Permitted Changes

	 	 	42	 
	Permitted Liens

	 	 	67	 
	Person

	 	 	67	 
	Personal Property Leases

	 	 	3	 
	Post-Closing Adjustment

	 	 	7	 
	Pre-Closing Hazardous Substance Activities

	 	 	67	 
	Pre-Closing Transactions

	 	 	4	 
	Pre-Existing Contamination

	 	 	67	 
	Prepaid Expenses

	 	 	3	 
	Proceedings

	 	 	22	 
	Product Supply Agreement

	 	 	12	 
	Product Warranty Claims

	 	 	67	 
	Property Taxes

	 	 	41	 
	Proposed Closing Balance Sheet Item Statement

	 	 	9	 
	Proposed Subsidiary Closing Balance Sheet

	 	 	9	 
	Purchase Price

	 	 	7	 
	Purchased Assets

	 	 	2	 
	Purchaser

	 	 	1	 
	Purchaser Disclosure Schedule

	 	 	35	 
	Purchaser Indemnified Party

	 	 	58	 
	Purchaser Rep Loss

	 	 	60	 
	Purchaser’s Knowledge

	 	 	66	 
	Purchaser’s Savings Plan

	 	 	52	 
	Real Estate Leases

	 	 	19	 
	Recipient

	 	 	39	 
	Registrable Securities

	 	 	48	 
	Required Consents

	 	 	11	 
	Restricted Laser Products

	 	 	46	 
	Retained Employees

	 	 	6	 
	Retained Liabilities

	 	 	6	 
	Returns

	 	 	30	 
	Scheduled Contracts

	 	 	23	 
	Securities Act

	 	 	34	 
	Seller

	 	 	1	 
	Seller Product

	 	 	67	 
	Seller’s Knowledge

	 	 	66	 
	Seller’s Retained Environmental Liabilities

	 	 	67	 
	Seller’s Welfare Benefit Plans

	 	 	52	 

69

 

	 	 	 	 	 
	Service Parts

	 	 	3	 
	Significant Supplier

	 	 	34	 
	Solvent

	 	 	68	 
	Stock Consideration

	 	 	7	 
	Straddle Period

	 	 	41	 
	Straddle Period Taxes

	 	 	41	 
	Subsidiaries

	 	 	3	 
	Subsidiary Balance Sheet Date

	 	 	17	 
	Subsidiary Balance Sheets

	 	 	17	 
	Subsidiary Closing Balance Sheet

	 	 	8	 
	Subsidiary Financial Statements

	 	 	17	 
	Tax

	 	 	31	 
	Tax Return

	 	 	32	 
	Taxes

	 	 	31	 
	Termination Date

	 	 	55	 
	Third Party Claim

	 	 	59	 
	Transfer Taxes

	 	 	40	 
	Transferred Employees

	 	 	51	 
	Transferred Equity Interests

	 	 	3	 
	Transferred Intellectual Property

	 	 	2	 

ARTICLE 11

MISCELLANEOUS

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

          If to Seller:

	 	 	 	 	 
	 
	 	To:	 	American Medical Systems, Inc.

	 
	 	 	 	10700 Bren Road West

	 
	 	 	 	Minnetonka, Minnesota 55343

	 
	 	 	 	Attn: Chief Executive Officer

	 
	 	 	 	Fax: (612) 930-6695

70

 

With a copy to:

Oppenheimer Wolff & Donnelly LLP

3300 Plaza VII

45 South Seventh Street

Minneapolis, Minnesota 55402

Attn: Thomas A. Letscher, Esq.

Fax: (612) 607-7100

If to Purchaser:

	 	 To:	 	Iridex Corporation

1212 Terra Bella Avenue

Mountain View, CA 94043

Attn: Chief Executive Officer

Fax: (650) 940-4710

With a copy to:

Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA 94304-1050

Fax: (650) 493-6811

Attn: David J. Segre, Esq.

     Any party may give any notice, request, demand, claim or other communication hereunder using
any other means (including ordinary mail or electronic mail), but no such notice, request, demand,
claim or other communication shall be deemed to have been duly given unless and until it actually
is received by the individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be delivered by giving
the other parties notice in the manner herein set forth.

	11.2	 	Amendments; No Waivers.

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

71

 

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

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

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

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

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

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

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

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

72

 

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

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

[Remainder of Page Intentionally Left Blank]

73

 

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

	 	 	 	 	 
	 	AMERICAN MEDICAL SYSTEMS, INC.

 	 
	 	By:  	/s/ John Nealon
 	 
	 	 	Name:  	John Nealon 	 
	 	 	Title:  	Senior Vice President of Business Development 	 
	 
	 	LASERSCOPE

 	 
	 	By:  	/s/ John Nealon
 	 
	 	 	Name:  	John Nealon 	 
	 	 	Title:  	Senior Vice President of Business Development 	 
	 
	 	IRIDEX CORPORATION

 	 
	 	By:  	/s/ Barry G. Caldwell
 	 
	 	 	Name:  	Barry G. Caldwell 	 
	 	 	Title:  	President and CEO 	 
	 

SIGNATURE PAGE

ASSET PURCHASE AGREEMENT

 

 

EXHIBIT AND SCHEDULE INDEX

	 	 	 
	Exhibits
	 	 
	Exhibit 1.1(a) 
	 	Equipment
	Exhibit 1.1(c) 
	 	Assigned Contracts
	Exhibit 1.1(d) 
	 	Transferred Intellectual Property
	Exhibit 1.1(f) 
	 	Governmental Permits
	Exhibit 1.1(g) 
	 	Personal Property Leases
	Exhibit 1.3(a)(v) 
	 	Assumed Service Contracts
	Exhibit 1.7(a)(iii) 
	 	License Agreement
	Exhibit 1.7(a)(iv) 
	 	Assignment and Assumption Agreement
	Exhibit 1.7(a)(v)(A) 
	 	Product Supply Agreement
	Exhibit 1.7(a)(v)(B) 
	 	Administrative Services Agreement
	Exhibit 1.7(a)(vi) 
	 	Consents
	Exhibit 1.7(a)(vii) 
	 	Form of Letter of Resignation
	Exhibit 2.6(a) 
	 	Unaudited Statement of Balance Sheet Items
	Exhibit 2.6(b) 
	 	Subsidiary Balance Sheets
	 
	 	 
	Schedules
	 	 
	Schedule 1.1 
	 	Transferred Subsidiary Assets
	Schedule 1.5(a) 
	 	Calculation of Balance Sheet Item Amount
	Schedule 1.6 
	 	Allocation of Purchase Price
	Schedule 6.2 
	 	List of Employees
	Schedule 6.2(d) 
	 	Vacation Balances for Transferred Employees
	Schedule 8.2
	 	Specifically Indemnified Matters by Parent and Sellerexv10w14

 

Exhibit 10.14

Description of 2007 Non-Employee Director Compensation

     Retainers and Meeting Fees. Each of our non-employee directors, after election to our board
of directors at our 2007 annual meeting of shareholders, will receive a $35,000 retainer for a
one-year term of service on our board of directors in 2007. In addition, each member of our audit
committee (who is not the chair of that committee) will receive a retainer of $5,000 for serving as
a member of our audit committee, and the chair of the audit committee will receive a $15,000
retainer. The chairs of our compensation committee and governance and nominating committee each
will receive a retainer of $5,000 for serving in these roles. These retainers are payable in two
equal installments, with 50% payable on February 15, 2007 and 50% payable on August 15, 2007.
Each non-employee director may elect to receive these retainers in the form of shares of common
stock of the Company, in lieu of cash payments. In addition to these retainers, each non-employee
director will receive a fee of $1,250 for each board of directors meeting attended and $1,250 for
each board committee meeting attended.

     Option Grants. Each non-employee director elected to our board of directors at the 2007 annual
meeting of shareholders will be granted an option on the date of that meeting, pursuant to our
Amended and Restated 1996 Incentive Plan, to purchase 5,000 shares of common stock of the Company at the fair
market value per share of our common stock at the time the option is granted.

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