ASSET PURCHASE AGREEMENT

EXHIBIT 10.1

W I T N E S S E T H :

WHEREAS , PHMD desires to sell, assign and transfer to PRI, and PRI desires to purchase and acquire from PHMD, certain assets and properties of the Surgical Services Segment of its  busi­ness (the “ Division ”) of PHMD as herein­after de­scribed, upon the terms and con­di­tions set forth in this Agree­ment; and

NOW, THEREFORE , in consideration of the premises and cove­nants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:

1.                       Sale of Assets .

hereby purchases from PHMD, the fol­lowing as­sets, rights and prop­erties relat­ing to the Division free and clear of any encumbrances other than as specified herein. On the Closing Date, the following assets will be sold:

(i)The accounts receivable relating to the Division, as listed and subject to the terms on Schedule 1(a)(i) , which list contains a complete list of all accounts receivable as of July 30, 2008 that is accurate in material respects, and that will be updated, within 5 business days of the execution of the Agreement, to be accurate in material respects as of the Closing Date, and subject to closing and post-closing adjustment as described in Schedule 1(a)(i) ;

(ii)           The inventories used by the Division in the provision of the surgical services, as listed and subject to the terms on Schedule 1(a)(ii), which list contains a complete list of all inventories as of July 30, 2008 that is accurate in material respects, and that will be updated through a physical count to be conducted on August 8, 2008, and reconciled within 5 business days of the count, to be accurate in material respects as of the Closing Date, and subject to closing and post-closing adjustment as described in Schedule 1(a)(ii) ;

(iii)           The equipment, accessories and other fixed, physical assets used by the Division, as listed and subject to the terms on Schedule 1(a)(iii) , which list contains a complete list of all equipment, accessories and physical assets as of July 30, 2008 that is accurate in material respects, and that will be updated by a physical count on August 8, 2008, as described in Schedule 1(a)iii), and reconciled within 5 business days of the count, and subject to post-closing adjustment as described in Schedule 1(a)(iii) ; and

(iv)           The intangible prop­erty rights relating to the

Division, as listed and subject to the terms on Schedule 1(a)(iv) as of the execution of this Agreement and that will be updated as of the Closing Date.

All of the above described assets are hereinafter sometimes collectively referred to as the “ Acquired Assets .” The foregoing Schedules, and all subsequent Schedules, shall be treated by the parties as confidential.

(b)                  Delivery of Certain Rights, Properties and Information to PRI .  In con­nec­tion with the transfer of the Acquired Assets, PHMD has hereto­fore or will prompt­ly deliv­er to PRI all of the other rights, properties and information in its possession which are listed on confidential Schedule 1(b) here­to. The information shall be shipped, if not already shipped, to PRI collect by motor freight no later than 30 days after the Closing Date. PHMD shall be entitled to retain a copy of such information for archival purposes.

2.                        Purchase Price; the Closing .   The pur­chase price for the Ac­quired Assets and related rights, properties and information transferred under Section 1(b) shall be as set forth on confidential Schedule 2 (the “ Purchase Price ”). PRI will be using the Acquired Assets (e.g. lasers) for rental to customers and, therefore, will present to PHMD suitable exemption certificates, in form satisfactory to PHMD, in order to exempt from sales tax the sale and purchase of the Acquired Assets under Section 1(a) and for the transfer and/or assignment of rights, properties and information under Section 1(b).

(a)            Payment .   Payment of 90% of the Purchase Price, plus or minus closing adjustments, shall be made to PHMD by wire transfer on the Closing Date, in accordance with the wire transfer instructions set forth on confidential Schedule 2(a) . The remaining balance of the Purchase Price shall be made as a post-closing adjustment upon receipt by PRI of the physical count of the inventory and of the lasers, lithotripters and vehicles, per Schedules 1(a)(ii) and 1(a)(iii) .

(b)        Allocation of Consideration . Two  (2) days prior to Closing, the parties will agree to an allocation of the Purchase Price among the Acquired Assets and the rights assigned to PRI under Section 1(b). The allocation will be attached to this Agreement prior to Closing as confidential Schedule 2(b) . The parties hereto will adhere to such allocation for all purposes, including without limitation federal and state income tax purposes. PRI and PHMD agree to cooperate in preparing and filing IRS Form 8594 reflecting that allocation.

(c)            Assumption of Liabilities .  PRI as­sumes no debts or trade payables of the Division existing as of, and incurred prior to, the Closing Date. PRI shall assume only those operating leases under which PHMD rents certain fixed assets as set forth in Schedule2(c) and any other liabilities incurred by the Division on or after the Closing Date, including without limitation all maintenance obligations relating to the Acquired Assets and all operating expenses of the Division.

(d)            The Closing . The purchase and sale provided for in this Agreement (the “ Closing ”) will take place at a location agreed in writing by the parties, commencing at 10:00 a.m. (local time) on the date that is five (5) business days following the satisfaction or waiver of the conditions set forth in Section 3, unless the parties otherwise agree, but in no case will the Closing take place later than August 15, 2008.  The parties contemplate that the date of execution of this Agreement will be August 1, 2008, that the execution of this Agreement will be announced in press releases on August 4, 2008, and that the Closing will be on August 8, 2008. PRI and PHMD contemplate that a joint call will be made, no sooner than the close of the Nasdaq market on the evening of Monday, August 4, 2008, to the Division employees announcing the execution of this Agreement. The date on which the Closing occurs shall be deemed to be the “ Closing Date .” All income and expenses from the Division business arising after the Closing Date shall belong to PRI; all income and expenses from the Division business arising on or before the Closing Date shall belong to PHMD.

3.            Conditions Precedent to Closing; Deliveries at Closing .

(a)            Conditions Precedent to Closing.   The Closing of the proposed transaction will be subject to the following conditions:

(i) At Closing, there will have been no material adverse changes in the business, operations, properties, prospects or condition (financial or otherwise) of the Division;

(ii) The proposed transaction will have been approved by (1) the Board of Directors of PHMD and (2) the Board of Directors of PRI;

(iii) Receipt of all necessary consents and approvals of governmental bodies, lenders, lessors and other third parties;

(iv) Absence of pending or threatened litigation regarding this Agreement or the transactions to be contemplated thereby;

(v) Employment agreements conforming to the standard form set forth in Schedule 7(g) , prepared and procured by PRI and signed by Stewart Jaffe, Tracy Hunt, Walter Reddick, Todd Dahlman and Michael Philipovich;

(vi) Receipt of evidence of recorded UCC3’s; and

(vii) Receipt of evidence that the physical counts described in Schedules 1(a)(ii) and 1(a)(iii) have timely occurred.

(iii) such other deeds, bills of sale, assignments, certificates of title, documents and other instruments of transfer and conveyance, executed by PHMD, as may reasonably be requested by PRI, each in form and substance satisfactory to PRI;

(iv) evidence that the Acquired Assets are free of liens and encumbrances, except as set forth in Schedule 3(b)(iv) ;

(v) landlord’s consents to PHMD’s assignment of the Division’s Real Property Leases (as defined in Section 5.6), or failing any such consent, PHMD’s sublease of such lease to PRI in lieu of assignment, if permitted under the terms of such Real Property Leases;

(vi) a Supply Agreement in accordance with Section 4 hereof;

(vii) the agreement of Michael R. Stewart referenced in Section 7(e)(ii);

(viii) authorization under Section 7(a) to PRI to negotiate checks made payable to PHMD for accounts receivable listed in Schedule 1(a)(i) or for accounts receivable arising on or after the Closing Date which were earned by PRI;

(ix) evidence that the physical counts described in Schedules 1(a)(ii) and 1(a)(iii) have taken place; and

(ix) Certificate of PHMD’s Secretary or Assistant Secretary evidencing the resolutions of the Board of Directors of PHMD authorizing the transactions contemplated by this Agreement.

After the Closing, PHMD will deliver:

(x) the Financial Statements described in Section 5.3 will be delivered by PHMD within 60 days after the Closing Date, to allow PRI time to file the same with the Securities and Exchange Commission;

(xi) evidence that vacation pay accrued to the Closing Date has been paid out to Division employees in the final payroll of PHMD for Division employees following Closing; and

(xii) payment of any post-closing adjustment that may be necessary, the first such payment to be made no later than August 15, 2008.

(c)            PRI’s Deliveries .  At the Closing, PRI will deliver:

(i) the payment of the Purchase Price to PHMD, net of any closing adjustments;

(ii) reimbursement to PHMD of security deposits, as set forth in Schedule 7(h),   reimbursement of any extant  amounts prepaid by PHMD for third-party maintenance contracts for the Division, as set forth in Schedule1(a)(iii ) at para. (ix);

(iii) suitable sales tax exemption certificates as described in Section 2, in form satisfactory to PHMD;

(iv) copies of the five employment agreements described in Section  3(a)(v); and

(v) Certificate of PRI’s Secretary or Assistant Secretary evidencing the resolutions of the Board of Directors of PRI authorizing the transactions contemplated by this Agreement.

After the Closing, PRI will deliver:

(vi) payment of any post-closing adjustments that may be necessary, the first such payment to be made no later than August 15, 2008.

4.                        Agreement to Supply.   (a)   PHMD agrees, in accordance with a separate Supply Agreement in the form set forth in confidential Schedule 4(a) , to continue to supply PRI with LaserPro® diode laser systems, LaserPro® CTH holmium laser systems and UniMax® micromanipulators and fiber delivery systems of PHMD’s own manufacture. PHMD further agrees, in accordance with the same Supply Agreement, to continue to provide field and depot maintenance services for the lasers of its own manufacture and those manufactured by Trimedyne in the Division. (b) Where PHMD has not provided such services, PHMD shall inform PRI of its third-party vendors set forth in Schedule 4(b) and, at PRI’s request, endorse to such vendors that they continue to supply such services to PRI.

5.                        Representations and Warranties of PHMD .   PHMD represents and warrants to PRI as follows, with respect to, and solely with respect to, the Acquired Assets and the Division:

5.1            Organization and Qualification of PHMD .  PHMD is a corporation duly organized, validly existing and in good standing under the laws of Delaware. PHMD has full corporate power and authority to conduct the Division’s business as it is presently being conducted by the Division. PHMD does not do business in any jurisdiction where the failure to be qualified to do business has had a material adverse effect on the Division’s business or the Acquired Assets, it being understood that PRI must secure its own permits, licenses, qualifications and the like to conduct the business of the Division.

5.2            Authorization .  PHMD has all requisite corporate power and authority to execute and deliver this Agreement and any ancillary agreements, and all other instruments and certificates to be delivered at the Closing, and to consummate the transactions contemplated by such agreements and to perform its respective obligations under such agreements.  The execution and delivery of this Agreement and any ancillary agreements by PHMD and the other agreements, instruments and certificates to be delivered at the Closing, and the consummation by PHMD of the transactions contemplated by such agreements have been duly approved by the Board of Directors of PHMD.  No other actions on the part of PHMD are necessary to authorize this Agreement, any ancillary agreements or the other agreements, instruments and certificates to be delivered by PHMD under this Agreement or the ancillary agreements, or the transactions contemplated by such agreements.  This Agreement and the other agreements, instruments, certificates and documents to be delivered by PHMD, including any ancillary agreement, have been (or, if to be executed or delivered after the date of this Agreement, will be) duly executed and delivered by PHMD, and are (or, when executed, will be) legal, valid and binding obligations of PHMD, enforceable against PHMD in accordance with their terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, and other similar laws affecting creditors’ rights generally and by equitable principles.

5.3            Financial Statements.   (a)   The financial statements of the Division for the period ended December 31, 2007 that are to be provided by PHMD to PRI and which are to be delivered after Closing (the “ Financial Statements ”) (i) will have been prepared, based on management reports, substantially in accordance with GAAP that was consistently applied  as of the date or for the period covered thereby, but without accompanying footnotes, and (ii) will fairly and adequately represent the assets, liabilities, and the financial position and financial results (P&L) of the Division as of the date, or for the period, set forth on the Financial Statements. PRI further requires that it receive the Financial Statements in full accordance with GAAP and that the Financial Statements should be audited by an independent auditing firm and further requires unaudited quarterly statements of the Division for 2007, and for such quarters in 2008 (e.g. first and second quarters) as may be required by the Securities and Exchange Commission, all to be compiled and reviewed, in order to fulfill SEC reporting obligations, then at PRI’s request and on PRI’s behalf, PHMD shall engage its independent auditors to perform such audit, compilation and review, and the expense of such work shall be borne by the parties as follows: the first $10,000 by PHMD, then the next $27,000 by PRI, and any additional costs by PHMD.  PHMD shall provide to PRI the unaudited results of operations of the Division from July 1, 2008 to the Closing Date, and the unaudited balance sheet of the Division as of the Closing Date, but prior to the Closing itself.  (b) PHMD represents to PRI that the accounting reports (i.e. profit and loss statement and balance sheet) which PHMD provided to PRI for the Division as of, and for the periods ended, December 31, 2007 and May 31, 2008, are management reports that PHMD generated for managing the business of the Division under the rules of segment reporting. PHMD further represents that, except as set forth in Schedule 5.3 , such reports were materially accurate for purposes of management reporting and, with adjustments disclosed and discussed with PRI and set forth in Schedule 5.3 , were materially accurate for use in segment reporting in PHMD’s financial statements.

5.4            Scope of Rights in Acquired Assets.   The rights, properties, and assets included in the Acquired Assets include substantially all of the rights, properties, and assets, of every kind, nature and description, wherever located that are presently used and have been generally used by PHMD in connection with the Division’s business or that PHMD believes are necessary to own, use or operate the Division as the same is presently conducted.

5.5            Ownership and Condition of Acquired Assets   .   PHMD has, and at the Closing will have, good and marketable ownership or title (or in the case of leased personal property, a good and valid leasehold interest) to all of the Acquired Assets, including its intellectual property rights in and to the use of the common law trademark “SIS™” and of “PhotoMedex® Surgical Services™”, and all the properties and assets reflected in the Financial Statements, subject to no liens, claims, security interests or encumbrance except for permitted liens, claims, security interests or encumbrances.  PHMD owns exclusively, or validly leases or licenses, all Acquired Assets (including at least non-exclusive rights to all material intellectual property, tradenames, trademarks and service marks used in the Division) and all names and images that are or have been used in connection with the Division’s business. PHMD shall convey to PRI at Closing good and marketable title to the Acquired Assets, except as otherwise specified.  The Acquired Assets include all the assets, properties and rights used by PHMD to operate the Division’s business as currently conducted. Substantially all of the lasers, lithotripters and vehicles included in the Acquired Assets are in working condition and reasonable repair. All of the lasers encompassed within the Acquired Assets have been maintained in accordance with the Division’s standard  maintenance schedules. As to all other Acquired Assets, PHMD is selling same “as is, where is”.

  5.6            Real Property Leases .   PHMD is not conveying any real property to PRI.   Schedule 5.6 contains a complete and correct list of all written leases and subleases pursuant to which PHMD leases real property to or from any person (the “ Real Property Leases ”) and from which the Division conducts its business.  With respect to each Real Property Lease, PHMD represents to its knowledge that there are no liens or encumbrances in the leasehold interest that PHMD has by virtue of the Real Property Leases, except insofar as PHMD’s leasehold interest may have been subordinated to the interests of mortgagees on the real property in question.  PHMD enjoys, without material exceptions,  peaceful and undisturbed possession of all the leased real property covered by the Real Property Leases.  To the knowledge of PHMD, no portion of the security deposit under any Real Property Lease has been applied that has not been re-deposited in full.  Except as set forth in Schedule 5.6 , PHMD has not received notice (and has no knowledge) of any special assessment proceedings affecting the leased real property that have not been resolved.  There is no pending or, to the knowledge of PHMD, threatened condemnation affecting any real property that is leased or used by the Division.  Except as set forth in Schedule 5.6, PHMD has not caused any work or improvements to be performed upon or made to any of the leased real property for which there remains outstanding any material payment obligation that could result in the imposition of any material encumbrance on the leased real property.  To the knowledge of PHMD, the current use and occupancy by PHMD of the real property and operation of the Division’s business at the locations of the real property does not violate in any material respect any applicable law, rule or regulation.  PHMD has not received any notice (and has no knowledge) of violation of any easement, covenant, condition, restriction or similar provision in any instrument of record or other unrecorded agreement affecting the real property occupied or used by the Division.

5.7            Contracts and Commitments .

(a)           Except for the contracts listed on Schedule 5.7 (the “ Specified Contracts ”), the Division is not a party to, nor is the Division or any of its Acquired Assets bound by, any:

(i)           contract for the employment of any person on a full-time, part-time, consulting or other basis or contract relating to loans to officers, directors or affiliates, except oral or written contracts for employment at-will or contracts that will be terminated at or prior to Closing ;

(ii)           contract relating to any severance, golden parachute, stay bonus or similar contract with or for the benefit of any person engaged on a full-time, part-time, consulting or other basis requiring payments by PHMD upon the sale of the Division or otherwise;

(iii)           contract relating to borrowed money or other indebtedness (including any capital lease agreements) or the mortgaging, pledging or otherwise placing an encumbrance on any Acquired Asset;

(iv)           contract under which PHMD is lessor of, or permits any third person to hold or operate, any Acquired Asset;

(v)           assignment, license, indemnification, joint development agreement or other contract with respect to any tradenames, trademarks, and service marks or designs used by the Division;

(vi)           sales, distribution, dealer or manufacturer’s representative or franchise contract;

(vii)           contract prohibiting or restricting the Division from freely engaging in any business or competing anywhere in the world, or subject to a change of control provision;

(viii)                      contract with any Division supplier containing any provision permitting any party other than PHMD to renegotiate the price or other terms, or containing any pay-back, retroactive adjustment or other similar provision, upon the occurrence of a failure by PHMD to meet its obligations under contract when due or the occurrence of any other event if such Division contract involves annual consideration in excess of $5,000 or aggregate consideration in excess of $10,000, except where such failure gives the other party to the contract the right to terminate the contract and as a result of such right, the other party may seek to renegotiate any of such terms;

(ix)           contract for the Division’s committed future purchase of fixed assets or the maintenance of such fixed assets subject to future purchase or for the committed future purchase of materials, supplies or equipment involving annual consideration of $5,000 or aggregate consideration in excess of $10,000;

(x)           Division contract relating to joint ventures or other agreements involving a sharing of Division profits;

(xi)           Division contract relating to cleanup, abatement or other actions in connection with environmental liabilities;

(xii)           Division contract relating to any “lock-box” with any financial institution;

(xiii)                      Division guaranty, bond or similar contract;

(xiv)                      Division contracts that require the payment of royalties, commissions, finder’s fees or similar payments which involves in the aggregate annual consideration in excess of $25,000;

(xv)           contract limiting or restricting the disclosure of confidential information by PHMD; or

(xvi)                      material oral contracts not in the ordinary course of business that are binding on the Division.

 (b)           Materially complete and correct copies of each of the written Specified Contracts, including all amendments, waivers and modifications have been delivered, or will be delivered under Section 1(b), to PRI by PHMD. Except as set forth on Schedule 5.7 , PHMD has not received notice of any breach or default under any of the contracts from any other party to the contracts, or sent notice of any breach or default under any of the contracts to any other party to the contracts.  To the knowledge of PHMD, no event has occurred that, with the giving of notice or the lapse of time, or both, would constitute a breach or default on the part of PHMD under any of the contracts; nor to PHMD’s knowledge, has any event occurred which with the giving of notice or the lapse of time, or both, would constitute a breach or default on the part of any other party to any of the contracts. Each contract that contains a change in control clause or otherwise requires the consent or approval of any person in connection with the transactions contemplated by this Agreement is appropriately identified as such on Schedule 5.7 .

5.8            Permits .  To the knowledge of PHMD, PHMD has all material permits necessary for the conduct of, or relating to the operation of, the Division as now being conducted, except as set forth on Schedule 5.8 .  To the knowledge of PHMD, except as set forth on Schedule 5.8 , all permits of PHMD are valid and in full force and effect.  There is not now pending nor, to the knowledge of PHMD, threatened any action by or before any governmental authority to revoke, cancel, rescind, modify, or refuse to renew in the ordinary course of business any of such permits.  Except as set forth on Schedule 5.8 , to the knowledge of PHMD, no notice to, declaration, filing or registration with, or permit from, any governmental authority, or any other person, is required to be made or obtained by PHMD in connection with the execution, delivery or performance of this Agreement or any ancillary agreements by PHMD and the consummation of the transactions contemplated by this Agreement.

5.9            No Conflict or Violation .  Except as set forth on Schedule 5.9 , none of the execution, delivery or performance of this Agreement or any ancillary agreements, the consummation of the transactions contemplated by this Agreement or any ancillary agreements, or compliance by PHMD with any of the provisions of this Agreement or any ancillary agreements, will (a) violate or conflict with any provision of the Articles of Incorporation or Bylaws of PHMD, (b) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, any of the terms, conditions or provisions of any written contract or, to the knowledge of PHMD, any permit or other instrument or obligation (i) to which PHMD is a party or (ii) by which the Acquired Assets are bound, (c) to the knowledge of PHMD violate, in any respect material to the business of the Division, any statute, rule, regulation, ordinance, code, order, judgment, ruling, writ, injunction, decree or award, or (d) impose any encumbrance on the Acquired Assets or the Division’s business.

5.10            Absence of Certain Changes .  Except as disclosed in Schedule 5.10 , since January 1, 2008, PHMD has conducted the Division’s business only in the ordinary course consistent with past practice and there has not occurred: (a) any material adverse change with respect to the Acquired Assets or the Division’s business; (b) any damage to, destruction or loss of any Acquired Asset that is not covered by insurance and is not in the ordinary course of business and that would require expenditures in excess of $5,000 in the aggregate to repair or replace; (c) any change by PHMD in its accounting methods, principles or practices with respect to the Division except as required by any change in, or as appropriate to, GAAP; (d) any revaluation by PHMD of any of its Acquired Assets, including any writing down the value of inventory or writing off accounts receivable, except as such revaluation may happen in the ordinary course of business and consistent with past accounting practices; (e) any sale or disposition of, or encumbrance or security interest placed on, any Acquired Asset, except (1) sales or uses of inventory in the ordinary course of business and in a manner consistent with past practice and (2) dispositions of obsolete or worthless assets; (f) any execution or implementation of any employment, bonus, deferred compensation, severance or similar arrangement or agreement (or amendment of any such agreement) covering employees of the Division, or any increase in employee welfare or retirement benefits covering such employees of the Division, except as such may happen in the ordinary course of business and consistent with past practice, (g) any increase in the salary of any employee in the Division not in the ordinary course of business; (h) any labor dispute or any activity or proceeding by a labor union or labor representative to organize any employees of PHMD, or any lockouts, strikes, slowdowns, picketing, work stoppages or, to the knowledge of PHMD, threats thereof by or with respect to such employees; (i) any termination, or notice of termination, of any material written contract or, to the knowledge of PHMD, material permit, except as happens in the ordinary course of business; (j) any material failure that is inconsistent with past practice to pay the Division’s creditors or to collect debt or obligations owed to the Division or any material change in the Division’s selling, pricing or advertising practices; (k) any commitment to a third party for capital expenditures in excess of $5,000 that is not in the ordinary course of business; (l) any resignation, termination, death or material disability involving any of the Division’s employees, except as happen in the ordinary course of business; (m) any material adverse change in the amount, aging or collectibility of the Division’s accounts receivable or other debts due it or the allowances with respect thereto or in the Division’s accounts payable from those which are to be reflected on the Financial Statements.

5.11            Books and Records .   PHMD   has made and kept (and given PRI reasonable access to) its books and records.

5.12            Litigation . Except as set forth in Section 5.12 , there is no action, order, writ, injunction, judgment or decree outstanding or any claim, complaint, inquiry, suit, litigation, proceeding, hearing, dispute, arbitration, action, audit or investigation (whether by third parties or governmental agencies)  (collectively, “ Actions ”) pending, or to PHMD’s knowledge, threatened (a) involving, against, related to or affecting  PHMD with respect to the Division’s business or the Acquired Assets, or (b) seeking to delay, limit or enjoin the transactions contemplated by this Agreement or any ancillary agreements.  To the knowledge of PHMD, PHMD is not in breach or default with respect to, or subject to, any judgment, order, writ, injunction or decree of any court or other governmental authority that reasonably pertains to the Division, and there are no unsatisfied judgments not otherwise discharged by court order or an applicable statute of limitations, against PHMD, the Division’s business or the Acquired Assets.   Schedule 5.12 contains a brief summary of all material Actions involving, or re