ASSET PURCHASE AGREEMENT

    

Exhibit 10.27

 

 

 

 

 

 

ASSET PURCHASE AGREEMENT
(Vertebroplasty Assets)

dated as of December 20, 2006

by and among

DISC-O-TECH MEDICAL TECHNOLOGIES LTD. (IN LIQUIDATION)

DISCOTECH ORTHOPEDIC TECHNOLOGIES INC.

and

KYPHON INC.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement, dated as of December 20, 2006 (this " Agreement "), is by and among Kyphon Inc., a Delaware corporation (the " Purchaser "), on the one hand, and Disc-O-Tech Medical Technologies Ltd., an Israeli company (in liquidation) (the " Company ") and Discotech Orthopedic Technologies Inc., a Delaware corporation and wholly owned subsidiary of the Company (the " Subsidiary " and, together with the Company, the " Seller Parties "), on the other hand.

RECITALS :

A.            The Seller Parties are engaged, in part, in the business of inventing, researching, developing, manufacturing and/or marketing a variety of technologies and have certain products (excluding the Seller Parties' B-Twin and SKy product lines) for sale having application in the Field (as defined below) (the " Business ").

B.             The Seller Parties and the Purchaser have entered into an Asset Purchase Agreement (Non-Vertebroplasty Assets), dated as of the date hereof (the "Non-Vertebroplasty Purchase Agreement"), and certain related agreements pursuant to which, among other things, the Purchaser has agreed to acquire the Seller Parties' B-Twin and SKy product lines.

C.             The Seller Parties desire to sell any and all of their right, interest and title in and to the Acquired Assets (as defined below) and the Purchaser desires to acquire the Seller Parties' right, interest and title in and to the Acquired Assets and agrees to assume the Assumed Liabilities (as defined below), in each case on the terms and subject to the conditions set forth herein.

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

D.             Upon the Closing, the Seller Parties (as the case may be) and the Purchaser shall enter into a Transition Services Agreement (as defined below), a TSA License Agreement (as defined below), and a Manufacture and Supply Agreement (as defined below), pursuant to which the Seller Parties (as the case may be) will, among other things, (1) manufacture and sell outside the United States, pursuant to a license arrangement, the Existing Products during an initial period after Closing, (2) manufacture the Existing Products for sale by the Purchaser in the United States during such initial period and a second period after the Closing, and manufacture the Existing Products for sale by the Purchaser outside the United States during such second period after the Closing, and (3) assist in the transfer to the Purchaser of any and all know-how, trade secrets or similar intellectual property rights the transfer of which will require the participation and cooperation of the Seller Parties and their employees, in each case on the terms and subject to the conditions set forth therein.

E.              Upon the Closing, Motti Beyar and Oren Globerman (collectively, the " Entrepreneurs ") and the Purchaser shall enter into a Non-Competition, Confidentiality and Development Agreement (as defined below), pursuant to which the Entrepreneurs shall agree to undertake certain development and regulatory activities in connection with the Next Generation Product (as defined below), on the terms and subject to the conditions set forth therein.

F.              Upon the Closing, Lewis Pell (collectively with the Entrepreneurs, the " Founders ") and the Purchaser shall enter into a Non-Competition and Confidentiality Agreement (as defined below).

Accordingly , in consideration of the foregoing premises and the mutual representations, warranties, covenants and agreements set forth in this Agreement, the parties hereto, intending to be legally bound hereby, agree as follows:

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

ARTICLE I

DEFINITIONS

1.1    Defined Terms .

1. Capitalized terms defined in this Agreement whenever used herein (including, without limitation, the Exhibits and Schedules hereto) shall have the meanings given to such terms in this Agreement. The terms defined in this Section 1.1(a) , whenever used herein (including, without limitation, the Exhibits and Schedules hereto), shall have the following meanings for all purposes of this Agreement:

" Acquired Assets " shall mean, except for any Excluded Assets, all the right, title and interest that the Seller Parties or any Affiliate of the Seller Parties possess in and to the properties, assets and rights of any kind, whether tangible or intangible, including those listed on the Schedule of Assets attached hereto as Exhibit A , currently owned and primarily used in the Business (or, in the case of Intellectual Property Rights, used in the Business) by any of the Seller Parties or their respective Affiliates and shall include all of the following:

1. 1. all Assumed Contracts;
   2. all Intellectual Property Rights;
   3. all other technology rights and licenses, franchises, know-how, inventions, designs, specifications, plans and drawings primarily used in the Business;
   4. all Books and Records; provided , however , that the term Books and Records will include true copies (but not originals) of any Books and Records under clauses (a) through (c) of the definition thereof that are also used in or necessary for the businesses of the Seller Parties prior to the Closing or, if after the Closing, the businesses of the Seller Parties other than the Business;

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

1. 5. all Permits in the name of the Seller Parties that are necessary to enable the Purchaser to manufacture, sell and distribute the Existing Products from and after the Closing and operate the Business in the ordinary course of business (provided, such transfer may be delayed to the extent reasonably necessary for purposes of the Services under the Transition Services Agreement);
   6. all available product brochures primarily related to the Existing Products;
   7. all causes of action, rights and remedies arising under the Intellectual Property Rights prior to or after Closing;
   8. all rights, claims, credits, causes of action, choses in action and rights of set-off against third parties to the extent relating to any of the Acquired Assets or any of the Assumed Liabilities, including all rights in and to products sold or leased (including products returned after the Closing and rights of rescission, replevin and reclamation) in the operation or conduct of the Business and all guarantees, representations, warranties, indemnities and similar rights in favor of the Seller Parties to the extent relating to any of the Acquired Assets or any of the Assumed Liabilities (other than any such rights set forth in this Agreement); and
   9. all other assets primarily related to the Business; provided that all Fixtures and Equipment and Distribution Agreements will be transferred to Purchaser pursuant to the terms of Section 2(c) of the Transition Services Agreement.

" Action " shall mean any action, claim, suit, litigation, proceeding, labor dispute, arbitral action, governmental audit, inquiry, criminal prosecution, investigation or unfair labor practice charge or complaint.

" Affiliate " shall mean, with respect to any Person, (a) any other Person of which securities or other ownership interests representing more than ten percent (10%) of the voting

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

interests are, at the time such determination is being made, beneficially owned or Controlled by such Person, or (b) any other Person which, at the time such determination is being made, is Controlling, Controlled by or under common Control with such Person. For the purposes hereof, (i) " Control ," whether used as a noun or verb, refers to the possession, directly or indirectly, of the power to affirmatively direct, or affirmatively cause the direction of, the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and (ii) a " beneficial owner " of a security is any Person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares (x) voting power, which includes the power to vote, or direct the voting of, such security, or (y) investment power, which includes the power to dispose, or to direct the disposition of, such security. A Person shall lose its status as an Affiliate of a party if it no longer falls within the preceding definition of "Affiliate."

" Assignment and Assumption Agreement " means the Assignment and Assumption Agreement in the form attached hereto as Exhibit M .

" Assignment of Copyrights " means the Assignment of Copyrights in the form attached hereto as Exhibit K .

" Assignment of Other Intellectual Property Rights " means the Assignment of Other Intellectual Property Rights in the form attached hereto as Exhibit L .

" Assignment of Patent Rights " means the Assignment of Patent Rights in the form attached hereto as Exhibit I .

" Assignment of Trademark Rights " means the Assignment of Trademark Rights in the form attached hereto as Exhibit J .

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

" Assumed Contracts " shall mean all Contracts listed on Schedule 1.1 under the heading "Assumed Contracts".

" Bill of Sale " means the Bill of Sale in the form attached hereto as Exhibit H .

" Books and Records " shall mean (a) all records and lists, including those relating to customers, suppliers or personnel, (b) all financial, legal, regulatory, Tax, accounting and personnel records and files, (c) all other books, ledgers, files, reports, plans, drawings and operating records, whether in hard copy or computer or other format (including historical files and documents of the Business stored on computer systems or backup files), maintained by or for the Seller Parties, and (d) all files relating to the Intellectual Property Rights, but in the case of each of (a)-(c) above, only to the extent used in or necessary for the Business.

" Business Day " means any day other than a Saturday, Sunday or other day on which commercial banks in New York City are required or authorized by Law to be closed.

" Code " means the United States Internal Revenue Code of 1986, as amended.

" Company Disclosure Schedule " means the disclosure schedule and related attachments attached hereto as Exhibit B .

" Competing Product " means any product, product line, process formulation or service that is designed, developed, manufactured, marketed or sold by or on behalf of anyone other than the Purchaser and is used or intended for use in the Field.

" Confidentiality Agreements " shall mean, collectively, the Mutual Confidentiality Agreement, dated on or about February 3, 2005 between the Company and the Purchaser; the letter agreement dated as of October 20, 2006 between the Company and the Purchaser, and the Common Interest and Confidentiality Agreement dated as of October 20, 2006, between the Company and the Purchaser.

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

" Contract " shall mean any agreement, contract, note, loan, evidence of indebtedness, purchase order, letter of credit, indenture, security or pledge agreement, franchise agreement, undertaking, covenant not to compete, covenant not to sue, employment agreement, license, instrument, obligation or commitment to which any Seller Party is a party or is bound and that relates to the Business or the Acquired Assets, whether oral or written.

" Copyrights " shall mean all U.S. and non-U.S. registered copyrights, applications for copyright registration and unregistered copyrights owned or licensed from a third party by any of the Seller Parties and that relate to the Field and/or the Existing Products.

" Distribution Agreements " shall mean those rights and obligations of the Seller Parties under the Distribution Agreements listed on Exhibit C , as such agreements may be terminated, modified or otherwise amended in accordance with Section 5.1 , and as such other distribution agreements may be entered into after the date hereof in accordance with Section 5.1 .

" Environmental Laws " means all applicable federal, state, local and foreign laws, statutes, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, treaties or binding agreements issued, promulgated or entered into by any Governmental Entity (as defined below), relating in any way to the environment, preservation or reclamation of natural resources or endangered species, the presence, management, Environmentally Relevant Release or threat of Environmentally Relevant Release of, or exposure to, Hazardous Materials and any Permits issued thereunder.

" Environmentally Relevant Release " means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migrating into or through the environment or any natural or man-made structure.

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

" Excluded Assets " shall mean the following assets of the Seller Parties which are not to be acquired by Purchaser hereunder:

1. 10. the corporate charters and other organizational documents of the Seller Parties or any of their respective Affiliates, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualification, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of the Seller Parties or any of their Affiliates as a corporation;
   11. all cash, cash equivalents and investments (except as received pursuant to a Disposition pursuant to Section 7.5 );
   12. all accounts receivable and notes receivable;
   13. all Fixtures and Equipment and other non-Inventory tangible assets (except that Fixtures and Equipment shall be treated under the terms of Section 2(c) of the Transition Services Agreement);
   14. all Inventory (except that such Inventory shall be treated under the terms of the Transition Services Agreement);
   15. any Permits that are not Acquired Assets;
   16. all claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind against any Person to the extent related to the Liabilities that are not Assumed Liabilities;
   17. all equity interests and other capital stock that is owned by the Company or the Subsidiary;
   18. the assets listed on Schedule 1.1 under the heading "Excluded Assets";

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

1. 19. all rights of any Seller Party under Contracts that are not Assumed Contracts (except that Purchaser shall assume all obligations of the Seller Parties arising under the Distribution Agreements pursuant to and in accordance with the terms of Section 2(c) of the Transition Services Agreement);
   20. all claims for refund of Taxes and other governmental charges of whatever nature attributable to the period ending on or before the Closing Date;
   21. the rights of the Seller Parties under this Agreement and the other agreements entered into in connection herewith;
   22. all insurance policies in the name of the Seller Parties or any of their Affiliates, and any rights to payment (whether matured or unmatured) with respect thereto; and
   23. copies of all Books and Records that any Seller Party is required by Law or good business practice to retain in its possession .

" Existing Products " shall mean (a) the Confidence product line, together with the related cement system and cement injectors and (b) all other products conceived, reduced to practice or in development by Seller Parties prior to the Closing Date having application within the Field, excluding (i) the Next Generation Product, (ii) the B-Twin product line and (iii) the SKy product line.

" FDA " means the United States Food and Drug Administration.

" FDA Act " means the United States Food, Drug and Cosmetic Act, as amended, and applicable regulations and guidances thereunder.

" Field " shall mean the field of accessing, diagnosing or treating spinal disease states or disorders.

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

" Fixtures and Equipment " shall mean all of the machinery, automobiles, trucks, spare parts, tools, supplies, equipment and other tangible personal property owned by any Seller Party and primarily used in connection with the Business, wherever located and including any such Fixtures and Equipment in the possession of any of such Seller Party's suppliers, including all warranty rights with respect thereto.

" GAAP " shall mean generally accepted accounting principles in effect in the United States, applied on a consistent basis.

" Governmental Entity " shall mean any court or any governmental or other administrative or regulatory authority, department, ministry, agency or commission, whether federal, state or local, U.S. or non-U.S., including notified bodies designated by the member states of the European Union and the European Free Trade Association.

" Hazardous Materials " means (1) petroleum products and by-products, friable asbestos and friable asbestos containing materials, urea formaldehyde foam insulation, polychlorinated biphenyls, radon gas, radioactive substances, chlorofluorocarbons and all other ozone depleting substances or (2) any chemical, substance, waste, or contaminant that is prohibited, limited or regulated by or pursuant to any Environmental Law.

" HSR Act " shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

" Intellectual Property Rights " shall mean all intellectual property rights, whether protected, created or arising under the Laws of the United States or any other jurisdiction, including: (i) Trademark Rights; (ii) Patent Rights; (iii) Copyrights; (iv) Trade Secrets; (v) moral rights, publicity rights and any other proprietary, intellectual or industrial property rights of any kind or nature that do not comprise or are not protected by Trademark

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Rights, Patent Rights, Copyrights or Trade Secrets and (vi) the right to sue for past, present or future infringement of any of the foregoing, that:

1. 24. are owned and/or developed, or otherwise licensed from a third party by any of the Seller Parties; and
   25. relate to the Field and/or the Existing Products.

" Inventory " shall mean all inventory held for resale and all raw materials, work in process, finished products, wrapping, supply and packaging items and similar items with respect to the Business and in each case whether owned or held by the Seller Parties or their Affiliates and wherever the same may be located.

" Laws " shall mean any law, constitution, statute, ordinance, regulation, rule, notice requirement, court decision, agency guideline, order, writ, injunction, award, judgment, decree, resolution, code, edict, treaty or binding agreement issued, enacted, adopted, promulgated, implemented, entered into or otherwise put into effect by or under the authority of any Governmental Entity.

" Liabilities " shall mean, as to any particular Person, any direct or indirect liability, indebtedness, obligation, commitment, claim, deficiency or guaranty of or by such Person of any type, whether known or unknown, disputed or undisputed, secured or unsecured, due or to become due, vested or unvested, liquidated or unliquidated, accrued, absolute, contingent, matured or unmatured, whether or not the same is required to be accrued on the financial statements of such Person.

" Liens " means any and all mortgages, liens, pledges, charges, restrictions or encumbrances of any nature whatsoever.

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

" Manufacture and Supply Agreement " shall mean the Manufacture and Supply Agreement, dated as of the Closing Date, between the Purchaser and the Company, in the form attached hereto as Exhibit F .

" Next Generation Product " means a vertebral compression fracture repair system to be developed after the Closing by the Entrepreneurs and that incorporates [***] and the other basic design features described by the Entrepreneurs in a schedule to the Non-Competition, Confidentiality and Development Agreement, and which is substantially different from the Company's existing Confidence system such that separate and new FDA and CE mark regulatory clearances or approvals will be required.

" Non-Competition and Confidentiality Agreement " means the Non-Competition and Confidentiality Agreement, in the form attached hereto as Exhibit O , between the Purchaser and Lewis Pell.

" Non-Competition, Confidentiality and Development Agreement " means the Post-Acquisition Non- Competition, Confidentiality and Development Agreement, in the form attached hereto as Exhibit D .

" Patent Rights " shall mean any and all U.S. and international patents and patent applications, inventor's certificates, utility models, design registrations, provisional applications, nonprovisional applications, substitutions, extensions, reissues, reexaminations, renewals, divisions, continuations, continuations-in-part, parents and other related applications and foreign counterparts of all of the foregoing (i) owned and/or developed by any of the Seller Parties or (ii) licensed from a third party by any of the Seller Parties and that are used or applied, or are capable of being used or applied, within the Field or relate to the Existing Products.

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

" Permitted Liens " means (i) Liens arising under equipment or maintenance financing or leasing agreements, (ii) Liens for Taxes not yet due and payable or which are being contested in good faith and by appropriate proceedings, (iii) mechanics', workmen's, repairmen's, warehousemen's, and carriers' Liens, or Liens of a similar type, arising in the ordinary course of business and/or (iv) Liens expressly set forth in any Assumed Contract.

" Person " means an individual, corporation, partnership, limited liability company, firm, joint venture, association, joint stock company, trust, unincorporated organization or other entity, or any Governmental Entity or quasi-governmental body or regulatory authority.

" Pre-Closing Tax Period " means any Tax period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date.

" Proprietary Rights " means all U.S. and foreign trademarks and trademark rights, trade names and trade name rights, service marks and service mark rights, service names and service name rights, domain names, copyrights and copyright rights, patents and patent rights, mask works, brand names, trade dress, industrial or product designs, business and product names, logos, slogans, trade secrets, inventions (whether or not patentable), invention disclosures, processes, formulae, industrial models, designs, specifications, data, databases and data collections, technology, methodologies, computer programs (including all source codes, object codes, firmware, software, development tools, files, records and data), manufacturing, engineering and technical drawings, and any other trade secret or other technical information, whether or not subject to statutory registration, and all common law and world-wide rights to registrations of trademarks, service marks and copyrights, and the right to sue for patent

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

infringement, if any, in connection with any of the foregoing, and all documents, disks and other media on which any of the foregoing is stored.

" Severance " shall mean, with respect to any employee of the Seller Parties principally employed in Europe or Israel, any statutory pay, programmatic pay, contractual redundancy pay under a program, policy or contract of any Seller Party in effect immediately before the Closing, or pay in respect of contractual or statutory notice periods.

" Software " shall mean any and all computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, and all documentation, including user manuals and training materials, relating to any of the foregoing; provided , however , that the term "Software" shall specifically exclude any computer programs that are generally available to the public, including computer programs available pursuant to "shrink wrap," "click wrap" and other similar license agreements.

" Spine " means the cervical, thoracic and lumbar regions, the sacrum, the coccyx, and all soft tissues attached to such bones, including the discs, facets, ligaments and muscles, and " spinal " shall have a correlating meaning.

" Straddle Period " means any Tax period beginning before and ending after the Closing Date.

" Tax Return " means any report, return, declaration, information return, statement or other information required to be supplied to a taxing authority with respect to any Tax or Taxes.

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

" Trade Secrets " shall mean non-public know-how, inventions, discoveries, improvements, concepts, ideas, methods, processes, designs, schematics, drawings, formulae, technical data, specifications, research and development information, technology, data bases, inventions for which patent applications have not yet been filed and other technical information (i) owned or otherwise controlled by either of the Seller Parties or (ii) licensed from a third party by either of the Seller Parties and that relate to the Field and/or the Existing Products, but excluding any Copyrights or Patent Rights that may cover or protect any of the foregoing.

" Trademark Rights " shall mean trademarks, including all U.S. and non-U.S. registered trademarks, applications to register trademarks, intent-to-use applications, or other registrations or applications related to trademarks, common-law trademarks and rights, service marks, trade dress, logos, trade names, corporate names, all rights arising from the use of or existing in connection with domain names, and all goodwill associated with the foregoing and all registrations and applications for registration of any of the foregoing owned or otherwise controlled by either of the Seller Parties and that relate to the Field and/or the Existing Products.

" Transition Services Agreement " shall mean the Transition Services Agreement, in the form of Exhibit E hereto.

" TSA License Agreement " shall mean the License Agreement, dated as of the Closing Date, between the Purchaser and the Company, in the form attached hereto as Exhibit P .

ARTICLE II

SALE AND PURCHASE OF ACQUIRED ASSETS AND ASSUMED LIABILITIES

2.1    Closing .

1. The closing (the " Closing ") of the transactions contemplated herein with respect to the Business shall be held at 8:00 a.m., local time, at the offices of Proskauer Rose

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

LLP, 1585 Broadway, New York, New York 10036, on the date that is two (2) Business Day after satisfaction or waiver of the conditions set forth in Article VIII (other than those conditions that are to be satisfied at Closing, but subject to the satisfaction or waiver of those conditions), or such other date as Purchaser and the Company shall mutually agree upon in writing (such date, the " Closing Date "). Notwithstanding the foregoing, upon the expiration or termination of any waiting periods or extensions under the HSR Act required to consummate the transactions contemplated hereby, the Closing shall occur within two (2) Business Days after such expiration or termination and satisfaction or waiver of the conditions set forth in Article VIII (other than those conditions that are to be satisfied at Closing, but subject to the satisfaction or waiver of those conditions).

2. Documents Delivered to the Seller Parties . At the Closing, the Seller Parties shall have received, and the Purchaser shall execute and deliver, or, if applicable, cause its Affiliates or its permitted assigns to execute and deliver, each of the following documents, executed by the appropriate counterparty party thereto:
3. 1. the Transition Services Agreement;
   2. the TSA License Agreement;
   3. the Manufacture and Supply Agreement;
   4. the Non-Competition, Confidentiality and Development Agreement;
   5. the Bill of Sale;
   6. the Assignment of Patent Rights;
   7. the Assignment of Trademark Rights;
   8. the Assignment of Copyrights;

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

2. 9. the Assignment of Other Intellectual Property Rights;
   10. the Assignment and Assumption Agreement; and
   11. the Non-Competition and Confidentiality Agreement.
3. Documents Delivered to the Purchaser . At the Closing, the Purchaser shall have received, and the applicable Seller Party shall execute and deliver, or if applicable, cause the applicable third party (other than the Purchaser) to execute and deliver, each of the following, executed by the appropriate counterparty party thereto:
4. 1. the Transition Services Agreement;
   2. the TSA License Agreement;
   3. the Manufacture and Supply Agreement;
   4. the Non-Competition, Confidentiality and Development Agreement;
   5. the Bill of Sale;
   6. the Assignment of Patent Rights;
   7. the Assignment of Trademark Rights;
   8. the Assignment of Copyrights;
   9. the Assignment of Other Intellectual Property Rights;
   10. the Assignment and Assumption Agreement;
   11. the Non-Competition and Confidentiality Agreement;
   12. releases of Liens on the Acquired Assets from Bank Hapoalim and Union Bank of Israel, Ltd., in form and substance reasonably satisfactory to Purchaser;

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

3. 13. resolutions duly adopted by the Seller Parties' respective Boards of Directors and shareholders approving this Agreement and the transactions contemplated hereby, in form and substance reasonably satisfactory to the Purchaser;
   14. the Acknowledgement and Waiver in the form attached hereto as Exhibit Q , executed by each of N.M.B. Medical Applications Limited, By-Pass Makafim Ltd. and Existent Ltd.;
   15. the legal opinion of Guy, Bachar & Co., counsel to the Company, dated the Closing Date and addressed to the Purchaser, in the form attached hereto as Exhibit R ; and
   16. all reasonably necessary forms and certificates complying with applicable Law duly executed and acknowledged by the Seller Parties, certifying that the transaction contemplated hereby is exempt from withholding under Section 1445 of the Code.

2.2    Transfer of Acquired Assets . Upon the terms and subject to the conditions contained herein, at the Closing, the Seller Parties will sell, convey, transfer, assign and deliver to Purchaser or such Affiliate of Purchaser as Purchaser will designate in accordance with Section 11.8 hereof, and Purchaser or such Affiliate shall purchase and acquire from the Seller Parties, the Acquired Assets free and clear of all Liens except Permitted Liens.

2.3    Assumption of Liabilities . Upon the terms and subject to the conditions contained herein, at the Closing, Purchaser or such Affiliate of Purchaser as Purchaser will designate as permitted by Section 11.8 hereof shall assume and pay, discharge and perform as and when due, and the Seller Parties shall assign to Purchaser (or such Affiliate of Purchaser) the

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following, and only the following, Liabilities of the Seller Parties relating to the Business (the " Assumed Liabilities "):

1. all Liabilities of Seller Parties or their Affiliates arising from and after the Closing under all Assumed Contracts;
2. all Liabilities of Seller Parties or their Affiliates arising from and after the Phase II Commencement Date (as defined in the Transition Services Agreement) under all Distribution Agreements;
3. all Liabilities set forth on Schedule 2.3(b) ; and
4. all Liabilities arising out of or related to the ownership and use of the Acquired Assets and the operation and conduct of the Business on and after the Closing Date.

2.4    Retained Liabilities . Neither the Purchaser nor any Affiliate of the Purchaser shall assume, or otherwise be responsible for any and all Liabilities of the Seller Parties and their Affiliates not expressly assumed as an Assumed Liability in Section 2.3 , whether liquidated or unliquidated, or known or unknown, whether arising out of occurrences prior to, at or after the Closing Date. Without limitation of the foregoing provisions of this Section 2.4 , it is expressly agreed and understood that neither the Purchaser nor any Affiliate of the Purchaser shall assume any of the following liabilities of the Seller Parties:

1. any Liability of the Seller Parties to or in respect of any employees or former employees of the Seller Parties or their Affiliates, including, (i) any claim or demand of a current or former employee relating to or arising as a result of employment, termination by the Seller Parties thereof, or an employment agreement, whether or not written, between a Seller Party or its Affiliates and any Person, including, for this purpose, with respect to any Person claiming entitlements or benefits on the basis of a claimed employer-employee relationship

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

between a Seller Party and such Person, (ii) any Liability under any employee plan at any time maintained, contributed to or required to be contributed to by or with respect to a Seller Party or its Affiliates or under which a Seller Party or its Affiliates may incur Liability, or any contributions, benefits or Liabilities therefor, or any Liability with respect to a Seller Party's or its Affiliates' withdrawal or partial withdrawal from or termination of any employee plan, (iii) any Liability under the Consolidated Omnibus Budget Reconciliation Act of 1985 (" COBRA ") arising as a result of any act or omission by Seller Parties, (iv) any Liability of a Seller Party or its Affiliates under the WARN Act, and any similar state, local U.S. or non-U.S. law or regulation, (v) any Liability of a Seller Party or its Affiliates for Severance, accrued vacation and/or paid time and/or mandatory or customary payment and/or benefit and/or entitlement for employees of a Seller Party or its Affiliates, and (vi) any claim of an unfair labor practice, or any claim under any state unemployment compensation or worker's compensation law or regulation or under any federal, state or non-U.S. employment discrimination law or regulation, which shall have been asserted prior to the Closing Date or is based on acts or omissions by any Seller Party which occurred prior to the Closing Date;

2. except as provided in Section 2.9 , any Liability of a Seller Party or its Affiliates in respect of any Tax with respect to any Tax period (including any liability for the Taxes of any other Person (i) under Treasury Regulation Section 1.1502- 6 (or any similar provision of state, local, or foreign law), (ii) as a transferee or successor, (iii) by contract or otherwise (iv) and any Liability for Tax attributable to the Acquired Assets or the Business with respect to any Pre-Closing Tax Period, including any Liability for the breach of the terms of any "approved enterprise" programs received by the Company which may result from the transactions contemplated by this Agreement (such Liability for Taxes for the portion of any

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Straddle Period ending on the Closing Date shall be determined as follows: (A) in the case of any Taxes other than Taxes based upon or related to income or receipts, the portion allocable to the Straddle Period ending on the Closing Date shall be deemed to be the amount of such Tax for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the Tax period ending on the Closing Date and the denominator of which is the number of days in the entire Straddle Period; and (B) in the case of any Tax based upon or related to income or receipts, the portion allocable to the Straddle Period ending on the Closing Date shall be deemed equal to the amount which would be payable if the relevant Straddle Period ended on the Closing Date);

3. any Liability to the extent arising from any injury to or death of any person or damage to or destruction of any property, whether based on negligence, breach of warranty, strict liability, enterprise liability or any other legal or equitable theory arising from defects in or use or misuse of products sold or from services performed by or on behalf of any Seller Party or any other Person prior to the Closing Date;
4. any Liability of the Seller Parties for any Action to the extent arising out of or related to claims (i) asserted prior to the Closing Date against any Seller Party or against or in respect of any Acquired Assets or (ii) the basis of which shall have arisen prior to the Closing Date;
5. except as expressly provided in this Agreement with respect to Assumed Contracts, any Liability of the Seller Parties to the extent resulting from entering into, performing its obligations pursuant to or consummating the transactions contemplated by this Agreement;
6. any Liability of a Seller Party or its Affiliates that arises out of or relates to any Excluded Asset;

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7. any Liability of a Seller Party or the Business to any Seller Party's Affiliates arising prior to the Closing Date;
8. any Liability of a Seller Party for the payment of fees or expenses of any broker or finder in connection with the origin, negotiation or execution of this Agreement or in connection with any transaction contemplated hereby; and
9. any Liability of a Seller Party arising out of or relating to the ownership or operation of the Business or the Acquired Assets prior to the Closing Date, including outstanding (immediately prior to the Closing) debts or obligations owed to third parties under any Assumed Contracts.

2.5    Deferred Payments .

1. In consideration of the Seller Parties entering into this Agreement and agreeing to perform the covenants and agreements contained herein, including without limitation the provisions of Section 5.4 , Purchaser or such Affiliate of Purchaser as Purchaser may designate in accordance with Section 11.8 hereof shall pay or cause to be paid to the Company an aggregate amount equal to one hundred twenty million dollars ($120,000,000) as follows (collectively, the " Deferred Payments "), by wire transfer of immediately available funds and in lawful currency of the United States to one or more accounts designated in writing by the Seller Parties:
2. 1. an aggregate amount of forty million dollars ($40,000,000) on January 7, 2008;

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1. 2. an aggregate amount of forty million dollars ($40,000,000) on January 5, 2009; and
   3. an aggregate amount of forty million dollars ($40,000,000) on January 4, 2010.
2. Subject to Section 10.8 hereof, in the event that the Purchaser shall fail to make any Deferred Payment within fifteen (15) days of the due date thereof, then in addition to all other remedies that the Company may have as a result of such failure, all Deferred Payments hereunder shall immediately become due and payable without further act or notice by the Company.
3. In the event that the Purchaser shall fail to make the Second Payment (as defined in the Non-Vertebroplasty Purchase Agreement) when due, then in addition to all other remedies that the Company may have as a result of such failure, all Deferred Payments hereunder shall immediately become due and payable without further act or notice by the Company.

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2.6    Transfer of Distribution Agreements . Upon the Phase II Commencement Date (as defined in the Transition Services Agreement), the Purchaser and the Seller Parties shall execute and deliver such documents as shall be reasonably necessary to effect the transfer and assignment to Purchaser (or one or more Affiliates of Purchaser designated in accordance with Section 11.8 hereof, as the case may be) of all right, title and interest in and to the Distribution Agreements, which documents shall be in form and substance reasonably consistent with the Assignment and Assumption Agreement; provided, however, that the Purchaser shall not be required to assume any obligations thereunder other than obligations incurred after the date hereof in the ordinary course of business consistent with past practice.

2.7    Allocation .

1. The Deferred Payments plus Assumed Liabilities, in each case, to the extent properly taken into account under the Code and the regulations promulgated thereunder, shall be allocated among the Acquired Assets and the non-competition undertakings contained in this Agreement in accordance with Section 1060 of the Code and the Treasury regulations promulgated thereunder (and any similar provision of Israeli or other state, local or foreign Law, as appropriate) as set forth on Exhibit G hereto (as may be revised in accordance with the following sentence, the " Allocation "), which shall be jointly prepared by Purchaser and the Seller Parties before Closing. Purchaser and the Seller Parties agree to revise the Allocation to reflect any Deferred Payments or Assumed Liabilities, in either case to the extent not previously taken into account for purposes of the Allocation.
2. Purchaser and the Seller Parties agree to (i) be bound by the Allocation, (ii) act in accordance with the Allocation in the preparation of all financial statements and the filing of all Tax Returns (including filing Form 8594 with their United States federal income Tax

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Return for the taxable year that includes the Closing Date) and in the course of any Tax audit, Tax review or Tax litigation relating thereto, and (iii) take no position and cause their Affiliates to take no position inconsistent with the Allocation in any filings, declarations or reports with any U.S. or foreign Tax authority, including for income Tax purposes, United States federal and state income Tax and non-U.S. income Tax, unless otherwise required pursuant to a "determination" within the meaning of Section 1313(a) of the Code. Not later than thirty (30) days prior to the filing of their respective Forms 8594 relating to this transaction if such filing is required by Law, each of Purchaser and Seller Parties shall deliver to the other a copy of its Form 8594.

2.8    Transfer Taxes . All transfer, stamp, documentary, sales, use and similar Taxes and any sales, use or other Taxes imposed by reason of the transfers of Acquired Assets provided hereunder (excluding for the removal of doubt income or similar Taxes and further excluding any VAT or similar Taxes, as to which Section 2.9 hereof shall govern) and any deficiency, interest or penalty asserted with respect thereto (" Transfer Taxes ") shall be paid to the relevant Taxing authority by the Seller Parties when due. The Seller Parties shall file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes; provided , that, the Seller Parties shall permit Purchaser to review and comment on each such Tax Return and other documentation prior to filing and shall make such revisions to each such Tax Return and other documentation as are reasonably requested by Purchaser. If required by applicable Law, Purchaser will, and will cause its Affiliates to, join in the execution of any such Tax Returns and other documentation. The Seller Parties shall provide Purchaser with evidence satisfactory to Purchaser that such Transfer Taxes have been paid by the Seller Parties, and Purchaser shall reimburse the Seller Parties for fifty percent (50%) of such Transfer Taxes and

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the expenses incurred by Seller Parties in connection with the preparation of any related Tax Return within fifteen (15) days after the date on which the Seller Parties have provided Purchaser with reasonable evidence thereof.

2.9    VAT and Similar Taxes .

1. The parties understand and agree that the Deferred Payments have been determined exclusive of VAT, and believe as of the date hereof that any applicable VAT rate would be 0%. If in the reasonable opinion of the Company's counsel the VAT rate is not 0%, then Purchaser shall be entitled to file a request pursuant to Section 20 of Israeli Value Added Tax Law with respect to the transactions contemplated hereby (the " VAT Request "). At Purchaser's request and expense, the Company shall cooperate with Purchaser in preparing and filing the VAT Request. If Purchaser does not file a VAT Request, or if the VAT Request is denied, the applicable VAT, to the extent required to be paid, shall be paid by Purchaser to the Company at any time after the date on which the applicable portion of the Deferred Payment is payable in accordance with this Agreement, but not later than two (2) Business Days prior to the date upon which the Company is required to remit the applicable VAT to the Israeli VAT Authorities, against receipt by Purchaser of a valid VAT invoice from the Company. The Company will furnish an invoice to Purchaser reflecting a VAT rate of 0% unless in the reasonable opinion of counsel to the Company the VAT rate is not 0%.

2.10    Withholding .

1. Withholding Under Israeli Law . Subject to the third sentence of this Section 2.10 , the Purchaser shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to the Seller Parties such amounts as the Purchaser is required to deduct and withhold under Israeli Law, with respect to the making of such

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payment. To the extent that amounts are so withheld by the Purchaser, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Seller Parties in respect of whom such deduction and withholding was made by the Purchaser. If, at or prior to the Closing, the Company delivers to the Purchaser a certificate from the Israeli Tax Authority evidencing an exemption from withholding of Taxes, which shall be applicable, valid and in effect as of the Closing, the Purchaser shall honor such withholding tax exemption. The Company has presented to Purchaser, and Purchaser acknowledges receipt of, a certificate from the Israeli Tax Authority evidencing an exemption from withholding of Taxes, which is applicable, valid and in effect, and as such, the Purchaser shall honor such withholding tax exemption.

2. Withholding Under Other Laws . Should a withholding tax be levied by virtue of a double tax treaty or a source country's Law, the parties will undertake reasonable efforts and coordinate in advance of any payment in order to benefit from any tax treaty provision providing for a withholding tax exemption or a reduction of the applicable withholding tax rate; provided that under no circumstance shall Purchaser be entitled to delay any payment under this Agreement or withhold from or reduce all or any portion of any payment under this Agreement as a result of the provisions of this Section 2.10(b) , and the Seller Parties (and any of the stockholders of the Seller Parties) shall not be required to incur or suffer any financial detriment or loss in order to comply with the provisions of this Section 2.10(b) .

2.11    Alternative Arrangements . Notwithstanding anything contained herein or in any agreement or certificate executed and delivered in connection with the transactions contemplated hereby to the contrary, neither this Agreement nor any such agreement or certificate shall constitute an agreement to assign any Contract, Permit or any claim or right or

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any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without the consent of a third party thereto, would constitute a default thereof. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would affect the rights thereunder so that Purchaser would not receive all such rights, the Seller Parties shall, at the expense of the Purchaser, use commercially reasonable efforts to effect alternative arrangements in the form of a license, sublease, or operating agreement in form and substance reasonably satisfactory to Purchaser and the Seller Parties until such time as such consent or approval has been obtained that results in Purchaser receiving substantially all of the benefits under and bearing all the ordinary course costs, liabilities and other obligations with respect to any such Contract or Permit. Upon obtaining the requisite third party consent thereto, each such non-assignable Contract or Permit shall be transferred and assigned to Purchaser hereunder.

ARTICLE III

REPRESENTATIONS AND WARRANTIES RELATING TO THE BUSINESS

The Seller Parties hereby, jointly and severally, represent and warrant to the Purchaser as follows:

3.1    Organization of the Company and the Subsidiary .

1. Each of the Company and the Subsidiary is an entity duly formed, validly existing and in good standing (in jurisdictions that recognize the concept of "good standing") under the Laws of the jurisdiction of its organization, has all requisite company, corporate or other power to own, lease and operate its properties and assets and to carry on the Business as now being conducted. Each of the Company and the Subsidiary is duly qualified or licensed to do business and is in good standing as a foreign entity in each jurisdiction in which the nature of

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its business or ownership or leasing of its properties or assets makes such qualification or licensing necessary.

2. On November 17, 2006, the Board of Directors of the Company recommended to the shareholders of the Company to voluntarily liquidate the Company. On December 10, 2006, the shareholders of the Company duly approved to commence a voluntary liquidation of the Company and duly appointed Motti Beyar as the receiver of the Company.

3.2    Subsidiaries .

1. Schedule 3.2(a) of the Company Disclosure Schedule shows for the Subsidiary: (i) its jurisdiction of organization and each other jurisdiction in which it is qualified to do business, (ii) the authorized and outstanding capital stock or other ownership interests of the Subsidiary, and (iii) the identity of and number of shares of such capital stock or other ownership interests owned (of record and beneficially) by each holder thereof.
2. The Subsidiary is duly organized, validly existing and in good standing in its jurisdiction of organization, with all requisite corporate power to own, lease and operate its properties and assets and to carry on the Business as now being conducted, and is duly qualified and/or licensed to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of its business or ownership or leasing of its properties and assets makes such qualification or licensing necessary.
3. The capital stock and hence the entire equity of the Subsidiary is owned, beneficially and of record, by the Company. Except for the Company's ownership of the Subsidiary, and except as set forth on Schedule 3.2(c) of the Company Disclosure Schedule, neither of the Seller Parties has any equity, membership, joint venture or other ownership interest in any Person.

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3.3    Authority; No Conflict; Required Filings and Consents .

1. Each Seller Party has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. Without limiting the foregoing, the receiver of the Company has all requisite power and authority to operate the business of the Company during the liquidation of the Company and to enter into and execute this Agreement, in each case on behalf of the Company, and to cause the Company to consummate the transactions contemplated hereby. This Agreement, and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of each Seller Party. This Agreement has been duly executed and delivered by each Seller Party. This Agreement constitutes, assuming the due authorization, execution and delivery by the Purchaser, the valid and binding obligation of each Seller Party, enforceable against each Seller Party in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other Laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding at law or in equity. No vote or written consent of any holder of securities of any Seller Party is necessary to approve this Agreement or any of the transactions contemplated hereby except such as has been obtained prior to the date hereof.
2. The execution and delivery by each Seller Party of this Agreement does not, the consummation of the transactions contemplated hereby will not and the Company's commencement of a voluntary liquidation does not, (i) result in the creation of any Liens on any of the Acquired Assets (other than Permitted Liens and Liens created pursuant to the terms of this Agreement and the other agreements and documents executed in connection with the

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consummation of the transactions contemplated hereby), (ii) conflict with, or result in any violation or breach of any provision of the articles of organization, certificate of incorporation, bylaws or other formation documents of either Seller Party, (iii) violate any Laws applicable to either Seller Party, or (iv) except as set forth on Schedule 3.3(b) of the Company Disclosure Schedule, conflict with or result in a breach of, or give rise to a right of termination of or loss of benefit under, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any Material Contract or constitute a default thereunder.

3. Neither the execution and delivery by the Seller Parties of this Agreement nor the consummation of the transactions contemplated hereby nor the Company's commencement of a voluntary liquidation will require any consent, approval, order or authorization of, or registration, declaration or filing with, or notification to any Governmental Entity or any Person, except for (i) such consents, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities Laws, (ii) such filings as may be required under the HSR Act, and (iii) such other consents, approvals, authorizations, permits, filings, registrations and notifications which are listed on Schedule 3.3(c) of the Company Disclosure Schedule.

3.4    Tax Matters .

1. For purposes of this Section 3.4 and other provisions of this Agreement relating to Taxes, the term " Tax " or " Taxes " shall mean all taxes, however denominated, including any interest, penalties, linkage differentials ( hefreshei hatzmada ) or other additions to Tax that may become payable in respect thereof, imposed by any federal, territorial, state, local or foreign government.
2. Except as set forth on Schedule 3.4(b) of the Company Disclosure Schedule, (i) all Tax Returns required to be filed prior to the date hereof by the Company and/or the Subsidiary have been filed, (ii) all Taxes whether or not shown on such Tax Returns have been paid in full or have been accrued on the Company's financial statements, (iii) the Company and the Subsidiary have withheld and paid over all Taxes and other compulsory payments required to have been withheld and paid over prior to the date hereof in connection with amounts paid or owing to any employee, independent contractor, or other third party, (iv) none of the Company and/or the Subsidiary is currently the beneficiary of any extension of time within which to file any Tax Return, and (v) there are no Liens on any of the Acquired Assets with respect to Taxes, other than Permitted Liens.

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3. Except as set forth on Schedule 3.4(c) of the Company Disclosure Schedule: (i) the Tax Returns of the Company and the Subsidiary are not being audited by a taxing authority, and to the Knowledge of the Seller Parties, no such audit is threatened, (ii) neither the Company nor the Subsidiary is a party to any action or proceeding for assessment or collection of Taxes, and, to the Knowledge of the Seller Parties, no such action or proceeding is threatened against the Company or the Subsidiary, (iii) no claim has ever been made by a Governmental Entity in a jurisdiction where either the Company and/or the Subsidiary does not file Tax Returns that such entity is or may be subject to taxation by that jurisdiction, and (iv) no waiver or extension of any statute of limitations is in effect with respect to Taxes or Tax Returns of the Company or the Subsidiary.
4. Except as set forth on Schedule 3.4(d) of the Company Disclosure Schedule, neither the Company nor the Subsidiary is a party to any Tax sharing agreement. Neither the Company nor the Subsidiary has applied for or received any pre-tax ruling from the

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Israel Tax Authority or any other Tax assessing agency regarding the Business or the Acquired Assets, except for a pre-tax ruling relating to the tax liabilities of the Company, its Subsidiary and the shareholders of the Company, and except for any pre-tax ruling that shall not limit the ability of the Seller Parties to sell the Acquired Assets in accordance with the terms hereof or affect or otherwise cause the Purchaser to incur any Liability.

3.5    Absence of Certain Changes or Events . Since June 30, 2006 through the date of this Agreement, except as set forth on Schedule 3.5 of the Company Disclosure Schedule, neither the Company nor the Subsidiary has:

1. made any material change in the accounting methods or practices it follows other than as required by Law or GAAP;
2. made any capital expenditures or commitments exceeding $20,000 per expenditure or commitment, or $100,000 in the aggregate in respect of the Business;
3. sold, assigned, transferred or licensed any patents, trademarks, trade names, copyrights, trade secrets or other intangible assets, in each case used in connection with the Business, except nonexclusive licenses in the ordinary course of business consistent with past practice;
4. sold, leased, licensed, transferred, or otherwise disposed of any of its properties or assets primarily used in the Business, except Inventory sold or transferred in the ordinary course of business consistent with past practice and obsolete or worn out equipment sold or otherwise disposed of in a manner consistent with past practice which was not otherwise material (individually or in the aggregate) to the Business, or canceled any material indebtedness or waived any material claims or rights of material value;

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5. suffered any damage to or destruction or casualty of (whether or not covered by insurance) any asset individually or in the aggregate material to the operation of the Business;
6. failed to pay any creditor any amount arising from the operation of the Business owed to such creditor when due, other than good faith disputes and trade payables arising in the ordinary course of business and not past due more than sixty (60) days;
7. failed to discharge or satisfy any Lien on any of the Acquired Assets, other than Permitted Liens, at or prior to the time that the obligation with respect to such Lien became due;
8. defaulted on any material obligation relating to the conduct or operation of the Business without curing such default;
9. granted any allowances or discounts with respect to the Business outside the ordinary course of business consistent with past practice or sold Inventory materially in excess of reasonably anticipated consumption for the near term outside the ordinary course of business consistent with past practice;
10. incurred or assumed any Liabilities with respect to the Business other than in the ordinary course of business consistent with past practice and Liabilities that are not Assumed Liabilities;
11. amended, cancelled or terminated any Assumed Contract or Permit that is an Acquired Asset or entered into any Material Contract or obtained any Permit primarily related to the Business, other than in the ordinary course of business and consistent with past practices;

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12. failed to carry on the Business in the ordinary course and consistent with past practices so as to preserve the Acquired Assets and the Business and the goodwill of the suppliers, customers, distributors and others having business relations with the Business; or
13. entered into any agreement or commitment, whether in writing or otherwise, to do any of foregoing.

3.6    Title to Property and Assets . Except as set forth on Schedule 3.6(a) of the Company Disclosure Schedule, the Seller Parties have good and valid title to all of the Acquired Assets, free and clear of all Liens, except for Permitted Liens. Following the consummation of the transactions contemplated by this Agreement and the execution of the instruments of transfer contemplated by this Agreement, Purchaser will acquire good and marketable title to all of the Acquired Assets, free and clear of any Liens, other than Permitted Liens. Except as set forth on Schedule 3.6(b) of the Company Disclosure Schedule, the Acquired Assets include all of the tangible and intangible property of the Seller Parties primarily used in, primarily related to or primarily dedicated to the Business. Except as set forth on Schedule 3.6(c) of the Company Disclosure Schedule, all of the tangible Acquired Assets (other than Inventory) are (a) suitable for the uses to which they are currently employed, (b) in good operating condition and repair, subject to normal and ordinary wear and tear, (c) regularly and properly maintained, (d) free from any material defects and (e) are adequate and sufficient for all current operations of the Business. Schedule 3.6(d) of the Company Disclosure Schedule sets forth a true, complete and accurate list of each item, or each group of like items (stating the number), of the tangible Acquired Assets, which list identifies (i) the type and location of each such item or group of items, and (ii) to the extent available, the original acquisition date and cost of such items.

35
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

3.7    Intellectual Property .

1. Schedule 3.7(a) of the Company Disclosure Schedule contains a true and complete list of all registered Intellectual Property Rights, including the jurisdictions in which each such Intellectual Property Right has been issued or registered or in which any application for such issuance and registration has been filed. Schedule 3.7(a)(i) lists all registered Intellectual Property Rights owned by a third party and either used by the Company and/or the Subsidiary pursuant to written contracts or agreements or knowingly incorporated by the Company and/or the Subsidiary into any of the Existing Products. The Company and the Subsidiary collectively are the sole and exclusive owners of, or otherwise have a right to use, all Intellectual Property Rights, free and clear of any Liens other than Permitted Liens; and Schedule 3.7(a)(ii) of the Company Disclosure Schedule contains a true and complete list of all Contracts to which the Company and/or the Subsidiary is a party, relating to any item of Intellectual Property Rights, other than "shrink wrap," "click wrap" and other similar license agreements relating to software applications that are generally available to the public. To the Knowledge of the Seller Parties and except as set forth on Schedule 3.7(a)(ii) of the Company Disclosure Schedule and except for "shrink wrap," "click wrap" and other similar license agreements relating to software applications that are generally available to the public, to the extent that any third party Proprietary Rights are incorporated into, integrated or bundled with, or used by the Company and/or the Subsidiary in the development, manufacture or compilation of any of the Existing Products, the Company and/or the Subsidiary has a written agreement with such third party with respect thereto pursuant to which the Company and/or the Subsidiary either has obtained complete, unencumbered and unrestricted ownership of, and is the exclusive owner of, or has obtained perpetual, nonterminable licenses sufficient for the conduct of the Business as

36
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

currently conducted by the Company and/or the Subsidiary to all such third party Proprietary Rights.

2. All Assumed Contracts entered into between the Company and/or the Subsidiary and a third party for use of third party Proprietary Rights are set forth on Schedule 3.7(b)(i) of the Company Disclosure Schedule. To the Knowledge of the Seller Parties, no party to any Assumed Contract for use of third party Proprietary Rights to which the Company or the Subsidiary is a party is in breach or default in any material respect, and no written notice of termination has been given or, to the Knowledge of the Seller Parties, threatened. The consummation of the transactions contemplated by this Agreement will neither result in the modification, cancellation, termination, suspension of, or acceleration of any payments with respect to such Assumed Contracts, nor give any third party to any such Assumed Contract the right to do any of the foregoing. Following the Closing, and assuming all consents and/or notices required by the Assumed Contracts have been duly obtained and/or given, as the case may be, Purchaser will be permitted to exercise all of the rights of the Company and/or the Subsidiary under the Assumed Contracts to the same extent the Company and/or the Subsidiary would have been able had the transactions contemplated by this Agreement not occurred and without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments that the Company and/or the Subsidiary would otherwise be required to pay. Except as set forth on Schedule 3.7(b)(ii) of the Company Disclosure Schedule, as of the date of this Agreement, neither the Company nor the Subsidiary has granted licenses or covenants not to sue, or sold or otherwise transferred (other than standard licenses or rights to use granted to customers and distributors in the ordinary course of its business) any of the Intellectual Property Rights to any third party, and there exists no obligation by the Company or

37
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

the Subsidiary to assign, license or otherwise transfer any of the Intellectual Property Rights to any third party (other than the obligations of the Seller Parties hereunder).

3. Except as set forth on Schedule 3.7(c)(i) of the Company Disclosure Schedule, as of the date of this Agreement, (i) none of the Intellectual Property Rights, or the Assumed Contracts relating thereto, is the subject of any pending (or, to the Knowledge of the Seller Parties, threatened) litigation, and (ii) no third party has provided the Company or the Subsidiary with written notice that it claims any ownership of or right to use any Intellectual Property Rights, and (iii) to the Knowledge of the Seller Parties, no third party is infringing upon, violating, misusing or misappropriating any Intellectual Property Rights. Except as set forth on Schedule 3.7(c) of the Company Disclosure Schedule, to the Knowledge of the Seller Parties, as of the date of this Agreement, the conduct of the business of the Company and/or the Subsidiary, including the production, marketing, selling, and servicing of their products, is not infringing upon the Proprietary Rights of any third party, and no proceedings have been instituted against, or written notices received by the Company or the Subsidiary, alleging that the Existing Products infringe upon any Proprietary Rights of a third party or that any of the Intellectual Property Rights are invalid. Except as set forth on Schedule 3.7(c)(ii) of the Company Disclosure Schedule, the Seller Parties have not obtained or received any written opinion of counsel regarding any Proprietary Right of a third party (other than Proprietary Rights of the Purchaser).
4. Except as set forth on Schedule 3.7(d) of the Company Disclosure Schedule, all Intellectual Property Rights owned by the Company and/or the Subsidiary were developed by current or former employees, consultants, independent contractors or agents of the Company or the Subsidiary and (if not owned as a matter of law) have been assigned to the

38
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Company or the Subsidiary and, to the Knowledge of the Seller Parties, are free of any claims of such employees, consultants, independent contractors or agents thereto. To the Knowledge of the Seller Parties, none of such employees, consultants, independent contractors or agents has violated any agreement with respect to the use or disclosure of third party confidential information or Proprietary Rights or has developed any technology, Software or other copyrightable, patentable or otherwise proprietary work for the Company or the Subsidiary that is subject to any agreement under which such employee, consultant, independent contractor or agent has assigned or otherwise granted, or is obligated to assign or otherwise grant, to any third party any rights in or to such technology, Software or other copyrightable, patentable or otherwise proprietary work.

5. To the Knowledge of the Seller Parties, the Seller Parties own or possess adequate rights in and to all Intellectual Property Rights necessary to conduct the Business as presently conducted.
6. Except as set forth on Schedule 3.7(f) of the Company Disclosure Schedule, no issued patent or registered trademark of the Company and/or the Subsidiary is subject to any interference, cancellation, reexamination, opposition proceeding or any other actual or, to the Knowledge of the Seller Parties, threatened proceedings challenging statutory or regulatory requirements, scope, validity or ownership, anywhere in the world. To the Knowledge of the Seller Parties, (i) no inequitable conduct that would be in violation of 37 C.F.R. 1.56 has been committed in the prosecution of the Patent Rights, and (ii) no material information was intentionally withheld from any entity requiring disclosure of such information during prosecution of the Patent Rights.

39
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

7. Insofar as applicable to any particular registered Intellectual Property Rights, to the Knowledge of the Seller Parties, all such registered Intellectual Proper