Public Offering Registration - CYNOSURE INC - 8-11-2005

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As filed with the Securities and Exchange Commission on August 11, 2005. Registration No. 333-

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

CYNOSURE, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)

3845 (Primary Standard Industrial Classification Code No.) 5 Carlisle Road Westford, MA 01886 (978) 256-4200
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

04-3125110 (I.R.S. Employer Identification No.)

Michael R. Davin President and Chief Executive Officer Cynosure, Inc. 5 Carlisle Road Westford, MA 01886 (978) 256-4200
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to: David E. Redlick, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 (617) 526-6000 Donald J. Murray, Esq. Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019-6092 (212) 259-8000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”) please check the following box.  If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. 

CALCULATION OF REGISTRATION FEE

Each Class of Securities to be Registered

Proposed Maximum Aggregate Offering Price(1)

Amount of Registration Fee(2)

Class A Common Stock, par value $0.001 per share

$75,000,000

$8,828

(1)

Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

(2)

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED AUGUST 11, 2005

PROSPECTUS

Shares Class A Common Stock $ per share
We are selling shares of our class A common stock, and El.En. S.p.A., as selling stockholder, is selling shares of our class A common stock. We will not receive any proceeds from the sale of the shares by El.En. We have granted the underwriters an option to purchase up to additional shares of class A common stock to cover over-allotments. This is the initial public offering of our class A common stock. We currently expect the initial public offering price to be between $ and $ per share. We have applied to have our class A common stock included for quotation on The Nasdaq National Market under the symbol “CYNO.”

Investing in our class A common stock involves risks. See “Risk Factors” beginning on page 8.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Per Share

Total

Public Offering Price Underwriting Discounts Proceeds to Cynosure (before expenses) Proceeds to El.En. (before expenses) The underwriters expect to deliver the shares to purchasers on or about , 2005.

$ $ $ $

$ $ $ $

Citigroup
UBS Investment Bank Jefferies & Company, Inc. Needham & Company, LLC
, 2005

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different or additional information. We are not making an offer of these securities in any state where an offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of our class A common stock.

TABLE OF CONTENTS
Page

Summary Risk Factors Forward-Looking Statements Use of Proceeds Dividend Policy Capitalization Dilution Selected Consolidated Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Business Management Certain Relationships and Related Party Transactions Principal and Selling Stockholders Description of Capital Stock Shares Eligible for Future Sale Material U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders Underwriting Legal Matters Experts Where You Can Find More Information Index to Financial Statements Ex-3.1 Certificate of Incorporation of the Registrant, as amended Ex-3.2 Form of Restated Certificate of Incorporation of the Registrant Ex-3.3 Bylaws of the Registrant Ex-3.4 Form of Amended and Restated Bylaws of the Registrant Ex-10.1 1992 Stock Option Plan Ex-10.2 2004 Stock Option Plan, as amended Ex-10.3 2005 Stock Incentive Plan Ex-10.4 Employment Agreement, dated September 2003 Ex-10.5 Employment Agreement, dated January 1, 2003 Ex-10.6 Employment Agreement, dated September 2003 Ex-10.7 Exclusive Distribution Agreement Ex-10.8 Exclusive Distribution Agreement Ex-10.9 Promissory Note, dated October 1, 2004 Ex-10.10 Lease, dated January 31, 2005 Ex-21.1 Subsidiaries of the Registrant Ex-23.1 Consent of Ernst & Young LLP

1 8 23 24 24 25 26 28 30 47 68 80 82 84 91 93 97 100 100 100 F-1

Through and including , 2005 (25 days after the date of this prospectus), all dealers that buy, sell or trade our class A common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments and subscriptions. i

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SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that is important to you. Before investing in our class A common stock, you should read this prospectus carefully in its entirety, especially the description of risks of investing in our class A common stock set forth under “Risk Factors,” and our consolidated financial statements and related notes beginning on page F-1. Cynosure, Inc. We develop and market aesthetic treatment systems that are used by physicians and other practitioners to perform non-invasive procedures to remove hair, treat vascular lesions, rejuvenate skin through the treatment of shallow vascular lesions and pigmented lesions and temporarily reduce the appearance of cellulite. Our systems incorporate a broad range of laser and other light-based energy sources, including Alexandrite, pulse dye, Nd:Yag and diode lasers, as well as intense pulsed light. We believe that we are one of only a few companies that currently offer aesthetic treatment systems utilizing Alexandrite and pulse dye lasers, which are particularly well suited for some applications and skin types. We offer single energy source systems as well as workstations that incorporate two or more different types of lasers or pulsed light technologies. We offer multiple technologies and system alternatives at a variety of price points depending primarily on the number and type of energy sources included in the system. Our newer products are designed to be easily upgradeable to add additional energy sources and handpieces as our customers expand their practices. As the aesthetic treatment market evolves to include new customers, such as aesthetic spas and additional physician specialties, we believe that our broad technology base and tailored solutions will provide us with a competitive advantage. We sell over 14 different aesthetic treatment systems and have focused our development and marketing efforts on offering leading, or flagship, products for each of the major aesthetic procedure categories that we address. Our flagship products are:

• the Apogee® Elite TM system for hair removal; • the Cynergy TM system for the treatment of vascular lesions; • the PhotoSilk Plus TM system for skin rejuvenation through the treatment of shallow vascular lesions and pigmented lesions; and • the TriActive® LaserDermology SM system for the temporary reduction of the appearance of cellulite.

We sell our products through a direct sales force in North America, four European countries, Japan and China and through international distributors in 31 other countries. In January 2005, we launched a separate CynosureSpa TM brand with product offerings, tailored marketing and sales personnel focused exclusively on the aesthetic spa market. As of June 30, 2005, we had sold more than 4,500 aesthetic treatment systems worldwide. Our company was founded in 1991. El.En. S.p.A., an Italian company listed on the techSTAR segment of the Italian stock market, Borsa Italiana, that itself and through subsidiaries develops and markets laser systems for medical and industrial applications, acquired a majority of our capital stock in 2002. In September 2003, we recruited a new management team that has implemented a comprehensive reorganization of our company. Our revenues have increased from $23.0 million in 2002 to $41.6 million in 2004, a compound annual growth rate of 35%. Our revenues for the six months ended June 30, 2005 increased 31% to $25.1 million, compared to $19.2 million for the first six months of 2004. Our gross profit margin improved from 43% in 2002 to 51% in 2004, and we achieved profitability in 2004. Aesthetic Market Opportunity Michael Moretti/Medical Insight, Inc., an aesthetic treatment market research firm, estimates that the number of non-invasive aesthetic treatment procedures worldwide using laser and other light-based 1

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technologies will grow from nearly 20 million in 2003 to over 53 million in 2008, representing a compound annual growth rate of over 20%. We estimate that the worldwide market for aesthetic treatment systems based on laser and other light-based technologies will exceed $550 million in 2005. We base this estimate on published market research reports, revenue figures for public companies and our conversations with the managements of private companies that compete in the aesthetic treatment equipment market. Key factors contributing to growth in the markets for aesthetic treatment procedures and aesthetic laser equipment include:

• the aging population of industrialized countries and the rising discretionary income of the “baby boomer” demographic segment; • the desire of many individuals to improve their appearance; • the development of technology that allows for safe and effective aesthetic treatment procedures; • the impact of managed care and reimbursement on physician economics, which has motivated physicians to establish or expand their elective aesthetic practices with procedures that are paid for directly by patients; and • reductions in cost per procedure, which has attracted a broader base of clients and patients for aesthetic treatment procedures.

Aesthetic treatment procedures that use lasers and other light-based equipment have traditionally been performed by dermatologists and plastic surgeons, of whom there are more than 18,000 in the United States, based on published membership information from professional medical organizations. More recently, a broader group of physicians in the United States, including primary care physicians, obstetricians, gynecologists, ophthalmologists and ear, nose and throat specialists, have incorporated aesthetic treatment procedures into their practices. We believe that there are approximately 200,000 of these potential customers in the United States and Canada, representing a significant market opportunity that is only beginning to be addressed by suppliers of lasers and other light-based aesthetic equipment. An aesthetic spa market is also rapidly developing, with approximately 12,000 aesthetic spas in North America in 2004, an increase of approximately 26% from 2002 according to the International Spa Association. In addition to conventional massage and cosmetic treatments, aesthetic spas are beginning to offer non-invasive light-based procedures. We believe that non-traditional physician customers and spa customers currently represent at least one-half of the North American laser and other light-based aesthetic treatment systems market. We also believe that as aesthetic spas and non-traditional physician customers play increasingly important roles as purchasers of aesthetic treatment systems, the market for these products will become even more diverse. Specifically, we expect that owners of different types of aesthetic treatment practices will place different emphases on various system attributes, such as breadth of treatment applications, return on investment, upgradeability and price. Accordingly, we believe that there is significant market opportunity for a company that tailors its product offerings to meet the needs of a wide range of market segments. Our Solution We offer tailored customer solutions to address the market for non-invasive light-based aesthetic treatment applications, including hair removal, treatment of vascular lesions, skin rejuvenation through the treatment of shallow vascular lesions and pigmented lesions and temporary reduction of the appearance of cellulite. We believe our laser and other light-based systems are reliable, user friendly and easily incorporated into both physician practices and spas. We complement our product offerings with comprehensive and responsive service offerings, including assistance with training, aesthetic practice development consultation and product maintenance. 2

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We believe that the following factors enhance our market position:

• Broad Technology Base. Our products are based on a broad range of technology and incorporate different types of lasers, such as Alexandrite, pulse dye, Nd:Yag and diode, as well as intense pulsed light devices. • Expansive Portfolio of Aesthetic Treatment Systems. Our product portfolio of over 14 aesthetic treatment systems includes single energy source systems as well as workstations that incorporate two or more different types of lasers or light-based technologies. By offering multiple technologies and system alternatives at a variety of price points, we seek to provide customers with tailored solutions that meet the specific needs of their practices while providing significant flexibility in their level of investment. • Upgrade Paths Within Product Families. We have designed our new products to facilitate upgrading within product families. For example, our Cynergy system and our redesigned Apogee Elite system are multiple energy source workstations that can be upgraded from our single energy source systems. We began shipping these new upgradeable systems in mid-2005. • Global Presence. We have offered our products in international markets for over 14 years, with approximately 45% of our revenue generated from international markets in 2004. We target international markets through a direct sales force in four European countries, Japan and China and through international distributors in 31 other countries. • Strong Reputation Established Over 14-Year History. We have been in the business of developing and marketing aesthetic treatment systems for over 14 years. As a result of this history, we believe the Cynosure brand name is associated with a tradition of technological leadership.

Our Business Strategy Our goal is to become the worldwide leader in providing non-invasive aesthetic treatment systems. The key elements of our business strategy to achieve this goal are to:

• Offer a Full Range of Tailored Aesthetic Solutions. Our product portfolio incorporates a variety of laser and light sources at various price points across many aesthetic applications to address the needs of the traditional physician customer market as well as the growing non-traditional physician customer market. • Launch Innovative New Products and Technologies for Emerging Non-Invasive Aesthetic Applications. Since 2002, we have introduced 11 new products. We introduced two of our flagship products, the Apogee Elite and TriActive LaserDermology systems, in 2004 and two of our flagship products, the Cynergy and the PhotoSilk Plus systems, in 2005. We are also working on new technologies for emerging aesthetic applications, such as tattoo removal and acne. • Pursue Spa Market with Dedicated Organization. In January 2005, we launched our separate CynosureSpa brand with tailored marketing and sales personnel focused exclusively on penetrating the aesthetic spa market. We have also introduced products specifically designed for the aesthetic spa market, such as the TriActive LaserDermology system and the PhotoLight TM system. • Provide Comprehensive, Ongoing Customer Service. We support our customers with a worldwide service organization to provide product installation and ongoing maintenance services. Most of our new products are modular in design to enable quick and efficient service and support. We offer our North American customers additional training, business development and marketing services through a third party consulting firm. • Generate Additional Revenue from Existing Customer Base. We believe that there are opportunities for us to generate additional revenue from existing customers who are already familiar

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with our products through additional sales of standalone systems, upgrades to our new modular products and increasing the percentage of our customers that enter into service contracts.

Relationship with El.En. S.p.A. Upon completion of this offering, El.En. S.p.A. will own % of our outstanding class B common stock, representing % of the aggregate number of shares of our class A and class B common stock outstanding. El.En. has agreed with the underwriters for this offering that, without the prior written consent of Citigroup Global Markets Inc., the lead-managing underwriter of this offering, it will not sell or otherwise dispose of any shares of our common stock for a period of 24 months after the date of this prospectus, other than:

• up to 33% of the shares of our common stock that it beneficially owned on the date of this prospectus during the period between 12 and 18 months after the date of this prospectus; and • up to an additional 33% of the shares of our common stock that it beneficially owned on the date of this prospectus during the period between 18 and 24 months after the date of this prospectus.

We are party to distribution agreements with El.En. under which we distribute products manufactured by El.En., including our Cynergy PL TM , PhotoLight, PhotoSilk Plus and TriActive LaserDermology products. These agreements provide us with exclusive worldwide distribution rights for the Cynergy PL product and exclusive distribution rights in the United States and Canada for the PhotoLight, PhotoSilk Plus and TriActive LaserDermology products. Each of the distribution agreements has an initial term that expires in January 2012, and each will automatically renew for additional one-year terms unless either party provides notice of termination within a specified period prior to the expiration of the initial term or any subsequent renewal term. Prior to the closing of this offering, we and El.En. intend to enter into an agreement providing that, to the extent El.En. is required to make any indemnity payments to the underwriters pursuant to the underwriting agreement relating to this offering, and such indemnity payments relate to matters as to which El.En., after reasonable inquiry, had no knowledge, we will reimburse El.En. for such indemnity payments. This agreement will not affect the respective liability of us and El.En. to the underwriters pursuant to the underwriting agreement. See “ Underwriting.” See “Risk Factors — Risks Related to Our Relationship with El.En.,” “Business — El.En. Commercial Relationship,” “Certain Relationships and Related Party Transactions” and “Underwriting.” Our Dual Class Capital Structure Prior to the completion of this offering, we will restate our certificate of incorporation to, among other things, create a dual class capital structure by authorizing class A and class B common stock and reclassifying all of our outstanding shares of previously existing common stock into shares of class B common stock. In addition, upon our filing of the restated certificate of incorporation, each outstanding option to purchase shares of our common stock will automatically convert into an option to purchase an equal number of shares of our class B common stock, with no other changes to the terms of the option. We and El.En. are selling shares of class A common stock in this offering, and the only shares of our class A common stock to be outstanding immediately following this offering will be the shares being sold in this offering. The holders of class A common stock and class B common stock have identical rights and will be entitled to one vote per share with respect to each matter presented to our stockholders on which the holders of common stock are entitled to vote, except as discussed below. Until El.En. beneficially owns less than 20% of the aggregate number of shares of our class A common stock and class B common stock 4

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outstanding, or less than 50% of the number of shares of our class B common stock outstanding, the holders of shares of our class B common stock will have the right to:
• elect a majority of our board of directors; • approve amendments to our bylaws adopted by our stockholders; and • approve amendments to any provision of our certificate of incorporation relating to the rights of holders of common stock, the powers, election and classification of the board of directors, corporate opportunities and the rights of holders of class A common stock and class B common stock to elect and remove directors, act by written consent and call special meetings of stockholders.

In addition, the holders of shares of our class B common stock will vote with our class A stockholders in the election of the remaining directors. Shares of class B common stock will convert automatically into class A common stock upon any transfer of such shares, whether or not for value. Shares of class B common stock are also convertible into class A common stock upon the occurrence of events specified in our restated certificate of incorporation. See “Description of Capital Stock — Common Stock.” Risks Associated with Our Business Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary. We have a history of operating losses, and we may not maintain profitability. We rely on third party suppliers, including some sole source suppliers, for the components and subassemblies of many of our products. We compete against companies that have longer operating histories, more established products and greater resources than we do. We rely on third party distributors to market, sell and service a significant portion of our products. El.En. will continue to have substantial control over us after this offering. We depend on El.En. for several of the products that we market and sell. El.En. markets and sells products that compete with our products. Our Corporate Information We were incorporated under the laws of the State of Delaware in July 1991. Our principal executive offices are located at 5 Carlisle Road, Westford, Massachusetts 01886, and our telephone number is (978) 256-4200. Our website address is www.cynosurelaser.com. The information on our website is not a part of this prospectus.

Except for our financial statements included in this prospectus, the capitalization table set forth under “Capitalization” or where otherwise expressly indicated, this prospectus assumes for all purposes that our restated certificate of incorporation has been filed and become effective and that our previously existing shares of and options to purchase common stock have been converted into and reclassified as shares of and options to purchase class B common stock. In this prospectus, we refer to our to be authorized class A common stock and class B common stock collectively as our common stock. Cynosure ®, Apogee ®, PhotoGenica ® and SmartCool ® are our registered trademarks. We also have the following trademarks and servicemarks: Acclaim TM , Affinity TM , Apogee Elite TM , Cynergy TM , CynosureSpa TM , LaserDermology SM , Photolight TM , PhotoSilk TM , PhotoSilk Plus TM and VStar TM . TriActive ® is the registered trademark of El.En. S.p.A. Each of the other trademarks, trade names or service marks appearing in this prospectus belongs to its respective holder. 5

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The Offering

Class A common stock offered by: Us El.En. Total Common stock to be outstanding after this offering: Class A Class B Total Common stock to be held by El.En. immediately after this offering: Class B shares, which El.En. has agreed not to sell for 12 to 24 months following this offering, as described under “Shares Eligible for Future Sale — Lock-up Agreements.” One vote for each share of class A common stock and one vote for each share of class B common stock on all matters on which stockholders are entitled to vote, except holders of class B common stock will have the right separately (1) to elect and remove a majority of the members of our board of directors, (2) to approve amendments to our bylaws adopted by our stockholders and (3) to approve amendments to specified provisions of our certificate of incorporation. See “Description of Capital Stock — Common Stock.” We expect to use our net proceeds from this offering to expand our sales, marketing and distribution capabilities, to fund our research and development activities and for general corporate purposes, including potential acquisitions of complementary products, technologies or businesses. We will not receive any proceeds from the sale of shares of class A common stock by El.En. Risk Factors See “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in shares of our class A common stock. CYNO shares shares shares shares shares shares

Voting Rights

Use of Proceeds

Proposed Nasdaq National Market symbol

The number of shares of our class A common stock and class B common stock to be outstanding after this offering is based on no shares of class A common stock and 6,242,877 shares of class B common stock outstanding as of June 30, 2005. The number of shares to be outstanding after this offering excludes:
• 1,862,642 shares of class B common stock issuable upon the exercise of stock options outstanding as of June 30, 2005 at a weighted average exercise price of $3.31 per share; and • 541,342 shares of class A common stock reserved for future issuance under our equity compensation plans as of the date of this prospectus.

Unless otherwise noted, the information in this prospectus assumes that the underwriters do not exercise their over-allotment option. 6

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Summary Consolidated Financial Data The following summary consolidated financial data for the years ended December 31, 2002, 2003 and 2004 have been derived from our audited financial statements. The summary consolidated financial data as of June 30, 2005 and for the six month periods ended June 30, 2004 and 2005 have been derived from our unaudited financial statements. The unaudited summary consolidated financial statement data includes, in our opinion, all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of our financial position and results of operations for these periods. Operating results for the six months ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005. You should read this data together with our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus. The as adjusted consolidated balance sheet data gives effect to the sale by us of shares of class A common stock in this offering at an assumed initial public offering price of $ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
Year Ended December 31, 2002 2003 2004 Six Months Ended June 30, 2004 2005

(In thousands, except per share data)

Consolidated Statement of Operations Data: Revenues Cost of revenues Gross profit Operating expenses: Sales and marketing Research and development General and administrative Stock-based compensation Total operating expenses (Loss) income from operations Interest expense, net Gain on sale of investment Other income (expense), net (Loss) income before (benefit) provision for income taxes and minority interest (Benefit) provision for income taxes Minority interest in net income of subsidiary Net (loss) income Basic net (loss) income per share Diluted net (loss) income per share Basic weighted average common shares outstanding Diluted weighted average common shares outstanding

$

22,962 13,198 9,764 5,777 2,379 3,979 — 12,135 (2,371 ) (25 ) — 298 (2,098 ) (301 ) 70

$

27,125 14,207 12,918 8,720 2,481 3,766 76 15,043 (2,125 ) (62 ) — 1,822 (365 ) 72 63

$

41,633 20,465 21,168 12,590 3,139 4,092 136 19,957 1,211 (122 ) 3,019 976 5,084 (276 ) 64

$

19,171 9,721 9,450 5,762 1,406 1,899 89 9,156 294 (71 ) 3,019 493 3,735 97 27

$

25,080 11,632 13,448 8,048 1,523 2,364 245 12,180 1,268 (45 ) — (281 ) 942 383 35

$ $ $

(1,867 ) (0.35 ) (0.35 ) 5,272 5,272

$ $ $

(500 ) (0.09 ) (0.09 ) 5,530 5,530

$ $ $

5,296 0.93 0.92 5,700 5,773

$ $ $

3,611 0.65 0.65 5,530 5,530

$ $ $

524 0.08 0.07 6,226 7,234

As of June 30, 2005 Actual (In thousands) As adjusted

Consolidated Balance Sheet Data: Cash and cash equivalents Working capital Total assets Capital lease obligation, net of current portion

$

3,198 11,416 30,649 761

$

Retained earnings Total stockholders’ equity

2,834 15,273

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RISK FACTORS Investing in our class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information included in this prospectus, including the financial statements and related notes appearing at the end of this prospectus, before deciding to invest in our class A common stock. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations may be materially harmed. In this event, the market price of our class A common stock could decline and you could lose part or all of your investment. Risks Related to Our Business and Industry We have a history of operating losses, and we may not maintain profitability. Although we were profitable in 2004 and for the first six months of 2005, we incurred operating losses for three of the last five years. Our net losses were approximately $6.0 million in 2001, $1.9 million in 2002 and $0.5 million in 2003. We may not be able to sustain or increase profitability on a quarterly or annual basis. If we are unable to maintain profitability, the market value of our stock will decline, and you could lose all or a part of your investment.

If we fail to obtain Alexandrite rods or our air cooling system from our sole suppliers, our ability to manufacture and sell our products and components would be impaired. We use Alexandrite rods to manufacture the lasers for our Apogee products. We depend exclusively on Northrop Grumman SYNOPTICS to supply Alexandrite rods to us, and we are aware of no alternative supplier meeting our quality standards. We offer our SmartCool ® treatment cooling systems for use with our laser aesthetic treatment systems, and we depend exclusively on Zimmer Elektromedizin GmbH to supply SmartCool systems to us. Both Alexandrite lasers and our SmartCool systems are important to our business. We do not have long-term arrangements with Northrop Grumman SYNOPTICS or Zimmer Elektromedizin for the supply of Alexandrite rods or SmartCool systems, but instead purchase from them on a purchase order basis. Northrop Grumman SYNOPTICS and Zimmer Elektromedizin are not required, and may not be able or willing, to meet our future requirements at current prices, or at all. Any extended interruption in our supplies of Alexandrite rods or our SmartCool treatment cooling systems could materially harm our business.

We compete against companies that have longer operating histories, more established products and greater resources than we do, which may prevent us from achieving further market penetration or improving operating results. Competition in the aesthetic laser industry is intense. Our products compete against products offered by public companies, such as Candela Corporation, Cutera, Inc., Laserscope, Lumenis Ltd., Palomar Medical Technologies, Inc. and Syneron Medical Ltd., as well as several smaller specialized private companies, such as Radiancy, Inc. and Thermage, Inc. Some of these competitors have significantly greater financial and human resources than we do and have established reputations, as well as worldwide distribution channels and sales and marketing capabilities that are larger and more established than ours. Additional competitors may enter the market, and we are likely to compete with new companies in the future. We also face competition from medical products, such as BOTOX® and collagen injections, and surgical and non-surgical aesthetic procedures, such as face lifts, sclerotherapy, electrolysis, microdermabrasion and chemical peels. We may also face competition from manufacturers of pharmaceutical and other products that have not yet been developed. As a result of competition with these companies, products and procedures, we could experience loss of market share and decreasing revenue as well as reduced prices and profit margins, any of which would harm our business and operating results. 8

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Our ability to compete effectively depends upon our ability to distinguish our company and our products from our competitors and their products. Factors affecting our competitive position include: • product performance and design; • ability to sell products tailored to meet the applications needs of clients and patients; • quality of customer support; • product pricing; • product safety; • sales, marketing and distribution capabilities; • success and timing of new product development and introductions; and • intellectual property protection. Some of our competitors have more established products and customer relationships than we do, which could inhibit our further market penetration efforts. For example, we have encountered, and expect to continue to encounter, situations where, due to pre-existing relationships, potential customers determine to purchase additional products from our competitors. If we are unable to compete effectively, our business and operating results will be harmed. In addition, some of our current and potential competitors have significantly greater financial, research and development, manufacturing and sales and marketing resources than we have. Our competitors could utilize their greater financial resources to acquire other companies to gain enhanced name recognition and market share, as well as to acquire new technologies or products that could effectively compete with our product lines.

If we do not continue to develop and commercialize new products and identify new markets for our products and technology, we may not remain competitive, and our revenues and operating results could suffer. The aesthetic laser and light-based treatment system industry is subject to continuous technological development and product innovation. If we do not continue to be innovative in the development of new products and applications, our competitive position will likely deteriorate as other companies successfully design and commercialize new products and applications. Accordingly, our success depends in part on developing new and innovative applications of laser and other light-based technology and identifying new markets for and applications of existing products and technology. If we are unable to develop and commercialize new products and identify new markets for our products and technology, our products and technology could become obsolete and our revenues and operating results could be adversely affected. To remain competitive, we must: • develop or acquire new technologies that either add to or significantly improve our current products; • convince our target customers that our new products or product upgrades would be attractive revenue-generating additions to their practices; • sell our products to non-traditional customers, including primary care physicians, gynecologists and other specialists; • identify new markets and emerging technological trends in our target markets and react effectively to technological changes; and • maintain effective sales and marketing strategies.

If our new products do not gain market acceptance, our revenues and operating results could suffer. The commercial success of the products and technology we develop will depend upon the acceptance of these products by providers of aesthetic procedures and their patients and clients. It is difficult for us to predict how successful recently introduced products, or products we are currently developing, will be over

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the long term. If the products we develop do not gain market acceptance, our revenues and operating results could suffer. We expect that many of the products we develop will be based upon new technologies or new applications of existing technologies. It may be difficult for us to achieve market acceptance of some of our products, particularly the first products that we introduce to the market based on new technologies or new applications of existing technologies.

If demand for our aesthetic treatment systems by non-traditional physician customers and spas does not develop as we expect, our revenues will suffer and our business will be harmed. Our revenues from non-traditional physician customers and spa purchasers of our products have increased significantly since January 1, 2004. We believe, and our growth expectations assume, that we and other companies selling lasers and other light-based aesthetic treatment systems have only begun to penetrate these markets and that our revenues from selling to these markets will continue to increase. If our expectations as to the size of these markets and our ability to sell our products to participants in these markets are not correct, our revenues will suffer and our business will be harmed.

We rely upon third party suppliers for the components and subassemblies of many of our products, making us vulnerable to supply shortages and price fluctuations, which could harm our business. Many of the components and subassemblies that comprise our aesthetic treatment systems are currently manufactured for us by a limited number of suppliers. In addition, one third party supplier assembles and tests many of the components and subassemblies for our Apogee, Cynergy, Acclaim and VStar product families. We do not have long-term contracts with any of these third parties, including the third party supplier that assembles many of our components and subassemblies, for the supply of parts or services. Any interruption in the supply of components or subassemblies, or our inability to obtain substitute components or subassemblies from alternate sources at acceptable prices in a timely manner, or our inability to obtain assembly and testing services, could impair our ability to meet the demand of our customers, which would have an adverse effect on our business and operating results.

We sell our products in numerous international markets. Our operating results may suffer if we are unable to manage our international operations effectively. We sell our products in 48 foreign countries, and we therefore are subject to risks associated with having international operations. International sales accounted for 58% of our revenue for 2003, 45% of our revenue for 2004 and 43% of our revenue for the first six months of 2005. Our international sales are subject to a number of risks, including: • foreign certification and regulatory requirements; • difficulties in staffing and managing our foreign operations; • import and export controls; and • political and economic instability.

Revenue from our international sales could be adversely affected by fluctuations in currency exchange rates, which would cause our operating results to suffer. We face risks associated with changes in foreign currency exchange rates. Revenues from our international operations that were recorded in U.S. dollars represented approximately 45% of our total 2004 international revenues. Substantially all of the remaining 55% of our total 2004 revenues from international operations were sales in euros, British pounds and Japanese yen. Since we report our financial position and results of operations in U.S. dollars, our reported results of operations may be adversely affected by changes in the exchange rate between these currencies and the U.S. dollar. We have not historically engaged in hedging activities relating to our non-U.S. dollar operations. We may incur negative foreign currency translation charges as a result of changes in currency exchange rates, which could cause our operating results to suffer. 10

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We rely on third party distributors to market, sell and service a significant portion of our products. If these distributors do not commit the necessary resources to effectively market, sell and service our products or if our relationships with these distributors are disrupted, our business and operating results may be harmed. In North America, the United Kingdom, Germany, Spain, France, Japan and China, we sell our products through our internal sales organization. Outside of these markets, we sell our products through third party distributors. Our sales and marketing success in these other markets depends on these distributors, in particular their sales and service expertise and relationships with the customers in the marketplace. Sales of our aesthetic treatment systems by third party distributors represented 21% of our revenue in 2003, 13% of our revenue in 2004 and 20% of our revenue in the first six months of 2005. We do not control these distributors, and they may not be successful in marketing our products. Third party distributors may terminate their relationships with us, or fail to commit the necessary resources to market and sell our products to the level of our expectations. Currently, we have written distributor agreements in place with only nine of our 19 third party distributors. The third party distributors with which we do not have written distributor agreements may terminate their relationships with us and stop selling and servicing our products with little or no notice. If current or future third party distributors do not perform adequately, or if we fail to maintain our existing relationships with these distributors or fail to recruit and retain distributors in particular geographic areas, our revenue from international sales may be adversely affected and our operating results could suffer.

Because we do not require training for users of our products, and sell our products to non-physicians, there exists an increased potential for misuse of our products, which could harm our reputation and our business. Federal regulations allow us to sell our products to or on the order of practitioners licensed by law to use or order the use of a prescription device. The definition of “licensed practitioners” varies from state to state. As a result, our products may be purchased or operated by physicians with varying levels of training and, in many states, by non-physicians, including nurse practitioners, chiropractors and technicians. Outside the United States, many jurisdictions do not require specific qualifications or training for purchasers or operators of our products. We do not supervise the procedures performed with our products, nor do we require that direct medical supervision occur. We and our distributors offer product training sessions, but neither we nor our distributors require purchasers or operators of our products to attend training sessions. The lack of required training and the purchase and use of our products by non-physicians may result in product misuse and adverse treatment outcomes, which could harm our reputation and expose us to costly product liability litigation.

Product liability suits could be brought against us due to a defective design, material or workmanship or due to misuse of our products. These lawsuits could be expensive and time consuming and result in substantial damages to us and increases in our insurance rates. If our products are defectively designed, manufactured or labeled, contain defective components or are misused, we may become subject to substantial and costly litigation by our customers or their patients or clients. Misusing our products or failing to adhere to operating guidelines for our products can cause severe burns or other damage to the eyes, skin or other tissue. We are routinely involved in claims related to the use of our products. Product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizable damage awards against us. Our current insurance coverage may not be sufficient to cover these claims. Moreover, in the future, we may not be able to obtain insurance in amount or scope sufficient to provide us with adequate coverage against potential liabilities. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, could harm our reputation in the industry and reduce product sales. We would need to pay any product losses in excess of our insurance coverage out of cash reserves, harming our financial condition and adversely affecting our operating results. 11

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Our financial results may fluctuate from quarter to quarter, which makes our results difficult to predict and could cause our results to fall short of expectations. Our financial results may fluctuate as a result of a number of factors, many of which are outside of our control. For these reasons, comparing our financial results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our future quarterly and annual expenses as a percentage of our revenues may be significantly different from those we have recorded in the past or which we expect for the future. Our financial results in some quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed in this “Risk Factors” section, and the following factors, may adversely affect our financial results: • continued availability of attractive equipment leasing terms for our customers, which may be negatively influenced by interest rate increases; • increases in the length of our sales cycle; and • reductions in the efficiency of our manufacturing processes.

If there is not sufficient demand for the procedures performed with our products, practitioner demand for our products could decline, which would adversely affect our operating results. Most procedures performed using our aesthetic treatment systems are elective procedures that are not reimbursable through government or private health insurance. The cost of these elective procedures must be borne by the patient. As a result, the decision to undergo a procedure that utilizes our products may be influenced by a number of factors, including: • patient awareness of procedures and treatments; • the cost, safety and effectiveness of the procedure and of alternative treatments; • the success of our and our customers’ sales and marketing efforts to purchasers of these procedures; and • consumer confidence, which may be affected by economic and other conditions. If there is not sufficient demand for the procedures performed with our products, practitioner demand for our products would be reduced, which would adversely affect our operating results.

The expense and potential unavailability of liability insurance coverage for our customers could adversely affect our ability to sell our products and our financial condition. Some of our customers and prospective customers have had difficulty in procuring or maintaining liability insurance to cover their operation and use of our products. Medical malpractice carriers are withdrawing coverage in some states or substantially increasing premiums. If this trend continues or worsens, our customers may discontinue using our products, and potential customers may elect not to purchase laser and other light-based products.

Our business and operations are experiencing rapid growth. If we fail to effectively manage our growth, our business and operating results could be harmed. We have experienced significant growth in the scope of our operations and the number of our employees. For example, our revenue increased from $23.0 million in 2002 to $41.6 million in 2004, and the number of our employees increased from 138 at the beginning of 2003 to 178 as of June 30, 2005. This growth has placed significant demands on our management, as well as our financial and operational resources. If we do not effectively manage our growth, the efficiency of our operations and the quality of our products could suffer, which could adversely affect our business and operating results. To effectively manage this growth, we will need to continue to: • implement appropriate operational, financial and management controls, systems and procedures; • expand our manufacturing capacity and scale of production; 12

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• expand our sales, marketing and distribution infrastructure and capabilities; and • provide adequate training and supervision to maintain high quality standards.

We may be unable to attract and retain management and other personnel we need to succeed. Our success depends on the services of our senior management and other key research and development, manufacturing, sales and marketing employees. The loss of the services of one or more of these employees could have a material adverse effect on our business. We consider retaining Michael R. Davin, our president and chief executive officer, to be key to our efforts to develop, sell and market our products and remain competitive. We have entered into an employment agreement with Mr. Davin; however, the employment agreement is terminable by him on short notice and may not ensure his continued service with our company. Our future success will depend in large part upon our ability to attract, retain and motivate highly skilled employees. We cannot be certain that we will be able to do so.

Any acquisitions that we make could disrupt our business and harm our financial condition. From time to time, we evaluate potential strategic acquisitions of complementary businesses, products or technologies, as well as consider joint ventures and other collaborative projects. We may not be able to identify appropriate acquisition candidates or strategic partners, or successfully negotiate, finance or integrate any businesses, products or technologies that we acquire. We do not have any experience with acquiring companies or products. Any acquisition we pursue could diminish the proceeds from this offering available to us for other uses or be dilutive to our stockholders, and could divert management’s time and resources from our core operations. Risks Related to Our Relationship with El.En. El.En. will continue to have substantial control over us after this offering and could delay or prevent a change of control. Even after this offering, El.En., our largest stockholder, will be able to control the election of a majority of the members of our board of directors. Immediately prior to this offering, El.En. held 78% of our outstanding common stock. Immediately following this offering, El.En. will own % of our outstanding class B common stock, which will comprise % of our aggregate outstanding common stock, or % of our aggregate outstanding common stock if the underwriters exercise their over-allotment right in full. Until El.En. beneficially owns less than 20% of the aggregate number of shares of our class A common stock and class B common stock outstanding or less than 50% of the number of shares of our class B common stock outstanding, El.En., as holder of a majority of the shares of our class B common stock, will have the right: • to elect a majority of the members of our board of directors; • to approve amendments to our bylaws adopted by our stockholders; and • to approve amendments to any provisions of our restated certificate of incorporation relating to the rights of holders of common stock, the powers, election and classification of the board of directors, corporate opportunities and the rights of holders of class A common stock and class B common stock to elect and remove directors, act by written consent and call special meetings of stockholders. In addition, the holders of shares of our class B common stock will vote with our class A stockholders for the election of the remaining directors. Because El.En. will be able to control the election of a majority of our board, and because of its substantial holdings of our capital stock, El.En. will likely have the ability to delay or prevent a change of control of our company that may be favored by other directors or stockholders and otherwise exercise substantial control over all corporate actions requiring board or stockholder approval. 13

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We currently depend on El.En. for our Cynergy PL, PhotoLight, PhotoSilk Plus and TriActive LaserDermology products. If our distribution agreements with El.En. terminate, we will no longer be able to sell these products, and our business will be harmed. El.En. manufactures and owns the intellectual property rights to the Cynergy PL, PhotoLight, PhotoSilk Plus and TriActive LaserDermology products. We distribute these products pursuant to distribution agreements we have with El.En. These agreements provide us with exclusive worldwide distribution rights for our Cynergy PL product, and exclusive North American distribution rights for our PhotoLight, PhotoSilk and TriActive LaserDermology products. For the six months ended June 30, 2005, we derived 6% of our revenues from our distribution relationship with El.En., and for the year ended December 31, 2004, we derived 4% of our revenues from this relationship. Although we have distribution rights for the PhotoLight, PhotoSilk Plus, Cynergy PL and TriActive LaserDermology products during the terms of the agreements, El.En. may discontinue production of these products at any time and must make reasonable efforts to provide one year’s notice to us prior to such discontinuation. Additionally, El.En. may not be able or willing to provide these products to us after the expiration of those agreements. El.En. may change the prices that we pay for these products on 30 days’ notice to us. Additionally, El.En. may terminate the distribution agreement for the PhotoLight, PhotoSilk Plus and TriActive LaserDermology systems if we do not meet annual minimum purchase obligations specified in the agreements. If El.En. ceases production of these products, is unable or unwilling to sell these products to us after the expiration of the distribution agreements, terminates the agreements or increases the prices that we pay for the products, we may not be able to replace them with similar products in a timely manner or on comparable terms, and our business could be adversely affected.

El.En. and its subsidiaries market and sell products that compete with our products, and any competition by El.En. could have a material adverse effect on our business. El.En. is a leading laser manufacturer in Europe and a leading light-based medical device manufacturer worldwide. El.En. and its subsidiaries develop and produce laser systems with scientific, industrial, commercial and medical applications. Although we have exclusive North American distribution rights for our PhotoLight, PhotoSilk Plus and TriActive LaserDermology products, El.En. may compete with us in North America with its other products. In the event that our distribution agreements with El.En. terminate, El.En. may compete with us in North America with these products. El.En. markets, sells, promotes and licenses products that compete with our products outside of North America. El.En. has significantly greater financial, technical and human resources than we have and is better equipped to research, develop, manufacture and commercialize products. In addition, El.En. has more extensive experience in light-based technologies. Our business could be materially and adversely affected by competition from El.En.

Conflicts of interest may arise between us and El.En., and these conflicts might ultimately be resolved in a manner unfavorable to us. For financial reporting purposes, our financial results are included in El.En.’s consolidated financial statements. Two of our directors, Andrea Cangioli and Gabriele Clementi, and the spouse of one of our directors, Leonardo Masotti, are also officers or directors of El.En. These three directors own or have an interest in substantial amounts of El.En. stock. Ownership interests of our directors in El.En. stock, or service as a director of our company while at the same time serving as, or being the spouse of, a director or officer of El.En., could give rise to conflicts of interest when a director or officer is faced with a decision that could have different implications for the two companies. Conflicts may arise with respect to possible future distribution and research and development arrangements with El.En. or another El.En. affiliated company in which the terms and conditions of the arrangements are subject to negotiation between us and El.En. or such other El.En. affiliated company. These potential conflicts could also arise, for example, over matters such as: • the nature, timing, marketing, distribution and price of our products and El.En.’s products that compete with each other; 14

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• intellectual property matters; and • business opportunities that may be attractive to both El.En. and us. In order to address potential conflicts of interest between us and El.En., upon completion of this offering, our restated certificate of incorporation will contain provisions regulating and defining the conduct of our affairs as they may involve El.En. and El.En. affiliated companies and El.En.’s officers and directors who serve as our directors. These provisions recognize that we and El.En. and El.En. affiliated companies engage and may continue to engage in the same or similar business activities and lines of business and will continue to have contractual and business relations with each other. These provisions expressly permit El.En. and its affiliated companies to compete against us and narrowly limit corporate opportunities that El.En. or its directors or officers who serve as our directors must make available to us.

Our class A share price may decline because of future sales of our shares by El.En. After completion of this offering, El.En. may sell all or part of the shares of our class B common stock that it owns, at which time those shares would automatically convert into shares of our class A common stock. El.En. is not subject to any contractual obligation to maintain its ownership position in our shares, except that it has agreed with the underwriters for this offering that, without the prior written consent of Citigroup Global Markets Inc., the lead-managing underwriter of this offering, it will not sell or otherwise dispose of any shares of our common stock for a period of 24 months after the date of this prospectus, other than: • up to 33% of the shares of our common stock that it beneficially owned on the date of this prospectus during the period between 12 and 18 months after the date of this prospectus; and • up to an additional 33% of the shares of our common stock that it beneficially owned on the date of this prospectus during the period between 18 and 24 months after the date of this prospectus. Consequently, El.En. may not maintain its ownership of our common stock following this offering. Sales by El.En. of substantial amounts of our common stock in the public market could adversely affect prevailing market prices for our class A common stock. Risks Related to Intellectual Property If we infringe or are alleged to infringe intellectual property rights of third parties, our business could be adversely affected. Our products may infringe or be claimed to infringe patents or patent applications under which we do not hold licenses or other rights. Third parties may own or control these patents and patent applications in the United States and abroad. These third parties could bring claims against us that would cause us to incur substantial expenses and, if successfully asserted against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay manufacturing or sales of the product that is the subject of the suit. As a result of patent infringement claims, or in order to avoid potential claims, we may choose or be required to seek a license from the third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms. This could harm our business significantly. There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in our industry. In addition to infringement claims against us, we may become a party to other types of patent litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products and technology. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can 15

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because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

A third party has asserted that we need a license to its patents in order for us to continue selling many of our products. On July 2, 2004, Palomar Medical Technologies, Inc. sent us a letter proposing to enter into negotiations with us regarding the grant of a nonexclusive license under specified United States and foreign patents owned or licensed by Palomar with respect to our Apogee Elite, Apogee 5500 , PhotoLight and Acclaim 7000 products, and also with respect to our SmartEpil II product, which we no longer offer. In subsequent letters from Palomar dated September 14, 2004 and March 24, 2005, Palomar reiterated its willingness to negotiate a license under these patents and, in its March 24, 2005 letter, stated that it continues to believe that we need a license under these patents for each of the products listed in the July 2, 2004 letter, as well as for our PhotoSilk, PhotoSilk Plus, Cynergy, Cynergy PL and Cynergy III systems. We have not entered into negotiations with Palomar with respect to such a license. In February 2002, Palomar filed a lawsuit against one of our competitors, Cutera, Inc., alleging that by making, using, selling or offering for sale its hair removal products, Cutera willfully and deliberately infringed one of the patents that Palomar has asserted against us in its letters to us. This litigation between Palomar and Cutera is ongoing. Palomar may also bring suit against us claiming that some or all of our products violate patents owned or licensed by Palomar. Litigation is unpredictable, and we may not prevail in successfully defending or asserting our position. If Palomar takes legal action against us, and if we do not prevail, we may be ordered to pay substantial damages for past sales and an ongoing royalty for future sales of products found to infringe Palomar’s patents or we could be ordered to stop selling any products that are found to infringe Palomar’s patents.

If we are unable to obtain or maintain intellectual property rights relating to our technology and products, the commercial value of our technology and products will be adversely affected and our competitive position could be harmed. Our success and ability to compete depends in part upon our ability to obtain protection in the United States and other countries for our products by establishing and maintaining intellectual property rights relating to or incorporated into our technology and products. We own a variety of patents and patent applications in the United States and corresponding patents and patent applications in many foreign jurisdictions. To date, however, our patent estate has not stopped other companies from competing against us, and we do not know how successful we would be should we choose to assert our patents against suspected infringers. Our pending and future patent applications may not issue as patents or, if issued, may not issue in a form that will be advantageous to us. Even if issued, patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected. In addition to patented technology, we rely upon unpatented proprietary technology, processes and know-how, particularly with respect to our Alexandrite and pulse dye lasers. We generally seek to protect this information in part by confidentiality agreements with our employees, consultants and third parties. These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors. 16

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Risks Related to Government Regulation If we fail to obtain and maintain necessary U.S. Food and Drug Administration clearances for our products and indications or if clearances for future products and indications are delayed or not issued, our business would be harmed. Our products are classified as medical devices and are subject to extensive regulation in the United States by the Food and Drug Administration, or FDA, and other federal, state and local authorities. These regulations relate to manufacturing, labeling, sale, promotion, distribution, importing and exporting and shipping of our products. In the United States, before we can market a new medical device, or a new use of, or claim for, an existing product, we must first receive either 510(k) clearance or premarket approval from the FDA, unless an exemption applies. Both of these processes can be expensive and lengthy and entail significant user fees, unless exempt. The FDA’s 510(k) clearance process usually takes from three to 12 months, but it can last longer. The process of obtaining premarket approval is much more costly and uncertain than the 510(k) clearance process. It generally takes from one to three years, or even longer, from the time the premarket approval application is submitted to the FDA until an approval is obtained. In order to obtain premarket approval and, in some cases, a 510(k) clearance, a product sponsor must conduct well controlled clinical trials designed to test the safety and effectiveness of the product. Conducting clinical trials generally entails a long, expensive and uncertain process that is subject to delays and failure at any stage. The data obtained from clinical trials may be inadequate to support approval or clearance of a submission. In addition, the occurrence of unexpected findings in connection with clinical trials may prevent or delay obtaining approval or clearance. If we conduct clinical trials, they may be delayed or halted, or be inadequate to support approval or clearance, for numerous reasons, including: • FDA, other regulatory authorities or an institutional review board may place a clinical trial on hold; • patients may not enroll in clinical trials, or patient follow-up may not occur, at the rate we expect; • patients may not comply with trial protocols; • institutional review boards and third party clinical investigators may delay or reject our trial protocol; • third party clinical investigators may decline to participate in a trial or may not perform a trial on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices, or other FDA requirements; • third party organizations may not perform data collection and analysis in a timely or accurate manner; • regulatory inspections of our clinical trials or manufacturing facilities may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials, or invalidate our clinical trials; • changes in governmental regulations or administrative actions; and • the interim or final results of the clinical trials may be inconclusive or unfavorable as to safety or effectiveness. Medical devices may be marketed only for the indications for which they are approved or cleared. The FDA may not approve or clear indications that are necessary or desirable for successful commercialization. Indeed, the FDA may refuse our requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products. Our clearances can be revoked if safety or effectiveness problems develop.

After clearance or approval of our products, we are subject to continuing regulation by the FDA, and if we fail to comply with FDA regulations, our business could suffer. Even after clearance or approval of a product, we are subject to continuing regulation by the FDA, including the requirements that our facility be registered and our devices listed with the agency. We are subject to Medical Device Reporting regulations, which require us to report to the FDA if our products 17

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may have caused or contributed to a death or serious injury or malfunction in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. We must report corrections and removals to the FDA where the correction or removal was initiated to reduce a risk to health posed by the device or to remedy a violation of the Federal Food, Drug, and Cosmetic Act caused by the device that may present a risk to health, and maintain records of other corrections or removals. The FDA closely regulates promotion and advertising and our promotional and advertising activities could come under scrutiny. Since 1994, we have received five untitled letters from the FDA regarding alleged violations caused by our promotional activities. We have responded to these letters and the FDA has found our responses acceptable. If the FDA objects to our promotional and advertising activities or finds that we failed to submit reports under the Medical Device Reporting regulations, for example, the FDA may allege our activities resulted in violations. The FDA and state authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA or state agencies, which may include any of the following sanctions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recall or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying our requests for 510(k) clearance or premarket approval of new products or new intended uses; • withdrawing 510(k) clearance or premarket approvals that have already been granted; and • criminal prosecution. If any of these events were to occur, they could harm our business.

Federal regulatory reforms may adversely affect our ability to sell our products profitably. From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the clearance or approval, manufacture and marketing of a device. In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance or interpretations changed, and what the impact of such changes, if any, may be.

We have modified some of our products without FDA clearance. The FDA could retroactively determine that the modifications were improper and require us to stop marketing and recall the modified products. Any modifications to one of our FDA-cleared devices that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires a new 510(k) clearance or a premarket approval. We may be required to submit extensive pre-clinical and clinical data depending on the nature of the changes. We may not be able to obtain additional 510(k) clearances or premarket approvals for modifications to, or additional indications for, our existing products in a timely fashion, or at all. Delays in obtaining future clearances or approvals would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would harm our revenue and operating results. We have made modifications to our devices in the past and may make additional modifications in the future that we believe do not or will not require additional clearances or approvals. If the FDA disagrees, and requires new clearances or approvals for the modifications, we may be required to recall and to stop marketing the modified devices, which could harm our operating results and require us to redesign our products.

If we fail to comply with the FDA’s Quality System Regulation and laser performance standards, our manufacturing operations could be halted, and our business would suffer. We are currently required to demonstrate and maintain compliance with the FDA’s Quality System Regulation, or QSR. The QSR is a complex regulatory scheme that covers the methods and 18

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documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products. Because our products involve the use of lasers, our products also are covered by a performance standard for lasers set forth in FDA regulations. The laser performance standard imposes specific record keeping, reporting, product testing and product labeling requirements. These requirements include affixing warning labels to laser products as well as incorporating certain safety features in the design of laser products. The FDA enforces the QSR and laser performance standards through periodic unannounced inspections. We have been, and anticipate in the future being, subject to such inspections. Our failure to comply with the QSR or to take satisfactory corrective action in response to an adverse QSR inspection or our failure to comply with applicable laser performance standards could result in enforcement actions, including a public warning letter, a shutdown of or restrictions on our manufacturing operations, delays in approving or clearing a product, refusal to permit the import or export of our products, a recall or seizure of our products, fines, injunctions, civil or criminal penalties, or other sanctions, such as those described in the preceding paragraphs, any of which could cause our business and operating results to suffer.

If we fail to comply with state laws and regulations, or if state laws or regulations change, our business could suffer. In addition to FDA regulations, most of our products are also subject to state regulations relating to their sale and use. These regulations are complex and vary from state to state, which complicates monitoring compliance. In addition, these regulations are in many instances in flux. For example, federal regulations allow our products to be sold to or on the order of “licensed practitioners,” that is, practitioners licensed by law to use or order the use of a prescription device, which is defined on a state-by-state basis. As a result, some states permit non-physicians to legally purchase and operate our products, while other states do not. Additionally, a state could change its regulations at any time to prohibit sales to particular types of customers. Our failure to comply with state laws or regulations and changes in state laws or regulations may adversely affect our business.

We or our distributors may be unable to obtain or maintain international regulatory qualifications or approvals for our current or future products and indications, which could harm our business. Sales of our products outside the United States are subject to foreign regulatory requirements that vary widely from country to country. In many countries, our third party distributors are responsible for obtaining and maintaining regulatory approvals for our products. We do not control our third party distributors, and they may not be successful in obtaining or maintaining these regulatory approvals. In addition, the FDA regulates exports of medical devices from the United States. Complying with international regulatory requirements can be an expensive and time consuming process, and approval is not certain. The time required to obtain foreign clearances or approvals may be longer than that required for FDA clearance or approval, and requirements for such clearances or approvals may differ significantly from FDA requirements. Foreign regulatory authorities may not clear or approve our products for the same indications cleared or approved by the FDA. The foreign regulatory approval process may include all of the risks associated with obtaining FDA clearance or approval in addition to other risks. Although we or our distributors have obtained regulatory approvals in the European Union and other countries outside the United States for many of our products, we or our distributors may be unable to maintain regulatory qualifications, clearances or approvals in these countries or obtain qualifications, clearances or approvals in other countries. For example, we are in the process of seeking regulatory approvals from the Japanese Ministry of Health, Labour and Welfare for the direct sale of our products into that country. If we are not successful in doing so, our business will be harmed. We may also incur significant costs in attempting to obtain and in maintaining foreign regulatory clearances, approvals or qualifications. Foreign regulatory agencies, as well as the FDA, periodically inspect manufacturing facilities both in the United States and abroad. If we experience delays in receiving necessary qualifications, clearances or approvals to market our products outside the United States, or if we fail to receive those qualifications, clearances or approvals, or if we fail to comply with other foreign regulatory requirements, we and our 19

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distributors may be unable to market our products or enhancements in international markets effectively, or at all. Additionally, the imposition of new requirements may significantly affect our business and our products. We may not be able to adjust to such new requirements.

New regulations may limit our ability to sell to non-physicians, which could harm our business. Currently, we sell our products primarily to physicians and, outside the United States, to aestheticians. In addition, we recently began marketing our products to the growing aesthetic spa market, where non-physicians under physician supervision perform aesthetic procedures at dedicated facilities. However, federal, state and international regulations could change at any time, disallowing sales of our products to aestheticians, and limiting the ability of aestheticians and non-physicians to operate our products. Any limitations on our ability to sell our products to non-physicians or on the ability of aestheticians and non-physicians to operate our products could cause our business and operating results to suffer. Risks Related to the Offering After this offering, El.En. will continue to have substantial control over us. In addition, El.En. and our executive officers and directors will maintain the ability to control all matters submitted to stockholders for approval. In addition to the factors discussed above regarding El.En.’s ability to control the election of a majority of the members of our board of directors, when this offering is completed El.En. and our executive officers and directors will, in the aggregate, beneficially own shares representing approximately % of our common stock. As a result, if these stockholders were to act together, they would be able to control all matters submitted to our stockholders for approval. For example, these persons could control any amendment of our certificate of incorporation and bylaws and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire. Please also see the discussion under “— Risks Related to Our Relationship with El.En. — El.En. will continue to have substantial control over us after this offering and could delay or prevent a change of control.”

Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management and hinder efforts to acquire a controlling interest in us. Provisions of our certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include: • a dual class capital structure that allows El.En. to control the election of a majority of the members of our board of directors; • the classification of the members of our directors who are elected by holders of our class A common stock and class B common stock, voting together as a single class; • limitations on the removal of directors who are elected by holders of our class A common stock and class B common stock, voting together as a single class; • advance notice requirements for stockholder proposals and nominations; • the inability of class A stockholders to act by written consent or to call special meetings; and • the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors. The affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our certificate of incorporation, and the right of the holders of shares of our class B common stock to elect a majority of the members of our board of directors may not be modified without the approval of the holders of at least a majority of the shares of 20

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our class B common stock outstanding. In addition, absent approval of our board of directors, our bylaws may only be amended or repealed by the affirmative vote of the holders of at least 75% of the voting power of our shares of capital stock entitled to vote and the affirmative vote of holders of at least a majority of the shares of class B common stock outstanding. In addition, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Section 203 may discourage, delay or prevent a change in control of our company.

If you purchase shares of our class A common stock in this offering, you will suffer immediate and substantial dilution of your investment. We expect the initial public offering price of our class A common stock to be substantially higher than the net tangible book value per share of our class A common stock. Therefore, if you purchase shares of our class A common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. See “Dilution.”

An active trading market for our class A common stock may not develop. Prior to this offering, there has been no public market for any shares of our common stock. The initial public offering price for our class A common stock will be determined through negotiations with the underwriters. Although we have applied to have our class A common stock quoted on The Nasdaq National Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our class A common stock does not develop, it may be difficult to sell shares you purchase in this offering without depressing the market price for the shares or at all.

Our stock price is likely to be volatile, and purchasers of our class A common stock could incur substantial losses. Our class A common stock price is likely to be volatile. The stock market in general has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their class A common stock at or above the initial public offering price. The market price for our class A common stock may be influenced by many factors, including: • the success of competitive products or technologies; • regulatory developments in the United States and foreign countries; • developments or disputes concerning patents or other proprietary rights; • the recruitment or departure of key personnel; • variations in our financial results or those of companies that are perceived to be similar to us; • market conditions in the our industry and issuance of new or changed securities analysts’ reports or recommendations; and • general economic, industry and market conditions.

We have broad discretion in the use of our net proceeds from this offering and may not use them effectively. Our management will have broad discretion in the application of our net proceeds from this offering and could spend the proceeds in ways that do not improve our operating results or enhance the value of our class A common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our class A common stock to decline and delay the development of our product candidates. Pending their use, we may invest our net proceeds from this offering in a manner that does not produce income or that loses value. 21

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We have never paid cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the foreseeable future. We have paid no cash dividends on our capital stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of existing or any future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our class A common stock will be your sole source of gain for the foreseeable future.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our class A common stock to drop significantly, even if our business is doing well. Sales of a substantial number of shares of our class A common stock, including shares of our class B common stock that have been converted into shares of our class A common stock, in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our class A common stock. We also intend to register all shares of our class A common stock that we may issue under our employee benefit plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements described in “Underwriting.” 22

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FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about: • our ability to identify and penetrate new markets for our products and technology; • our ability to innovate, develop and commercialize new products; • our ability to obtain and maintain regulatory clearances; • our sales and marketing capabilities and strategy in the United States and internationally; • our intellectual property portfolio; and • our estimates regarding expenses, future revenues, capital requirements and needs for additional financing. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements. 23

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USE OF PROCEEDS $ $ We estimate that we will receive approximately $ million in net proceeds from this offering, or approximately million if the underwriters exercise their over-allotment option in full, based upon an assumed initial public offering price of per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We estimate that we will use: • approximately $ • approximately $ million of our net proceeds to expand our sales, marketing and distribution capabilities; and million of our net proceeds to fund our research and development activities.

We intend to use the remainder of our net proceeds for general corporate purposes. We may use a portion of our net proceeds to acquire complementary products, technologies or businesses. We currently have no agreements or commitments to complete any such transactions. The amounts and timing of our actual expenditures may vary significantly depending upon numerous factors, including our future revenues and cash generated by operations. Accordingly, we will retain broad discretion in the allocation of our net proceeds of this offering. Pending use of our net proceeds from this offering, we intend to invest the proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments. We will not receive any proceeds from the sale of shares of class A common stock offered by El.En. DIVIDEND POLICY We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings to finance the growth and development of our business. We do not anticipate paying cash dividends to our stockholders in the foreseeable future. 24

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CAPITALIZATION The following table sets forth our capitalization as of June 30, 2005: • on an actual basis; and • on an as adjusted basis to give effect to: • the filing of our restated certificate of incorporation prior to the completion of this offering; • the reclassification and conversion of our outstanding shares of common stock into shares of class B common stock on a one for one basis; and • the sale of shares of class A common stock in this offering at an assumed initial public offering price of $ share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. You should read this table together with our financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus.
As of June 30, 2005 Actual As Adjusted (In thousands, except share data) (Unaudited)

per

Cash and cash equivalents Capital lease obligation, net of current portion Stockholders’ equity Common stock, par value $0.01 per share; 15,000,000 shares authorized actual and no shares authorized as adjusted; 6,242,877 shares outstanding actual and no shares outstanding as adjusted Class A common stock, par value $0.001 per share; no shares authorized actual, 61,500,000 shares authorized as adjusted; no shares outstanding actual and shares outstanding as adjusted Class B common stock, par value $0.001 per share; no shares authorized actual, 8,500,000 shares authorized as adjusted; no shares outstanding actual and shares outstanding as adjusted Preferred stock, par value $0.001 per share; no shares authorized actual, 5,000,000 shares authorized as adjusted; no shares outstanding actual and no shares outstanding as adjusted Additional paid-in capital Retained earnings Deferred stock-based compensation Accumulated other comprehensive loss Treasury stock, 36,136 shares, at cost Total stockholders’ equity Total capitalization

$

3,198 761

$ 761

63

—

—

—

— 14,885 2,834 (1,637 ) (585 ) (287 ) 15,273 $ 16,034 $

— 2,834 (1,637 ) (585 ) (287 )

The number of shares in the table above excludes: • 1,862,642 shares of class B common stock issuable upon the exercise of stock options outstanding as of June 30, 2005 at a weighted average exercise price of $3.31 per share; and • 541,342 shares of class A common stock reserved for future issuance under our equity compensation plans as of the date of this prospectus. 25

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DILUTION If you invest in our class A common stock, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our class A common stock and the net tangible book value per share of our class A and class B common stock after this offering. Our actual net tangible book value as of June 30, 2005 was $15.0 million, or $2.40 per share of class A and class B common stock. Net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of class A and class B common stock outstanding. After giving effect to the issuance and sale by us of the shares of class A common stock in this offering, at an assumed initial public offering price of $ per share, less the underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value as of June 30, 2005 would have been $ , or $ per share of class A and class B common stock. This represents an immediate increase in net tangible book value per share of $ to existing stockholders and immediate dilution of $ per share to new investors purchasing shares in this offering. Dilution per share to new investors is determined by subtracting the net tangible book value per share after this offering from the initial public offering price per share paid by a new investor. The following table illustrates the per share dilution without giving effect to the over-allotment option granted to the underwriters: Assumed initial public offering price per share of class A common stock Actual net tangible book value per share as of June 30, 2005 Increase in net tangible book value per share attributable to new investors Adjusted net tangible book value per share after the offering Dilution per share to new investors $ $ $ 2.40

If the underwriters exercise their over-allotment option in full, our net tangible book value will increase to $ per share, representing an immediate increase to existing stockholders of $ per share and an immediate dilution of $ per share to new investors. If any shares are issued in connection with outstanding options, you will experience further dilution. The following table summarizes as of June 30, 2005 the number of shares of class A common stock purchased or to be purchased from us, the total consideration paid or to be paid and the average price per share paid by El.En., other existing stockholders and by new investors in this offering, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.
Total Shares Number % Total Consideration Amount % Average Price Per Share

El.En.(1) Other existing stockholders(2) New investors Totals

612,959 5,629,918

%

$

1,793,920 10,516,447

%

$

2.93 1.87

100 %

100 %

(1)

Excludes an aggregate of 4,275,669 shares purchased by El.En. from other stockholders at a weighted-average purchase price of $3.29 per share. El.En. currently holds, including shares purchased directly from us and shares purchased from other stockholders, a total of 4,888,628 at a weighted-average purchase price of $3.25 per share. Includes 4,275,669 shares purchased from us by other stockholders and sold to El.En. by other stockholders as described in Note 1 above. The table above is based on shares outstanding as of June 30, 2005 and excludes: • 1,862,642 shares of class B common stock issuable upon the exercise of stock options outstanding as of June 30, 2005 at a weighted average exercise price of $3.31 per share; and 26

(2)

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• 541,342 shares of class A common stock reserved for future issuance under our equity compensation plans as of the date of this prospectus. If the underwriters’ over-allotment option is exercised in full, the following will occur: • the percentage of shares of class A and class B common stock held by existing stockholders will decrease to approximately total number of shares of our class A and class B common stock outstanding after this offering; and • the number of shares held by new investors will increase to our class A and class B common stock outstanding after this offering. 27 , or approximately % of the

%, of the total number of shares of

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SELECTED CONSOLIDATED FINANCIAL DATA You should read the following selected consolidated financial data in conjunction with our consolidated financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus. We have derived the consolidated statement of operations data for the years ended December 31, 2002, 2003 and 2004 and the consolidated balance sheet data as of December 31, 2003 and 2004 from our audited consolidated financial statements, which are included elsewhere in this prospectus. We have derived the consolidated statement of operations data for the years ended December 31, 2000 and 2001 and the consolidated balance sheet data as of December 31, 2000, 2001 and 2002 from our audited consolidated financial statements, which are not included in this prospectus. We have derived the unaudited consolidated statement of operations data for the six months ended June 30, 2004 and 2005 and the unaudited consolidated balance sheet data as of June 30, 2005 from our unaudited consolidated financial statements, which are included in this prospectus. The unaudited selected consolidated financial statement data include, in our opinion, all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of our financial position and results of operations for these periods. Our historical results for any prior period are not necessarily indicative of results to be expected for any future period.
Year Ended December 31, 2000 2001 2002 2003 2004 Six Months Ended June 30, 2004 2005

(In thousands, except per share data)

Consolidated Statement of Operations Data: Revenues Revenues from related party Total revenues Cost of revenues Gross profit Operating expenses: Sales and marketing Research and development General and administrative Stock-based compensation Total operating expenses Income (loss) from operations Interest income (expense), net Gain on sale of investment Other (expense) income, net (Loss) income before (benefit) provision for income taxes and minority interest (Benefit) provision for income taxes Minority interest in net income of subsidiary Net (loss) income Basic net (loss) income per share Diluted net (loss) income per share Basic weighted average common shares outstanding Diluted weighted average common shares outstanding

$

23,602 193 23,795 10,989 12,806 6,446 3,179 2,888 19 12,532 274 149 — (644 )

$

22,389 677 23,066 12,158 10,908 7,007 3,216 4,496 — 14,719 (3,811 ) 40 — (1,417 )

$

21,678 1,284 22,962 13,198 9,764 5,777 2,379 3,979 — 12,135 (2,371 ) (25 ) — 298

$

25,525 1,600 27,125 14,207 12,918 8,720 2,481 3,766 76 15,043 (2,125 ) (62 ) — 1,822

$

40,364 1,269 41,633 20,465 21,168 12,590 3,139 4,092 136 19,957 1,211 (122 ) 3,019 976

$

17,902 1,269 19,171 9,721 9,450 5,762 1,406 1,899 89 9,156 294 (71 ) 3,019 493

$

25,080 — 25,080 11,632 13,448 8,048 1,523 2,364 245 12,180 1,268 (45 ) — (281 )

(221 ) (13 ) — $ $ $ (208 ) (0.04 ) (0.04 ) $ $ $

(5,188 ) 779 48 (6,015 ) (1.25 ) (1.25 ) $ $ $

(2,098 ) (301 ) 70 (1,867 ) (0.35 ) (0.35 ) $ $ $

(365 ) 72 63 (500 ) (0.09 ) (0.09 ) $ $ $

5,084 (276 ) 64 5,296 0.93 0.92 $ $ $

3,735 97 27 3,611 0.65 0.65 $ $ $

942 383 35 524 0.08 0.07

4,802

4,808

5,272

5,530

5,700

5,530

6,226

4,802

4,808

5,272

5,530

5,773

5,530

7,234

28

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As of December 31, 2000 2001 2002 2003 (In thousands) 2004 As of June 30, 2005

Consolidated Balance Sheet Data: Cash and cash equivalents Working capital Total assets Capital lease obligation, net of current portion Retained earnings (deficit) Total stockholders’ equity

$

1,854 11,128 18,379 63 5,007 13,200

$

473 5,439 14,548 328 (619 ) 7,679

$

3,290 6,262 15,979 123 (2,486 ) 7,890

$

2,111 4,572 18,228 81 (2,986 ) 7,288

$

4,028 10,678 28,001 476 2,310 14,640

$

3,198 11,416 30,649 761 2,834 15,273

29

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial data included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Company Overview We develop and market aesthetic treatment systems used by physicians and other practitioners that incorporate laser and light-based energy sources. As of June 30, 2005, we had sold more than 4,500 aesthetic treatment systems worldwide. We were incorporated in July 1991. In 2002, El.En. S.p.A., an Italian company that itself and through subsidiaries develops and markets laser systems for medical and industrial applications, acquired a majority of our capital stock. In September 2003, we recruited a new management team that has implemented a comprehensive reorganization of our company, including: • redesigning many of our existing products; • introducing innovative new products and technologies; • streamlining and rationalizing our manufacturing processes; • reorganizing and expanding our research and development, sales and marketing and distribution capabilities; and • enhancing our customer service network. Since the beginning of 2004, we have introduced 10 new aesthetic treatment systems, including our four flagship products: • the Apogee Elite system, our flagship product for hair removal, in March 2004; • the Cynergy system, our flagship product for the treatment of vascular lesions, in February 2005; • the PhotoSilk Plus system, our flagship product for skin rejuvenation through the treatment of shallow vascular lesions and pigmented lesions, in February 2005; and • the TriActive LaserDermology system, our flagship product for the temporary reduction of the appearance of cellulite, in February 2004. As a result of our product development efforts, we incurred increased research and development expenses in absolute dollars, although not as a percentage of revenues, during each of 2003 and 2004. We have expanded our direct sales and marketing organization from 22 employees as of September 30, 2003 to 53 employees as of June 30, 2005. In addition, we have expanded our distribution relationships and had 19 distributors covering 31 countries as of June 30, 2005. In January 2005, we launched a separate CynosureSpa brand with product offerings, tailored marketing and sales personnel focused exclusively on the aesthetic spa market. As a result of these activities, we incurred increased sales and marketing expenses in absolute dollars, although not as a percentage of revenues, during each of 2003 and 2004. We recently redesigned or introduced a number of our products, including our Apogee, Cynergy, Acclaim and VStar product families, so that they are built in a modular fashion using fewer components. We began shipping these redesigned products in the second quarter of 2005. We believe that this new 30

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approach allows our platform technology to be easily upgradeable, increases the scalability and efficiency of our production process and facilitates improvements in field service diagnosis and repair. We expect that the new modular design of these products will reduce our direct labor and inventory costs and result in lower cost of revenues as a percentage of revenues. In November 2000, we purchased a 20% equity interest, which we subsequently increased to 40%, in Sona MedSpa, an operator and franchisor of spa franchises. Also in November 2000, we entered into a supply and revenue sharing arrangement with Sona MedSpa pursuant to which we provided our aesthetic treatment systems to Sona MedSpa and its franchisees and received a share of their revenues from procedures using our products. We also guaranteed the lease obligations for two facilities operated by Sona MedSpa. In May 2004, we sold our equity interest in Sona MedSpa to third parties and also sold to Sona MedSpa a portion of the aesthetic treatment systems previously provided by us under the supply and revenue sharing arrangement. We recognized a gain of $3.0 million from the sale of our equity interest and an additional $1.2 million in revenue from the sale of the systems to Sona MedSpa in connection with the transaction. Also in May 2004, we entered into an amended supply and revenue sharing arrangement with Sona MedSpa pursuant to which we continue to sell systems to Sona MedSpa and its franchisees and receive a share of their revenues from procedures using our systems. During the period in which we held our equity interest in Sona MedSpa, we accounted for our investment using the equity method of accounting and recognized our share of Sona MedSpa’s income or loss as a component of other income (expense). We recognized other expense of $0.2 million in 2002 for our share of Sona MedSpa’s loss and recognized other income of $0.7 million in 2003 and $0.2 million in 2004 for our share of Sona MedSpa’s income. We also sell our lasers on an original equipment manufacturer basis to third parties with whom we collaborate in connection with surgical uses of our laser products. In addition, until 2004, we had a distributor relationship with El.En. pursuant to which we sold a veterinary laser product in the United States supplied by El.En. Financial Operations Overview Revenues We generate revenues primarily from sales of our products and parts and accessories and, to a lesser extent, from services, including product warranty revenues, and from our revenue sharing arrangement with Sona MedSpa. In 2004, we derived approximately 87% of our revenues from sales of our products, 6% of our revenues from service and 7% of our revenues from our revenue sharing arrangement. For the six months ended June 30, 2005, we derived approximately 90% of our revenues from sales of our products, 6% of our revenues from service and 4% of our revenues from our revenue sharing arrangement. Generally, we recognize revenues from the sales of our products upon delivery to our customers, revenues from service contracts and extended product warranties ratably over the coverage period, revenues from service in the period in which the service occurs and revenues from our revenue sharing arrangement in the period the procedures are performed. We sell our products directly in North America, four European countries, Japan and China and use distributors to sell our products in other countries where we do not have a direct presence. For the year ended December 31, 2004, we derived 45%, and for the six months ended June 30, 2005 we derived 43%, of our revenues from sales of our products outside North America. As of June 30, 2005, we had 27 sales employees in North America, 11 sales employees in four European countries, Japan and China and 31

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distributors in 31 countries. The following table provides revenue data by geographical region for the year ended December 31, 2004 and the six months ended June 30, 2005:
Percentage of Revenues Year Ended December 31, 2004 Six Months Ended June 30, 2005

Region

North America Europe Asia/ Pacific Other Total

55 % 24 16 5 100 %

57 % 24 13 6 100 %

See Note 3 to our consolidated financial statements included in this prospectus for revenues and asset data by geographic region.

Cost of Revenues Our cost of revenues consists primarily of material, labor and manufacturing overhead expenses and includes the cost of components and subassemblies supplied by third party suppliers. Cost of revenues also includes service and warranty expenses, as well as salaries and personnel-related expenses for our operations management team, purchasing and quality control.

Sales and Marketing Expenses Our sales and marketing expenses consist primarily of salaries, commissions and other personnel-related expenses for employees engaged in sales, marketing and support of our products, trade show, promotional and public relations expenses and management and administration expenses in support of sales and marketing. We expect our sales and marketing expenses to increase in absolute dollars, though we do not expect them to increase significantly as a percentage of revenues, as we expand our sales, marketing and distribution capabilities.

Research and Development Expenses Our research and development expenses consist of salaries and other personnel-related expenses for employees primarily engaged in research, development and engineering activities and materials used and other overhead expenses incurred in connection with the design and development of our products. We expense all of our research and development costs as incurred. We expect our research and development expenditures to increase in absolute dollars, though we do not expect them to increase significantly as a percentage of revenues, as we continue to devote resources to research and develop new products and technologies.

General and Administrative Expenses Our general and administrative expenses consist primarily of salaries and other personnel-related expenses for executive, accounting and administrative personnel, professional fees and other general corporate expenses. We expect our general and administrative expenses to increase in absolute dollars and as a percentage of revenues as a result of our becoming a public company.

Stock-Based Compensation Our stock-based compensation consists of expenses related to stock-based awards to employees and non-employees. We currently account for our stock-based awards to employees using the intrinsic-value method. Under the intrinsic-value method, compensation expense is measured on the date of grant as the difference between the deemed fair market value of our common stock for accounting purposes and the option exercise price multiplied by the number of options granted. In May 2005, we recorded $1.7 million 32

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of deferred stock-based compensation in connection with options granted at that time, which we are amortizing over the vesting periods of the options. Stock-based awards to non-employees are currently expensed under the fair value method using the Black-Scholes option pricing model. We expect to adopt SFAS 123(R) in the first quarter of fiscal 2006, which will require us to expense all stock-based awards under the fair value method.

Interest Expense, net Interest expense consists primarily of interest due on short-term indebtedness owed to El.En. and with respect to capitalized leases.

Provision for Income Taxes As of December 31, 2004, we had federal tax credits of $0.4 million and state tax credits of $0.5 million to offset future tax liability and state net operating losses of approximately $3.1 million to offset future taxable income. If not utilized, these credit carryforwards will expire at various dates through 2019, and the net operating losses will expire at various dates through 2024. In addition, the future utilization of our net operating loss carryforwards may be limited based upon changes in ownership pursuant to regulations promulgated under the Internal Revenue Code. We also had foreign net operating losses of approximately $2.6 million available to reduce future foreign income taxes, which will expire at various times beginning in 2005. Results of Operations Six Months Ended June 30, 2004 and 2005 The following table contains selected unaudited statement of operations data, which serves as the basis of the discussion of our results of operations for the six months ended June 30, 2004 and 2005:
Six Months Ended June 30, 2004 As a % of Revenues Six Months Ended June 30, 2005 As a % of Revenues Change 2004 Period to 2005 Period $ Change % Change

Amount

Amount

(In thousands, except for percentages)

Revenues Cost of revenues Gross profit Operating expenses: Sales and marketing Research and development General and administrative Stock-based compensation Total operating expenses Income from operations Interest expense, net Gain on sale of investment Other income (expense), net Income before provision for income taxes and minority interest Provision for income taxes Minority interest in net income of subsidiary Net income

$

19,171 9,721 9,450 5,762 1,406 1,899 89 9,156 294 (71 ) 3,019 493 3,735 97 27

100 % 51 49 30 7 10 — 48 2 — 16 3 20 1 — 19 %

$

25,080 11,632 13,448 8,048 1,523 2,364 245 12,180 1,268 (45 ) — (281 ) 942 383 35

100 % 46 54 32 6 9 1 48 5 — — (1 ) 4 2 — 2%

$

5,909 1,911 3,998 2,286 117 465 156 3,024 974 (26 ) (3,019 ) (774 ) (2,793 ) 286 8

31 % 20 42 40 8 24 175 33 331 (37 ) (100 ) (157 ) (75 ) 294 30 ) (85 %

$

3,611

$

524

$

(3,087 )

33

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Revenues Total revenues for the six months ended June 30, 2004 included $1.3 million of revenues from related party. For purposes of the following discussion, we refer to revenues and revenues from related party on a combined basis. Revenues in the six months ended June 30, 2005 exceeded revenues in the same period of 2004 by $5.9 million, or 31%. The increase in revenues was attributable to a number of factors: • Revenues from the sale of products in North America increased $5.8 million, or 105%, to $11.3 million in the first six months of 2005 as compared to $5.5 million in the first six months of 2004. The increase was attributable to an increase in the number of product units sold and a higher average selling price due to a favorable change in product mix. The increase in North American revenues resulted in part from the reorganization and expansion of our North American sales organization, including the hiring of 12 additional direct sales employees between June 30, 2004 and 2005. The increase also resulted from the introduction of new products, particularly our Apogee Elite system at the end of the first quarter of 2004. Revenues from sales of products introduced in 2004 totaled $9.8 million, or 87%, of total North American product revenues in the first six months of 2005. • Revenues from sales of products outside of North America increased $2.0 million, or 32%, to $8.2 million in the first six months of 2005 as compared to $6.2 million in the same period in 2004. The increase was mainly attributable to an increase in sales in Europe of $1.8 million, or 54%, over the same period in 2004, resulting from a favorable change in product mix and our increased focus on direct selling, for which we receive higher average selling prices as compared to sales through distributors, including the opening of our direct sales office in Spain in the second half of 2004. • Revenues from original equipment manufacturer and other relationships and our revenue sharing arrangement decreased $2.1 million, or 50%, to $2.1 million in the first six months of 2005 as compared to $4.2 million in the same period in 2004. The decrease was mainly attributable to non-recurring revenues of $1.2 million from the purchase of aesthetic treatment systems by Sona MedSpa in May 2004 in connection with the sale of our equity interest in Sona MedSpa, and a $0.7 million decrease in sales of a product we distributed that was supplied by El.En. in 2004 but that we did not distribute in 2005. • Revenues from the sale of parts and accessories and services increased $0.1 million, or 3%, to $3.4 million in the first six months of 2005 as compared to $3.3 million in the first six months of 2004. The increase was primarily attributable to an increase of revenues generated from service contracts.

Cost of Revenues Cost of revenues increased $1.9 million, or 20%, to $11.6 million in the first six months of 2005, as compared to $9.7 million in the same period in 2004. The increase in the cost of revenues was primarily attributable to an increase in direct labor, overhead and material costs associated with increased sales of our products. Our cost of revenues decreased as a percentage of revenues to 46% in the first six months of 2005 from 51% in the first six months of 2004, resulting in an increase in our gross margin of 5% between the two periods. The improved margin resulted from higher average selling prices of our products due to a favorable change in product mix, in part as a result of the introduction of our Apogee Elite system in the first quarter of 2004, as well as increased direct sales in North America and increased direct sales in Europe, for which we receive higher average selling prices as compared to sales through distributors. In the first six months of 2005, we derived 57% of our international product revenues from direct sales by us or our subsidiaries compared to 50% of our international product revenues in the same period in 2004. We derived all of our North American product revenues from direct sales. 34

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Sales and Marketing Sales and marketing expenses increased $2.3 million, or 40%, to $8.0 million in the first six months of 2005, as compared to $5.8 million in the same period in 2004. The increase was primarily attributable to an increase of $1.4 million in personnel costs and travel expenses associated with the expansion of our North American direct sales organization and $0.2 million in personnel costs and travel expenses associated with our international subsidiaries. Promotional costs increased $0.3 million, primarily due to our increased number of clinical workshops, trade shows and promotional efforts. As a percentage of revenues, sales and marketing expenses increased to 32% for the first six months of 2005 from 30% in the same period in 2004.

Research and Development Research and development expenses remained relatively flat, increasing by $0.1 million, or 8%, to $1.5 million in the first six months of 2005, as compared to $1.4 million in the same period in 2004. In the first six months of 2005, our research and development expenses were attributable to project research costs and product engineering expenses related to the introduction of our new Cynergy system in the first quarter of 2005 and ongoing development of new products. In the first six months of 2004, our research and development expenses were attributable to project research costs and product engineering expenses related to the introduction of our new Apogee Elite, Apogee 5500 NL and Acclaim 7000 NL products in the first quarter of 2004 and our ongoing development of new products. As a percentage of revenues, research and development expenses decreased to 6% in the first six months of 2005 from 7% in the same period in 2004.

General and Administrative General and administrative expenses increased $0.5 million, or 24%, to $2.4 million in the first six months of 2005 from $1.9 million in the same period in 2004. The increase was primarily attributable to a $0.2 million increase in our international subsidiaries’ administrative expenses in connection with our opening an office in Spain in the second half of 2004, as well as a $0.1 million increase in legal expenses associated with patent filing costs. As a percentage of revenues, general and administrative expenses decreased to 9% in the first six months of 2005 from 10% in the same period in 2004.

Stock-Based Compensation Stock-based compensation related to employee stock-based awards was $53,000 in the first six months of 2005 compared to $89,000 in the first six months of 2004. We expect amortization of deferred stock-based compensation to be approximately $0.2 million for the remainder of 2005. Stock-based compensation related to non-employee option grants was $0.2 million in the first six months of 2005.

Interest Expense, net; Gain on Sale of Investment and Other Income (Expense), net Interest expense decreased to $45,000 in the first six months of 2005 from $71,000 in the same period in 2004. The decrease resulted from a reduction in short-term notes payable for the 2005 period. In the first six months of 2004, we recorded a gain of $3.0 million on the sale of our 40% equity interest in Sona MedSpa. We had no similar gain in the 2005 period. Other income (expense) decreased to $0.3 million in expense in the first six months of 2005 from $0.5 million in income in the same period in 2004. The decrease was partially attributable to an increase in foreign currency transaction losses of $0.5 million and to a $0.2 million decrease in our equity interest in Sona MedSpa for the first six months of 2005 as compared to the same period in 2004 as a result of the sale of such interest partially offset by $0.3 million that we realized in the first six months of 2004 in connection with a settlement with an insurer.

(Benefit) Provision for Income Taxes In the first six months of 2005, we recorded an income tax provision of $0.4 million, reflecting an effective tax rate of 41%. In the first six months of 2004, we recorded an income tax provision of $97,000, 35

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reflecting an effective tax rate of 3%. The increase in our effective income tax rate was primarily due to a reduction in our valuation allowance in 2004 on our U.S. federal net operating loss carryforwards. In 2004, we utilized all of our available U.S. federal net operating loss carryforwards. As a result, we had no U.S. federal net operating loss carryforwards available to utilize against our 2005 taxable income, which resulted in a higher effective tax rate in 2005. Years Ended December 31, 2003 and 2004 The following table contains selected statement of operations data, which serves as the basis of the discussion of our results of operations for the years ended December 31, 2003 and 2004 (in thousands, except for percentages):
Year Ended December 31, 2003 As a % of Revenues Year Ended December 31, 2004 As a % of Revenues Change 2003 to 2004 $ Change % Change

Amount

Amount

Revenues Cost of revenues Gross profit Operating expenses: Sales and marketing Research and development General and administrative Stock-based compensation Total operating expenses (Loss) income from operations Interest expense, net Gain on sale of investment Other income, net (Loss) income before provision (benefit) for income taxes and minority interest Provision (benefit) for income taxes Minority interest in net income of subsidiary Net (loss) income

$

27,125 14,207 12,918 8,720 2,481 3,766 76 15,043 (2,125 ) (62 ) — 1,822 (365 ) 72 63

100 % 52 48 32 9 14 — 55 (8 ) — — 7 (1 ) — — (2 )%

$

41,633 20,465 21,168 12,590 3,139 4,092 136 19,957 1,211 (122 ) 3,019 976 5,084 (276 ) 64

100 % 49 51 30 8 10 — 48 3 — 7 2 12 (1 ) — 13 %

$

14,508 6,258 8,250 3,870 658 326 60 4,914 3,336 (60 ) 3,019 (846 ) 5,449 (348 ) 1

53 % 44 64 44 27 9 79 33 157 (97 ) — (46 ) 1,493 (483 ) 2 1,159 %

$

(500 )

$

5,296

$

5,796

Revenues Total revenues for the year ended December 31, 2003 included $1.6 million, and for the year ended December 31, 2004 included $1.3 million, of revenues from related party. For purposes of the following discussion, we refer to revenues and revenues from related party on a combined basis. Revenues in 2004 exceeded revenues in 2003 by $14.5 million, or 53%. The increase in revenues was attributable to a number of factors: • Revenues from the sale of products in North America increased $6.2 million, or 86%, to $13.4 million in 2004 as compared to $7.2 million in 2003. The increase was attributable to an increase in the number of products sold and a higher average selling price due to a favorable change in product mix. The increase in North American revenues resulted in part from the reorganization and expansion of our North American sales organization, including the hiring of new sales management and 10 additional direct sales employees between November 2003 and the end of 2004. The increase also resulted from the introduction of new products, particularly our Apogee 36

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Elite system at the end of the first quarter of 2004. Revenues from sales of products introduced in 2004 totaled $9.8 million, or 74%, of total North American product revenues in 2004. • Revenues from sales of products outside of North America increased $2.4 million, or 20.7%, to $14.0 million in 2004 as compared to $11.6 million in 2003. The increase was primarily attributable to an increase in sales in Europe of $3.3 million, or 65%, over 2003, resulting from our introduction of new products and our increased focus on direct selling in 2004, for which we receive higher average selling prices as compared to sales through distributors, partially offset by a $1.0 million decrease in revenues from product sales in the Asia/ Pacific region, which was primarily attributable to the discontinuation of a product distributed in the region. • Revenues from original equipment manufacturer and other relationships and our revenue sharing arrangement increased $4.8 million, or 200%, to $7.2 million in 2004 as compared to $2.4 million in 2003. The increase was mainly attributable to a $3.6 million increase in revenues from our revenue sharing arrangement with Sona MedSpa, reflecting growth in Sona MedSpa’s business, a different revenue sharing formula in the amended supply and revenue sharing arrangement entered into in May 2004 and non-recurring revenues of $1.2 million from the purchase of aesthetic treatment systems by Sona MedSpa in May 2004 in connection with the sale of our equity interest in Sona MedSpa, and a $0.9 million increase in sales of a product we formerly distributed supplied by El.En. in 2003 and 2004. • Revenues from the sale of parts and accessories and services increased $1.1 million, or 20%, to $6.7 million in 2004 as compared to $5.6 million in 2003. The increase was primarily attributable to an increase in revenues generated from service contracts, reflecting increased service contract marketing efforts by us. Cost of Revenues Cost of revenues increased $6.3 million in 2004, or 44%, to $20.5 million as compared to $14.2 million in 2003. The increase in cost of revenues was primarily attributable to an increase in direct labor, overhead and material costs associated with increased sales of our products. Our cost of revenues decreased as a percentage of revenues to 49% in 2004 from 52% in 2003, resulting in an increase in our gross margin of 3% between the two periods. The improved margin resulted from higher average selling prices of our products due to a favorable change in product mix, in part as a result of the introduction of our Apogee Elite system in the first quarter of 2004, as well as increased direct sales in North America and Europe, from which we receive higher average selling prices as compared to sales through distributors. In 2004, we derived 63% of our international product revenues from direct sales by us or our subsidiaries compared to 52% of our international product revenues in the same period in 2003. We derived all of our North American product revenues from direct sales. Sales and Marketing Sales and marketing expenses increased $3.9 million, or 44%, to $12.6 million in 2004, as compared to $8.7 million in 2003. The increase was attributable to an increase of $1.9 million in personnel costs and travel expenses associated with the expansion of our North American direct sales organization, an increase of $0.9 million in personnel costs and travel expenses associated with our international subsidiaries and an increase of $0.5 million in clinical research expenses. Promotional costs increased $0.7 million, primarily due to our increased number of clinical workshops, trade shows and promotional efforts, including product launch expenses incurred in connection with the introduction of our Apogee Elite, Apogee 5500 NL, Acclaim 7000 NL and TriActive LaserDermology systems in early 2004. As a percentage of revenues, sales and marketing expenses decreased to 30% in 2004 from 32% in 2003. Research and Development Research and development expenses increased $0.7 million, or 27%, to $3.1 million in 2004 as compared to $2.5 million in 2003. The increase was primarily attributable to expenses related to the 37

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development and introduction of our Apogee Elite, Apogee 5500 NL and Acclaim 7000 NL systems in 2004 and the development of our Cynergy and Cynergy III systems that were introduced in 2005. In 2003, our research and development expenses were attributable to project research costs and product engineering expenses related to the introduction of our Apogee 5500 and Acclaim 7000 products that were introduced in 2003 and the development of our Apogee Elite, Apogee 5500 NL and Acclaim 7000 NL products which were introduced in 2004. As a percentage of revenues, research and development expenses decreased to 8% in 2004 from 9% in 2003. General and Administrative General and administrative expenses increased $0.3 million, or 9%, to $4.1 million in 2004 as compared to $3.8 million in 2003. The increase was attributable to a $0.2 million increase in audit expenses and a $0.1 million increase in consulting expenses relating to our reorganization by the new management team. As a percentage of revenues, general and administrative expenses decreased to 10% in 2004 from 14% in 2003. Stock-Based Compensation In connection with employee stock purchase rights granted under our 2003 Stock Compensation Plan, we recorded stock-based compensation of $0.1 million in 2004 and $76,000 in 2003. The 2003 Stock Compensation Plan terminated on December 31, 2004 and we do not expect any additional stock-based compensation related to this plan. Interest Expense, net; Gain on Sale of Investment and Other Income (Expense), net Interest expense increased to $0.1 million in 2004 from $62,000 in 2003. The increase resulted from an increase in short-term notes payable for the 2004 period. Gain on sale of investment was $3.0 million in 2004; we did not record a similar gain in 2003. The gain on sale of investment in 2004 resulted from the non-recurring sale of our equity interest in Sona MedSpa. Other income, net decreased to $1.0 million in income in 2004 from $1.8 million in income in 2003. The decrease is attributable to the $0.6 million decrease in our equity interest in Sona MedSpa in 2004 as compared to 2003, reflecting the sale of such interest in May 2004, combined with a $0.5 million decrease in foreign currency transaction gains, partially offset by $0.3 million realized in connection with a settlement with an insurer. (Benefit) Provision for Income Taxes During 2004, we recorded an income tax benefit of $0.3 million compared to an income tax provision of $72,000 recorded in 2003. The increase in our income tax benefit was due to the receipt of $0.5 million of refund claims in the second half of 2004, which was recorded as an income tax benefit, partially offset by an increase in the proportion of our taxable income from foreign locations for which we did not have available loss carryforwards in 2004 as compared to 2003. We did not apply for or receive any refund claims in 2003. 38

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Years Ended December 31, 2002 and 2003 The following table contains selected statement of operations data, which serves as the basis of the discussion of our results of operations for the years ended December 31, 2002 and 2003 (in thousands, except for percentages):
Year Ended December 31, 2002 As a % of Revenues Year Ended December 31, 2003 As a % of Revenues Change 2002 to 2003 $ Change % Change

Amount

Amount

Revenues Cost of revenues Gross profit Operating expenses: Sales and marketing Research and development General and administrative Stock-based compensation Total operating expenses Loss from operations Interest expense, net Other income, net Loss before (benefit) provision for income taxes and minority interest (Benefit) provision for income taxes Minority interest in net income of subsidiary Net loss

$

22,962 13,198 9,764 5,777 2,379 3,979 — 12,135 (2,371 ) (25 ) 298 (2,098 ) (301 ) 70

100 % 57 43 25 11 17 — 53 (10 ) — 1 (9 ) (1 ) — (8 )%

$

27,125 14,207 12,918 8,720 2,481 3,766 76 15,043 (2,125 ) (62 ) 1,822 (365 ) 72 63

100 % 52 48 32 9 14 — 55 (8 ) — 7 (1 ) — — (2 )%

$

4,163 1,009 3,154 2,943 102 (213 ) 76 2,908 246 (37 ) 1,524 1,733 373 (7 )

18 % 8 32 51 4 (5 ) 100 24 10 (148 ) 511 83 (124 ) (10 ) 73 %

$

(1,867 )

$

(500 )

$

1,367

Revenues Total revenues for the year ended December 31, 2002 included $1.3 million, and for the year ended December 31, 2003 included $1.6 million, of revenues from related party. For purposes of the following discussion, we refer to revenues and revenues from related party on a combined basis. Revenues in 2003 exceeded revenues in 2002 by $4.2 million, or 18%. The increase in revenues was attributable to a number of factors: • Revenues from the sale of products in North America increased $1.9 million, or 36%, to $7.2 million in 2003 as compared to $5.3 million in 2002. The increase was primarily attributable to an increase in sales of new products introduced in 2003 of $1.3 million, including our Photolight, Apogee 5500 and Acclaim 7000 systems. The increase also resulted from the hiring of eight additional direct sales employees in North America in the second half of 2003. • Revenues from sales of products outside of North America increased $1.6 million, or 16%, to $11.9 million in 2003 as compared to $10.3 million in 2002. The increase was primarily attributable to an increase in sales in Europe of $2.0 million, or 64%, over 2002, resulting from our increased focus on direct selling in 2003, for which we receive higher average selling prices as compared to sales through distributors, partially offset by a $0.8 million decrease in revenues from product sales in the Asia/ Pacific region resulting from the termination of a distributor relationship in the region. • Revenues from original equipment manufacturer and other relationships and our revenue sharing arrangement increased $0.7 million, or 41%, to $2.4 million in 2003 as compared to $1.7 million in 39

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2002. The increase was attributable to a $0.3 million increase in revenues attributable to our revenue sharing arrangement with Sona MedSpa and a $0.3 million increase in sales of a product we formerly distributed supplied by El.En. in 2002 and 2003. • Revenues from the sale of parts and accessories and services increased $0.3 million, or 6%, to $5.6 million in 2003 as compared to $5.3 million in 2002. The increase was attributable to an increase of $0.9 million in revenues generated from parts sales, partially offset by a $0.6 million decrease in revenues generated from service contracts.

Cost of Revenues Cost of revenues increased $1.0 million in 2003, or 8%, to $14.2 million as compared to $13.2 million in 2002. The increase in the cost of revenues was primarily attributable to an increase in direct labor, overhead and material costs associated with increased sales of our products. Our cost of revenues decreased as a percentage of revenues to 52% in 2003 from 57% in 2002, resulting in an increase in our gross margin of 5% between the two periods. The improved margin resulted from higher average selling prices of our products due to a favorable change in product mix, in part as a result of the introduction of our Photolight, Apogee 5500 and Acclaim 7000 systems in 2003, an increased gross profit contribution resulting from an increase in parts sales in 2003 as well as increased direct sales in North America, from which we receive a higher average selling price as compared to sales through distributors. In 2003, we derived 52% of our international product revenues derived from direct sales by us or our subsidiaries compared to 43% of our international product revenues in 2002. We derived all of our North American product revenues from direct sales.

Sales and Marketing Sales and marketing expenses increased $2.9 million, or 51%, to $8.7 million in 2003, as compared to $5.8 million in 2002. Of the increase, $1.6 million was attributable to the expansion of our international sales, marketing and customer service organization and $0.7 million was attributable to an increase in personnel costs and travel expenses in North America. Promotional costs increased $0.3 million, primarily due to our increased number of clinical workshops and trade shows. As a percentage of revenues, sales and marketing expenses increased to 32% in 2003 from 25% in 2002.

Research and Development Research and development expenses remained relatively flat, increasing by $0.1 million, or 4%, to $2.5 million in 2003 as compared to $2.4 million in 2002. In 2003, our research and development expenses were attributable to project research costs and product engineering expenses related to the introduction of our Apogee 5500 and Acclaim 7000 systems and the development of our Apogee Elite , Apogee 5500 NL and Acclaim 7000 NL systems that were introduced in 2004. In 2002, our research and development expenses were attributable to project research costs and product engineering expenses related to the development of our Apogee 5500 and Acclaim 7000 systems that were introduced in 2003. As a percentage of revenues, research and development expenses decreased to 9% in 2003 from 11% in 2002.

General and Administrative General and administrative expenses decreased $0.2 million, or 5%, to $3.8 million in 2003 as compared to $4.0 million in 2002. The decrease was primarily attributable to costs incurred in 2002 related to El.En.’s purchase of a majority of our outstanding common stock. As a percentage of revenues, general and administrative expenses decreased to 14% in 2003 from 17% in 2002.

Stock-Based Compensation In 2003, we recorded stock-based compensation of $76,000 in connection with employee stock purchase rights granted under the 2003 Stock Compensation Plan. The 2003 Stock Compensation Plan 40

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terminated on December 31, 2004 and we do not expect any additional stock-based compensation related to this plan. We did not record any stock-based compensation charges in 2002.

Interest Expense, net and Other Income (Expense), net Interest expense increased to $62,000 in 2003 from $25,000 in 2002. The increase resulted from an increase in short-term notes payable for the 2003 period. Other income increased by $1.5 million, or 511%, to $1.8 million in 2003 as compared to $0.3 million in 2002. The increase was attributable to the $0.9 million increase in our equity interest in Sona MedSpa in 2003 as compared to 2002, combined with a $0.6 million increase in foreign currency transaction gains.

(Benefit) Provision for Income Taxes During 2003, we recorded an income tax provision of $72,000. During 2002, we recorded an income tax benefit of $0.3 million. The decrease in provision for income taxes is primarily due to the receipt of $0.4 million of carryback claims from a refund in 2002. Liquidity and Capital Resources We require cash to pay our operating expenses, make capital expenditures and pay our long-term liabilities. Since our inception, we have funded our operations through private placements of equity securities, short-term borrowings and funds generated from our operations. From inception through June 30, 2005, we had received net proceeds of $12.3 million from the issuance of shares of common stock. At June 30, 2005, our cash and cash equivalents were $3.2 million as compared to $4.0 million at December 31, 2004 and $2.1 million at December 31, 2003. Our cash and cash equivalents are highly liquid investments with maturity of 90 days or less at date of purchase and consist of time deposits and investments in money market funds with commercial banks and financial institutions and United States government obligations.

Cash Flows Net cash used in operating activities was $57,000 for the six months ended June 30, 2005. This resulted primarily from net income for the period of $0.5 million, increased by approximately $1.1 million in depreciation and stock-based compensation expense. Net changes in working capital items decreased cash from operating activities by approximately $1.7 million principally related to an increase in inventory for anticipated future sales and in preparation for our transition to modular assembly and contract manufacturing. Net cash used in investing activities was $1.2 million for the six months ended June 30, 2005, which consisted primarily of $1.2 million used for fixed asset purchases and the payment of a $0.2 million security deposit relating to the lease for our new corporate headquarters offset by the receipt of $0.3 million released from escrow as part of the sale of our investment in Sona MedSpa. Net cash used in financing activities during the six months ended June 30, 2005 was $0.1 million, principally relating to payments on our capital lease obligations. Net cash provided by operating activities was $1.3 million for the year ended December 31, 2004. This resulted primarily from net income of $5.3 million increased by $1.3 million in depreciation and amortization, reduced by a $3.0 million gain from the sale of our equity interest in Sona MedSpa and a $2.3 million decrease in working capital primarily attributable to an increase in accounts receivables from increased sales and inventory for anticipated future sales. Net cash provided by investing activities was $0.3 million for the year ended December 31, 2004 resulting primarily from $3.1 million in net proceeds from the sale of our investment in Sona MedSpa, offset in large part by $2.8 million in capital expenditures. Net cash provided by financing activities was $0.1 million for the year ended December 31, 2004 resulting primarily from proceeds of $2.1 million from the sale of common stock and $0.5 million of proceeds from a note payable to El.En., offset by payments of $2.0 million on short-terms loans and payments of $0.2 million on capital lease obligations. 41

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Net cash used in operating activities was $0.3 million for the year ended December 31, 2003. This primarily resulted from net loss of $0.5 million and a $0.4 million decrease in working capital primarily attributable to an increase in accounts receivables from increased sales and inventory for anticipated future sales, partially offset by $1.3 million in depreciation and amortization. Net cash used in investing activities was $1.2 million for the year ended December 31, 2003 and consisted of $0.9 million in capital expenditures and $0.2 million relating to an equity investment. Net cash provided in financing activities was $0.7 million for the year ended December 31, 2003 and resulted primarily from proceeds of $1.4 million from the sale of common stock to El.En. and $0.7 million in proceeds from notes payable to El.En., offset by $1.3 million for the repurchase of common stock from several minority stockholders and payments of $0.3 million on capital lease obligations. We expect to generate positive cash flows from operations in the future. Our future capital requirements depend on a number of factors, including the rate of market acceptance of our current and future products, the resources we devote to developing and supporting our products and continued progress of our research and development of new products. We expect our capital expenditures over the next 12 months generally to be consistent with our capital expenditures during the prior 12 months. We believe that our net proceeds from this offering, together with our current cash and cash equivalents and cash generated from operations, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures at least through 2006. If existing cash and cash generated from operations are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or convertible securities could result in dilution to our stockholders. If additional funds are raised through the issuance of debt securities, these securities could have rights senior to those associated with our class A or class B common stock and could contain covenants that would restrict our operations. Any financing may not be available in amounts or on terms acceptable to us. If we are unable to obtain required financing, we may be required to reduce the scope of our planned product development and marketing efforts, which could harm our financial condition and operating results.

Contractual Obligations Our major outstanding contractual obligations relate to our capital leases from equipment financings and our facilities leases. In addition, we guaranteed the lease obligations for two facilities that are operated by Sona MedSpa and will be obligated to pay these leases if Sona MedSpa can not or does not make the required lease payments. We have summarized in the table below our fixed contractual cash obligations as of June 30, 2005.
Payments Due by Period Less Than One Year One to Three Years (In thousands) Three to Five Years More Than Five Years

Total

Capital lease obligations, including interest Operating leases Short-term indebtedness, including interest Lease guarantees Total contractual cash obligations

$

1,153 5,701 310 386 7,550

$

298 817 310 91 1,516

$

553 1,591 — 165 2,309

$

302 1,591 — 90 1,983

$

— 1,702 — 40 1,742

$

$

$

$

$

Off Balance Sheet Arrangements Since inception, we have not engaged in any off balance sheet financing activities. Quantitative and Qualitative Disclosures About Market Risk Our exposure to market risk is currently confined to our cash and cash equivalents that have maturities of less than 90 days. We currently do not hedge interest rate exposure. We have not used 42

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derivative financial instruments for speculation or trading purposes. Because of the short-term maturities of our cash and cash equivalents, we do not believe that an increase in market rates would have any significant impact on the realized value of our investments. A significant portion of our operations is conducted through operations in countries other than the United States. Revenues from our international operations that were recorded in U.S. dollars represented approximately 45% of our total international revenues for the year ended December 31, 2004. Substantially all of the remaining 55% were sales in euros, British pounds and Japanese yen. Since we conduct our business in U.S. dollars, our main exposure, if any, results from changes in the exchange rate between these currencies and the U.S. dollar. Our functional currency is the U.S. dollar. Our policy is to reduce exposure to exchange rate fluctuations by having most of our assets and liabilities, as well as most of our revenues and expenditures, in U.S. dollars, or U.S. dollar linked. Therefore, we believe that the potential loss that would result from an increase or decrease in the exchange rate is immaterial to our business and net assets. Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations set forth above are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates and judgments, including those described below. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities, and the reported amounts of revenues and expenses, that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies require significant judgment and estimates by us in the preparation of our financial statements.

Revenue Recognition and Deferred Revenue In accordance with Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements, we recognize revenue from sales of aesthetic treatment systems and accessories when each of the following four criteria are met: • delivery has occurred; • there is persuasive evidence of an agreement; • the fee is fixed or determinable; and • collection is reasonably assured. Revenue from the sale of service contracts is deferred and recognized on a straight-line basis over the contract period as services are provided. We are party to a revenue sharing arrangement with an operator and franchisor of spa franchises and recognize revenue from this arrangement in the period in which the procedures are performed. We defer until earned payments that we receive in advance of product delivery or performance of services. When we enter into arrangements with multiple elements, which may include sales of products together with service contracts and warranties, we allocate revenue among the elements based on each element’s fair value in accordance with the principles of Emerging Issues Task Force Issue Number 00-21, Revenue Arrangements with Multiple Deliverables . This allocation requires us to make estimates of fair value for each element. 43

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Accounts Receivable and Concentration of Credit Risk Our accounts receivable balance, net of allowance for doubtful accounts, was $8.4 million as of December 31, 2004, compared with $5.6 million as of December 31, 2003. The allowance for doubtful accounts as of December 31, 2004 and 2003 was $0.5 million. We maintain an allowance, or reserve, for doubtful accounts based upon the aging of our receivable balances, known collectibility issues and our historical experience with losses. While our credit losses have historically been within our expectations and the allowances established, we may not continue to experience the same credit losses that we have in the past, which could cause our provisions for doubtful accounts to increase. We work to mitigate bad debt exposure through our credit evaluation policies, reasonably short payment terms and geographical dispersion of sales. Our revenues include export sales to foreign companies located principally in Europe, the Asia/Pacific region and the Middle East. We obtain letters of credit for foreign sales that we consider to be at risk.

Inventories and Allowance for Obsolescence We state all inventories at the lower of cost or market value, determined on a first-in, first-out method. We monitor standard costs on a monthly basis and update them annually and as necessary to reflect changes in raw material costs and labor and overhead rates. Our inventory balance was $9.9 million as of December 31, 2004, compared with $6.7 million as of December 31, 2003. Our inventory allowances as of December 31, 2004 and 2003 were $0.8 million. We provide inventory allowances when conditions indicate that the selling price could be less than cost due to physical deterioration, usage, obsolescence, reductions in estimated future demand and reductions in selling prices. We balance the need to maintain strategic inventory levels with the risk of obsolescence due to changing technology and customer demand levels. Unfavorable changes in market conditions may result in a need for additional inventory reserves that could adversely impact our gross margins. Conversely, favorable changes in demand could result in higher gross margins when we sell products.

Product Warranty Costs and Provisions We provide a one-year parts and labor warranty on end-user sales of our aesthetic treatment systems. Distributor sales generally include a warranty on parts only. We estimate and provide for future costs for initial product warranties at the time revenue is recognized. We base product warranty costs on related material costs, technical support labor costs and overhead. We provide for the estimated cost of product warranties by considering historical material, labor and overhead expenses and applying the experience rates to the outstanding warranty period for products sold. As we sell new products to our customers, we must exercise considerable judgment in estimating the expected failure rates and warranty costs. If actual product failure rates, material usage, service delivery costs or overhead costs differ from our estimates, we would be required to revise our estimated warranty liability. The following table sets forth activity in the accrued warranty account for each of the two years ended December 31, 2003 and 2004.
2003 (In thousands) 2004

Balance at beginning of year Charged to expense Costs incurred Balance at end of year

$

863 1,317 (928 ) 1,252

$

1,252 1,606 (1,248 ) 1,610

$

$

Stock-Based Compensation We have elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, or APB 25, and related interpretations, in accounting for our stock-based compensation plans, rather than the alternative fair value method provided for under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation , or SFAS No. 123. In 2005, some grants of 44

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stock options were made at exercise prices less than the deemed fair value of our common stock for accounting purposes and, as a result, we recorded deferred stock-based compensation. This deferred stock-based compensation will be amortized to expense over the vesting period of the stock options. In the notes to our financial statements, we provide pro forma disclosures in accordance with SFAS No. 123 that reflect the effect on net (loss) income as if we had applied the fair value provisions of SFAS No. 123. We account for transactions in which services are received from non-employees in exchange for equity instruments based on the fair value of such services received or of the equity instruments issued, whichever is more reliably measured, in accordance with SFAS No. 123 and the Emerging Issues Task Force Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services , or EITF Issue No. 96-18. Accounting for equity instruments granted or sold by us under APB 25, SFAS No. 123 and EITF Issue No. 96-18 requires fair value estimates of the equity instrument granted or sold. If our estimates of the fair value of these equity instruments for accounting purposes are too high or too low, our expenses may be overstated or understated. We estimated the fair value of the equity instruments for accounting purposes based upon consideration of factors we deemed to be relevant at the time. Because shares of our common stock have not been publicly traded, market factors historically considered in valuing stock and stock option grants include comparative values of public companies discounted for the risk of limited liquidity provided for in the shares we are issuing, pricing of private sales of our common stock between unrelated parties and the effect of certain events that have occurred between the time of such private sales and such grants. The fair value of our common stock for accounting purposes is determined by our management and board of directors. In making that determination, our management and the board of directors draw on the knowledge of our officers and directors who have experience with companies in the medical device sector. For options granted in May 2005, our management and board of directors used hindsight, the valuation implied in the sale of our common stock to accredited investors during October and November 2004 and our estimate of the value of our stock in a liquid trading market to determine that the deemed fair value of our common stock for accounting purposes was higher than the exercise price. Because the accredited investors who purchased shares in October and November 2004 had not previously purchased shares of our common stock, we considered the pricing of these sales to be a strong indicator of the fair value of our common stock. In addition, during October and November 2004, we did not consider an initial public offering or other liquidity event to be likely to occur during the ensuing three to four months. This retrospective valuation for accounting purposes, performed in August 2005, caused us to record deferred stock-based compensation of approximately $1.7 million during the six months ended June 30, 2005. We recognized $53,000 of amortization of deferred stock-based compensation during the six months ended June 30, 2005. We expect to record amortization of this deferred stock-based compensation of $0.2 million during the remainder of 2005, $0.4 million in each of 2006, 2007 and 2008 and $0.2 million in 2009, subject to employee terminations. We use the Black-Scholes option pricing model to determine the fair value of each option grant to non-employees. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, this option pricing model requires the use of highly subjective assumptions, including expected stock price volatility. These assumptions reflect our best estimates, but these items involve inherent uncertainties based on market conditions that are generally outside of our control. If other assumptions had been used in the current period, stock-based compensation expense could have been materially affected. Furthermore, if we use different assumptions in future periods, stock-based compensation expense could be materially affected in future years. Income Taxes We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes . Under this method, we determine deferred tax assets and liabilities based upon the differences between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in 45

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effect for the year in which the differences are expected to affect taxable income. The tax consequences of most events recognized in the current year’s financial statements are included in determining income taxes currently payable. However, because tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenues, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income for a year and between the tax bases of assets or liabilities and their reported amounts in the financial statements. Because we assume that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount in the balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered, giving rise to a deferred tax asset. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance. Recent Accounting Pronouncements In December 2004, the Financial Accounting Standards Board issued SFAS Statement No. 123 (revised 2004), Share-Based Payment , or SFAS 123(R), which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation . SFAS 123(R) supersedes APB 25 and amends FASB Statement No. 95, Statement of Cash Flows . SFAS 123(R) requires companies to measure compensation costs for share-based payments to employees, including stock options, at fair value and expense such compensation over the service period beginning with the first interim or annual period after December 15, 2005. The pro forma disclosures previously permitted under SFAS 123 will no longer be an alternative to financial statement recognition. We expect to adopt SFAS 123(R) in the first quarter of fiscal 2006. Under SFAS 123(R), companies must determine the appropriate fair value model to be used for valuing share-based payments, the amortization method for compensation cost and the transition method to be used at the date of adoption. The transition methods include prospective and retroactive adoption options. Management is evaluating the requirements of SFAS 123(R) and cannot currently estimate the future effects of adopting this new guidance. In November 2004, the Financial Accounting Standards Board issued SFAS Statement No. 151, Inventory Costs, an Amendment of Accounting Principles Board Opinion No. 43, Chapter 4 , or SFAS 151. SFAS 151 requires that items such as idle facility expense, freight, handling costs and wasted materials be recognized as current-period charges rather than being included in inventory regardless of whether the costs meet the criterion of abnormal as defined in Accounting Principles Board Opinion No. 43. SFAS 151 is applicable for inventory costs incurred during fiscal years beginning after June 15, 2005. We will adopt this pronouncement on January 1, 2006 and we do not expect the adoption with have a material impact on our financial condition or results of operation. 46

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BUSINESS Overview We develop and market aesthetic treatment systems that are used by physicians and other practitioners to perform non-invasive procedures to remove hair, treat vascular lesions, rejuvenate skin through the treatment of shallow vascular lesions and pigmented lesions and temporarily reduce the appearance of cellulite. Our systems incorporate a broad range of laser and other light-based energy sources, including Alexandrite, pulse dye, Nd:Yag and diode lasers, as well as intense pulsed light. We believe that we are one of only a few companies that currently offer aesthetic treatment systems utilizing Alexandrite and pulse dye lasers, which are particularly well suited for some applications and skin types. We offer single energy source systems as well as workstations that incorporate two or more different types of lasers or pulsed light technologies. We offer multiple technologies and system alternatives at a variety of price points depending primarily on the number and type of energy sources included in the system. Our newer products are designed to be easily upgradeable to add additional energy sources and handpieces, which provides our customers with technological flexibility as they expand their practices. As the aesthetic treatment market evolves to include new customers, such as aesthetic spas and additional physician specialties, we believe that our broad technology base and tailored solutions will provide us with a competitive advantage. We sell over 14 different aesthetic treatment systems and have focused our development and marketing efforts on offering leading, or flagship, products for each of the major aesthetic procedure categories that we address. Our flagship products are: • the Apogee Elite system for hair removal; • the Cynergy system for the treatment of vascular lesions; • the PhotoSilk Plus system for skin rejuvenation through the treatment of shallow vascular lesions and pigmented lesions; and • the TriActive LaserDermology system for the temporary reduction of the appearance of cellulite. In addition to their primary applications, the Apogee Elite, Cynergy and PhotoSilk Plus systems can each be used by practitioners for a variety of other applications. We sell our products through a direct sales force in North America, four European countries, Japan and China and through international distributors in 31 other countries. In January 2005, we launched a separate CynosureSpa brand with product offerings, tailored marketing and sales personnel focused exclusively on the aesthetic spa market. As of June 30, 2005, we had sold more than 4,500 aesthetic treatment systems worldwide. Our company was founded in 1991. El.En. S.p.A., an Italian company listed on the techSTAR segment of the Italian stock market, Borsa Italiana, that itself and through subsidiaries develops and markets laser systems for medical and industrial applications, acquired a majority of our capital stock in 2002. In September 2003, we recruited a new management team that has implemented a comprehensive reorganization of our company. Our revenues have increased from $23.0 million in 2002 to $41.6 million in 2004, a compound annual growth rate of 35%. Our revenues for the six months ended June 30, 2005 increased 31% to $25.1 million, compared to $19.2 million for the first six months of 2004. Our gross profit margin improved from 43% in 2002 to 51% in 2004, and we achieved profitability in 2004. Industry Aesthetic Market Opportunity Michael Moretti/Medical Insight, Inc., an aesthetic treatment market research firm, estimates that the number of non-invasive aesthetic treatment procedures worldwide using laser and other light-based technologies will grow from nearly 20 million in 2003 to over 53 million in 2008, representing a compound 47

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annual growth rate of over 20%. We estimate that the worldwide market for aesthetic treatment systems based on laser and other light-based technologies will exceed $550 million in 2005. We base this estimate on published market research reports, revenue figures for public companies and our conversations with the managements of private companies that compete in the aesthetic treatment equipment market. Key factors contributing to growth in the markets for aesthetic treatment procedures and aesthetic laser equipment include: • the aging population of industrialized countries and the rising discretionary income of the “baby boomer” demographic segment; • the desire of many individuals to improve their appearance; • the development of technology that allows for safe and effective aesthetic treatment procedures; • the impact of managed care and reimbursement on physician economics, which has motivated physicians to establish or expand their elective aesthetic practices with procedures that are paid for directly by patients; and • reductions in cost per procedure, which has attracted a broader base of clients and patients for aesthetic treatment procedures.

Expansion Into Non-Traditional Physician Customer and Spa Markets Aesthetic treatment procedures that use lasers and other light-based equipment have traditionally been performed by dermatologists and plastic surgeons. Based on published membership information from professional medical organizations, there are more than 18,000 dermatologists and plastic surgeons in the United States. More recently, a broader group of physicians in the United States, including primary care physicians, obstetricians, gynecologists, ophthalmologists and ear, nose and throat specialists, have incorporated aesthetic treatment procedures into their practices. These non-traditional physician customers are largely motivated to offer aesthetic procedures by the potential for a reliable revenue stream that is unaffected by managed care and government payor reimbursement economics. We believe that there are approximately 200,000 of these potential customers in the United States and Canada, representing a significant market opportunity that is only beginning to be addressed by suppliers of lasers and other light-based aesthetic equipment. Some physicians are electing to open medical spas, often adjacent to their conventional office space, where they perform aesthetic procedures in an environment designed to feel less like a health care facility. The International Spa Association, known as ISPA, estimates that there were approximately 600 of these medical spas in North America in 2004 and that the number of medical spas more than doubled between 2002 and 2004. An aesthetic spa market is also rapidly developing and growing in the United States at dedicated day spa facilities and hotels and resorts. In addition to conventional massage and cosmetic treatments, aesthetic spas are also beginning to offer non-invasive light-based procedures performed by spa technicians and other non-medical professionals. ISPA estimates that there were approximately 12,000 aesthetic spas in North America in 2004, an increase of approximately 26% from 2002. We believe that non-traditional physician customers and spa customers currently represent at least one-half of the North American laser and other light-based aesthetic treatment systems market.

The Structure of Skin and Conditions that Affect Appearance The human skin consists of several layers. The epidermis is the outer layer and contains the cells that determine pigmentation, or skin color. The dermis is a thicker inner layer that contains hair follicles and large and small blood vessels. Beneath the dermis is a layer that contains subdermal fat and collagen, which provides strength and flexibility to the skin. 48

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The appearance of the skin may change over time due to a variety of factors, including age, sun damage, circulatory changes, deterioration of collagen and the human body’s diminished ability to repair and renew itself. These changes include: • unwanted hair growth; • uneven pigmentation; • wrinkles; • blood vessels and veins that are visible at the skin’s surface; and • the appearance of cellulite. Changes to the skin caused by pigmentation are called pigmented lesions and are the result of the accumulation of excess melanin, the substance that gives skin its color. Pigmented lesions are characterized by the brown color of melanin and include freckles, solar lentigines, also known as sun spots or age spots, and café au lait birthmarks. Changes to the skin caused by abnormally large or numerous blood vessels located under the surface of the skin are called vascular lesions. Vascular lesions are characterized by blood vessels that are visible through the skin or that result in a red appearance of the skin. Vascular lesions may be superficial and shallow in the skin or deep in the skin. Shallow vascular lesions include small spider veins, port wine birthmarks, facial veins and rosacea, a chronic skin condition that causes rosy coloration and acne-like pimples on the face. Deep vascular lesions include large spider veins and leg veins. People with undesirable skin conditions or unwanted hair growth often seek aesthetic treatments, including treatments using non-invasive laser and light-based technologies.

Non-Invasive Laser and Light-Based Aesthetic Treatments A laser is a device that creates and amplifies a narrow, intense beam of light. Lasers have been used for medical and aesthetic applications since the 1960s. Intense pulsed light technology was introduced in the 1990s and uses flashlamps, rather than lasers, to generate multiple wavelengths of light with varying pulse durations, or time intervals, over which the energy is delivered. By producing intense bursts of highly focused light, lasers and other light-based technologies selectively target hair follicles, veins or collagen in or below the dermis, as well as cells responsible for pigmentation in the epidermis. When the target absorbs sufficient energy, it is destroyed. The degree to which energy is absorbed in the skin depends upon the skin structure targeted — e.g., hair follicle or blood vessel — and the skin type — e.g., light or dark. Different types of lasers and other light-based technologies are needed to effectively treat the entire spectrum of skin types and conditions. As a result, an active aesthetic practice may require multiple laser or other light-based systems in order to offer treatments to its entire client base. Different types of lasers are currently used for a wide range of aesthetic treatments. Each type of laser operates at its own wavelength, measured in nanometers, which corresponds to a particular emission and color in the light spectrum. The most common lasers used for non-invasive aesthetic treatments are: • Pulse dye lasers — produce a yellow light that functions at a shallow penetration depth. • Alexandrite lasers — produce a near infrared invisible light that functions with high power at a deep penetration depth. • Diode lasers — produce a near infrared invisible light that functions at a deep penetration depth. • Nd:Yag lasers — produce a near infrared invisible light that functions over a wide range of penetration depths. 49

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In addition to selecting the appropriate wavelength for a particular application, laser and other light-based treatments require an appropriate balance among three other parameters to optimize safety and effectiveness for aesthetic treatments: • energy level — the amount of light emitted to heat the target; • pulse duration — the time interval over which the energy is delivered; and • spot size — the diameter of the energy beam. As a result of the wide spectrum of aesthetic applications, patient skin types and users of technology, customer purchasing objectives for aesthetic treatment systems are diverse. We believe that as aesthetic spas and non-traditional physician customers play increasingly important roles as purchasers of aesthetic treatment systems, the market for these products will become even more diverse. Specifically, we expect that owners of different types of aesthetic treatment practices will place different emphases on various system attributes, such as breadth of treatment applications, return on investment, upgradeability and price. Accordingly, we believe that there is significant market opportunity for a company that tailors its product offerings to meet the needs of a wide range of market segments. Our Solution We offer tailored customer solutions to address the market for non-invasive light-based aesthetic treatment applications, including hair removal, treatment of vascular lesions, skin rejuvenation through the treatment of shallow vascular lesions and pigmented lesions and temporary reduction of the appearance of cellulite. We believe our laser and other light-based systems are reliable, user friendly and easily incorporated into both physician practices and spas. We complement our product offerings with comprehensive and responsive service offerings, including assistance with training, aesthetic practice development consultation and product maintenance. As of June 30, 2005, we had sold more than 4,500 aesthetic treatment systems. We believe that the following factors enhance our market position: • Broad Technology Base. Our products are based on a broad range of technology and incorporate different types of lasers, such as Alexandrite, pulse dye, Nd:Yag and diode, as well as intense pulsed light devices. We believe we are one of a few companies that currently offer aesthetic treatment systems using Alexandrite and pulse dye lasers, which are particularly well suited for some applications and skin types. The following table provides information regarding the principal energy sources used in laser and other light-based aesthetic treatments that we offer and the primary application of each of these energy sources. The table also indicates how many of the six largest competitors in our industry we believe also offer products using this energy source. See “— Competition” below. We base our belief as to the six largest competitors in our industry and their product offerings on public company filings and information available on company websites. 50

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Competitive Offerings Six Largest Competitors

Energy Source

Type of Light/Wavelength

Principal Applications

Cynosure

Pulse Dye Laser Alexandrite Laser Diode Laser

Visible light (Yellow) (585/595 nm) Near infrared invisible light (755 nm) Near infrared invisible light (805/940/980 nm)

Vascular lesions, including shallow and deep lesions Hair removal, particularly for light skin types Hair removal, particularly for light skin types Vascular lesions, particularly shallow lesions Temporary reduction in the appearance of cellulite Hair removal, particularly for medium and dark skin types Vascular lesions, particularly deep lesions Hair removal, all skin types Vascular lesions, particularly shallow lesions Pigmented lesions Temporary reduction in the appearance of cellulite Multiple

  

1 of 6 1 of 6 3 of 6

Nd:Yag Laser

Near infrared invisible light (1064 nm)



5 of 6

Intense Pulsed Light

Visible/Near infrared invisible light (400-950 nm)



5 of 6

Multiple Energy Source Workstations (incorporating two or more energy sources)

Multiple



3 of 6

• Expansive Portfolio of Aesthetic Treatment Systems. We sell over 14 different aesthetic treatment systems so that customers can select the product best suited to their practice or business. Our product portfolio includes single energy source systems as well as workstations that incorporate two or more different types of lasers or light-based technologies. By offering multiple technologies and system alternatives at a variety of price points, we seek to provide customers with tailored solutions that meet the specific needs of their practices while providing significant flexibility in their level of investment. • Upgrade Paths Within Product Families. We have designed our new products to facilitate upgrading within product families. For example, our redesigned single energy source Acclaim 7000 NL and Apogee 5500 NL laser systems are each upgradeable to our Apogee Elite workstation, which includes a combination of these two laser systems. Similarly, our two laser Cynergy system, which is a combination of our VStar and Acclaim 7000 NL laser systems, is upgradeable to our Cynergy III multi-energy source workstation through the addition of an intense pulsed light module. We began shipping these new upgradeable systems in mid-2005. • Global Presence. We have offered our products in international markets for over 14 years, with approximately 45% of our revenue generated from international markets in 2004. We target international markets through a direct sales force in four European countries, Japan and China and through international distributors in 31 other countries. • Strong Reputation Established Over 14-Year History. We have been in the business of developing and marketing aesthetic treatment systems for over 14 years. As a result of this history, we believe the Cynosure brand name is associated with a tradition of technological leadership. 51

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Our Business Strategy Our goal is to become the worldwide leader in providing non-invasive aesthetic treatment systems. The key elements of our business strategy to achieve this goal are to: • Offer a Full Range of Tailored Aesthetic Solutions. We believe that we have one of the broadest product portfolios in the industry, with multiple product offerings incorporating a range of laser and light sources at various price points across many aesthetic applications. Our approach is designed to allow our customers to select products that best suit their client base, practice size and the types of treatments that they wish to offer. This allows us to address the needs of the traditional physician customer market as well as the growing non-traditional physician customer market. Many of our newer products can be upgraded to systems with greater functionality as our customers’ practices expand. • Launch Innovative New Products and Technologies for Emerging Non-Invasive Aesthetic Applications. Our research and development team builds on our broad range of laser and light-based technologies to target unmet needs in significant aesthetic treatment markets. Since 2002, we have introduced 11 new products. We launched the Apogee Elite system, our flagship product for hair removal, in March 2004, and the Cynergy system, our flagship product for the treatment of vascular lesions, in February 2005. In addition, we began to distribute the TriActive LaserDermology system, our flagship product for the temporary reduction of the appearance of cellulite, in North America in February 2004, and the PhotoSilk Plus system, our flagship product for skin rejuvenation through the treatment of shallow vascular lesions and pigmented lesions, in North America in February 2005. We are also working on new technologies for other emerging aesthetic applications, such as tattoo removal and acne. • Pursue Spa Market with Dedicated Organization. We believe that the aesthetic spa market’s emergence and growth presents a significant sales opportunity for us. In January 2005, we launched our separate CynosureSpa brand with tailored marketing and sales personnel focused exclusively on penetrating the aesthetic spa market. We have also introduced products specifically designed for the aesthetic spa market, such as the TriActive LaserDermology system for the temporary reduction of the appearance of cellulite and the PhotoLight system for hair removal, skin rejuvenation through the treatment of shallow vascular lesions and pigmented lesions and the treatment of vascular and pigmented lesions. We are establishing relationships with aesthetic spa distributors and operators to augment our efforts to sell and market our products to this growing market. • Provide Comprehensive, Ongoing Customer Service. We support our customers with a worldwide service organization that includes 18 field service engineers in North America and 43 international field service engineers working directly for us or our international distributors. The field service engineers install our products and respond rapidly to service calls to minimize disruption to our customers’ businesses. Most of our new products are modular in design to enable quick and efficient service and support. In addition, we have engaged a third party consulting firm to assist our North American customers with training and the development of business and marketing plans to establish and grow their aesthetic treatment businesses. We plan to bolster our existing service infrastructure by establishing new training and inventory hubs in Europe and the Asia/Pacific region. • Generate Additional Revenue from Existing Customer Base. We believe that there are opportunities for us to generate additional revenue from existing customers who are already familiar with our products. Many of our existing traditional and non-traditional customers may be purchasers of additional aesthetic treatment systems to address increasing treatment volumes or new treatment applications. We also expect that customers purchasing our new modular products will be candidates for technology upgrades to enhance the capabilities of their systems. In addition, as we continue to grow our service organization, we are seeking to increase the 52

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percentage of our customers that enters into service contracts, which would provide additional recurring customer revenue. Products We offer a broad portfolio of aesthetic treatment systems that address a wide variety of applications. From our entry-level, standalone pulsed light products that cost as little as approximately $30,000, to our multi-laser, multi-application workstations that we sell for over $100,000, we can address a wide range of markets and applications. The following table provides information concerning our products and their applications. We use the flagship designation for our products that are our leading products for a particular application.

Application Temporary Reduction of Appearance of Cellulite

Year Laser/Light Source Introduced

Hair Removal

Vascular Lesions

Skin Rejuvenation(1)

Pigmented Lesions

Tattoo Acne Removal

Principal Products: Apogee Elite Apogee 5500 NL Acclaim 7000 NL Cynergy III

Alexandrite Nd:Yag Alexandrite Nd:Yag Pulse Dye Nd:Yag Pulsed Light Pulse Dye Nd:Yag Pulse Dye Nd:Yag Pulsed Light Diode Laser Pulsed Light Q-Switch 1064/532 Nd:Yag Alexandrite Nd:Yag Pulsed Light Pulse Dye

2004 2004 2004

Flagship  

 

 

  

2005 2005 2000 2004 2005 2004 2005

   

 Flagship   

   

    Flagship

Cynergy VStar Acclaim 7000 NL Cynergy PL(2) TriActive LaserDermology(3) PhotoSilk Plus(3) Other Products: Affinity QS(4)





Flagship



Apogee 9300 Acclaim 9300 PhotoLight(3) PhotoGenica MiniV

2005 2000 2004 2003 2001

          



(1) (2) (3) (4)

We consider skin rejuvenation to be the treatment of shallow vascular lesions and pigmented lesions to rejuvenate the skin’s appearance. We distribute the Cynergy PL product worldwide pursuant to a distribution agreement with El.En. We distribute the PhotoLight, PhotoSilk Plus and TriActive LaserDermology systems in North America pursuant to a distribution agreement with El.En. We currently offer the Affinity QS system outside of the United States only and are seeking regulatory clearance for this product in the United States.

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System Components Each of our systems consists of a control console and one or more handpieces. Our control consoles are each comprised of a graphical user interface, a laser or other light source, control system software and high voltage electronics. The graphical user interface allows the practitioner to set the appropriate laser or flashlamp parameters to meet the requirements of a particular application and patient. The laser or other light source consists of electronics, a visible aiming beam, a focusing lens and a laser or flashlamp. Using the graphical user interface, the practitioner can independently adjust the system’s power level and pulse duration to optimize the desired treatment’s safety and effectiveness. The graphical user interface on our multiple energy workstations also allows the practitioner to change energy sources with the press of a button. The graphical user interfaces on our intense pulsed light systems offer practitioners a choice between using programmed preset treatment settings that address a variety of skin types and treatment options or manually adjusting the energy level and pulse duration settings. The control system software communicates the operator’s instructions from the graphical user interface to the system’s components and manages system performance and calibration. The handpieces on our laser systems deliver the laser energy through a maneuverable optical fiber to the treatment area. These handpieces weigh approximately eight ounces and are ergonomically designed to allow the practitioner to use the system with one hand and without becoming fatigued. Other features of our laser system handpieces include: • interchangeable components that permit the practitioner to easily adjust the spot size; and • an integrated aiming beam of harmless visible light that allows the practitioner to verify the treatment area, thereby reducing the risk of unintended skin damage and potentially reducing treatment time. The handpieces for our intense pulsed light systems consist of the flashlamp, a wavelength filter and, on some models, an integrated flashlamp cooling system. These handpieces weigh approximately two pounds and also are ergonomically designed to be operated with one hand. Practitioners generally use our laser systems in combination with a cooling system. We offer our customers our SmartCool treatment cooling system, which we purchase from a third party supplier and sell as a private label product under the Cynosure SmartCool brand. Our SmartCool product has six variable settings and allows the practitioner to provide a continuous flow of chilled air before, during and after treatment to cool and comfort the patient’s skin. The SmartCool handpiece, which is specially designed for use with our laser systems, interlocks with the laser handpiece. In contrast to some competitive cooling systems, there are no disposable supplies required to use our SmartCool system. In North America, our SmartCool system is generally packaged and sold with our laser aesthetic treatment systems, and nearly all of our North American customers purchase a SmartCool system when they purchase one of our laser aesthetic treatment systems. Outside of North America, our customers either purchase our SmartCool system when they purchase one of our aesthetic treatment systems or they purchase another cooling system from a third party supplier. Our PhotoSilk Plus system provides contact cooling for patient comfort. Practitioners generally do not use our other intense pulsed light systems in combination with cooling systems or treatments. Applications Practitioners use our products to perform a variety of non-invasive procedures to remove hair, treat vascular and pigmented lesions, rejuvenate skin through the treatment of shallow vascular lesions and pigmented lesions and temporarily reduce the appearance of cellulite. These applications of our products are described below. Hair Removal. In a typical laser or pulsed light hair removal treatment, the target area is first cleaned and shaved. The practitioner then selects appropriate laser or pulsed light parameters based on the patient’s skin and hair types and pre-cools the treatment area. The practitioner next applies the handpiece to the target area and delivers laser or pulsed light energy to the selected area. The laser or pulsed light 54

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removes hair by directing energy to the target melanin pigment of the hair follicle, destroying the hair follicle without harming the surrounding skin. This procedure can last from a few minutes to one hour depending on the size of the treatment area and laser or pulsed light spot size. Chilled air is applied to the treatment area on a continuous basis to cool and comfort the patient’s skin. Generally, for permanent reduction, hair removal requires three to six treatments spaced four to six weeks apart. Our Apogee Elite workstation is our flagship product for hair removal. It is a two-in-one laser system that contains both an Alexandrite laser, which is best suited for hair removal for patients with light skin types, and an Nd:Yag laser, which is best suited for hair removal for patients with medium and dark skin types or tanned skin. The practitioner can switch between these two energy sources simply by pressing a button on the system console. Features of the Apogee Elite system include: • A wide range of separately adjustable power and pulse duration settings. This allows the practitioner to select the best settings for safe and efficient hair removal depending on the patient’s skin and hair type. Some competitive systems do not permit pulse duration adjustment, which we believe may reduce the effectiveness of the treatment, particularly for thicker hair. • A large, 15 millimeter spot size and a laser beam that distributes energy evenly over the entire treatment area. This allows the practitioner to treat a targeted area in an efficient manner. Some competitive systems have smaller spot sizes or beams that concentrate the energy in the middle of the treatment area of each pulse of light, which requires more overlap of the treatment areas of the individual pulses of light to achieve an effective result. • A rapid pulse rate. This permits the practitioner to cover the treatment area quickly, which is particularly important when removing hair from large areas, such as backs and legs. In addition to the Apogee Elite system, each of our Apogee 5500 NL, Acclaim 7000 NL, Cynergy III, Cynergy, Cynergy PL, PhotoSilk Plus, Apogee 9300 , Acclaim 9300 and PhotoLight systems can be used for hair removal. Treatment of Vascular Lesions. To treat vascular lesions the practitioner generally first pre-cools the target area and then applies the system handpiece to deliver laser energy to the treatment area. Depending on the size of the treatment area, procedures last between 20 and 30 minutes. In some cases, a topical anesthetic is applied to the treatment area to minimize pain. For spider veins, redness and rosacea, patients generally receive between two and four treatments spaced over two to three weeks. For port wine birthmarks, patients may receive ten or more treatments. Our Cynergy workstation is our flagship product for the treatment of vascular lesions. The Cynergy system combines a pulse dye laser, which is best suited for treating shallow vascular lesions, such as port wine birthmarks, facial veins and rosacea, and an Nd:Yag laser, which is best suited for treating large or deep veins, such as leg veins. The practitioner can switch between these two energy sources simply by pressing a button on the system console. Other features of the Cynergy system include: • A wide range of separately adjustable power and pulse duration settings. This allows the practitioner to select the best settings for safe and efficient treatment depending on the particular type and depth of the vascular lesion to be treated. • One of the most powerful pulse dye lasers currently available in the aesthetic treatment system market. The power of this laser allows a practitioner to provide treatment with a spot size that is larger than would be effective with a less powerful laser, thereby enhancing treatment efficiency. • SixPulse TM technology in the pulse dye laser, which distributes the power of one long pulse of energy into six micro pulses. This allows the practitioner to deliver more energy with less patient discomfort. • A choice of five different spot sizes that are easily selected through the use of interchangeable headpiece components. This allows the practitioner to select the appropriate spot size for the 55

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particular vascular lesion to be treated. For example, a large spot size is generally used for a large leg vein, while a small spot size is normally used for facial veins. We recently obtained FDA clearance for our innovative Multiplex TM energy delivery system that we plan to make available on the Cynergy system. Our Multiplex system mixes the energy from the two lasers included in Cynergy system by quickly following a pulse of energy from the pulse dye laser with a pulse of energy from the Nd:Yag laser. We are studying whether Multiplex delivery allows for more efficient treatment of vascular lesions by reducing the amount of laser power required and allowing the laser energy to penetrate deeper into the target. In addition to the Cynergy system, each of our Apogee Elite, Acclaim 7000 NL, Cynergy III, VStar, Cynergy PL, PhotoSilk Plus, Acclaim 9300, PhotoLight and PhotoGenica MiniV systems can be used for the treatment of vascular lesions. Skin Rejuvenation. Skin rejuvenation involves the treatment of shallow vascular lesions and pigmented lesions to rejuvenate the skin’s appearance. In a skin rejuvenation procedure, the practitioner applies the system handpiece to the target area and delivers laser or pulsed light energy. The energy destroys the shallow vascular lesions and pigmented lesions and rejuvenates the skin’s appearance without damage to the treated or surrounding area through the improvement in skin texture and reduction or elimination of skin irregularities. Cooling is generally not required. Patients typically receive between four to six treatments of approximately 30 minutes each. Treatments are spaced two to four weeks apart. Our PhotoSilk Plus system is our flagship product for skin rejuvenation. The PhotoSilk Plus system is a high-powered pulsed light system that delivers energy over a broad spectrum of wavelengths that are best suited for treatment of shallow vascular lesions and pigmented lesions. Features of the PhotoSilk Plus system include: • A wide range of separately adjustable power and pulse duration settings. This allows the practitioner to select the best settings for safe and efficient skin rejuvenation depending on the patient’s skin type and the treatment desired. • U-shaped design, with the flashlamp located close to the treatment area. In contrast with some competitive products that locate the flashlamp further away from the treatment area, we believe that our design enhances patient safety and comfort by reducing the heat produced in the procedure. In addition, this design reduces the energy required for effective treatment. • A number of preprogrammed settings for a variety of skin types and different types of treatments. This permits the practitioner to quickly adjust the system for use in typical applications, such as treatment of vascular lesions, pigmented lesions or both. We offer the PhotoSilk Plus system with a variety of handpieces that have different wavelength filters and spot sizes. We offer three different wavelength filters and three different spot sizes. The range of available wavelength filters allows the practitioner to select the handpiece best suited for the type of treatment to be performed. For example, treatments with a short wavelength filter are best suited for pigmented lesions, while treatment with long wavelength filters are best suited for vascular lesions. A medium wavelength filter may be used to treat both vascular lesions and pigmented lesions. The range of available spot sizes allows the practitioner to select the handpiece best suited for the treatment area. For example, treatments on some areas of the face may require a small spot size, while other treatments may be more efficient with a large spot size. Up to two handpieces may be connected to the PhotoSilk Plus system at one time, which reduces delays in switching between treatments with handpieces. This feature enables a practitioner to easily switch between handpieces to address varying treatment needs for an individual patient, as well as allowing for quick turnaround times between different patients. In addition to the PhotoSilk Plus system, each of our Apogee Elite, Acclaim 7000 NL, Cynergy III, Cynergy, Cynergy PL, Acclaim 9300 and PhotoLight systems can be used for skin rejuvenation through the treatment of shallow vascular lesions and pigmented lesions. 56

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Temporary Reduction of Appearance of Cellulite. Cellulite is a deposit of fat that causes a dimple or other uneven appearance of the skin on women, typically around the thighs, hips and buttocks. According to published reports, an estimated 80% of women have some degree of cellulite. In a treatment for the temporary reduction of the appearance of cellulite, the practitioner applies the multifunction handpiece to deliver diode laser energy, as well as suction and manipulation therapy, to the treatment area. The laser energy and suction and manipulation therapy enhance micro-circulation in the area of the cellulite. Treatment for the temporary reduction in the appearance of cellulite requires a series of treatments of approximately 30 to 45 minutes each, depending on the treatment area and patient response. Our TriActive LaserDermology system is our flagship product for temporarily reducing the appearance of cellulite. The TriActive system contains six low-energy diode lasers, mechanical massage and suction features and localized cooling. The TriActive system is one of only two light-based systems, and the only laser-based system, cleared by the FDA for use for the temporary reduction in the appearance of cellulite. In addition, the FDA has cleared TriActive system as an over-the-counter device, for sale and use without physician supervision, because its diode lasers are sealed and do not pose a risk of exposure to operators’ eyes. We believe that TriActive system is the only light-based system for this application that has been so cleared by the FDA, which significantly facilitates our marketing of TriActive system to the growing aesthetic spa market. Other Aesthetic Applications. We are developing flagship products based on laser technologies in two other areas: • tattoo removal, which we consider a large and growing market opportunity as a result of the increasing popularity of tattoos and the limitations on effectiveness of current laser treatments; and • acne, for which we believe laser treatment may be seen as an attractive alternative to Accutane because of safety issues with this drug. Currently, our VStar product is used for the treatment of acne and our Affinity QS system, which has not received regulatory clearance in the United States, is used for tattoo removal. Original Equipment Manufacturing and Other Relationships We are collaborating with third parties in connection with surgical uses of our laser products. Specifically: • In 2004, we began supplying our surgical pulse dye lasers on an original equipment manufacturer basis to PENTAX Medical Company, which sells these lasers for use with its endoscopic video imaging system in North America and South America for use in treating recurrent respiratory papilloma and glottal dysplasia. Recurrent respiratory papilloma is a disease characterized by tumor growth in the larynx, vocal cords and trachea. Glottal dysplasia is a disease characterized by abnormal changes in the cells that line the glottis, or middle part of the larynx, caused by damage to the lining of the larynx. In these treatments, the PENTAX endoscope is inserted through the nose to access the larynx. A disposable, flexible optical fiber is then passed through the endoscope. Our system is used to deliver laser energy through the optical fiber to target and destroy the tumors or abnormal cells. The FDA has cleared the use of our laser for these indications. • In 2004, we began supplying our lasers on an original equipment manufacturer basis to Solx, Inc., which is using the lasers with its systems for the treatment of glaucoma. Glaucoma is an eye disease associated with the degeneration of the retinal cells responsible for transmitting images from the eye to the brain. This treatment involves the implantation of the Solx system in the eye and the use of laser energy to activate the system to reduce intraocular pressure associated with some types of glaucoma. Solx is marketing our lasers in Europe, where their use in this procedure has been approved. Clinical trials of our lasers for this procedure are ongoing in the United States. 57

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• We are supplying our VStar pulse dye lasers to DUSA Pharmaceuticals, Inc., which is using these lasers in a phase II clinical trial of photodynamic therapy for the treatment of acne and sun damage. Sales and Marketing We sell our aesthetic treatment systems to the traditional physician customer base of dermatologists and plastic surgeons as well as to the increasing number of non-traditional physician customers who are providing aesthetic services using laser and light-based technology. Non-traditional physician customers include primary care physicians, obstetricians, gynecologists, ophthalmologists and ear, nose and throat specialists. In early 2005, we created our CynosureSpa brand, which is focused on the emerging market of approximately 12,000 aesthetic spas in North America. We target potential customers through office visits, trade shows and trade journals. We also conduct clinical workshops featuring recognized expert panelists and opinion leaders to promote existing and new treatment techniques using our products. We believe that these workshops enhance customer loyalty and provide us with new sales opportunities. We plan to increase the number of workshops that we conduct from 40 in 2004 to 90 in 2005. We also use direct mail programs to target specific segments of the market that we seek to access, such as members of medical societies and attendees at meetings sponsored by medical societies or associations. In addition, we have recently implemented a public relations program that has resulted in treatments based on our products being featured in magazines such as Elle, Harper’s Bazaar and Redbook . Physician Sales We sell our products to physicians in North America through a direct sales force. Outside of North America, we sell our products to physicians through a direct sales force in four European countries, Japan and China and through independent distributors in 31 other countries. We conduct our own international sales and service operations through wholly-owned subsidiaries in the United Kingdom, France, Germany, Spain and Japan and through a majority-owned joint venture in China. We seek distributors in international markets where we do not believe that a direct sales presence is warranted or feasible. In those markets, we select distributors that have extensive knowledge of our industry and their local markets. Our distributors sell, install and service our products. We require our distributors to invest in service training and equipment, to stock and supply maintenance and service parts for our systems, to attend exhibitions and industry meetings and, in some instances, to commit to minimum sales amounts to gain or retain exclusivity. Currently, we have written distribution agreements with nine of our 19 third party distributors. Generally, the written agreements with our distributors have terms of between one and two years. Spa Sales We have implemented a tailored marketing program, including focused product offerings, for the aesthetic spa market. In North America, we maintain a separate sales organization for our CynosureSpa brand. In addition, we are working with several aesthetic spa distributors and operators to address this growing market. For example, in April 2005 we entered into a distribution agreement with Universal Companies, which has over 40,000 spa customers worldwide, to include our PhotoLight and TriActive LaserDermology systems in its product catalog. In addition, we are a party to an agreement with Sona MedSpa, in which we formerly held an equity interest and which operates or franchises 36 spa locations across the United States, to provide our laser aesthetic treatment systems to its facilities in exchange for a share of the facilities’ revenues. In 2004, we derived 13% of our revenues from Sona MedSpa. Our existing direct sales force and independent distributors sell to the spa market outside of North America. 58

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Service and Support We support our customers with a range of services, including installation and product training, business and practice development consulting and product service and maintenance. In North America, our field service organization has 18 field service engineers. Outside of North America, our sales and service subsidiaries and our trained distributors employ 43 field service engineers. In connection with direct sales of our aesthetic treatment systems, we arrange for the installation of the system and initial product training. Generally, installation and initial training take less than three hours. The installation is conducted by our field service engineers. We have engaged a third party consulting firm to provide advice to North American purchasers of our systems on the development of their aesthetic treatment businesses and marketing plans. We have found that this service is particularly appealing to the non-traditional physician customer and aesthetic spa segments of the market, which have less familiarity with the business aspects of laser and light-based aesthetic treatments than dermatologists and cosmetic surgeons. The cost of installation, initial training and, for North American purchasers, the basic consulting package of this third party consultant are all included in the purchase price of our systems. We also offer for an additional charge a more comprehensive package of services from the third party consultant. We strive to respond to all service calls within 24 hours to minimize disruption of our customers’ businesses. We have designed our new products in a modular fashion to enable quick and efficient service and support. Specifically, we build these products with several separate components that can easily be removed and replaced when the product is being serviced. We provide initial warranties on our products to cover parts and service, and we offer extended warranty packages that vary by type of product and level of service desired. Our base warranty covers parts and service for one year. We offer extended warranty arrangements through service plans. We believe that we have a significant opportunity to increase our recurring customer revenues by increasing the percentage of our customers that enter into service contracts for our systems. Research and Development Our research and development team consists of 19 employees with a broad base of experience in lasers and optoelectronics. Our research and development team works closely with opinion leaders and customers, both individually and through our sponsored seminars, to understand unmet needs and emerging applications in the field of aesthetic skin treatments and to develop new products and improvements to our existing products. They also conduct and coordinate clinical trials of our products. Our research and development team builds on the significant base of patented and proprietary intellectual property that we have developed in the fields of laser and other light-based technologies since our inception in 1991. Our research and development expenses were approximately $2.4 million in 2002, $2.5 million in 2003 and $3.1 million in 2004, none of which was customer sponsored. We expect our research and development expenditures to increase as we continue to devote resources to research and develop new products and technologies. Manufacturing and Raw Materials We manufacture all of our products, other than the Cynergy PL, PhotoLight, PhotoSilk Plus and TriActive LaserDermology systems, which are manufactured by El.En. and which we sell and market under our distribution agreement with El.En. We manufacture our products with components and subassemblies purchased from third party suppliers. Accordingly, our manufacturing operations consist principally of assembly and testing of our systems and integration of our proprietary software. We recently redesigned a number of our products, including our Apogee, Cynergy, Acclaim and VStar product families, so that they are built in a modular fashion using fewer components. We began shipping 59

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these redesigned products in the second quarter of 2005. This new approach enables us to manufacture our products more efficiently. Specifically, we have: • reduced our assembly part counts and our direct labor costs; • reduced our service parts inventories; and • increased our ability to test our products during the manufacturing process. We purchase many of our components and subassemblies from third party manufacturers on an outsourced basis. We use one third party to assemble and test many of the components and subassemblies for our Apogee, Cynergy, Acclaim and VStar product families. We also depend exclusively on sole source suppliers for Alexandrite rods, which we use in the manufacture of our Apogee products, and for our SmartCool treatment cooling systems. We do not have long-term contracts with our third party manufacturers or sole source suppliers. We generally purchase components and subassemblies as well as our other supplies on a purchase order basis. If for any reason, our third party manufacturers or sole source suppliers are not willing or able to provide us with components, subassemblies or supplies in a timely fashion, or at all, our ability to manufacture and sell many of our products could be impaired. To date, we have been able to obtain adequate outsourced manufacturing services and supplies of Alexandrite rods and air cooling systems from our third party manufacturers and suppliers in a timely manner. We believe that over time alternative component and subassembly manufacturers and suppliers can be identified if our current third party manufacturers and suppliers fail to fulfill our requirements. El.En. Commercial Relationship The Cynergy PL, PhotoLight, PhotoSilk Plus and TriActive LaserDermology systems sold by us were developed, and associated intellectual property rights are owned, by El.En. El.En. manufactures, and we distribute, these products pursuant to distribution agreements between us and El.En. These agreements provide us with exclusive worldwide distribution rights for the Cynergy PL system and exclusive distribution rights in the United States and Canada for the PhotoLight, PhotoSilk Plus and TriActive LaserDermology systems. The transfer prices for products that we currently distribute under the agreements are specified in the agreement; however, they may be changed by El.En. at its discretion upon 30 days’ notice. El.En. is required to provide us with training, marketing and other sales support for the products we distribute under these agreements. We are required to use best efforts to sell and promote these products, and we are responsible for obtaining and maintaining regulatory approvals for them. If El.En. wishes to discontinue producing products that we distribute, it must make reasonable efforts to provide us with one year’s notice of its plan to do so. Each of the distribution agreements has an initial term that expires in January 2012. The distribution agreement relating to the PhotoLight , PhotoSilk Plus and TriActive LaserDermology systems will automatically renew for additional one-year terms unless either party provides notice of termination at least six months prior to the expiration of the initial term or any subsequent renewal term. The distribution agreement relating to the Cynergy system will automatically renew for additional one year terms unless either party provides notice of termination at least one year prior to the expiration of the initial term or any subsequent renewal term. We or El.En. may terminate the distribution agreements at any time based upon material uncured breaches by, or the insolvency of, the other party. In addition, El.En. may terminate the distribution agreement for the PhotoLight , PhotoSilk Plus and TriActive LaserDermology systems if we do not meet annual minimum purchase obligations specified in the agreements. Patents, Proprietary Technology and Trademarks Our success depends in part on our ability to obtain and maintain proprietary protection for our products, technology and know-how, to operate without infringing the proprietary rights of others and to 60

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prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing United States and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position. As of June 30, 2005, we owned a total of 38 United States patents and six United States patent applications, as well as foreign counterparts to 17 of these patents and four of these patent applications. Our patent portfolio includes patents and patent applications with claims directed to: • the design and method of use and operation of our pulse dye laser systems; • the design and method of use and operation of our Alexandrite laser systems for hair removal; • our Multiplex energy delivery system for our pulse dye lasers; and • the design of endoscopic laser and light delivery systems. The expiration dates for our issued United States patents range from 2013 to 2022. Additionally, El.En. has applied for a patent covering the methods of use and operation of the TriActive LaserDermology system. We do not consider any single patent or patent application that we hold to be material to our business. The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology will depend on our success in obtaining effective patent claims and enforcing those claims once granted. We do not know whether any of our patent applications or those patent applications that we license will result in the issuance of any patents. Our issued patents and those that may issue in the future, or those licensed to us, may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related products or shorten the term of patent protection that we may have for our products. In addition, the rights granted under any issued patents may not provide us with competitive advantages against competitors with similar technology. Furthermore, our competitors may independently develop similar technologies or duplicate any technology developed by us. Because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our products under development can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent. On July 2, 2004, Palomar Medical Technologies, Inc. sent us a letter proposing to enter into negotiations with us regarding the grant of a nonexclusive license under specified United States and foreign patents owned or licensed by Palomar with respect to our Apogee Elite, Apogee 5500, PhotoLight and Acclaim 7000 products, and also with respect to our SmartEpil II product, which we no longer offer. In subsequent letters from Palomar dated September 14, 2004 and March 24, 2005, Palomar reiterated its willingness to negotiate a license under these patents and, in its March 24, 2005 letter, stated that it continues to believe that we need a license under these patents for each of the products listed in the July 2, 2004 letter, as well as for our PhotoSilk, PhotoSilk Plus, Cynergy, Cynergy PL and Cynergy III systems. We have not entered into negotiations with Palomar with respect to such a license. In February 2002, Palomar filed a lawsuit against one of our competitors, Cutera, Inc., alleging that by making, using, selling or offering for sale its hair removal products, Cutera willfully and deliberately infringed one of the patents that Palomar has asserted against us in its letters to us. This litigation between Palomar and Cutera is ongoing. Palomar may also bring suit against us claiming that some or all of our products violate patents owned or licensed by Palomar. Litigation is unpredictable, and we may not prevail in successfully defending or asserting our position. If Palomar takes legal action against us, and if we do not prevail, we may be ordered to pay substantial damages for past sales and an ongoing royalty for future sales of products found to infringe Palomar’s patents or we could be ordered to stop selling any products that are found to infringe Palomar’s patents. 61

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We rely, in some circumstances, on trade secrets to protect our technology. Trade secrets, however, are difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, scientific advisors and other contractors. These agreements may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. We use trademarks on nearly all of our products and believe that having distinctive marks is an important factor in marketing our products. We have registered our Cynosure ® , Apogee ®, PhotoGenica ® and SmartCool ® marks, among others, in the United States. Our other trademarks include Affinity TM , Acclaim TM , Apogee Elite TM , Cynergy TM , CynosureSpa TM , PhotoLight TM , PhotoSilk TM , PhotoSilk Plus TM and LaserDermology SM . We have also registered some of our marks in a number of foreign countries. In addition, El.En. has registered the TriActive ® mark in the United States. Although we have a foreign trademark registration program for selected marks, we may not be able to register or use such marks in each foreign country in which we seek registration. Competition Our industry is subject to intense competition. Our products compete against laser and other light-based products offered by public companies, such as Candela Corporation, Cutera, Inc., Laserscope, Lumenis Ltd., Palomar Medical Technologies, Inc. and Syneron Medical Ltd., as well as several smaller specialized private companies, such as Radiancy, Inc. and Thermage, Inc. Some of these competitors have significantly greater financial and human resources than we do and have established reputations, as well as worldwide distribution channels and sales and marketing capabilities that are larger and more established than ours. Additional competitors may enter the market, and we are likely to compete with new companies in the future. Our products also compete against non-light-based medical products, such as BOTOX® and collagen injections, and surgical and non-surgical aesthetic procedures, such as face lifts, chemical peels, microdermabrasion, sclerotherapy and electrolysis. Competition among providers of aesthetic laser and other light-based products is characterized by significant research and development efforts and rapid technological progress. There are few barriers that would prevent new entrants or existing competitors from developing products that would compete directly with ours. There are many companies, both public and private, that are developing innovative devices that use both light-based and alternative technologies for aesthetic and medical applications. Accordingly, our success depends in part on developing and commercializing new and innovative applications of laser and other light-based technology and identifying new markets for and applications of existing products and technology. To compete effectively, we have to demonstrate that our products are attractive alternatives to other devices and treatments by differentiating our products on the basis of performance, reputation, quality of customer support and price. Breadth of product offering is also important. We believe that we perform favorably with respect to each of these factors. However, we have encountered and expect to continue to encounter potential customers who, due to pre-existing relationships with our competitors, are committed to, or prefer the products offered by these competitors. Potential customers also may decide not to purchase our products, or to delay such purchases, based on a decision to recoup the cost of expensive products that they may have already purchased from our competitors. In addition, we expect that competitive pressures may result in price reductions and reduced margins over time for our products. Government Regulation Our products are medical devices subject to extensive and rigorous regulation by the FDA, as well as other regulatory bodies. FDA regulations govern the following activities that we perform and will continue to perform to ensure that medical devices distributed domestically are safe and effective for their intended uses. 62

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FDA’s Regulation of Manufacturing The FDA requires that we manufacture our products in accordance with its Quality System Regulation, or QSR. The QSR covers the methods and documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage and shipping of our products. The FDA enforces the QSR through periodic unannounced inspections. Based on our communication with the FDA, we expect an inspection of our new facility to occur in the near future. Our failure to maintain compliance with the QSR requirements could result in the shut down of, or restrictions on, our manufacturing operations and the recall or seizure of our products, which would have a material adverse effect on our business. In the event that one of our suppliers fails to maintain compliance with our quality requirements, we may have to qualify a new supplier and could experience manufacturing delays as a result. We maintain quality assurance and quality management certifications to enable us to market our products in the member states of the European Union, the European Free Trade Association and some countries that have entered into Mutual Recognition Agreements with the European Union. In November 1998, our former facility was awarded the ISO 9001 and EN 46001 certifications. In October 2003, we received our ISO 9001 updated certification as well as our certification for ISO 13485, which replaced our EN 46001 certification. We are in the process of transferring these certifications to our new facility and are currently able to conduct our manufacturing activities in the normal course.

FDA’s Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device we wish to distribute commercially in the United States requires either prior 510(k) clearance or premarket approval from the FDA. The FDA classifies medical devices into one of three classes. Devices deemed to pose lower risks are placed in either class I or II, which requires the manufacturer to submit to the FDA a premarket notification requesting permission to distribute the device commercially. This process is generally known as 510(k) clearance. Class I devices are subject to general controls such as labeling and adherence to FDA’s QSR. Class II devices are subject to special controls such as performance standards and FDA guidelines as well as general controls. The FDA exempts some low risk devices from premarket notification requirements and the requirement of compliance with certain provisions of the QSR. The FDA places devices in class III, requiring premarket approval, if insufficient information exists to determine that the application of general controls or special controls are sufficient to provide reasonable assurance of safety and effectiveness and they are life-sustaining, life-supporting or implantable devices, or devices deemed not substantially equivalent to a previously cleared 510(k) device or to a “preamendment” class III device in commercial distribution before May 28, 1976, for which premarket approval applications have not been required. All of our current products are class II devices. Both premarket notifications and premarket approval applications when submitted to FDA must be accompanied by a user fee, unless exempt.

510(k) Clearance Pathway When a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our proposed device is substantially equivalent to a previously cleared 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of premarket approval applications, or premarket approval. By regulation, the FDA must clear or deny a 510(k) premarket notification within 90 days of submission of the application. As a practical matter, clearance often takes significantly longer. The FDA may require further information, including clinical data, to make a determination regarding substantial equivalence. Laser devices used for aesthetic procedures, such as hair removal, have generally qualified for clearance under 510(k) procedures. 63

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Premarket Approval Pathway If the device cannot be cleared through the 510(k) process, the sponsor must submit a premarket approval application, which is known as a PMA. The sponsor must support the PMA with extensive data, including but not limited to, technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device. No device that we have developed has required premarket approval, nor do we currently expect that any future device or indication will require premarket approval.

Product Modifications After a device receives 510(k) clearance or a PMA approval, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new clearance or approval. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. We have modified aspects of various products since receiving regulatory clearance and believe that new 510(k) clearances are not required for these modifications. If the FDA disagrees with our determination not to seek a new 510(k) clearance or PMA approval, the FDA may retroactively require us to seek 510(k) clearance or premarket approval. The FDA could also require us to cease marketing and distributing the modified device, and the recall any sold devices, until 510(k) clearance or premarket approval is obtained. Also, in these circumstances, we may be subject to significant regulatory fines or penalties.

Clinical Trials We perform clinical trials to provide data to support the FDA clearance process for our products and for use in our sales and marketing efforts. Human clinical studies are generally required in connection with approval of class III devices and may be required for clearance of class I and II devices. When FDA clearance or approval of a device requires human clinical trials, and if the device presents a “significant risk,” as defined by the FDA, to human health, the FDA requires the device sponsor to file an investigational device exemption, or IDE, application with the FDA and obtain IDE approval prior to commencing the human clinical trials. The sponsor must support the IDE application with appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The sponsor also must obtain approval from the institutional review board overseeing the clinical trial. To date, we have not submitted any IDEs because we believe our devices present only “non-significant” risks and, therefore, do not require IDE submission to the FDA. Instead, only institutional review board approval is required. Future clinical trials of our products may require that we submit and obtain approval of an IDE from the FDA prior to commencing clinical trials. The FDA, and the Institutional Review Board at each institution at which a clinical trial is being performed, may suspend a clinical trial at any time for various reasons, including a belief that the subjects are being exposed to an unacceptable health risk. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s IDE regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. Clinical trials must further comply with FDA’s regulations for institutional review board approval and for informed consent. Required records and reports are subject to inspection by the FDA. The results of clinical testing may be unfavorable or inconclusive or, even if the intended safety and effectiveness success criteria are achieved, may not be considered sufficient for the FDA to grant approval or clearance of a product. The commencement or completion of any of our clinical trials may be delayed or halted, or be inadequate to support approval of a PMA application, or 510(k) clearance, for numerous reasons, including, but not limited to, the following: • patients do not enroll in clinical trials or there is not patient follow-up at the rate we expect; • patients do not comply with trial protocols; 64

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• patients experience adverse side effects; • institutional review boards and third party clinical investigators may delay or reject our trial protocol; • third party clinical investigators decline to participate in a trial or do not perform a trial on our anticipated schedule or consistent with the clinical trial protocol, good clinical practices, or other FDA requirements; • regulatory inspections of our clinical trials or manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend or terminate our clinical trials or invalidate our clinical trials; and • changes in governmental regulations or administrative actions. Our clinical trials may not generate favorable data to support any PMA or 510(k), and we may not be able to obtain such approvals or clearances on a timely basis, or at all. Delays in receipt of or failure to receive such approvals or clearances or failure to comply with existing or future regulatory requirements would have a material adverse effect on our business, financial condition and results of operations. Even if granted, the approvals or clearances may include significant limitations on the intended use and indications for use for which our products may be marketed. Clinical studies conducted on 510(k) cleared devices, when used or investigated in accordance with the devices’ labeled instructions, are exempt from most of the FDA’s IDE requirements.

Pervasive and Continuing Regulation After a device is placed on the market, numerous regulatory requirements apply. These include: • establishment registration and device listing; • the quality system regulation, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process; • labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or “off-label” uses, and other requirements related to promotional activities; • medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; • corrections and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the Federal Food, Drug, and Cosmetic Act that may present a risk to health; and • post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device. The FDA may require us to maintain a system for tracking our products through the chain of distribution to the patient level. The FDA has broad post-market and regulatory enforcement powers. We are subject to unannounced inspections by the FDA to determine our compliance with the QSR and other regulations. These inspections may include the manufacturing facilities of our subcontractors. Thus, we must continue to spend time, money and effort to maintain compliance. In the past, our prior facility has been inspected and observations were noted. The FDA has accepted our responses to these observations, and we believe that we are in substantial compliance with the QSR. The FDA has not inspected our current manufacturing facility, although we understand that the FDA intends to inspect this facility in the near future. Since 1994, we have received five untitled letters from the FDA regarding alleged violations 65

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caused by our promotional activities. We have responded to these letters and the FDA found our responses acceptable. We are also regulated under the Radiation Control for Health and Safety Act, which requires laser products to comply with performance standards, including design and operation requirements. The law also requires manufacturers to certify in product labeling and in reports to the FDA that their products comply with all such standards. The law and applicable federal regulations also require laser manufacturers to file new product and annual reports, maintain manufacturing, testing and sales records, and report product defects. Various warning labels must be affixed and certain protective devices installed, depending on the class of the product. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • repair, replacement, refunds, recall or seizure of our products; • operating restrictions, partial suspension or total shutdown of production; • refusing or delaying our requests for 510(k) clearance or premarket approval of new products or new intended uses; • withdrawing 510(k) clearance or premarket approvals that are already granted; and • criminal prosecution. The FDA also has the authority to require us to repair, replace or refund the cost of any medical device that we have manufactured or distributed. If any of these events were to occur, they could have a material adverse effect on our business. We are also subject to a wide range of federal, state and local laws and regulations, including those related to the environment, health and safety, land use and quality assurance. We believe that compliance with these laws and regulations as currently in effect will not have a material adverse effect on our capital expenditures, earnings and competitive and financial position.

International International sales of medical devices are subject to foreign governmental regulations, which vary substantially from country to country. The time required to obtain clearance or approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may be different. The primary regulatory environment in Europe is that of the European Union, which consists of 25 countries encompassing most of the major countries in Europe. The European Union has adopted numerous directives, and European Standardization Committees have promulgated voluntary standards, regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices. Devices that comply with the requirements of a relevant directive will be entitled to bear CE conformity marking, indicating that the device conforms to the essential requirements of the applicable directives and, accordingly, can be commercially distributed throughout the member states of the European Union and the member states of the European Free Trade Association, including Switzerland. The method of assessing conformity varies depending on the type and class of the product, but normally involves a combination of self-assessment by the manufacturer and a third party assessment by a Notified Body, an independent and neutral institution appointed by a country to conduct the conformity assessment. This third party assessment may consist of an audit of the manufacturer’s quality system and specific testing of the manufacturer’s device. An assessment by a Notified Body in one member state of the European Union or the European Free Trade Association is required in order for a manufacturer to distribute the product commercially throughout these countries. ISO 9001 and ISO 13845 certification are 66

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voluntary harmonized standards. Compliance establishes the presumption of conformity with the essential requirements for a CE Marking. In November 1998, our former facility was awarded the ISO 9001 and EN 46001 certifications. In October 2003, we received our ISO 9001 updated certification as well as our certification for ISO 13485, which replaced our EN 46001 certification. Employees As of June 30, 2005, we had 178 employees, including 53 employees in sales and marketing functions, 19 employees in research, development and engineering functions, 82 employees in manufacturing and service functions and 24 employees in general and administrative functions. We believe that our future success will depend in part on our continued ability to attract, hire and retain qualified personnel. None of our employees is represented by a labor union, and we believe our employee relations are good. Facilities In July 2005, we moved our executive offices and our manufacturing, research and development and warehouse operations to a new 55,000 square foot facility that we lease in Westford, Massachusetts. The lease on this facility expires in March 2012. In addition, we lease an aggregate of approximately 5,300 square feet of space at six other locations in Europe and the Asia/ Pacific region that we use for sales and service purposes. Litigation We are subject to legal proceedings, claims and litigation, including product liability claims, arising in the ordinary course of business. While the outcome of these matters is currently not determinable, we do not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows. 67

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MANAGEMENT Our executive officers, directors and other significant employees and their respective ages and positions as of June 30, 2005 are as follows:
Name Age Position

Executive Officers Michael R. Davin Timothy W. Baker Douglas J. Delaney John T. Theroux Directors Andrea Cangioli George Cho Gabriele Clementi Leonardo Masotti Other Significant Employees Marina Kamenakis David Mackie Kenji Shimizu Rafael Sierra 47 44 38 52 39 61 54 66 46 43 52 55

President, Chief Executive Officer and Chairman of the Board of Directors Executive Vice President, Chief Financial Officer and Treasurer Executive Vice President, Sales Chief Operating Officer Director Senior Vice President, Medical Technology and Regulatory Affairs and Director Director Director Vice President, Marketing Vice President, Operations Senior Vice President, International Sales Chief Technology Officer

Michael R. Davin. Mr. Davin has been our president and chief executive officer and a director since September 2003 and became the chairman of our board of directors in October 2004. Mr. Davin has over 20 years of experience in the light-based technology field. From 1998 to 2003, Mr. Davin served as co-founder and vice president of worldwide sales and strategic development of Cutera, Inc., a provider of laser and other light-based aesthetic treatment systems. Prior to co-founding Cutera, Mr. Davin spent 11 years at Coherent Medical, Inc., a manufacturer of laser, optics and related equipment, in senior management positions in sales, marketing and clinical development. Timothy W. Baker. Mr. Baker has been our executive vice president, chief financial officer and treasurer since March 2004. From July 2003 to February 2004, Mr. Baker served as vice president, finance of Stryker Biotech, a division of Stryker Corporation, a medical products and services provider. From July 2000 to June 2003, Mr. Baker served as president and chief financial officer of Photoelectron Corp., a provider of miniature x-ray systems for radiation therapy. From January 1996 to July 2000, Mr. Baker served as the chief financial officer and vice president of operations of Radionics, Inc., a provider of surgical devices. Mr. Baker is a certified public accountant and holds an M.B.A. in operations management. Douglas J. Delaney. Mr. Delaney has been our executive vice president, sales since February 2005 and has worked in medical laser sales for more than ten years. From May 2004 until February 2005, Mr. Delaney was our vice president, North American sales, and from September 2003 until May 2004, he was our director of North American sales. From September 1999 to September 2003, Mr. Delaney served as national sales manager of Cutera. John T. Theroux. Mr. Theroux has been our chief operating officer since May 2004. From 1979 to May 2004, Mr. Theroux was a self-employed management consultant specializing in restructuring and process re-engineering. Mr. Theroux’s consulting experience spans across several industries, including manufacturing, health care, government, insurance and technology. 68

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Andrea Cangioli. Mr. Cangioli has been a director since 2002. Mr. Cangioli has served as a director and the general manager of El.En. since 1992. Mr. Cangioli also serves on the boards of other El.En. affiliated companies. George Cho. Mr. Cho has been a director since 1991. Mr. Cho has also been our senior vice president, medical technology and regulatory affairs since October 1991. Mr. Cho has been awarded 22 United States patents related to medical devices and methods. Gabriele Clementi. Mr. Clementi has been a director since 2002. Mr. Clementi co-founded El.En. in 1981. Mr. Clementi has served as a director of El.En. since 1981 and as its president since 1987. Mr. Clementi also serves on the boards of other El.En. affiliated companies. Leonardo Masotti. Prof. Masotti has been a director since 2002. Prof. Masotti has been a full professor in electronics at the University of Florence, Italy since 1976, where he has also served as the director of the doctorate course in non destructive testing since 1989. Prof. Masotti has served as the president of the Research Consortium Centro Eccellenza Optronica in Florence, Italy since 1992. Prof. Masotti is a member of the Regional High Technology Director Board (Florence) as well as the editorial board of “Fisica Medica.” Prof. Masotti has been awarded 30 patents and is the author of 180 scientific and technical papers. Prof. Masotti’s wife is a director of El.En. Marina Kamenakis. Ms. Kamenakis has been our vice president, marketing since May 2004. From September 2003 until May 2004, Ms. Kamenakis was our director of marketing. From January 2001 to September 2003, she served as our director of product marketing with responsibility for the marketing of our entire product line. From September 1997 until January 2001, Ms. Kamenakis was a product manager responsible for our hair removal products. David Mackie. Mr. Mackie has been our vice president, operations since April 2004. From January 2000 to October 2003, Mr. Mackie served as senior director of operations of Alcatel, an international telecommunications company, with responsibility for Alcatel’s Chelmsford, Massachusetts operations organization. Kenji Shimizu. Mr. Shimizu has been our senior vice president, international sales since April 1999. During the 20 years prior to his joining Cynosure, Mr. Shimizu held senior international sales positions at several laser companies. Rafael Sierra. Dr. Sierra has been our chief technology officer since May 1997. Dr. Sierra has been involved in the laser and fiberoptics industries for over 25 years. From 1991 to 1995, Dr. Sierra served as director of laser technology at Candela Corporation, a provider of laser and other light-based aesthetic treatment systems. Dr. Sierra has been awarded seven patents related to medical devices and methods. There are no family relationships among any of our directors or executive officers. Board Composition and Election of Directors Upon the completion of this offering, our board of directors will be authorized to have seven members. We currently have five directors, two of whom, Messrs. Cho and Clementi, are expected to resign before the completion of the offering. We are actively identifying and recruiting four additional candidates to join our board prior to the completion of this offering. Upon the completion of this offering, four of our seven directors will be elected by holders of our class B common stock, voting as a separate class, and the remaining three directors will be elected by holders of our class A common stock and class B common stock, voting together as a single class. The three directors serving on our board who are to be elected by holders of our class A common stock and 69

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class B common stock, voting together as a single class, will be divided into three classes, each of which will consist of one member who will serve for a staggered three-year term: • • • will serve in the class of directors whose term expires at our 2006 annual meeting; will serve in the class of directors whose term expires at our 2007 annual meeting; and will serve in the class of directors whose term expires at our 2008 annual meeting.

Upon the expiration of the term of a class of directors, the director in that class will be eligible to be elected for a new three-year term at the annual meeting of stockholders in the year in which his or her term expires. As a result, after the offering and based on the board composition described above, holders of our class A common stock, voting together with holders of class B common stock as a single class, will elect one director at each annual meeting. The four directors to be elected by the holders of the class B common stock will not be divided into classes and will be elected annually to the board. These four directors may be removed from office at any time, without cause, solely by the affirmative vote of the holders of the class B common stock, voting as a separate class. El.En., as the holder of a majority of the shares of our class B common stock, will be able to control the election and removal of these four directors. See “Description of Capital Stock — Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws.” The rules of The Nasdaq National Market require that a majority of our board of directors be independent directors, as defined by such rules. The Nasdaq National Market rules also permit a company, such as us, listing on The Nasdaq National Market in connection with its initial public offer to have 12 months from the date of listing to comply with the majority independent board requirement. Currently, none of our directors are independent directors, as defined by the applicable rules of The Nasdaq National Market. We are seeking four independent directors to join our board prior to the completion of this offering. Prior to the end of the phase-in period permitted under The Nasdaq National Market rules, we expect to comply with the requirement that our board of directors consist of a majority of independent directors. Board Committees Our board of directors has established, effective upon completion of this offering, an audit committee, a compensation committee and a nominating and corporate governance committee. The composition of each of these committees will be determined prior to the completion of this offering.

Audit Committee Our audit committee will assist our board of directors in its oversight of the integrity of our financial statements, our independent registered public accounting firm’s qualifications and independence and the performance of our independent registered public accounting firm. Upon the completion of this offering, our audit committee’s responsibilities will include: • appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm; • overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from our independent registered public accounting firm; • reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures; • coordinating our board of directors’ oversight of internal control over financial reporting, disclosure controls and procedures and our code of business conduct and ethics; • establishing procedures for the receipt and retention of accounting related complaints and concerns; 70

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• meeting independently with our independent registered public accounting firm and management; and • preparing the audit committee report required by the rules of the Securities and Exchange Commission. All audit services to be provided to us and all non-audit services, other than de minimus non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee. We are seeking a director who will qualify as our audit committee financial expert.

Compensation Committee The purpose of our compensation committee will be to assist the board of directors in the discharge of its responsibilities relating to the compensation of our executive officers. Upon completion of this offering, our compensation committee’s responsibilities will include: • reviewing and approving, or making recommendations to the board of directors with respect to, our chief executive officer’s compensation; • evaluating the performance of our executive officers and reviewing and approving, or making recommendations to the board of directors with respect to, the compensation of our other executive officers; • overseeing and administering, and making recommendations to the board of directors with respect to, our equity incentive plans; • reviewing and making recommendations to the board of directors with respect to director compensation; and • preparing the compensation committee reports required by the rules of the Securities and Exchange Commission.

Nominating and Corporate Governance Committee Upon completion of this offering, our nominating and corporate governance committee’s responsibilities will include: • recommending to the board of directors the persons to be nominated for election as directors or to fill vacancies on the board of directors, and to be appointed to each of the board’s committees; • overseeing an annual review by the board of directors with respect to management succession planning; • developing and recommending to the board of directors corporate governance principles and guidelines; and • overseeing periodic evaluations of the board of directors. Compensation Committee Interlocks and Insider Participation In 2004, Mr. Davin, our chief executive officer and president, Messrs. Cangioli and Clementi, each of whom is a director and officer of El.En., and Prof. Masotti, whose wife is a director of El.En., participated in deliberations concerning the compensation of our executive officers. None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our board of directors or our compensation committee. 71

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Director Compensation In August 2005, our board of directors approved a compensation program pursuant to which we pay each of our directors who is not an employee of, or a spouse of an employee of, our company or El.En., whom we refer to as our non-employee directors, a fee for attendance at board and board committee meetings. This fee is currently $1,500 for each day that a non-employee director attends board or board committee meetings in person and $1,000 for each day that a non-employee director attends board or board committee meetings by telephone or videoconference. Upon completion of the offering, the fee will increase to $2,500 for each day that a non-employee director attends board or board committee meetings in person and will remain at $1,000 for each day that a non-employee director attends board or board committee meetings by telephone or videoconference. The chairman of our audit committee will receive an additional annual retainer of $5,000 and our other committee chairmen will receive an additional annual retainer of $2,500. Each of these committee chairmen will be non-employee directors. We reimburse each non-employee member of our board of directors for out-of-pocket expenses incurred in connection with attending our board and committee meetings. In addition, each non-employee director will receive an option to purchase 5,000 shares of class A common stock upon his or her appointment to our board of directors. These options will vest annually in three equal installments subject to the non-employee director’s continued service as a director. Thereafter, each non-employee director will receive an annual grant of an option to purchase 2,500 shares of class A common stock at each year’s annual meeting after which he or she will continue to serve as a director, provided each such non-employee director has served on our board of directors for a least six months. These options will vest in full on the first anniversary of the grant date, subject to the non-employee director’s continued service as a director. Each non-employee director stock option will have such terms as our board of directors may specify in the applicable option agreement, provided that no option will be granted to a non-employee director for a term in excess of 10 years. The exercise price of all of these options will equal the fair market value of our class A common stock on the date of grant. Compensation for our directors, including cash and equity compensation, is determined and subject to adjustment by our board of directors. Executive Compensation The following table sets forth the compensation paid or accrued during the fiscal year ended December 31, 2004 to our chief executive officer and to each of our three other most highly compensated executive officers whose salary and bonus exceeded $100,000 for the year ended December 31, 2004. We refer to these officers collectively as our named executive officers. 72

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Summary Compensation Table
Long-Term Compensation Annual Compensation Other Annual Compensation Number of Securities Underlying Options

Name and Principal Position

Salary

Bonus

Michael R. Davin President and Chief Executive Officer Timothy W. Baker(3) Executive Vice President, Chief Financial Officer and Treasurer Douglas J. Delaney Executive Vice President, Sales John T. Theroux(6) Chief Operating Officer (1) (2) (3) (4) (5) (6) (7)

$

186,917 129,038

$

155,851 (1) 20,000

$

55,000 (2) —

390,741 185,000

100,000 109,423

325,114 (4) 20,000

8,400 (5) 20,133 (7)

203,754 185,000

Includes $61,111 as compensation from the issuance of 20,310 shares of class B common stock. Represents amounts paid to Mr. Davin by El.En. pursuant to a consulting arrangement with El.En. Mr. Baker joined our company on March 29, 2004. Mr. Baker’s annual base salary is $202,000. Includes sales commissions of $221,982 and $43,132 as compensation from the issuance of 14,377 shares of class B common stock. Represents amounts paid under a car allowance arrangement. Mr. Theroux joined our company on May 10, 2004. Mr. Theroux’s annual base salary is $196,750. Represents amounts paid for moving expenses.

Stock Options The following table contains information regarding options to purchase shares of our class B common stock granted to our named executive officers during 2004. Amounts in the following table represent potential realizable gains that could be achieved for the options if exercised at the end of the option term. The 5% and 10% assumed annual rates of compounded stock price appreciation are calculated based on the requirements of the SEC and do not represent an estimate or projection of our future stock prices. These amounts represent certain assumed rates of appreciation in the value of our common stock from the fair market value on the date of grant. Actual gains, if any, on stock option exercises depend on the future performance of the common stock and overall stock market conditions. The amounts reflected in the following table may not necessarily be achieved. 73

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Option Grants in Fiscal Year 2004
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(2) Expiration Date 5% 10%

Number of Securities Underlying Options Granted(1)

Name

Percentage of Total Options Granted to Employees in Fiscal Year

Exercise Price per Share

Michael R. Davin Timothy W. Baker Douglas J. Delaney John T. Theroux

350,000 40,741 175,000 10,000 175,000 28,754 175,000 10,000

24 % 3 12 1 12 2 12 1

$

3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00

10/01/2014 11/16/2014 10/01/2014 11/16/2014 10/01/2014 11/16/2014 10/01/2014 11/16/2014

(1)

To date, the options that we have granted to our executive officers and other employees typically vest as to 25% on the first anniversary of the date of grant, and in equal quarterly installments thereafter until the fourth anniversary of the date of grant. See “— Stock Option and Other Compensation Plans — 1992 Stock Option Plan” and “— 2004 Stock Option Plan” below for information regarding the vesting of options under the 1992 Stock Option Plan and the 2004 Stock Option Plan. The dollar amounts under these columns are the result of calculations at rates set by the Securities and Exchange Commission and, therefore, are not intended to forecast possible future appreciation, if any, in the price of the underlying common stock. The potential realizable values are calculated using an assumed initial public offering price of $ per share and assuming that the market price appreciates from this price at the indicated rate for the entire term of each option and that each option is exercised and sold on the last day of its term at the assumed appreciated price.

(2)

In May 2005, we granted additional options to purchase shares of our class B common stock to most of our employees, including each of our named executive officers. Mr. Davin was granted an option to purchase 80,000 shares, and each of Messrs. Baker, Delaney and Theroux were granted an option to purchase 40,000 shares. Each of the options has an exercise price per share of $4.50 and expires on May 17, 2015. Option Exercises and Year-End Option Values The following table provides information about the number and value of options held by our named executive officers at December 31, 2004. There was no public trading market for our common stock as of December 31, 2004. Accordingly, as permitted by the rules of the Securities and Exchange Commission, we have calculated the value of unexercised in-the-money options at fiscal year end on the basis of an assumed initial public offering price of $ per share, less the aggregate exercise price. There were no options exercised by our named executive officers during the year ended December 31, 2004. 74

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Aggregated Option Exercises in Fiscal Year 2004 and 2004 Year-end Option Values
Number of Securities Underlying Unexercised Options at Fiscal Year-End Name Exercisable Unexercisable Value of Unexercised In-the-Money Options at Fiscal Year-End Exercisable Unexercisable

Michael R. Davin Timothy W. Baker Douglas J. Delaney John T. Theroux Employment Agreements

40,741 10,000 28,755 10,000

350,000 175,000 175,000 175,000

Michael R. Davin. Pursuant to an employment agreement entered into in September 2003, we employ Mr. Davin as our chief executive officer. Under this agreement, Mr. Davin was entitled to an annual base salary of $180,000 for the first year of his employment with us and to an annual base salary of $205,000 thereafter, subject to adjustment upon annual review by our board of directors. Mr. Davin’s annual base salary has been adjusted by our board of directors and is currently $230,000. The agreement provides for bonus payments of 10% of our adjusted net profit for each of 2004 and 2005, a bonus payment of 7.5% of our adjusted net profit for 2006 and a bonus payment of 5% of our adjusted net profit for each subsequent year. For purposes of Mr. Davin’s employment agreement, adjusted net profit is calculated based on our operating profit, excluding specified write-offs and non-recurring charges or gains, adjusted for an assumed fixed tax rate. Mr. Davin’s employment agreement does not have a term; however he or we may terminate his employment for any reason upon 30 days’ notice. Upon the termination of his employment other than for cause, or if he terminates his employment for good reason, Mr. Davin has the right to receive a severance payment equal to 24 months of his base salary then in effect. Mr. Davin is not entitled to severance payments if we terminate him for cause or if he resigns without good reason. Pursuant to this agreement, except as provided in the following sentence, Mr. Davin is prohibited from competing with us and soliciting our customers, prospective customers or employees for a period of two years if we terminate him for any reason or if he terminates his employment for good reason. This non-competition period is one year if Mr. Davin voluntarily resigns and does not receive severance payments. George Cho. Pursuant to an employment agreement entered into in January 2003, we employ Mr. Cho as our senior vice president, medical technology and regulatory affairs. The agreement will expire on December 31, 2005. Under the agreement, Mr. Cho is entitled to an annual base salary of $130,000, subject to adjustment upon annual review by our board of directors. Mr. Cho is also eligible to earn discretionary incentive bonuses. Upon the termination of his employment by us other than for cause, or if he terminates his employment for good reason, Mr. Cho has the right to receive a severance payment equal to 12 months of his base salary then in effect. Pursuant to this agreement, Mr. Cho is prohibited from competing with us for a period of one year and from soliciting our customers, prospective customers or employees for a period of two years after termination of his employment for any reason. Douglas J. Delaney. Pursuant to an employment agreement entered into in September 2003, we employ Mr. Delaney as our executive vice president, sales. Under this agreement, Mr. Delaney is entitled to an annual base salary of $100,000, subject to adjustment upon annual review by our board of directors. Mr. Delaney’s annual base salary has been adjusted by our board of directors and is currently $129,500. Mr. Delaney is also eligible to earn discretionary incentive bonuses. The agreement also provides for a monthly automobile allowance of $700. Mr. Delaney’s employment agreement does not have a term; however he or we may terminate his employment for any reason upon 30 days’ notice. Upon the termination of his employment by us other than for cause, or if he terminates his employment for good reason, Mr. Delaney has the right to receive a severance payment equal to 12 months of his base salary then in effect. Mr. Delaney is not entitled to severance payments if we terminate him for cause of if he 75

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resigns without good reason. Pursuant to this agreement, Mr. Delaney is prohibited from competing with us and from soliciting our customers, prospective customers or employees for a period of one year after termination of his employment for any reason. Stock Option and Other Compensation Plans 1992 Stock Option Plan Our 1992 stock option plan was adopted by our board of directors and approved by our stockholders on February 12, 1992, and expired on February 13, 2002. The 1992 stock option plan provided for the grant of incentive stock options and nonstatutory options. A maximum of 1,500,000 shares of class B common stock were authorized for issuance under our 1992 stock option plan. Our 1992 stock option plan is administered by our board of directors. Pursuant to the terms of the 1992 stock option plan and to the extent permitted by law, our board of directors may delegate authority to a committee of the board of directors. Under the 1992 stock option plan, if a merger or other reorganization event, as defined in the 1992 stock option plan, occurs, our board of directors may, in its discretion: • provide that the outstanding options under the 1992 stock option plan be assumed or substituted by the successor corporation; • upon written notice to optionees, provide that all unexercised options will terminate, unless exercised, immediately prior to the consummation of such transaction; • in the case of a merger in which the holders of our common stock receive a cash payment, provide for a cash payment equal to the difference between the merger price and the exercise price for all outstanding options, in exchange for the termination of such options; and • provide that all or any outstanding options become fully exercisable. As of June 30, 2005, options to purchase 53,983 shares of our class B common stock at a weighted average exercise price of $3.39 were outstanding under our 1992 stock option plan, options to purchase 1,172,049 shares of class B common stock had been exercised and options to purchase 1,102,072 shares of class B common stock had been forfeited. Because the plan expired in 2002, we will grant no further awards under the 1992 stock option plan.

2004 Stock Option Plan Our 2004 stock option plan was adopted by our board of directors and approved by our stockholders on November 16, 2004 and amended on May 17, 2005. The 2004 stock option plan provides for the grant of incentive stock options and nonstatutory options. A maximum of 1,850,000 shares of class B common stock are authorized for issuance under our 2004 stock option plan. Our employees, officers, directors, consultants and advisors are eligible to receive awards under our 2004 stock option plan; however, incentive stock options may only be granted to our employees. Our board of directors administers our 2004 stock option plan. Pursuant to the terms of our 2004 stock option plan and to the extent permitted by law, our board may delegate authority to a committee composed of two or more of our directors or to an officer who is also a member of our board of directors. Our board of directors, or a committee to whom the board of directors delegates authority, selects the recipients of awards and determines: • the number of shares of common stock covered by options and the dates upon which the options become exerciseable; • the exercise price of options; • the duration of the options; and 76

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• the terms and conditions of awards, including transfer restrictions, conditions for repurchase and rights of first refusal. If our board of directors delegates authority to an officer, the officer has the power to make awards to all of our employees, except executive officers. Under the 2004 stock option plan, if an acquisition of our company occurs, our board shall: • provide that the outstanding options under the 2004 stock option plan be assumed or substituted by the successor corporation; • upon written notice to optionees, provide that all options will become exercisable in full, subject to the transaction, and unless exercised, terminate immediately prior to, or within a specified time after, the consummation of such transaction; or • in the case of an acquisition in which the holders of our common stock receive cash or other securities or property, provide for a payment in cash, securities or property, as the case may be, equal to the difference between the merger price and the exercise price for all outstanding vested options, in exchange for the termination of such options. If a change in control event, as defined in the 2004 stock option plan, occurs, and an option holder’s employment is terminated for reasons other than misconduct within six months after the change in control event, that employee’s options that would have vested on or before the next anniversary of the grant date shall become immediately exercisable. No award may be granted under the 2004 stock option plan after November 16, 2014. Our board of directors may amend or terminate this plan at any time, except that: • the provision governing eligibility for grants of incentive stock options may not be modified; • the provision governing the exercise price at which shares may be offered pursuant to incentive stock options may not be modified; and • the expiration date of the plan may not be extended without stockholder approval. As of June 30, 2005, options to purchase 1,808,659 shares of our class B common stock at a weighted average exercise price of $3.31 were outstanding under our 2004 stock option plan, no options to purchase shares of class B common stock have been exercised and no options to purchase shares of class B common stock have been forfeited. After the effectiveness of the 2005 stock incentive plan described below, we will grant no further stock options or other awards under the 2004 stock option plan.

2005 Stock Incentive Plan Our 2005 stock incentive plan, which will become effective on the date that the registration statement for this offering is declared effective, was adopted by our board of directors on August 8, 2005 and approved by our stockholders on , 2005. The 2005 stock incentive plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards and other stock-based awards. Upon effectiveness of the plan, the number of shares of class A common stock that will be reserved for issuance under the 2005 stock incentive plan will be 500,000 shares plus the number of shares of class A common stock equal to the number of shares of class B common stock then available for issuance under the 2004 plan, up to a maximum of 100,000 shares. In addition, our 2005 stock incentive plan contains an “evergreen provision” which allows for an annual increase in the number of shares available for issuance under our 2005 stock incentive plan on the 77

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first day of each fiscal year beginning in fiscal year 2007 and ending on the second day of fiscal year 2015. The annual increase in the number of shares shall be equal to the lowest of: • 300,000 shares; • 2.5% of the aggregate number of shares of class A common stock and class B common stock outstanding on the first day of the fiscal year; and • an amount determined by our board of directors. Under this provision, no annual increase shall be made to the extent that the number of shares of class A common stock available for issuance under the 2005 stock incentive plan and all other employee or director equity incentive plans would exceed 25% of our outstanding shares on the first day of the applicable fiscal year. Our employees, officers, directors, consultants and advisors are eligible to receive awards under our 2005 stock incentive plan; however, incentive stock options may only be granted to our employees. The maximum number of shares of class A common stock with respect to which awards may be granted to any participant under the plan is 250,000 per calendar year. Our 2005 stock incentive plan is administered by our board of directors. Pursuant to the terms of the 2005 stock incentive plan, and to the extent permitted by law, our board of directors may delegate authority to one or more committees or subcommittees of the board of directors or to our executive officers. Our board of directors or any committee to whom the board of directors delegates authority selects the recipients of awards and determines: • the number of shares of class A common stock covered by options and the dates upon which the options become exercisable; • the exercise price of options; • the duration of the options; and • the number of shares of class A common stock subject to any restricted stock or other stock-based awards and the terms and conditions of such awards, including conditions for repurchase, issue price and repurchase price. If our board of directors delegates authority to an executive officer, the executive officer has the power to make awards to all of our employees, except to executive officers. Our board of directors will fix the terms of the awards to be granted by such executive officer, including the exercise price of such awards, and the maximum number of shares subject to awards that such executive officer may make. If a merger or other reorganization event occurs, our board of directors shall provide that all of our outstanding options are to be assumed or substituted by the successor corporation. If the merger or reorganization event also constitutes a change in control event under our 2005 stock incentive plan, the assumed or substituted options will become immediately exercisable in full if on or prior to the 18-month anniversary of the reorganization event an option holder’s employment with us or our succeeding corporation is terminated by the option holder for good reason or is terminated by us or the succeeding corporation without cause, each as defined in our 2005 stock incentive plan. In the event the succeeding corporation does not agree to assume, or substitute for, outstanding options, then our board of directors shall provide that all unexercised options will become exercisable in full prior to the completion of the event and that these options will terminate immediately prior to the completion of the merger or other reorganization event if not previously exercised. Our board of directors may also provide for a cash out of the value of any outstanding options. In addition, upon the occurrence of a change in control event that does not also constitute a reorganization event under our 2005 stock incentive plan, each option will continue to vest according to its original vesting schedule, except that an option will become immediately exercisable in full if on or prior to the 18-month anniversary of the reorganization event an option holder’s employment with us or our succeeding corporation is terminated by the option holder for good reason or is terminated by us or our succeeding corporation without cause. 78

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No award may be granted under the 2005 stock incentive plan after , 2015, but the vesting and effectiveness of awards granted before that date may extend beyond that date. Our board of directors may amend, suspend or terminate the 2005 stock incentive plan at any time, except that stockholder approval will be required for any revision that would materially increase the number of shares reserved for issuance, expand the types of awards available under the plan, materially modify plan eligibility requirements, extend the term of the plan or materially modify the method of determining the exercise price of options granted under the plan, or otherwise as required to comply with applicable law or stock market requirements.

401(k) Retirement Plan We maintain a 401(k) retirement plan which is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Internal Revenue Code. In general, all of our employees are eligible to participate, subject to a 90-day waiting period. The 401(k) Plan includes a salary deferral arrangement pursuant to which participants may elect to reduce their current compensation by up to the statutorily prescribed limit, equal to $14,000 in 2005, and have the amount of the reduction contributed to the 401(k) Plan. We are permitted to match employees’ 401(k) Plan contributions, however, we do not do so. 79

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Since January 1, 2002, we have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our voting securities, and affiliates of our directors, executive officers and 5% stockholders: Stock Issuances In February 2002, we issued and sold to Mr. Cho 95,000 shares of our class B common stock upon exercise of an incentive stock option. Mr. Cho paid the exercise price for the shares through a combination of cash and a promissory note payable to us secured by the underlying shares. As of June 30, 2005, Mr. Cho had repaid the note in full, including all interest. In May 2002, we issued and sold an aggregate of 3,327,960 shares of our class B common stock for an aggregate purchase price of $11.3 million to El.En. In November 2003, we issued to El.En. an aggregate of 3,499 shares of our class B common stock for no additional consideration as a final adjustment of the May 2002 stock purchase transaction. From September through November 2004, we issued and sold an aggregate of 744,577 shares of our class B common stock to El.En. and individual investors, including three of our executive officers. The following table sets forth the number of shares of class B common stock issued to our directors, executive officers and 5% stockholders from September through November 2004. The shares issued to our executive officers were in consideration of the performance of services and were not issued for cash.
Number of Shares of Class B Common Stock Aggregate Purchase Price

El.En. Michael R. Davin Douglas J. Delaney George Cho (1)

609,460 20,370 14,377 20,370

$

1,793,920 (1 ) (1 ) (1 )

Issued in consideration of the performance of services. We recorded compensation expense in the amount of $61,111 for the shares issued to Mr. Davin, $43,132 for the shares issued to Mr. Delaney and $61,111 for the shares issued to Mr. Cho.

In April 2005, we issued and sold an aggregate of 495,000 shares of our class B common stock to investors and employees, including four of our executive officers. The following table sets forth the number of shares of class B common stock sold to our directors, executive officers and 5% stockholders in April 2005:
Number of Shares of Class B Common Stock Aggregate Purchase Price

Michael R. Davin Timothy W. Baker Douglas J. Delaney John T. Theroux 80

50,000 5,000 30,000 35,000

$

150,000 15,000 90,000 105,000

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Certain Relationships El.En. Distribution Relationship Since 2002, we have distributed products that are developed and manufactured by El.En., which immediately prior to this offering owned approximately 78% of our aggregate outstanding capital stock. The following table sets forth our payments and indebtedness to El.En. pursuant to these distribution arrangements during the three most recent fiscal years and the first six months of 2005:
Payments to El.En. During Period(1) Trade Payables and Indebtedness at Period End(2)

Six months ended June 30, 2005 Fiscal year ended December 31, 2004 Fiscal year ended December 31, 2003 Fiscal year ended December 31, 2002

$

— 2,142,339 1,647,632 1,043,000

$

1,963,208 1,203,787 3,134,940 983,143

(1) (2)

Includes payments of trade payables and principal and interest on indebtedness. Our indebtedness to El.En. as of June 30, 2005 was $310,000 and is evidenced by a promissory note that is payable on demand. Interest on the indebtedness evidenced by this promissory note accrues at a rate of 5% per year.

For a more detailed discussion of our continuing distribution arrangements with El.En., please see “Business — El.En. Commercial Relationship.”

Other El.En. Arrangements Prior to the closing of this offering, we and El.En. intend to enter into an agreement providing that, to the extent El.En. is required to make any indemnity payments to the underwriters pursuant to the underwriting agreement relating to this offering, and such indemnity payments relate to matters as to which El.En., after reasonable inquiry, had no knowledge, we will reimburse El.En. for such indemnity payments. This agreement will not affect the respective liability of us and El.En. to the underwriters pursuant to the underwriting agreement. See “ Underwriting.”

Davin Consulting Arrangement with El.En. Since September 2003, Mr. Davin has provided consulting services to El.En. regarding laser industry marketing, for which El.En. paid Mr. Davin $18,333 in 2003, $55,000 in 2004 and $27,500 in the first six months of 2005.

Director Compensation Please see “Management — Director Compensation” for a discussion of options granted to our non-employee directors.

Executive Compensation and Employment Agreements Please see “Management — Executive Compensation” and “— Stock Options” for additional information on compensation of our executive officers. Information regarding employment agreements with several of our executive officers is set forth under “Management — Employment Agreements.” 81

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PRINCIPAL AND SELLING STOCKHOLDERS The following table sets forth information with respect to the beneficial ownership of our common stock, as of June 30, 2005, by: • each of our directors; • each of our named executive officers; • each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our class A common stock or our class B common stock; • all of our directors and executive officers as a group; and • El.En. The column entitled “Shares of Common Stock Beneficially Owned Prior to Offering” is based on no shares of our class A common stock and 6,242,877 shares of our class B common stock being outstanding as of June 30, 2005. The column entitled “Shares of Common Stock Beneficially Owned After Offering” is based on shares of our class A common stock and shares of our class B common stock to be outstanding after this offering, including the shares of class A common stock that we are selling in this offering and the shares of class A common stock that El.En. is selling in this offering. No shares of class A common stock are beneficially owned by any of the persons or entities in this table, and no shares of class A common stock will be beneficially owned by such persons immediately following the offering. For purposes of the table below, and in accordance with the rules of the Securities and Exchange Commission, we deem shares of class B common stock subject to options that are currently exercisable or exercisable within 60 days of June 30, 2005 to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise noted, the persons or entities in this table have sole voting and investing power with respect to all of the shares of common stock beneficially owned by them, subject to community property laws, where applicable. Except as otherwise set forth below, the street address of the beneficial owner is c/o Cynosure, Inc., 5 Carlisle Road, Westford, Massachusetts 01886.
Shares of Common Stock Beneficially Owned Prior to Offering Name of Beneficial Owner Shares % Shares of Common Stock Beneficially Owned After Offering Shares Being Offered Shares %

% Total Voting Power(1)

% Total Voting Power(1)

Officers and Directors Michael R. Davin(2) Timothy W. Baker(3) Douglas J. Delaney(4) John T. Theroux(5) Andrea Cangioli(6) George Cho(7) Gabriele Clementi(6) Leonardo Masotti(6) All executive officers and directors as a group (8 persons)(8) 5% Stockholder El.En. S.p.A.(6)(9)

111,111 15,000 73,131 45,000 4,888,628 117,768 4,888,628 4,888,628 5,250,638 4,888,628

1.8 * 1.2 * 78.3 1.9 78.3 78.3 82.4 78.3

1.8 * 1.2 * 78.3 1.9 78.3 78.3 82.4 78.3

— — — — —

111,111 15,000 73,131 45,000 117,768

* *

* *

82

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* (1)

Less than one percent. Percentage total voting power represents voting power with respect to all shares of our class A and class B common stock, as a single class. For a description of the voting rights of our class A common stock and class B common stock, see “Description of Capital Stock — Common Stock” below. Includes 40,741 shares of class B common stock issuable upon exercise of stock options exercisable within 60 days of June 30, 2005. Includes 10,000 shares of class B common stock issuable upon exercise of stock options exercisable within 60 days of June 30, 2005. Includes 28,754 shares of class B common stock issuable upon exercise of stock options exercisable within 60 days of June 30, 2005. Includes 10,000 shares of class B common stock issuable upon exercise of stock options exercisable within 60 days of June 30, 2005. The El.En. board of directors has voting and investment power for the shares held by El.En. The El.En. board of directors consists of nine persons, including Andrea Cangioli, Gabriele Clementi and the spouse of Leonardo Masotti. Includes 40,741 shares of class B common stock issuable upon exercise of stock options exercisable within 60 days of June 30, 2005. Includes 130,236 shares of class B common stock issuable upon exercise of stock options exercisable within 60 days of June 30, 2005. The address of El.En. is Via Baldanzee 17, Calezano, 50041, Florence, Italy. 83

(2) (3) (4) (5) (6)

(7) (8) (9)

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DESCRIPTION OF CAPITAL STOCK The following description of our capital stock and provisions of our restated certificate of incorporation, which we refer to below as our certificate of incorporation, and our amended and restated bylaws, which we refer to below as our bylaws, are summaries and are qualified by reference to the certificate of incorporation and the bylaws that will be in effect upon completion of this offering. Copies of these documents have been filed with the Securities and Exchange Commission as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of the common stock and preferred stock reflect changes to our capital structure that will occur prior to the closing of this offering. Upon the completion of this offering, our authorized capital stock will consist of 61,500,000 shares of class A common stock, par value $0.001 per share, 8,500,000 shares of class B common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, all of which shares of preferred stock will be undesignated. As of June 30, 2005, we had issued and outstanding 6,242,877 shares of common stock, held by 29 stockholders of record. As of June 30, 2005, we also had outstanding options to purchase 1,862,642 shares of class B common stock at a weighted average exercise price of $3.31 per share. Immediately prior to this offering, each outstanding share of our common stock will automatically be converted into one share of our class B common stock, and the only shares of our class A common stock to be outstanding immediately following this offering will be the shares being sold in this offering. In addition, immediately prior to this offering, each outstanding option to purchase shares of our common stock will automatically be converted into an option to purchase an equal number of shares of our class B common stock at the same exercise price per share. Common Stock Voting Rights The holders of class A common stock and class B common stock have identical rights and will be entitled to one vote per share with respect to each matter presented to our stockholders on which the holders of common stock are entitled to vote, except for the approval rights of the holders of the class B common stock applicable to specified amendments to our certificate of incorporation and amendments of our bylaws by stockholders and except with respect to the election and removal of directors. Our certificate of incorporation provides that until the first date on which El.En. beneficially owns less than 20% of the aggregate number of shares of our class A common stock and class B common stock outstanding or less than 50% of the number of shares of our class B common stock outstanding, which we refer to as the class B conversion date: • the number of authorized directors of our company will be established exclusively by our board of directors; • the holders of class B common stock, voting separately as a single class, will be entitled to elect the smallest number of directors which shall constitute a majority of the authorized number of directors; and • the holders of class A common stock and class B common stock, voting together as a single class, will be entitled to elect the remaining directors. We refer to the directors elected by the holders of class B common stock, voting as a separate class, as the class B directors and to the directors elected by the holders of class A common stock and class B common stock, voting together as a single class, as the classified directors. 84

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On the class B conversion date, all shares of our class B common stock will automatically convert into class A common stock and, beginning on such date: • the number of authorized directors of our company will be established exclusively by our board of directors; • the term of each class B director shall end; and • the holders of class A common stock, which will be the only class of our common stock outstanding, will be entitled to elect all directors, and all directors shall be classified directors. In general, each class B director will serve for a term ending on the date of the first annual meeting following the annual meeting at which the class B director was elected, and each classified director will serve for a term ending on the date of the third annual meeting following the annual meeting at which the classified director was elected. The term of office of each director can be earlier terminated upon his or her death, resignation, removal or until his or her successor is elected and qualified or, with respect to class B directors, the expiration of his or her term as discussed above. Neither the class A common stock nor the class B common stock will have cumulative voting rights in the election of directors. Conversion Our class A common stock is not convertible into any other shares of our capital stock. Each share of class B common stock is convertible into one share of class A common stock at any time at the option of the holder. In addition, each share of class B common stock shall convert automatically into one share of class A common stock upon any transfer of such share of class B common stock, whether or not for value. The death of any holder of class B common stock who is a natural person will result in the conversion of his or her shares of class B common stock into class A common stock. All shares of class B common stock will convert into shares of class A common stock on a one-for-one basis upon the earlier of the class B conversion date or the date the holders of a majority of the shares of class B common stock vote in favor of such conversion. Once converted into class A common stock, the class B common stock shall not be reissued. No class of common stock may be subdivided or combined unless the other class of common stock concurrently is subdivided or combined in the same proportion and in the same manner. Dividends Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of class A common stock and class B common stock shall be entitled to share equally, on a per share basis, in any dividends that our board of directors may determine to issue from time to time. In the event a dividend is paid in the form of shares of common stock or rights to acquire shares of common stock, the holders of class A common stock and the holders of class B common stock shall receive class A common stock, or rights to acquire class A common stock, as the case may be. In no event will we declare or pay dividends in the form of class B common stock except in connection with a stock split or subdivision, in which case the class A common stock and class B common stock will be proportionately split or subdivided in the same manner. Liquidation Rights In the event of our liquidation or dissolution, the holders of class A common stock and class B common stock shall be entitled to share equally, on a per share basis, in all assets remaining after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. 85

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Approval Rights of Holders of Class A Common Stock In addition to any other vote required by law, until the class B conversion date, the prior affirmative vote of holders of a majority of the shares of class A common stock that are not beneficially owned by any holder of 50% or more of the shares of class B common stock, voting as a separate class, is required to alter, amend, terminate or repeal any provisions of our certificate of incorporation relating to the powers, preferences, rights or other terms of the class A common stock or the class B common stock in a manner that adversely affects the class A common stock but does not similarly so affect the class B common stock or that affects the class A common stock differently than the effect on the class B common stock. In addition, until the class B conversion date, the prior affirmative vote of holders of a majority of the shares of class A common stock, voting separately as a class, is required to approve any merger or consolidation in which the class A common stock and the class B common stock are not exchanged for or converted into the same kind of amount of securities, cash or other property as the other. Approval Rights of Holders of Class B Common Stock In addition to any other vote required by law, until the class B conversion date, the prior affirmative vote or written consent of holders of a majority of the class B common stock is required: • to approve amendments to our bylaws adopted by our stockholders; • to alter, amend, terminate or repeal any provisions of our certificate of incorporation relating to the rights of holders of common stock, the powers, election and classification of the board of directors, corporate opportunities and the rights of holders of class A common stock and class B common stock to elect and remove directors, act by written consent and call special meetings of stockholders; and • to approve any merger or consolidation in which the class A common stock and the class B common stock are not exchanged for or converted into the same kind and amount of securities, cash or other property as the other. Because El.En. is the holder of a majority of the shares of our class B common stock, and because all shares of our class B common stock will convert to shares of our class A common stock if El.En. beneficially owns less than 50% of the outstanding shares of our class B common stock, El.En.’s approval will be required for any of the actions described above. Other Rights Except as described above, neither our class A common stock nor our class B common stock will have any preemptive, subscription, redemption or conversion rights. The outstanding shares of our class B common stock are, and the shares of class A common stock being offered in this offering will be when issued and paid for, validly issued, fully paid and non-assessable. The rights, preferences and privileges of holders of our class A common stock and class B common stock are subject to and may be adversely affected by, the rights of holders of shares of any series of preferred stock that we may designate and issue in the future. Preferred Stock Under the terms of our certificate of incorporation, our board of directors is authorized to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. Authorizing our board of directors to issue preferred stock and determine its rights and preferences has the effect of eliminating delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or 86

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could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Upon completion of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock. Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws Delaware law, our certificate of incorporation and our bylaws contain provisions that could have the effect of delaying, deferring or discouraging another party from acquiring control of us. In particular, our dual class common stock structure will give holders of our class B common stock the right to elect a majority of the members of our board of directors. These provisions, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors.

Dual Class Structure; Election of Directors As discussed above, until the class B conversion date, holders of our class B common stock will be entitled to elect the class B directors, who will comprise a majority of our board of directors. In addition, holders of class B common stock will vote with holders of class A common stock for the election of the remaining directors. Immediately prior to this offering, El.En. held approximately 78% of our outstanding common stock. After this offering, El.En. will own % of our outstanding class B common stock, which will comprise % of our aggregate outstanding common stock, or % of our aggregate outstanding common stock if the underwriters exercise their over-allotment right in full. Because of our dual class structure, El.En. will continue to be able to control our board of directors even if it owns less than 50% of the shares our of outstanding common stock. This control could discourage others from initiating a potential merger, takeover or other change of control transaction that other stockholders may view as beneficial.

Staggered Board; Removal of Directors Our certificate of incorporation and our bylaws divide the classified directors into three classes with staggered three-year terms. In addition, a classified director may be removed only for cause and only by the affirmative vote of the holders of at least 75% of the voting power of our outstanding class A common stock and class B common stock, voting together as a single class. Class B directors will be elected annually to our board of directors for one-year terms. A class B director may be removed from office at any time, without cause, by the affirmative vote of the holders of the class B common stock, voting as a separate class. Until the class B conversion date, vacancies among the class B directors may be filled only by the vote of a majority of the class B directors remaining in office or, if there are none, by the holders of the class B common stock. Vacancies among the classified directors may be filled only by the vote of a majority of the classified directors or, if there are none, by the holders of our capital stock, voting together as a single class. The classification of our board of directors and the limitations on the removal of directors and filling of vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company.

Stockholder Action by Written Consent; Special Meetings Our certificate of incorporation provides that, except for actions taken by written consent of the holders of the class B common stock with respect to matters subject to the approval only of the holders of the class B common stock, any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Our certificate of incorporation and our bylaws also provide that, except as 87

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otherwise required by law, special meetings of our stockholders can only be called by our board of directors.

Advance Notice Requirements Except with respect to candidates nominated for election as class B directors, our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of stockholders, including proposed nominations of persons for election to the board of directors. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors or by a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely written notice in proper form to our secretary of the stockholder’s intention to bring such business before the meeting. These provisions could have the effect of delaying until the next stockholder meeting stockholder actions that are favored by the holders of a majority of our outstanding voting securities.

Delaware Business Combination Statute We are subject to Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 prevents a publicly held Delaware corporation from engaging in a “business combination” with any “interested stockholder” for three years following the date that the person became an interested stockholder, unless the interested stockholder attained such status with the approval of our board of directors or unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger or consolidation involving us and the “interested stockholder” and the sale of more than 10% of our assets. In general, an “interested stockholder” is any entity or person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person. The restrictions contained in Section 203 are not applicable to any of our existing stockholders.

Super-Majority Voting The General Corporation Law of Delaware provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or bylaws, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our bylaws may be amended or repealed by a majority vote of our board of directors, or the affirmative vote of the holders of at least 75% of the voting power of our capital stock issued and outstanding and entitled to vote on the matter and, until the class B conversion date, the holders of a majority of shares of class B common stock, voting separately as a class. In addition, the affirmative vote of the holders of at least 75% of voting power of our capital stock issued and outstanding and entitled to vote on the matter, voting together as a single class, and, until the class B conversion date, the approval of holders of a majority of the outstanding shares of class B common stock, voting separately as a class, are required to amend or repeal or to adopt any provisions inconsistent with any of the provisions of our certificate of incorporation described in this section entitled “— Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws.” Provisions of Our Certificate of Incorporation Relating to Corporate Opportunities In order to address potential conflicts of interest between us and El.En., upon completion of this offering, our certificate of incorporation will contain provisions relating to the conduct of our affairs as they may involve El.En. and corporations and other entities controlled by El.En. other than us, which we refer to collectively as El.En. affiliated companies, and El.En.’s officers and directors who serve as our directors. These provisions recognize that we and El.En. affiliated companies engage and may continue to engage in the same or similar business activities and lines of business, have an interest in the same areas of corporate opportunities and will continue to have contractual and business relations with each other. 88

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Our certificate of incorporation will provide that, subject to any written agreement to the contrary, El.En. affiliated companies will have no duty to refrain from engaging in the same or similar business activities or lines of business as us. Our certificate of incorporation also will provide that, except for a corporate opportunity that is expressly offered to a director or officer of an El.En. affiliated company in writing solely in, and as a direct result of, his or her capacity as our director, we renounce our interest in any potential transaction or matter which may be a corporate opportunity for both us and El.En. affiliated companies. El.En. will have no duty to communicate or offer such corporate opportunity to us and will not be liable to us or our stockholders for breach of any fiduciary duty as our stockholder by reason of the fact that El.En. pursues or acquires the corporate opportunity for itself, directs that corporate opportunity to another person or does not communicate that corporate opportunity to us. In our certificate of incorporation, we will also renounce our interest in any corporate opportunity that we are not financially able or contractually permitted or legally able to undertake or that is, from its nature, not in our line of business or is of no practical advantage to us or is one in which we have no interest or reasonably expectancy. The provisions of our certificate of incorporation related to corporate opportunities will terminate and expire on the class B conversion date. In addition, the affirmative vote of the holders of at least a majority of the voting power of our capital stock issued and outstanding and entitled to vote on the matter, voting together as a single class, and, until the class B conversion date, the approval of holders of a majority of the outstanding shares of class B common stock, voting separately as a class, are required to amend or repeal or to adopt any provisions inconsistent with the provisions of our certificate of incorporation related to corporate opportunities. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to the provisions of our certificate of incorporation related to corporate opportunities that are described above. Limitation of Liability and Indemnification of Officers and Directors Our certificate of incorporation that will be in effect upon the completion of this offering limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law. Our certificate of incorporation provides that no director will have personal liability to us or to our stockholders for monetary damages for breach of fiduciary duty or other duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors: • for any breach of their duty of loyalty to us or our stockholders; • for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; • for voting or assenting to unlawful payments of dividends or other distributions; or • for any transaction from which the director derived an improper personal benefit. Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act or failure to act, or any cause of action, suit or claim that would accrue or arise prior to any amendment or repeal or adoption of an inconsistent provision. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the Delaware General Corporation Law. In addition, our certificate of incorporation provides that we must indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to limited exceptions. 89

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Authorized but Unissued Shares The authorized but unissued shares of class A common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the listing standards of The Nasdaq National Market. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise. Transfer Agent and Registrar The transfer agent and registrar for our class A common stock and class B common stock is American Stock Transfer & Trust Company. Nasdaq National Market We have applied for the quotation of our class A common stock on The Nasdaq National Market under the symbol “CYNO.” Our class B common stock will not be listed on any stock market or exchange. 90

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SHARES ELIGIBLE FOR FUTURE SALE Prior to this offering, there has been no market for our class A common stock, and a liquid trading market for our class A common stock may not develop or be sustained after this offering. Future sales of substantial amounts of class A common stock, including shares issued upon exercise of outstanding options or in the public market after this offering, or the anticipation of those sales, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through sales of our equity securities. We have applied for the quotation of our class A common stock on The Nasdaq National Market under the symbol “CYNO.” Our class B common stock will not be listed on any stock market or exchange. Due, in part, to the mandatory conversion features of our class B common stock, we do not anticipate that there will ever be a trading market for our class B common stock. Upon the completion of this offering, we will have outstanding shares of class A common stock and shares of class B common stock. All the shares of class A common stock sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. The shares of our class B common stock are “restricted securities” under Rule 144. Substantially all of these restricted securities will be subject to the lock-up agreements described below. After the expiration of the lock-up agreements, these restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rule 144 or 701 under the Securities Act. Any shares of class B common stock, whether sold under Rule 144, Rule 701, pursuant to a registration statement or otherwise, will automatically convert into shares of class A common stock upon transfer. Rule 144 In general and subject to the lock-up agreements described below, under Rule 144, beginning 90 days after the date of this prospectus, a person who has beneficially owned shares of our class A common stock or class B common stock for at least one year would be entitled to sell within any three-month period a number of shares that does not exceed: • for sales of class B common stock, 1% of the number of shares of our class B common stock then outstanding, which will equal approximately shares immediately after this offering; and • for sales of class A common stock that has been converted from class B common stock, the greater of: • 1% of the number of shares of our class A common stock then outstanding, which will equal approximately immediately after this offering; and shares

• the average weekly trading volume in our class A common stock on The Nasdaq National Market during the four calendar weeks preceding the sale. Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us. Upon expiration of the lock-up agreements described below, shares of our class B common stock will be eligible for sale under Rule 144, excluding shares eligible for resale under Rule 144(k) described below. We anticipate that our existing stockholders may convert their shares to class A common stock prior to selling them as only our class A common stock will be listed on The Nasdaq National Market. We cannot estimate the number of shares of class A common stock or class B commons stock that our existing stockholders will elect to sell under Rule 144. Rule 144(k) Subject to the lock-up agreements described below, shares of our class B common stock eligible for sale under Rule 144(k) may be sold immediately upon the completion of this offering. In general, under Rule 144(k), a person may sell shares of class B common stock acquired from us immediately upon the 91

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completion of this offering, without regard to manner of sale, the availability of public information about us or volume, if: • the person is not our affiliate and has not been our affiliate at any time during the three months preceding the sale; and • the person has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an affiliate. Upon the expiration of the lock-up agreements described below, approximately eligible for sale under Rule 144(k). shares of class B common stock will be

Rule 701 In general, under Rule 701 of the Securities Act, any of our employees, consultants or advisors who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement is eligible to resell those shares 90 days after the effective date of this offering in reliance on Rule 144, but without compliance with the various restrictions, including the holding period, contained in Rule 144. Subject to the lock-up agreements described below, approximately shares of our class B common stock will be eligible for sale in accordance with Rule 701. Lock-up Agreements The holders of substantially all of our currently outstanding stock other than El.En. have agreed that, without the prior written consent of Citigroup Global Markets Inc., they will not, during the period ending 180 days after the date of this prospectus, subject to exceptions specified in the lock-up agreements, offer, sell, contract to sell or otherwise dispose of, directly or indirectly, or hedge our class A common stock or securities convertible into or exchangeable for or exercisable for our class A common stock (including our class B common stock), sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise dispose of, directly or indirectly, any shares of class A common stock or any securities convertible into or exercisable for class A common stock (including our class B common stock). In addition, El.En. has agreed with the underwriters for this offering that, without the prior written consent of Citigroup Global Markets Inc., it will not offer, sell, contract to sell or otherwise dispose of, directly or indirectly, or hedge, sell options or contracts to purchase, purchase options or contracts to sell, grant options, rights or warrants to purchase, lend or otherwise dispose of, directly or indirectly any shares of class A common stock or any securities convertible into or exercisable for class A common stock (including our class B common stock) for a period of 24 months after the date of this prospectus, other than: • up to 33% of the shares of our class A common stock or any securities convertible into or exercisable for class A common stock (including our class B common stock) that it beneficially owned on the date of this prospectus during the period between 12 and 18 months after the date of this prospectus; and • up to an additional 33% of the shares of our class A common stock or any securities convertible into or exercisable for class A common stock (including our class B common stock) that it beneficially owned on the date of this prospectus during the period between 18 and 24 months after the date of this prospectus. Stock Options As of June 30, 2005, we had outstanding options to purchase 1,862,642 shares of class B common stock, of which options to purchase 333,807 shares of class B common stock were vested as of June 30, 2005. Following this offering, we intend to file registration statements on Form S-8 under the Securities Act to register all of the shares subject to outstanding options and options and other awards issuable pursuant to our 1992 stock option plan, 2004 stock option plan and 2005 stock incentive plan. Please see “Management — Stock Option and Other Compensation Plans” for additional information regarding these plans. 92

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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of our class A common stock by a non-U.S. holder that acquires our class A common stock pursuant to this offering. The discussion is based on provisions of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, applicable U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations, all as in effect on the date of this prospectus, and all of which are subject to change, possibly on a retroactive basis. The discussion is limited to non-U.S. holders that hold our class A common stock as a “capital asset” within the meaning of Section 1221 of the Code — generally, property held for investment. As used in this discussion, the term “non-U.S. holder” means a beneficial owner of our class A common stock that is not, for U.S. federal income tax purposes: • an individual who is a citizen or resident of the United States; • a corporation or partnership, including any entity treated as a corporation or partnership for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state of the United States or the District of Columbia, other than a partnership treated as foreign under U.S. Treasury regulations; • an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or • a trust (1) if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust, or (2) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. This discussion does not consider: • U.S. federal gift tax consequences, or U.S. state or local or non-U.S. tax consequences; • specific facts and circumstances that may be relevant to a particular non-U.S. holder’s tax position, including, if the non-U.S. holder is a partnership, that the U.S. tax consequences of holding and disposing of our class A common stock may be affected by certain determinations made at the partner level; • the tax consequences for partnerships or persons who hold their interests through a partnership or other entity classified as a partnership for U.S. federal income tax purposes; • the tax consequences for the stockholders or beneficiaries of a non-U.S. holder; • all of the U.S. federal tax considerations that may be relevant to a non-U.S. holder in light of its particular circumstances or to non-U.S. holders that may be subject to special treatment under U.S. federal tax laws, such as financial institutions, insurance companies, tax-exempt organizations, certain trusts, hybrid entities, certain former citizens or residents of the United States, holders subject to U.S. federal alternative minimum tax, broker-dealers, traders in securities, pension plans and regulated investment companies; or • special tax rules that may apply to a non-U.S. holder that holds our class A common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security,” or other integrated investment. 93

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Prospective investors are urged to consult their own tax advisors regarding the U.S. federal, state, local, and non-U.S. income and other tax considerations with respect to owning and disposing of shares of our class A common stock. Dividends As previously discussed, we do not anticipate paying dividends on our class A common stock in the foreseeable future. See “Dividend Policy.” If we make distributions on our class A common stock, those payments will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, the excess will constitute a return of capital and first reduce the non-U.S. holder’s basis, but not below zero, and then will be treated as gain from the sale of stock. We will have to withhold U.S. federal income tax at a rate of 30%, or a lower rate under an applicable income tax treaty, from the gross amount of the dividends paid to a non-U.S. holder, unless the dividend is effectively connected with the conduct of a trade or business of the non-U.S. holder within the United States or, if an income tax treaty applies, attributable to a permanent establishment or fixed base of the non-U.S. holder within the United States. Under applicable U.S. Treasury regulations, a non-U.S. holder, including, in certain cases of non-U.S. holders that are entities, the owner or owners of such entities, will be required to satisfy certain certification requirements in order to claim a reduced rate of withholding pursuant to an applicable income tax treaty. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty. Dividends that are effectively connected with a non-U.S. holder’s conduct of a trade or business in the United States and, if an income tax treaty applies, attributable to a permanent establishment or fixed base of the non-U.S. holder within the United States, are taxed on a net income basis at the regular graduated U.S. federal income tax rates in the same manner as if the non-U.S. holder were a resident of the United States. In such cases, we will not have to withhold U.S. federal income tax if the non-U.S. holder complies with applicable certification and disclosure requirements. In addition, a “branch profits tax” may be imposed at a 30% rate, or a lower rate under an applicable income tax treaty, on dividends received by a foreign corporation that are effectively connected with the conduct of a trade or business in the United States. In order to claim the benefit of an income tax treaty or to claim exemption from withholding because the income is effectively connected with the conduct of a trade or business in the United States, the non-U.S. holder must provide a properly executed IRS Form W-8BEN, for treaty benefits, or W-8ECI, for effectively connected income, respectively, or such successor forms as the IRS designates prior to the payment of dividends. These forms must be periodically updated. A non-U.S. holder that is eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for a refund together with the required information with the IRS. Gain on Disposition of Class A Common Stock A non-U.S. holder generally will not be subject to U.S. federal income tax or withholding tax with respect to gain realized on a sale or other disposition of our class A common stock unless one of the following applies: • the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States and, if an income tax treaty applies, is attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States; in these cases, the non-U.S. holder will generally be taxed on its net gain derived from the disposition in the manner and at the regular graduated U.S. federal income tax rates applicable to United States persons, as 94

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defined in the Code, and, if the non-U.S. holder is a foreign corporation, the “branch profits tax” described above may also apply; • the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of the disposition and meets certain other requirements; in this case, the non-U.S. holder will be subject to a 30% tax on the gain derived from the disposition which may be offset by U.S. source capital losses of the non-U.S. holder, if any; or • our class A common stock constitutes a United States real property interest by reason of our status as a “United States real property holding corporation,” or a USRPHC, for U.S. federal income tax purposes at any time during the shorter of the 5-year period ending on the date of such disposition or the period that the non-U.S. holder held our class A common stock. We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our United States real property interests relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. As long as our class A common stock is “regularly traded on an established securities market” within the meaning of Section 897(c)(3) of the Code, however, such class A common stock will be treated as United States real property interests only if a non-U.S. holder owned directly or indirectly more than 5 percent of such regularly traded class A common stock during the shorter of the 5-year period ending on the date of disposition or the period that the non-U.S. holder held our class A common stock and we were a USRPHC during such period. If we are or were to become a USRPHC and a non-U.S. holder owned directly or indirectly more than 5 percent of our class A common stock during the period described above or our class A common stock is not “regularly traded on an established securities market,” then a non-U.S. holder would generally be subject to U.S. federal income tax on its net gain derived from the disposition of our class A common stock at the regular graduated U.S. federal income tax rates applicable to United States persons, as defined in the Code. Federal Estate Tax Class A common stock owned or treated as owned at the time of death by an individual who is not a citizen or resident of the United States, as specifically defined for U.S. federal estate tax purposes, will be included in the individual’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax or other treaty provides otherwise and, therefore, may be subject to U.S. federal estate tax. Information Reporting and Backup Withholding Tax We must report annually to the IRS and to each non-U.S. holder the gross amount of the distributions paid to that holder and the tax withheld from those distributions. These reporting requirements apply regardless of whether withholding was reduced or eliminated by an applicable income tax treaty. Copies of the information returns reporting those distributions and withholding may also be made available under the provisions of an applicable income tax treaty or agreement to the tax authorities in the country in which the non-U.S. holder is a resident or incorporated. Under some circumstances, U.S. Treasury regulations require backup withholding and additional information reporting on reportable payments on class A common stock. The gross amount of dividends paid to a non-U.S. holder that fails to certify its non-U.S. holder status in accordance with applicable U.S. Treasury regulations generally will be reduced by backup withholding at the applicable rate, currently 28%. Dividends paid to non-U.S. holders subject to the U.S. withholding tax at a rate of 30%, described above in “Dividends,” generally will be exempt from U.S. backup withholding. The payment of the proceeds of the sale or other disposition of class A common stock by a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or non-U.S., generally will be reported to the IRS and reduced by backup withholding, unless the non-U.S. holder either certifies its status as a non-U.S. holder under penalties of perjury or otherwise establishes an exemption. The payment 95

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of the proceeds from the disposition of class A common stock by a non-U.S. holder effected by or through a non-U.S. office of a non-U.S. broker generally will not be reduced by backup withholding or reported to the IRS, unless the non-U.S. broker has certain enumerated connections with the United States. In general, the payment of proceeds from the disposition of class A common stock effected by or through a non-U.S. office of a broker that is a U.S. person or has certain enumerated connections with the United States will be reported to the IRS and may be reduced by backup withholding unless the broker receives a statement from the non-U.S. holder that certifies its status as a non-U.S. holder under penalties of perjury or the broker has documentary evidence in its files that the holder is a non-U.S. holder. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder can be refunded or credited against the non-U.S. holder’s U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS in a timely manner. These backup withholding and information reporting rules are complex and non-U.S. holders are urged to consult their own tax advisors regarding the application of these rules to them. The foregoing discussion of U.S. federal income and estate tax considerations is not tax advice and is not based on an opinion of counsel. Accordingly, each prospective non-U.S. holder of our class A common stock should consult that holder’s own tax advisor with respect to the federal, state, local and non-U.S. tax consequences of the ownership and disposition of our class A common stock. 96

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UNDERWRITING Citigroup Global Markets Inc. is acting as bookrunning manager of this offering, and together with UBS Securities LLC, Jefferies & Company, Inc., and Needham & Company, LLC, are acting as representatives of the underwriters named below. Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus, each underwriter named below has agreed to purchase, and we and El.En. have agreed to sell to that underwriter, the number of shares of class A common stock set forth opposite the underwriter’s name.
Underwriters Number of Class A Shares

Citigroup Global Markets Inc. UBS Securities LLC Jefferies & Company, Inc. Needham & Company, LLC Total

The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to approval of legal matters by counsel and to other conditions. The underwriters are obligated to purchase all the shares, other than those covered by the over-allotment option described below, if they purchase any of the shares. The underwriters propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this prospectus and some of the shares to dealers at the public offering price less a concession not to exceed $ per share. The underwriters may allow, and dealers may reallow, a concession not to exceed $ per share on sales to other dealers. If all of the shares are not sold at the initial offering price, the representatives may change the public offering price and the other selling terms. The representatives have advised us and El.En. that the underwriters do not intend sales to discretionary accounts to exceed five percent of the total number of shares of our class A common stock offered by them. We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of additional shares of class A common stock at the public offering price less the underwriting discount. The underwriters may exercise the option solely for the purpose of covering over-allotments, if any, in connection with this offering. To the extent the option is exercised, each underwriter must purchase a number of additional shares approximately proportionate to that underwriter’s initial purchase commitment. We, our officers and directors and holders of substantially all of our shares and options to purchase our shares other than El.En., have agreed that, for a period of 180 days from the date of this prospectus, we and they will not, without the prior written consent of Citigroup, dispose of or hedge any shares of our common stock or any securities convertible into or exchangeable for our common stock, subject to customary exceptions. In addition, El.En. has agreed that, without the prior written consent of Citigroup and subject to specified exceptions, it will not dispose of or hedge any shares of our common stock or any securities convertible into or exercisable for our common stock for a period of 24 months after the date of this prospectus, other than: • up to 33% of the shares of our common stock or any securities convertible into or exercisable for our common stock that it beneficially owned on the date of this prospectus during the period between 12 months and 18 months after the date of this prospectus; and • up to an additional 33% of the shares of our common stock or any securities convertible into or exercisable for our common stock that it beneficially owned on the date of this prospectus during the period between 18 months and 24 months after the date of this prospectus. 97

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Citigroup in its sole discretion may release any of the securities subject to these lock-up agreements at any time without notice. Prior to this offering, there has been no public market for our class A common stock. Consequently, the initial public offering price for the shares was determined by negotiations among us, El.En. and the representatives. Among the factors considered in determining the initial public offering price were our record of operations, our current financial condition, our future prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, our management, and currently prevailing general conditions in the equity securities markets, including current market valuations of publicly traded companies considered comparable to our company. We cannot assure you, however, that the prices at which the shares will sell in the public market after this offering will not be lower than the initial public offering price or that an active trading market in our class A common stock will develop and continue after this offering. We have applied to have our class A common stock included for quotation on The Nasdaq National Market under the symbol “CYNO.” The following table shows the underwriting discounts and commissions that we and El.En. are to pay to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares of class A common stock.
Paid by Cynosure No Exercise Full Exercise No Exercise Paid by El.En. Full Exercise

Per share Total

$ $

$ $

$ $

$ $

In connection with the offering, Citigroup on behalf of the underwriters, may purchase and sell shares of class A common stock in the open market. These transactions may include short sales, syndicate covering transactions and stabilizing transactions. Short sales involve syndicate sales of class A common stock in excess of the number of shares to be purchased by the underwriters in the offering, which creates a syndicate short position. “Covered” short sales are sales of shares made in an amount up to the number of shares represented by the underwriters’ over-allotment option. In determining the source of shares to close out the covered syndicate short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. Transactions to close out the covered syndicate short involve either purchases of the class A common stock in the open market after the distribution has been completed or the exercise of the over-allotment option. The underwriters may also make “naked” short sales of shares in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares of class A common stock in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of bids for or purchases of shares in the open market while the offering is in progress. The underwriters also may impose a penalty bid. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when Citigroup repurchases shares originally sold by that syndicate member in order to cover syndicate short positions or make stabilizing purchases. Any of these activities may have the effect of preventing or retarding a decline in the market price of the class A common stock. They may also cause the price of the class A common stock to be higher than the price that would otherwise exist in the open market in the absence of these transactions. The underwriters may conduct these transactions on The Nasdaq National Market or in the over-the-counter market, or otherwise. If the underwriters commence any of these transactions, they may discontinue them at any time. 98

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We estimate that the total expenses of this offering, paid and payable by us, not including the underwriting discounts and commissions, will be $ . Other than in connection with this offering, the underwriters have not performed investment banking and advisory services for us. A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters. The representatives may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. The representatives will allocate shares to underwriters that may make Internet distributions on the same basis as other allocations. In addition, shares may be sold by the underwriters to securities dealers who resell shares to online brokerage account holders. We and El.En. have agreed to indemnify the underwriters and their controlling persons against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make because of any of those liabilities. 99

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LEGAL MATTERS The validity of the class A common stock offered by this prospectus will be passed upon by Wilmer Cutler Pickering Hale and Dorr LLP, Boston, Massachusetts. Dewey Ballantine LLP, New York, New York, is counsel for the underwriters in connection with this offering. EXPERTS Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements at December 31, 2003 and 2004, and for each of the three years in the period ended December 31, 2004, as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act of 1933 with respect to the shares of class A common stock we are offering to sell. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in the registration statement and the exhibits, schedules and amendments to the registration statement. For further information with respect to us and our class A common stock, we refer you to the registration statement and to the exhibits and schedules to the registration statement. Statements contained in this prospectus about the contents of any contract or any other document are not necessarily complete, and, and in each instance, we refer you to the copy of the contract or other documents filed as an exhibit to the registration statement. Each of theses statements is qualified in all respects by this reference. You may read and copy the registration statement of which this prospectus is a part at the Securities and Exchange Commission’s public reference room, which is located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You can request copies of the registration statement by writing to the Securities and Exchange Commission and paying a fee for the copying cost. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for more information about the operation of the Securities and Exchange Commission’s public reference room. In addition, the Securities and Exchange Commission maintains an Internet website, which is located at http://www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Securities and Exchange Commission. You may access the registration statement of which this prospectus is a part at the Securities and Exchange Commission’s Internet website. Upon completion of this offering, we will be subject to the information reporting requirements of the Securities Exchange Act of 1934, and we will file reports, proxy statements and other information with the Securities and Exchange Commission. This prospectus includes statistical data that were obtained from industry publications. These industry publications generally indicate that the authors of these publications have obtained information from sources believed to be reliable but do no guarantee the accuracy and completeness of their information. While we believe these industry publications to be reliable, we have not independently verified their data. 100

CYNOSURE, INC. INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders’ Equity and Comprehensive (Loss) Income Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements F-1 F-2 F-3 F-4 F-5 F-7 F-8

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Cynosure, Inc. We have audited the accompanying consolidated balance sheets of Cynosure, Inc. as of December 31, 2003 and 2004, and the related consolidated statements of operations, stockholders’ equity and comprehensive (loss) income and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cynosure, Inc. at December 31, 2003 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP Boston, Massachusetts August 3, 2005 F-2

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CYNOSURE, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)
December 31, 2003 2004 June 30, 2005 (Unaudited)

ASSETS Current assets: Cash and cash equivalents Accounts receivable (net of allowance of $484, $460, and $563 respectively) Amounts due from related parties (Notes 5 and 6) Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Long-term investments Other noncurrent assets Total assets $ $ 2,111 5,572 263 6,654 437 15,037 2,138 627 426 18,228 $ $ 4,028 8,410 — 9,871 962 23,271 3,733 257 740 28,001 $ $ 3,198 9,732 49 11,663 977 25,619 4,255 257 518 30,649

LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Short-term loan Accounts payable Amounts due to related party (Note 6) Accrued expenses Deferred revenue Capital lease obligation Note payable to related party Total current liabilities Capital lease obligation, net of current portion Deferred revenue, net of current portion Minority interest in consolidated subsidiary Commitments and Contingencies (Note 12) Stockholders’ equity: Common stock, $0.01 par value Authorized — 15,000 shares as of December 31, 2003 and 2004, and June 30, 2005 Issued — 5,566, 6,279 and 6,279 shares as of December 31, 2003 and 2004 and June 30, 2005, respectively. Additional paid-in capital Notes receivable from stockholders Retained (deficit) earnings Deferred stock-based compensation Accumulated other comprehensive loss Treasury stock, 36 shares as of December 31, 2003 and 2004 and June 30, 2005, at cost Total stockholders’ equity Total liabilities and stockholders’ equity $ $ 157 2,634 1,242 3,648 739 152 1,893 10,465 81 — 394 $ 205 3,786 900 6,433 848 118 303 12,593 476 — 292 $ 193 4,603 1,653 6,395 854 195 310 14,203 761 87 325

56 10,947 (3 ) (2,986 ) — (439 ) (287 ) 7,288 18,228 $

63 12,990 (3 ) 2,310 — (433 ) (287 ) 14,640 28,001 $

63 14,885 — 2,834 (1,637 ) (585 ) (287 ) 15,273 30,649

The accompanying notes are an integral part of these consolidated financial statements

F-3

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CYNOSURE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
Year Ended December 31, 2002 2003 2004 Six Months Ended June 30, 2004 (Unaudited) 2005

Revenues Revenues from related party (Note 5) Total revenues Cost of revenues(1) Gross profit Operating expenses: Sales and marketing Research and development General and administrative Stock-based compensation(2) Total operating expenses (Loss) income from operations Interest expense, net Gain on sale of investment Other income (expense), net (Loss) income before (benefit) provision for income taxes and minority interest (Benefit) provision for income taxes Minority interest in net income of subsidiary Net (loss) income Basic net (loss) income per share Diluted net (loss) income per share Basic weighted average common shares outstanding Diluted weighted average common shares outstanding

$

21,678 1,284 22,962 13,198 9,764 5,777 2,379 3,979 — 12,135 (2,371 ) (25 ) — 298 (2,098 ) (301 ) 70

$

25,525 1,600 27,125 14,207 12,918 8,720 2,481 3,766 76 15,043 (2,125 ) (62 ) — 1,822 (365 ) 72 63

$

40,364 1,269 41,633 20,465 21,168 12,590 3,139 4,092 136 19,957 1,211 (122 ) 3,019 976 5,084 (276 ) 64

$

17,902 1,269 19,171 9,721 9,450 5,762 1,406 1,899 89 9,156 294 (71 ) 3,019 493 3,735 97 27

$

25,080 — 25,080 11,632 13,448 8,048 1,523 2,364 245 12,180 1,268 (45 ) — (281 ) 942 383 35

$ $ $

(1,867 ) (0.35 ) (0.35 )

$ $ $

(500 ) (0.09 ) (0.09 )

$ $ $

5,296 0.93 0.92

$ $ $

3,611 0.65 0.65

$ $ $

524 0.08 0.07

5,272

5,530

5,700

5,530

6,226

5,272

5,530

5,773

5,530

7,234

(1) Includes stock-based compensation of: (2) Stock-based compensation is attributable to the following categories: Sales and marketing Research and development General and administrative

$

—

$

10

$

46

$

5

$

13

— — — —

32 20 24 76 $ 86 $

37 83 16 136 182 $

47 5 37 89 94 $

219 5 21 245 258

Total stock-based compensation

$

—

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CYNOSURE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE (LOSS) INCOME (In thousands)
Common Stock Additional Paid-In Shares Par Value Capital Notes Receivable from Stockholders Retained (Deficit) Earnings Deferred Stock-Based Compensation Accumulated Other Comprehensive Income (Loss) Shares Cost Treasury Stock Total Stockholders’ Equity Comprehensive (Loss) Income

Balance at December 31, 2001 Sale of common stock Exercise of stock options Repurchase of common stock Repayment of notes receivable from stockholders Net loss Cumulative translation adjustment Balance at December 31, 2002 Additional consideration from parent company for purchase of ownership interest ( Note 8 ) Repurchase of common stock Repayment of notes receivable from stockholders Issuance of stock purchase rights Net loss Cumulative translation adjustment Balance at December 31, 2003 Sale of common stock Issuance of common stock in connection with stock purchase rights Repurchase of common stock Revaluation of stock purchase rights Net income Cumulative translation adjustment

4,845 — 721 —

$

49 — 7 —

$

8,697 357 1,662 —

$

(352 ) — (149 ) —

$

(619 ) — — —

$

— — — —

$

192 — — —

(36 ) 3,328 — (3,328 )

$

(287 ) 9,471 — (9,471 )

$

7,680 9,828 1,520 (9,471 )

— —

— —

— —

371 —

— (1,867 )

— —

— —

— —

— —

371 (1,867 )

$

(1,867

—

—

—

—

—

—

(171 )

—

—

(171 )

(171

5,566

56

10,716

(130 )

(2,486 )

—

21

(36 )

(287 )

7,890

$

(2,038

— —

— —

145 —

— —

— —

— —

— —

— —

1,317 (1,317 )

1,462 (1,317 )

— — —

— — —

— 86 —

127 — —

— — (500 )

— — —

— — —

— — —

— — —

127 86 (500 )

$

(500

—

—

—

—

—

—

(460 )

—

—

(460 )

(460

5,566

56

10,947

(3 )

(2,986 )

—

(439 )

(36 )

(287 )

7,288

$

(960

638

6

1,862

—

—

—

—

80

240

2,108

75 — — —

1 — — —

226 — (45 ) —

— — — —

— —

— — — —

— — — —

— (80 ) — —

— (240 ) — —

227 (240 ) (45 ) 5,296

5,296

$

5,296

—

—

—

—

—

—

6

—

—

6 $

6 5,302

F-5

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CYNOSURE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE (LOSS) INCOME (In thousands)
Common Stock Additional Paid-In Shares Par Value Capital Notes Receivable from Stockholders Retained (Deficit) Earnings Deferred Stock-Based Compensation Accumulated Other Comprehensive Income (Loss) Shares Cost Treasury Stock Total Stockholders’ Equity Comprehensive (Loss) Income

Balance at December 31, 2004 Sale of common stock (unaudited) Repurchase of common stock (unaudited) Issuance of stock options to nonemployees (unaudited) Deferred stock-based compensation in connection with stock options issued to employees (unaudited) Amortization of stock-based compensation (unaudited) Repayment of note receivable from stockholders (unaudited) Net income (unaudited) Cumulative translation adjustment (unaudited) Balance at June 30, 2005 (unaudited)

6,279

63

12,990

(3 )

2,310

—

(433 )

(36 )

(287 )

14,640

—

—

—

—

—

—

—

—

495

1,485

1,485

—

—

—

—

—

—

—

—

(495 )

(1,485 )

(1,485 )

—

—

—

205

—

—

—

—

—

—

205

—

—

—

1,690

—

—

(1,690 )

—

—

—

—

—

—

—

—

—

—

53

—

—

—

53

—

— —

— —

— —

3 —

— 524

— —

— —

— —

— —

3 524 $

— 524

—

—

—

—

—

—

(152 )

—

—

(152 )

(152 )

6,279

$

63

$

14,885

$

—

$

2,834

$

(1,637 )

$

(585 )

(36 )

$

(287 )

$

15,273

$

372

The accompanying notes are an integral part of these consolidated financial statements. F-6

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CYNOSURE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year Ended December 31, 2002 2003 2004 Six Months Ended June 30, 2004 (Unaudited) Operating activities Net (loss) income Reconciliation of net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization Gain on sale of investment Stock-based compensation expense Equity in investment net loss (income) Minority interest in consolidated subsidiary Changes in operating assets and liabilities: Accounts receivable Due from related party Inventories Net book value of demonstration inventory sold Prepaid expenses and other current assets Accounts payable Due to related party Accrued expenses Deferred revenue Net cash provided by (used in) operating activities Investing activities Purchases of property and equipment Net proceeds from the sale of investment Purchase of investment Increase in other noncurrent assets Net cash (used in) provided by investing activities Financing activities Payments on short-term loan and note payable to related party Deposit received for purchase of common stock from investors Deposit paid for repurchase of common stock Proceeds from exercise of stock options Proceeds from sale of common stock Proceeds from note payable to related party Repurchase of common stock Payments received on stockholder notes Payments on capital lease obligation Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period Supplemental cash flow information Cash paid for interest Income tax refunds received Noncash investing and financing activities: Inventory acquired via note payable to related party Assets acquired under capital lease Deferred compensation associated with stock option grants to employees $ $ (1,867 ) $ (500 ) $ 5,296 $ 3,611 $ 524 2005

1,383 — — 159 70 4 — 195 — 452 (298 ) 983 250 67 1,398 (572 ) — — — (572 ) (64 ) — — 1,520 9,828 — (9,471 ) 371 (204 ) 1,980 (33 ) 2,773 517 3,290 $

1,306 — 86 (737 ) 50 (1,358 ) (262 ) (719 ) 126 259 42 259 1,179 15 (254 ) (939 ) — (243 ) — (1,182 ) (14 ) — — — 1,462 733 (1,317 ) 127 (310 ) 681 (424 ) (1,179 ) 3,290 2,111 $

1,323 (3,019 ) 182 (154 ) (101 ) (3,054 ) 262 (3,884 ) 1,068 25 1,176 (342 ) 2,369 109 1,256 (2,758 ) 3,058 (15 ) — 285 (2,042 ) 413 (413 ) — 2,108 500 (240 ) — (233 ) 93 283 1,917 2,111 4,028 $

716 (3,019 ) 94 (154 ) (144 ) (1,259 ) 262 (995 ) 720 (52 ) 341 127 485 (43 ) 690 (1,645 ) 2,558 (15 ) — 898 (313 ) — — — — 500 — — (96 ) 91 141 1,821 2,111 3,932 $

823 — 258 — 32 (1,674 ) (38 ) (2,097 ) 210 (265 ) 853 743 481 93 (57 ) (1,248 ) 250 — (215 ) (1,213 ) (12 ) — — — 1,485 — (1,485 ) 3 (94 ) (103 ) 543 (830 ) 4,028 3,198

$ $

27 950

$ $

28 218

$ $

37 515

$ $

15 —

$ $

38 —

$ $

— —

$ $

1,119 117

$ $

— 595

$ $

— 426

$ $

— 455

$

—

$

—

$

—

$

—

$

1,690

Proceeds from the sale of investment held in escrow

$

—

$

—

$

500

$

1,000

$

250

The accompanying notes are an integral part of these consolidated financial statements. F-7

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Including Data Applicable to Unaudited Periods)

1.

Nature of the Business

Cynosure, Inc. (Cynosure or the Company) develops, manufactures and markets aesthetic treatment systems that are used by physicians and other practitioners to perform non-invasive procedures to remove hair, treat vascular lesions, rejuvenate skin through the treatment of shallow vascular lesions and pigmented lesions and temporarily reduce the appearance of cellulite. Cynosure markets and sells its products primarily to the dermatology, plastic surgery and general medical markets, both domestically and internationally. Cynosure is a Delaware corporation, incorporated on July 10, 1991, located in Westford, Massachusetts. In May 2002, Cynosure sold 3,327,960 shares of common stock (representing a 60% ownership interest) to El.En. S.p.A. (El.En.) for approximately $9.8 million in cash. As a consequence, the results of Cynosure are consolidated in the financial statements of El.En. Final consideration of $1.5 million from the sale was received in May 2003 (see Note 8). During 2004, El.En. acquired 2,190,834 additional shares of Cynosure’s common stock from the Company and certain minority stockholders, increasing its ownership percentage of Cynosure to approximately 87%.

2.

Summary of Significant Accounting Policies Significant accounting policies followed in the preparation of these consolidated financial statements are as follows:

Management Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures at the date of the financial statements and during the reporting period. Components particularly subject to estimation include the allowance for doubtful accounts, inventory reserves and accrued warranties. On an ongoing basis, management evaluates its estimates. Actual results could differ from these estimates.

Interim Unaudited Financial Statements Cynosure’s consolidated statements of operations and cash flows for the six months ended June 30, 2004 and 2005 and consolidated balance sheet at June 30, 2005 are unaudited, have been prepared on a basis consistent with the audited consolidated financial statements, and, in the opinion of Cynosure’s management, include all adjustments, consisting only of normal, recurring adjustments and accruals, necessary for a fair presentation of Cynosure’s financial position and results of operations for the periods presented. Results for the interim period are not necessarily indicative of results for the full year or any other interim period.

Principles of Consolidation The accompanying consolidated financial statements include the accounts of Cynosure, Inc. and its wholly owned subsidiaries: Cynosure GmbH, Cynosure S.A.R.L., Cynosure UK Limited and Cynosure KK. Cynosure has a 52% interest in Suzhou Cynosure Medical Devices, Co., located in the People’s Republic of China, and the related financial statements have been consolidated. All significant intercompany balances and transactions have been eliminated. F-8

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods)

Cash and Cash Equivalents Cynosure considers all short-term, highly liquid investments with original maturities at the time of purchase of 90 days or less to be cash equivalents.

Accounts Receivable and Concentration of Credit Risk Management works to mitigate its concentration of credit risk with respect to accounts receivable through its credit evaluation policies, reasonably short payment terms and geographical dispersion of sales. Revenue includes export sales to foreign companies located principally in Europe, the Asia/Pacific region and the Middle East. Cynosure obtains letters of credit for foreign sales considered by management to be at risk. Cynosure maintains reserves for potential credit losses based upon the aging of its receivable balances, known collectibility issues and its historical experience with losses. In the event that it is determined that the customer may not be able to meet its full obligation to Cynosure, Cynosure records a specific allowance to reduce the related receivable to the amount that Cynosure expects to recover given all information present. Cynosure had one customer that accounted for 11% of revenue in 2002. No customer accounted for 10% or greater of revenue during 2003 or 10% or greater of accounts receivable as of December 31, 2003. Another customer accounted for 13% of revenues in 2004 and 12% of accounts receivable as of December 31, 2004. Accounts receivable allowance activity consisted of the following for the years ended December 31:
2002 2003 (In thousands) 2004

Balance at beginning of year Additions Deductions Balance at end of year

$

930 (105 ) (120 ) 705

$

705 176 (397 ) 484

$

484 160 (184 ) 460

$

$

$

Inventory Cynosure states all inventories at the lower of cost or market, determined on a first-in, first-out method. Inventory includes material, labor and overhead and consists of the following:
December 31, 2003 2004 (In thousands) June 30, 2005

Raw materials Work in process Finished goods

$

1,992 1,383 3,279 6,654

$

2,381 2,413 5,077 9,871

$

2,686 2,942 6,035 11,663

$

$

$

Included in finished goods are lasers used for demonstration purposes. Cynosure’s policy is to include demonstration lasers as inventory for a period of up to one year after production at which time the demonstration lasers are either sold or transferred to fixed assets and depreciated over their estimated useful life. Cynosure’s policy is to establish inventory reserves when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for products and market conditions. Cynosure regularly evaluates the ability to realize the value of inventory based on a combination of factors including the following: historical usage rates, forecasted sales or usage, F-9

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) product end of life dates, estimated current and future market values and new product introductions. Assumptions used in determining management’s estimates of future product demand may prove to be incorrect; in which case the provision required for excess and obsolete inventory would have to be adjusted in the future. If inventory is determined to be overvalued, Cynosure recognizes such costs as cost of goods sold at the time of such determination. Although Cynosure performs a detailed review of its forecasts of future product demand, any significant unanticipated changes in demand could have a significant impact on the value of Cynosure’s inventory and reported operating results. Inventory reserve activity consisted of the following for the years ended December 31:
2002 2003 (In thousands) 2004

Balance at beginning of year Additions Deductions Balance at end of year

$

788 394 — 1,182

$

1,182 379 (764 ) 797

$

797 529 (514 ) 812

$

$

$

Cynosure purchases a significant raw material component from one vendor, who is the sole manufacturer of this component. A delay in the production capabilities of this vendor could cause a delay in Cynosure’s manufacturing, and a possible loss of revenues, which would adversely affect operating results.

Property and Equipment Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Assets under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the respective lease term. Included in property and equipment are certain lasers that are used for demonstration purposes, as well as lasers to which Cynosure continues to hold title that are placed at customer locations under a revenue-sharing arrangement. Maintenance and repairs are charged to expense as incurred. Cynosure continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be impaired. Cynosure evaluates the realizability of its long-lived assets based on profitability and cash flow expectations for the related asset. Any write-downs are treated as permanent reductions in the carrying amount of the assets. Based on this evaluation, Cynosure believes that, as of each of the balance sheet dates presented, none of the Cynosure’s long-lived assets was impaired.

Revenue Recognition and Deferred Revenue Cynosure generates revenue from the sale of aesthetic treatment systems that are used by physicians and other practitioners to perform various non-invasive aesthetic procedures. These systems incorporate a broad range of laser and other light-based energy sources. Cynosure offers service and warranty contracts in connection with these sales. Cynosure recognizes revenue in accordance with Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 104, Revenue Recognition in Financial Statements (SAB 104). Cynosure recognizes revenue from sales of its treatment systems and accessories upon delivery, provided there are no uncertainties regarding customer acceptance, the fee is fixed or determinable, and collectibility of the related receivable is reasonably assured. Revenues from the sales of service and warranty contracts are deferred and recognized on a straight-line basis over the contract period as services are provided. Payments F-10

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) received by Cynosure in advance of product delivery or performance of services are deferred until earned. Multiple-element arrangements are evaluated in accordance with the principles of Emerging Issues Task Force (EITF) Issue Number 00-21, Revenue Arrangements with Multiple Deliverables (EITF 00-21), and Cynosure allocates revenue among the elements based upon each element’s relative fair value. Cynosure has also entered into a revenue sharing arrangement with Sona MedSpa whereby Cynosure receives a percentage of the revenues related to the cosmetic procedures performed at Sona MedSpa locations. Cynosure recognizes this revenue in the period the procedure is performed. During the years ended December 31, 2002, 2003 and 2004 and the six month periods ended June 30, 2004 and 2005, Cynosure recognized approximately $1,284,000, $1,600,000, $2,402,000, $1,369,000 and $900,000, respectively, under this revenue sharing arrangement. In accordance with the provisions of EITF Issue Number 00-10, Accounting for Shipping and Handling Costs (EITF 00-10), Cynosure records shipping and handling costs billed to its customers as a component of revenue, and the underlying expense as a component of cost of revenue. Shipping and handling costs included as a component of revenue and cost of revenue totaled $167,000, $165,000 and $210,000 for the years ended December 31, 2002, 2003 and 2004, respectively.

Product Warranty Costs Cynosure provides a one-year parts and labor warranty on end-user sales of lasers. Distributor sales generally include a warranty on parts only. Estimated future costs for initial product warranties are provided for at the time of revenue recognition. The following table sets forth activity in the accrued warranty account for the years ended December 31:
2002 2003 (In thousands) 2004

Balance at beginning of year Charged to expense Costs incurred Balance at end of year

$

822 951 (910 ) 863

$

863 1,317 (928 ) 1,252

$

1,252 1,606 (1,248 ) 1,610

$

$

$

Research and Development Research and development costs consist of salaries and other personnel-related expenses of employees primarily engaged in research, development and engineering activities and materials used and other overhead expenses incurred in connection with the design and development of Cynosure’s products. These costs are expensed as incurred.

Advertising Costs Cynosure expenses advertising costs as incurred. Advertising costs totaled $88,000, $97,000 and $252,000 for the years ended December 31, 2002, 2003 and 2004, respectively.

Foreign Currency Translation The financial statements of Cynosure’s foreign subsidiaries are translated from local currency into U.S. dollars using the current exchange rate at the balance sheet date for assets and liabilities, and the average exchange rate prevailing during the period for revenue and expenses. The functional currency for Cynosure’s foreign subsidiaries is considered to be the local currency for each entity and, accordingly, translation adjustments for these subsidiaries are included in accumulated other comprehensive income F-11

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) (loss) within stockholders’ equity. Certain intercompany and third party foreign currency-denominated transactions generated foreign currency transaction gains of approximately $350,000, $864,000 and $558,000 during 2002, 2003 and 2004, respectively, which are included in other income in the consolidated statements of operations.

Comprehensive (Loss) Income Comprehensive (loss) income is the change in equity of a company during a period from transactions and other events and circumstances, excluding transactions resulting from investments by owners and distributions to owners. A reconciliation of Cynosure’s net (loss) income to comprehensive (loss) income is as follows:
Years Ended December 31, 2002 2003 2004 (In thousands) Six Months Ended June 30, 2004 2005

Net (loss) income Cumulative translation adjustment Comprehensive (loss) income

$ $

(1,867 ) (171 ) (2,038 )

$ $

(500 ) (460 ) (960 )

$ $

5,296 6 5,302

$ $

3,611 118 3,729

$ $

524 (152 ) 372

Fair Value of Financial Instruments The carrying value of Cynosure’s financial instruments, which include cash equivalents, accounts receivable, accounts payable, accrued expenses, short-term loan, note payable to related party and capital leases, approximates their fair value at December 31, 2003 and 2004.

Stock-Based Compensation Cynosure accounts for its stock-based awards to employees using the intrinsic-value method prescribed in Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations. Under the intrinsic-value method, compensation expense is measured on the date of grant as the difference between the deemed fair market value of Cynosure’s common stock for accounting purposes and the option exercise price multiplied by the number of options granted. Generally, Cynosure grants stock options with exercise prices equal to the fair market value for accounting purposes of its common stock; however, to the extent that the deemed fair market value for accounting purposes of the common stock exceeds the exercise price, Cynosure records deferred stock-based compensation and amortizes the expense over the vesting schedule of the options, generally four years. The fair value for accounting purposes of Cynosure’s common stock is determined by the Company’s board of directors. In the absence of a public trading market for Cynosure’s common stock, Cynosure’s board of directors considers objective and subjective factors in determining the fair value of Cynosure’s common stock for accounting purposes. During the six months ended June 30, 2005, Cynosure granted stock options with exercise prices less than the deemed fair market value of common stock for accounting purposes and, as a result, recorded deferred stock-based compensation of approximately $1.7 million. Cynosure also provides the disclosure requirements of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure , an amendment of FASB Statement No. 123 (SFAS 148). Stock-based awards to non-employees are accounted for under the provisions of SFAS No. 123 Accounting for Stock-Based Compensation (SFAS 123) and EITF Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services (EITF 96-18). F-12

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) If compensation cost had been determined for stock options granted to employees based on the fair value of the awards at the date of grant in accordance with the provisions of SFAS 123, Cynosure’s net (loss) income would have been the pro forma amount indicated below:
Year Ended December 31, 2002 2003 2004 Six Months Ended June 30, 2004 2005

(In thousands, except per share data)

Net (loss) income: As reported Add: Stock-based employee compensation expense included in determination of net loss, net of tax Less: Total stock-based employee compensation expense determined under the fair value-based method, net of tax Pro forma net (loss) income: Basic net (loss) income per share — as reported Diluted net (loss) income per share — as reported Basic net (loss) income per share — pro forma Diluted net (loss) income per share — pro forma

$

(1,867 ) —

$

(500 ) 56

$

5,296 118

$

3,611 61

$

524 34

(23 ) $ $ $ $ $ (1,890 ) (0.35 ) (0.35 ) (0.36 ) (0.36 ) $ $ $ $ $

(215 ) (659 ) (0.09 ) (0.09 ) (0.12 ) (0.12 ) $ $ $ $ $

(611 ) 4,803 0.93 0.92 0.84 0.83 $ $ $ $ $

(102 ) 3,570 0.65 0.65 0.65 0.65 $ $ $ $ $

(268 ) 290 0.08 0.07 0.05 0.04

For the purpose of SFAS 123 pro forma disclosures, Cynosure uses the Black-Scholes option pricing model to determine the fair value of each option granted to Cynosure employees. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including expected stock price volatility. Because Cynosure’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. The key assumptions used to apply this pricing model and the related weighted average fair values are as follows:
Year Ended December 31, 2003 2004 Six Months Ended June 30, 2005

Risk-free interest rate Expected dividend yield Expected lives Expected volatility Weighted average fair value

$ F-13

1.30 % — 1.5 years 75 % 0.90

$

3.44 % — 5 years 75 % 1.90

3.88 % — 5 years 75 % 6.90

$

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) There were no option grants during the year ended December 31, 2002 or during the six months ended June 30, 2004.

Income Taxes Cynosure provides for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes (SFAS 109). SFAS 109 recognizes tax assets and liabilities for the cumulative effect of all temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities, and are measured using the enacted tax rates that will be in effect when these differences are expected to reverse. Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Net (Loss) Income per Common Share Basic net (loss) income per share is determined by dividing net (loss) income by the weighted average common shares outstanding during the period. Diluted net income per share is determined by dividing net income by the diluted weighted average shares outstanding during the period. Diluted weighted average shares reflect the dilutive effect, if any, of common stock options based on the treasury stock method. The reconciliation of basic and diluted weighted average shares outstanding is as follows:
Years Ended December 31, 2002 2003 2004 (In thousands) Six Months Ended June 30, 2004 2005

Basic weighted average common shares outstanding Weighted average common equivalent shares Diluted weighted average common shares outstanding

5,272 — 5,272

5,530 — 5,530

5,700 73 5,773

5,530 — 5,530

6,226 1,008 7,234

As of December 31, 2002, 2003, 2004 and June 30, 2004, options to purchase approximately 165,000, 123,000, 8,000, 57,000, were excluded from the calculation of diluted weighted average common shares outstanding as their effect was antidilutive.

Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

Recent Accounting Pronouncements On December 16, 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), which is a revision of SFAS 123. SFAS 123(R) supersedes APB 25, and amends SFAS No. 95, Statement of Cash Flows (SFAS 95). Generally, the approach in SFAS 123(R) is similar to the approach described in SFAS 123. However, SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. SFAS 123(R) is effective for the Company beginning January 1, 2006. Upon adoption, Cynosure will apply the provisions of SFAS 123(R) to all unvested awards and to future awards. The adoption of SFAS 123(R)’s fair value method may have a significant impact on the Cynosure’s result of operations, although it will have no impact on Cynosure’s overall financial position. The impact of adoption of SFAS 123(R) cannot be predicted at this time because it will depend on levels of share-based F-14

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) payments granted in the future. Had Cynosure adopted SFAS 123(R) in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net income in Note 2 to the consolidated financial statements. In November 2004, the FASB issued Statement of SFAS No. 151, Inventory Costs (SFAS 151), an amendment of APB Opinion No. 43, Chapter 4. The amendments made by SFAS 151 will improve financial reporting by requiring that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) be recognized as current-period charges, and by requiring the allocation of fixed production overheads to inventory based on the normal capacity of production facilities. SFAS 151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 24, 2004. Cynosure is currently evaluating the impact that adoption of SFAS 151 will have on its financial positions and results of operations. 3. Segment and Geographic Information

In accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS 131), operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. Cynosure’s chief decision-maker, as defined under SFAS 131, is a combination of the Chief Executive Officer and the Chief Financial Officer. Cynosure views its operations and manages its business as one segment, aesthetic treatment products and services. The following table represents total revenue by geographic destination:
Year Ended December 31, 2002 2003 2004 (In thousands) Six Months Ended June 30, 2004 2005

North America Europe Asia/Pacific Other

$

9,301 4,278 7,649 1,734 22,962

$

11,375 6,477 6,728 2,545 27,125

$

23,033 9,901 6,515 2,184 41,633

$

10,857 3,986 3,391 937 19,171

$

14,335 5,883 3,381 1,481 25,080

$

$

$

$

$

Net assets by geographic area are as follows:
December 31, 2003 2004 (In thousands) June 30, 2005

North America Europe Asia/ Pacific Eliminations

$

10,200 (1,635 ) (500 ) (777 ) 7,288

$

17,205 (1,116 ) (501 ) (948 ) 14,640

$

18,591 (1,813 ) (428 ) (1,077 ) 15,273

$

$

$

No individual country within Europe or Asia/Pacific represented greater than 10% of total revenue or net assets for any period presented. F-15

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods)

4.

Balance Sheet Accounts Property and Equipment Property and equipment consists of the following at December 31:
Estimated Useful Life (Years) 2003 Cost (In thousands) 2004 Cost

Equipment Furniture and fixtures Computer equipment and software Leasehold improvements Demonstration equipment Revenue sharing lasers Less accumulated depreciation and amortization

3-5 5 3 5 3 3

$

1,592 379 1,014 337 2,821 2,405 8,548 (6,410 )

$

1,706 394 1,608 340 3,725 2,430 10,203 (6,470 )

$

2,138

$

3,733

Depreciation expense relating to property and equipment was $1,305,000, $1,235,000 and $1,275,000 for the years ended December 31, 2002, 2003 and 2004, respectively. As of December 31, 2003 and 2004, the cost of assets recorded under capitalized leases was approximately $679,000 and $872,000, and the related accumulated amortization was approximately $459,000 and $260,000, respectively. Amortization expense of assets recorded under capitalized leases is included as a component of depreciation expense.

Accrued Expenses Accrued expenses consist of the following at December 31:
2003 (In thousands) 2004

Accrued payroll and taxes Accrued employee benefits Accrued warranty costs Stock purchase deposit Accrued commissions Accrued legal fees Accrued other

$

832 319 1,252 — 180 339 726 3,648

$

1,504 380 1,610 413 339 562 1,625 6,433

$

$

5.

Investment in Sona MedSpa

As of December 31, 2003, Cynosure had invested $1,500,000 in the Series A preferred stock of Sona MedSpa International, Inc. (Sona MedSpa), a company that owns and operates hair removal clinics in the United States. Cynosure’s equity investment represented a 40% equity ownership which Cynosure accounted for under the equity method of accounting, which required classification of Sona MedSpa as a related party.

F-16

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) Selected Sona MedSpa financial information as of and for the year ended December 31, 2003 is as follows:
2003 (In thousands)

Assets Liabilities Net revenue Net income

$ $ $ $

3,296 2,284 5,066 1,313

As of December 31, 2003, Cynosure’s carrying value of its investment in Sona MedSpa was $384,000, and is included in long-term investments. The Company recognized $(159,000), $737,000 and $154,000 as the Company’s share of Sona MedSpa’s (loss) income as a component of other (expense) income for the years ended December 31, 2002, 2003 and 2004, respectively. In May 2004, Cynosure sold its 40% equity interest in Sona MedSpa for $3.6 million, resulting in a $3.0 million gain. Of the sales price, $2.6 million was received in cash and $1.0 million was deposited in escrow to be received in three installments over the next 18 months. As of December 31, 2004, $500,000 remained in escrow of which $250,000 was released during the first six months of 2005 and the remainder will be released to Cynosure in the second six months of 2005. In connection with the original investment in Sona MedSpa, Cynosure also entered into a revenue sharing arrangement with Sona MedSpa whereby Cynosure provided lasers to Sona MedSpa and, in return, received a percentage of the revenues related to the aesthetic procedures performed at Sona MedSpa locations. Simultaneous with the sale of Cynosure’s equity investment, Cynosure sold certain lasers previously placed in Sona MedSpa clinics to Sona MedSpa for $1.2 million, which is included in revenues. Cynosure also entered into an amended laser placement and revenue sharing arrangement with the new owners of Sona MedSpa. Effective May 24, 2004, Cynosure had no ongoing ownership interest in Sona MedSpa and Sona MedSpa was no longer considered a related party. During the years ended December 31, 2002, 2003 and 2004 and the six month periods ended June 30, 2004 and 2005, Cynosure recognized approximately $1,284,000, $1,600,000, $2,402,000, $1,369,000 and $900,000, respectively, under the revenue sharing arrangement of which $1,284,000, $1,600,000 and $1,269,000 are presented as related party revenues in the accompanying consolidated statement of operations for the years ended December 31, 2002 and 2003 and for the period in 2004 prior to the sale of the equity interest. As of December 31, 2003, amounts due to Cynosure from Sona MedSpa were approximately $233,000 which were paid in 2004. During 2000 and 2001, Cynosure agreed to guarantee certain Sona MedSpa lease commitments (see Note 12).

6.

Related Party Transactions

Purchases of inventory from El.En. during the years ended December 31, 2002, 2003 and 2004 and the six months ended June 30, 2004 and 2005 were approximately $1,043,000, $1,648,000, $2,142,000, $1,201,000 and $745,000, respectively. Cynosure has a note payable totaling $303,437, including accrued interest, at December 31, 2004 to El.En., which is payable on demand. Interest accrues on the note payable at a rate of 5% per annum. Amounts due from El.En. as of December 31, 2003 and June 30, 2005 are $29,000 and $49,000, respectively. There were no amounts due from El.En. as of December 31, 2004. During 2003, Cynosure made an investment in a private company that represents an approximate 2% ownership interest in the entity. During the years ended December 31, 2003 and 2004, Cynosure F-17

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) recognized revenue of $87,000 and $251,000, respectively, related to laser sales to this entity. Cynosure’s investment of $257,000 is carried at the lower of cost or fair value.

7.

Short-term Loan

Cynosure’s short-term loan consists of a line of credit with a bank which expires on May 11, 2006 and bears interest at 5.11%. There are no amounts available for borrowing at December 31, 2004 and the note is due in full on May 11, 2006.

8.

Common Stock

Of the 15,000,000 authorized shares of common stock, 14,600,000 are designated voting common stock and 400,000 are designated non-voting common stock.

Common Stock Reserved Cynosure has reserved 2,250,000 and 1,850,000 shares of common stock for issuance upon the exercise of stock options granted or available for grant under the 1992 Stock Option Plan and the 2004 Stock Option Plan, respectively (see Note 9). There were no outstanding shares of non-voting common stock as of December 31, 2002, 2003 and 2004 and June 30, 2005.

Issuance of Common Stock During May 2002, Cynosure signed an agreement with El.En. to sell 3,327,960 shares of its common stock for a total purchase price calculated via a formula based on 2001 and 2002 revenue and operating results, as defined. An initial payment of $9,828,000 (net of issuance costs) was received in May 2002. In May 2003, Cynosure completed its sale to El.En. The total purchase price for the 60% ownership share was $11,290,000 (net of issuance costs). The final payment of $1,462,000 (net of issuance costs) was received in May 2003 and, in turn, was partially used to purchase the ownership interests of several minority owners. The payment of $1,317,000 to minority stockholders is reflected as an increase in the cost of treasury stock in the statements of stockholders’ equity. During October and November 2004, Cynosure entered into Stock Subscription Agreements (the Agreements) with certain accredited investors for the purchase of 575,000 shares of Cynosure common stock at $3.00 per share. The purchase price was payable in two installments, 50% upon execution of the subscription agreement and 50% due April 1, 2005. Certain of the subscription agreements required a single payment due April 15, 2005. The first installment payment of $413,000 is recorded as a stock purchase deposit included as a component of accrued expenses in the accompanying balance sheet. The common stock sold under the Agreements was issued in April 2005. In connection with the signing of the stock subscription agreements, Cynosure entered into a Stock Purchase Agreement with El.En. to purchase 575,000 shares of Cynosure common stock at $3.00 per share to be delivered to the accredited investors pursuant to the subscription agreements. The payment terms of the Stock Purchase Agreement mirror those of the subscription agreement. The first installment payment of $413,000 is recorded as a stock purchase deposit in the other non-current assets section of the balance sheet. The common stock was purchased in April 2005 and recorded as a reduction of additional paid-in capital. F-18

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods)

9.

Stock-Based Compensation 1992 Stock Option Plan

In February 1992, the Board of Directors adopted, and the stockholders approved, the 1992 Stock Option Plan (the 1992 Plan). The 1992 Plan provided for the grant of incentive stock options (ISOs), as well as nonstatutory options. The Board of Directors administered the 1992 Plan and had sole discretion to grant options to purchase shares of the Company’s common stock. The Board of Directors determined the term of each option, option price, number of shares for which each option was granted, whether restrictions would be imposed on the shares subject to options and the rate at which each option was exercisable. The exercise price for options granted was determined by the Board of Directors, except that for ISOs, the exercise price could not be less than the fair market value per share of the underlying common stock on the date granted (110% of fair market value for ISOs granted to holders of more than 10% of the voting stock of the Cynosure). The term of the options were set forth in the applicable option agreements, except that in the case of ISOs, the option term was not to exceed ten years (five years for ISOs granted to holders of more than 10% of voting stock of the Cynosure). A maximum of 2,250,000 shares of common stock were reserved for issuance in accordance with the 1992 Plan. Options granted under the 1992 Plan vested either (i) over a 50-month period at the rate of 24% after the first year and 2% each month thereafter until fully vested or (ii) after eight years with acceleration of vesting if certain performance measures were met, as defined in the agreements. All options granted under the 1992 Plan to date were issued at fair market value as determined by the Board of Directors. The 1992 Plan expired on the tenth anniversary of the date of its adoption by the Board of Directors in February 2002. Options outstanding as of this date continue to have force and effect in accordance with the provisions of the instruments evidencing such options.

2003 Stock Compensation Plan In July 2003, the Board of Directors approved the 2003 Stock Compensation Plan (the 2003 Plan), which granted nine Cynosure executives the right to purchase up to a maximum of 550,000 shares of Cynosure’s common stock at an exercise price of $2.00 per share. The deemed fair value of Cynosure’s common stock for accounting purposes on the date of grant was $2.25. As a result, Cynosure recorded compensation expense for the difference between the purchase price and the deemed fair value over the period the rights vest. The number of shares each executive can purchase was determined by a service ratio, which is determined by the number of whole or partial months an executive is employed by Cynosure relative to a stated service period, determined on an individual participant basis. Once the right to purchase the shares is vested, the executives are obligated to purchase shares on the earlier of (1) an acquisition of Cynosure, (2) 180 days following an initial public offering of Cynosure’s common stock or (3) December 31, 2004. If neither of the first two events occurred, Cynosure or El.En. had the discretionary right to purchase the rights at the then-fair value of the common stock determined by a formula dependent upon operating results. Furthermore, one executive had a put right requiring either Cynosure or El.En. to purchase the common stock at a price determined by the formula previously noted. During 2003, Cynosure recorded $86,000 of compensation expense associated with the 2003 Plan. For the year ended December 31, 2004, Cynosure recorded approximately $122,000 of cash and $182,000 of non-cash stock-based compensation expense, respectively, associated with the 2003 Plan. A portion of the 2004 stock-based compensation expense resulted from Cynosure issuing 75,855 shares of common stock to certain executives, in lieu of acquiring stock purchase rights from the executives, who were active employees of Cynosure as of October 1, 2004, effectively terminating the 2003 Plan. All vested rights for executives who were no longer employees of Cynosure as of October 1, 2004 expired unexercised. F-19

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods)

2004 Stock Option Plan In October 2004, the Board of Directors adopted and the stockholders approved the 2004 Stock Option Plan (the 2004 Plan). The 2004 Plan provided for the grant of ISOs, as well as nonstatutory options. The Board of Directors administers the 2004 Plan and had sole discretion to grant options to purchase shares of Cynosure’s common stock. The Board of Directors determines the term of each option, option price, number of shares for which each option is granted, whether restrictions would be imposed on the shares subject to options and the rate at which each option is exercisable. The exercise price for options granted is determined by the Board of Directors, except that for ISOs, the exercise price could not be less than the fair market value per share of the underlying common stock on the date granted (110% of fair market value for ISOs granted to holders of more than 10% of the voting stock of Cynosure). The term of the options is set forth in the applicable option agreement, except that in the case of ISOs, the option term cannot exceed ten years. As of December 31, 2004, a maximum of 1,500,000 shares of common stock are reserved for issuance in accordance with the 2004 Plan. Options granted under the Plan vested either (i) over a 48-month period at the rate of 25% after the first year and 6.25% each quarter thereafter until fully vested or (ii) over a vesting period determined by the Board of Directors. As of December 31, 2004, there are 77,541 shares available for future grant under the 2004 Plan. In May 2005, the Board of Directors authorized an additional 350,000 shares of common stock in accordance with the 2004 Plan and granted 368,200 options to employees under the 2004 Plan. At the time of grant, these options were believed to have been issued at fair market value. Subsequently, the Board of Directors determined these options were issued below the deemed fair market value for accounting purposes and recorded approximately $1.7 million of deferred stock-based compensation expense which is being amortized over the vesting period of the options. During the six months ended June 30, 2005, Cynosure amortized approximately $53,000 related to this deferred stock-based compensation expense. In May 2005, Cynosure granted approximately 18,000 options to non-employees under the 2004 Plan. In connection with this grant, Cynosure recorded $205,000 of stock-based compensation expense. F-20

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) Stock option activity under the 1992 Plan and the 2004 Plan is as follows:
Number of Options Exercise Price Range WeightedAverage Exercise Price

Outstanding, December 31, 2001 967,436 Exercised (720,981 ) Forfeited (81,017 ) Outstanding, December 31, 2002 165,438 Forfeited (42,884 ) Outstanding, December 31, 2003 Granted Forfeited Outstanding, December 31, 2004 1,480,258 Granted 386,200 Forfeited (3,816 ) Outstanding, June 30, 2005 1,862,642 Exercisable, June 30, 2005 333,807 Exercisable, December 31, 2004 317,973 Exercisable, December 31, 2003 70,317 Exercisable, December 31, 2002 65,419 $ $ $ $ $ 122,554 1,422,459 (64,755 ) $

1.00 $4.00 1.00 3.50 3.00 4.00 3.00 4.00 3.25 3.50 3.00 4.00 3.00 3.00 3.50 3.00 4.00 3.00 4.50 3.25 3.50 3.00 $4.50 3.00 $4.50 3.00 $4.00 3.00 $4.00 3.00 $4.00

$

2.58 2.32 3.40 3.33 3.29 3.34 3.00 3.29 3.02 4.46 3.41

$

3.31

$

3.14

$

3.07

$

3.41

$

3.41

The following table summarizes information about stock options outstanding:

June 30, 2005
WeightedAverage Remaining Contractual Life

Exercise Price

Options Outstanding

Options Exercisable

$3.00

1,433,743

9.27

263,743

$3.25 $3.50 $4.00 $4.50

37,031 7,438 8,230 376,200 1,862,642

5.28 6.10 4.00 9.88 9.28

36,987 6,847 8,230 18,000 333,807

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods)

December 31, 2004
WeightedAverage Remaining Contractual Life

Exercise Price

Options Outstanding

Options Exercisable

$3.00 $3.25 $3.50 $4.00

1,423,743 38,447 9,838 8,230 1,480,258

9.77 5.76 6.67 4.54 9.61

263,743 37,581 8,419 8,230 317,973

10.

Income Taxes

As of December 31, 2004, Cynosure had federal and state tax credits of $420,000 and $500,000, respectively, to offset future tax liability, and state net operating losses of approximately $3,094,000 to offset future taxable income. If not utilized, these credit carryforwards will expire at various dates through 2019, and the losses will expire through 2024. Cynosure also had foreign net operating losses of approximately $2,647,000 available to reduce future foreign income taxes which will expire at various times through 2019. Foreign net operating losses in Germany do not expire. Cynosure has a net deferred tax asset before consideration of valuation allowances arising principally from domestic and foreign net operating loss and credit carryforwards, accruals and other reserves. Based upon the weight of the available evidence, it is more likely than not that all of the deferred tax assets will not be realized and, accordingly, the deferred tax assets have been fully reserved. Significant components of Cynosure’s net deferred tax assets as of December 31, 2003 and 2004 are as follows:
2003 (In thousands) 2004

Deferred tax assets (liabilities): Domestic net operating loss and tax credit carryforwards Foreign net operating loss carryforwards Reserves and allowances Depreciation Sona MedSpa equity loss Other temporary differences Valuation allowance for deferred tax assets Net deferred tax assets

$

1,757 1,098 1,157 120 422 138 (4,692 ) —

$

1,024 1,046 1,438 (314 ) — 187 (3,381 ) —

$

$

The net change in valuation allowance is $1,311,000 from the prior year primarily due to the utilization of net operating loss carryforwards. F-22

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) (Loss) income before income tax (benefit) provision and minority interest consists of the following:
2002 2003 2004

Domestic Foreign Total

$ $

(1,808 ) (290 ) (2,098 )

$ $

144 (509 ) (365 )

$ $

4,124 960 5,084

In 2004, Cynosure applied for a $515,000 refund claim, of which $476,000 was carried back to its 1997 U.S. income tax return filings and the remainder carried back to its 1998 U.S. income tax return filings. This amount was received in 2004 and was recorded as a net income tax benefit in the 2004 statement of operations. The (benefit) provision for income taxes consists of:
2002 2003 (In thousands) 2004

Current: Federal Foreign State Total current Deferred: Federal Foreign State Total deferred

$

(401 ) 99 1 (301 ) — — — —

$

— 72 — 72 — — — —

$

(491 ) 215 — (276 ) — — — —

$

(301 )

$

72

$

(276 )

A reconciliation of the federal statutory rate to Cynosure’s effective tax rate is as follows for the years ended December 31:
2002 2003 2004

Income tax (benefit) provision at federal statutory rate: Increase (decrease) in tax resulting from — Nondeductible expenses Change in valuation allowance, net operating loss utilization Other Effective income tax rate

) (35.0 % 1.2 18.6 0.9 ) (14.3 %

) (35.0 % 7.9 46.5 0.3 19.7 %

35.0 % 1.0 (40.8 ) (0.6 ) (5.4 )%

11.

401(k) Plan

Cynosure sponsors the Cynosure 401(k) defined contribution plan. Participation in the plan is available to all employees of Cynosure who meet certain eligibility requirements. The Plan is qualified under Section 401(k) of the Internal Revenue Code, and is subject to contribution limitations as set F-23

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods) annually by the Internal Revenue Service. Employer matching contributions are at Cynosure’s discretion. There were no employer matches for the years ended December 31, 2002, 2003 or 2004.

12.

Commitments and Contingencies Lease Commitments

Cynosure leases its U.S. operating facility and certain foreign facilities under noncancelable operating lease agreements, which expire July 31, 2005. Rent expense for the years ended December 31, 2002, 2003 and 2004 was approximately $678,000, $720,000 and $789,000, respectively. On January 31, 2005, Cynosure entered into a new seven-year noncancelable operating lease agreement for 55,817 square feet, which expires March 31, 2012. Cynosure relocated to the new facility in the third quarter of 2005. The facility houses Cynosure’s new corporate headquarters and operating facility. Commitments under Cynosure’s lease arrangements are as follows, in thousands:
Operating Leases Capital Leases

2005 2006 2007 2008 2009 Thereafter Total minimum lease payments Less amount representing interest Present value of obligations under capital leases Current portion of capital lease obligations Capital lease obligations, net of current portion

$

789 824 791 767 795 2,114 6,080

$

180 180 155 145 38 — 698 (104 ) 594 118

$

$

476

Lease Guarantees During 2000 and 2001, Cynosure guaranteed the lease obligations for two locations that are operated by Sona MedSpa, and will be obligated to pay these leases if Sona MedSpa cannot make the required lease payments. Minimum lease payments for the next five years and thereafter are as follows, in thousands: 2005 2006 2007 2008 2009 Thereafter $ 90 92 93 54 42 61 432

$

F-24

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CYNOSURE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (Including Data Applicable to Unaudited Periods)

Litigation From time to time, Cynosure is subject to various claims, lawsuits, disputes with third parties, investigations and pending actions involving various allegations against Cynosure incident to the operation of its business, principally product liability. Each of these matters is subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably to Cynosure. Cynosure establishes accruals for losses that are deemed to be probable and subject to reasonable estimate. Cynosure management believes in these matters and other matters that the ultimate outcome of these matters and any liabilities in excess of amounts provided will not have a material adverse impact on Cynosure’s consolidated financial position or on its future business operations.

13.

Subsequent Event (unaudited)

On August 8, 2005, Cynosure’s Board of Directors approved a restated certificate of incorporation. The restated certificate of incorporation, which remains subject to stockholder approval, will become effective upon the effective time of the registration statement relating to Cynosure’s initial public offering and will, among other things, authorize 61,500,000 shares of Cynosure’s class A common stock, 8,500,000 shares of class B common stock and 5,000,000 shares of preferred stock, each with a par value of $0.001 per share, and will reclassify each outstanding share of common stock into one share of class B common stock. In addition, upon effectiveness of the restated certificate of incorporation, outstanding options to purchase shares of Cynosure’s common stock will automatically be converted into an option to purchase an equal number of shares of class B common stock at the same exercise price per share. The impact of the restated certificate of incorporation has not been retroactively reflected in the financial statements. In August 2005, Cynosure’s Board of Directors approved the 2005 Stock Incentive Plan (the 2005 Plan). The 2005 Plan, which remains subject to stockholder approval, is expected to become effective on the date that the registration statement relating to the Company’s initial public offering is declared effective. Under the 2005 Plan, 541,342 shares of common stock will be authorized for issuance, subject to annual increases beginning in 2006 in accordance with the terms of the 2005 Incentive Plan. Upon the effectiveness of the 2005 Plan, the Company will grant no further stock options or other awards under the Company’s 2004 Plan. F-25

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Shares Class A Common Stock

PROSPECTUS , 2005

Citigroup
UBS Investment Bank Jefferies & Company, Inc. Needham & Company, LLC

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PART II INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.

Other Expenses of Issuance and Distribution

The following table indicates the expenses to be incurred in connection with the offering described in this Registration Statement, other than underwriting discounts and commissions, all of which will be paid by the Registrant. All amounts are estimated except the Securities and Exchange Commission registration fee and the National Association of Securities Dealers Inc. filing fee.
Amount

Securities and Exchange Commission registration fee National Association of Securities Dealers, Inc. fee Nasdaq Stock Market listing fee Accountants’ fees and expenses Legal fees and expenses Blue Sky fees and expenses Transfer Agent’s fees and expenses Printing and engraving expenses Miscellaneous Total Expenses

$

8,828 8,000 100,000 * * * * * * *

$

* To be filed by amendment.

Item 14.

Indemnification of Directors and Officers

Section 102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. The Registrant’s certificate of incorporation provides that no director of the Registrant shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as director, notwithstanding any provision of law imposing such liability, except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty. Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he is or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. II-1

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Our restated certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of Cynosure) by reason of the fact that he or she is or was, or has agreed to become, a director or officer of Cynosure, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, (all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity or in any other capacity while serving as a director, officer, partner, employee or trustee, against all expenses (including attorneys’ fees), liability, loss, judgments, fines, ERISA taxes or penalties and amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Our certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to or threatened to be made a party to any threatened, pending or completed action or suit by or in the right of Cynosure to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer of Cynosure, or is or was serving, or has agreed to serve, at our request, as a director, officer, partner, employee or trustee of or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, or in any other capacity while serving as a director, officer, partner, employee or trustee, against all expenses (including attorneys’ fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of Cynosure, except that no indemnification shall be made with respect to any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to us, unless, and only to the extent, that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expense (including attorney’s fees) which the Court of Chancery of Delaware or such other court shall deem proper. Notwithstanding the foregoing, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding, Indemnitee shall be indemnified by us against all expenses (including attorneys’ fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances. We maintain a general liability insurance policy which covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers. In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us with the meaning of the Securities Act of 1933, as amended, against certain liabilities.

Item 15.

Recent Sales of Unregistered Securities

Set forth below is information regarding shares of common stock issued, and options granted, by us within the past three years. Also included is the consideration, if any, received by us for such shares and II-2

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options and information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed. (a) Issuances of Capital Stock 1. In May 2002, we issued an aggregate of 3,327,960 shares of class B common stock at an approximate price per share of $3.40 to El.En. 2. In November 2003, we issued an aggregate of 3,499 shares of class B common stock to El.En. for no additional consideration as a final adjustment of the May 2002 stock purchase transaction. 3. From September through November 2004, we issued an aggregate of 789,947 shares of class B common stock at an approximate price per share of $2.67 to individual investors, including certain of our executive officers and El.En. The shares issued to our executive officers were issued in consideration of the performance of services, for which we recorded compensation expense in the amount of $3.00 per share, and were not issued for cash. 4. In April 2005, we issued an aggregate of 495,000 shares of our class B common stock at a price per share of $3.00 to individual investors, including certain of our executive officers. No underwriters were involved in the foregoing sales of securities. The securities described in this paragraph (a) of Item 15 were issued to a combination of foreign and U.S. investors in reliance upon the exemption from the registration requirements of the Securities Act, as set forth in Section 4(2) under the Securities Act and Rule 506 of Regulation D promulgated thereunder relative to sales by an issuer not involving any public offering, to the extent an exemption from such registration was required. (b) Stock Option Grants From the period beginning August 10, 2002 through August 10, 2005, we have granted stock options under our stock option plans for an aggregate of 1,808,659 shares of class B common stock (net of exercises, expirations and cancellations) at exercise prices of $3.00 to $4.50 per share. During the same period, no options to purchase stock were exercised. The issuances of stock options and the shares of common stock issuable upon the exercise of the options as described in this paragraph (b) of Item 15 were issued pursuant to written compensatory plans or arrangements with our employees, directors and consultants, in reliance on the exemption provided by Section 3(b) of the Securities Act and Rule 701 promulgated thereunder. All recipients either received adequate information about us or had access, through employment or other relationships, to such information.

Item 16.

Exhibits

The exhibits to the registration statement are listed in the Exhibit Index to this registration statement and are incorporated by reference herein.

Item 17.

Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the II-3

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opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective. (ii) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4

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SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Westford, Commonwealth of Massachusetts on the 11th day of August, 2005.

CYNOSURE, INC.

By: /s/ Michael R. Davin Michael R. Davin President, Chief Executive Officer and Chairman of the Board of Directors POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael R. Davin and Timothy W. Baker, and each of them, his/her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him/her and in his/her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any subsequent registration statements pursuant to Rule 462 of the Securities Act and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact or his/her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date

/s/ MICHAEL R. DAVIN Michael R. Davin /s/ TIMOTHY W. BAKER Timothy W. Baker

President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Director

August 11, 2005

August 11, 2005

/s/ ANDREA CANGIOLI Andrea Cangioli /s/ GEORGE CHO George Cho /s/ GABRIELE CLEMENTI Gabriele Clementi /s/ LEONARDO MASOTTI Leonardo Masotti II-5

August 11, 2005

Director

August 11, 2005

Director

August 11, 2005

Director

August 11, 2005

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EXHIBIT INDEX
Exhibit Number Description

1.1 * 3.1 3.2 3.3 3.4 4.1 * 5.1 * 10.1 10.2 10.3 10.4 10.5 10.6 10.7† 10.8† 10.9 10.10 21.1 23.1 23.2 * 24.1 * To be filed by amendment.

Form of Underwriting Agreement Certificate of Incorporation of the Registrant, as amended Form of Restated Certificate of Incorporation of the Registrant to be effective upon closing of the offering Bylaws of the Registrant Form of Amended and Restated Bylaws of the Registrant, to be effective upon the closing of the offering Specimen certificate evidencing shares of class A common stock Opinion of Wilmer Cutler Pickering Hale and Dorr LLP 1992 Stock Option Plan 2004 Stock Option Plan, as amended 2005 Stock Incentive Plan Employment Agreement, dated September 2003, between the Registrant and Michael Davin Employment Agreement, dated January 1, 2003, between the Registrant and George Cho Employment Agreement, dated September 2003, between the Registrant and Douglas Delaney Distribution Agreement, effective as of January 1, 2005, between the Registrant and El.En. S.p.A. Distribution Agreement, effective as of January 1, 2005, between the Registrant and El.En. S.p.A. Promissory Note, dated October 1, 2004, between the Registrant and El.En. S.p.A. Lease, dated January 31, 2005, between Glenborough Fund V, Limited Partnership and the Registrant Subsidiaries of the Registrant Consent of Ernst & Young LLP Consent of Wilmer Cutler Pickering Hale and Dorr LLP (included in Exhibit 5.1) Powers of Attorney (included on signature page)

† Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission.

EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF CYNOSURE, INC. FIRST. The name of the Corporation is: Cynosure, Inc. SECOND. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The nature of the business or purposes to be conducted or promoted by the Corporation is as follows: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares of stock which the Corporation shall have authority to issue is 50,000 shares of Common Stock, $.01 par value per share. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of Delaware. FIFTH. The name and mailing address of the sole incorporator are as follows:
NAME --------------------------Dr. Horace W. Furumoto MAILING ADDRESS ---------------------14 Woodridge Road Wellesley, MA 02181

SIXTH. In furtherance of and not in limitation of powers conferred by statute, it is further provided: 1. Election of directors need not be by written ballot. 2. The Board of Directors is expressly authorized to adopt, amend or repeal the By-Laws of the Corporation. SEVENTH. Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them -1-

and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. EIGHTH. Except to the extent that the General Corporation Law of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment. NINTH. 1. Actions, Suits and Proceedings Other than by or in the Right of the Corporation. The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' -2-

fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Not-withstanding anything to the contrary in this Article, except as set forth in Section 6 below, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation. 2. Actions or Suits by or in the Right of the Corporation. The Corporation shall indemnify any Indemnitee who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses (including attorneys' fees) which the Court of Chancery of Delaware or such other court shall deem proper. 3. Indemnification for Expenses of Successful Party. Notwithstanding the other provisions of this Article, to the -3-

extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, he shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto. 4. Notification and Defense of Claim. As a condition precedent to his right. to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any action suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Section 4. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article. The Corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. -4-

5. Advance of Expenses. Subject to the provisions of Section 6 below, in the event that the Corporation does not assume the defense pursuant to Section 4 of this Article of any action, suit, proceeding or investigation of which the Corporation receives notice under this Article, any expenses (including attorneys' fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter, provided, however, that the payment of such expenses incurred by an Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of such person to make such repayment. 6. Procedure for Indemnification. In order to obtain indemnification or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article the Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the corporation determines, by clear and convincing evidence, within such 60-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance by (a) a majority vote of a quorum of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question ("disinterested directors"), (b) if no such quorum is obtainable, a majority vote of a committee of two or more disinterested directors, (c) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action, suit or proceeding in question, (d) independent legal counsel (who may be regular legal counsel to the Corporation), or (e) a court of competent jurisdiction. 7. Remedies. The right to indemnification or advances as granted by this Article shall be enforceable by the Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or if no disposition thereof is made within the 60-day period referred to above in Section 6. Unless -5-

otherwise provided by law, the burden of proving that the Indemnitee is not entitled to indemnification or advancement of expenses under this Article shall be on the Corporation. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. The indemnitee's expenses (including attorneys' fees) incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation. 8. Subsequent Amendment. No amendment, termination or repeal of this Article or of the relevant provisions of the General Corporation Law of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal. 9. Other Rights. The indemnification and advancement of expenses provided by this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators Of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. In addition, the Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article. 10. Partial Indemnification. If an Indemnitee is entitled under any provision of this Article to indemnification by the Corporation for some or a portion of the expenses (including 'attorneys' fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in -6-

connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys' fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled. 11. Insurance. The Corporation may purchase and maintain insurance, at its expense,to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of Delaware. 12. Merger or Consolidation. If the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation. 13. Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. 14. Definitions. Terms used herein and defined in Section 145(h) and Section 145(i) of the General Corporation Law of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i). 15. Subsequent Legislation. If the General Corporation Law of Delaware is amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the Corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of Delaware, as so amended. TENTH. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by -7-

statute and this Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation. ELEVENTH. Section 203 of the General Corporation Law of Delaware, as it may be amended from time to time, shall apply to the Corporation. EXECUTED at Wayland, MA, on July 5, 1991.
/s/ Horace W. Furumoto ---------------------------Incorporator

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CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CYNOSURE, INC. (Pursuant to Section 242 of the General Corporation Law) Cynosure, Inc., a corporation organized and existing under and by virtue Of the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies as follows: FIRST: That the Board of Directors of the Corporation, acting pursuant to section 242 of the General Corporation Law of the State of Delaware, pursuant to written action duly taken, duly adopted the following resolutions amending the Corporation's Certificate of Incorporation and recommended that such amendments be adopted by the stockholders of the Corporation:
RESOLVED: That Article FOURTH of the Certificate of Incorporation be and hereby is deleted in its entirety and the following inserted in lieu thereof: "FOURTH. The total number of shares of stock which the Corporation shall have the authority to issue is 5,000,000 shares of Common Stock, $.01 par value per share."

SECOND: That all of the stockholders of the Corporation have duly consented to the adoption of the foregoing resolution and the amendment contained therein, and that the aforesaid amendment was duly adopted in accordance with the applicable -9-

provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware. ******** IN WITNESS WHEREOF, Cynosure, Inc. has caused this certificate to be signed by its President and attested by its Secretary this 10 day of February, 1992, CYNOSURE, INC.
By: /s/ Horace W. Furumoto ----------------------President ATTEST: /s/ Horace W. Furumoto ---------------------Secretary

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CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CYNOSURE, INC. CYNOSURE, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify as follows: FIRST. Pursuant to written action of the Board of Directors of the Corporation, a resolution was duly adopted, pursuant to Sections 141 and 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the certificate of Incorporation of the corporation and declaring said amendment to be advisable. The stockholders of the Corporation duly Approved said proposed amendment by written action in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware; and written notice of such consent has been given to all Stockholders who have not consented in writing to said amendment. The resolution setting forth the amendment is as follows: "RESOLVED" That Article FOURTH of the Certificate of Incorporation of the Corporation be and hereby is deleted and the following Article FOURTH is inserted in lieu thereof: FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is Seven Million(7,000,000) shares of Common Stock, $.01 par value per share, of which Six Million Six Hundred Thousand (6,600,000) shares are hereby designated Voting Common Stock and Four Hundred Thousand (400,000) shares are hereby designated Non-Voting Common Stock. All shares of Common Stock shall be considered to be voting common Stock unless the certificate representing such shares specifically states that such shares are shares of Non-Voting Common Stock. -11-

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of common Stock of the Corporation. A. VOTING COMMON STOCK. The holders of the Voting Common Stock (the "Common Stock") are entitled to one vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. B. NON-VOTING COMMON STOCK. 1. No Voting Rights. The holders of the Non-Voting Common Stock are not entitled to vote on any matter submitted for action to the stockholders of the Company until such time as the Non-Voting Common Stock is converted into Common Stock pursuant to Section 3 of this Part B. Except for the voting and conversion rights of the Non-Voting Common Stock the rights and privileges of the holders of Voting Common stock and Non-Voting Common Stock shall be identical in all respects. 2. Conversion. (a) Automatic Conversion. Each outstanding shares of Non-Voting Stock shall automatically be converted into one share of Voting Common Stock upon the consummation of an underwritten initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, for the offer and sale by the Company of Common Stock to the public at a price per share equal to not less than two times the then conversion price of the Corporation's 12% Convertible Subordinated Notes due 1998 resulting in gross offering proceeds of not less than $5,000,000 (the "Mandatory Conversion Date"). (b) Optional Conversion. The transferee of any shares of Non-Voting Common Stock whether acquired from the original holder of such shares or other- wise may, at any time, elect to convert such Non-Voting Common Stock into Voting Common Stock by surrendering their certificate or certificates for the Non-Voting Common Stock to the Company. Upon receipt of such stock certificate or certificates such shares shall be deemed to be converted into shares of Voting Common Stock. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. As soon as practicable thereafter and the surrender of the certificate or certificates for Non-Voting Common Stock, the Corporation shall cause to be issued and delivered to such holder, or on his or its written order, a certificate or certificates for the number of full shares of Voting Common Stock issuable on such -12-

conversion in accordance with the provisions hereof and cash as provided in Section 3(e) in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion. (c) Automatic Conversion Procedures. All holders of record of shares of Non-Voting Stock will be given written notice of the Mandatory Conversion Date and the place designated for mandatory conversion of all such shares of Non-Voting Common Stock pursuant to this Section 2. such notice shall be sent by first class, registered or overnight mail, postage prepaid, to each record holder of Non-Voting Common Stock at such holder's address last shown on the records of the transfer agent for the Non-Voting Common Stock (or the records of the Corporation, if it serves as its own transfer agent). Upon receipt of such notice, each holder of shares of Non-Voting Common Stock shall surrender his, her or its certificate or certificates for all such shares to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section 2. On the Mandatory Conversion Date, all rights with respect to the Non-Voting Common Stock so converted, including the rights, if any, to receive notices and vote, will terminate, except only the rights of the holders thereof, upon surrender of their certificate or certificates therefor, to receive certificate for the number of shares of Common Stock into which such Non-Voting Common Stock has been converted, and payment of any declared or accrued but unpaid dividends thereon (all of which shall be deemed to be declared by the Board of Directors on the Mandatory Conversion Date). If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. As soon as practicable after the Mandatory Conversion Date and the surrender of the certificate or certificates for Non-Voting Common Stock, the Corporation shall cause to be issued and delivered to each holder, or on his or its written order, a certificate or certificates for the number of full shares of Voting Common Stock issuable on such conversion in accordance with the provisions hereof and cash as provided in Section 3(e) in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion. (d) Retirement of Non-Voting Common Stock. All certificates evidencing shares of Non-Voting Common Stock which are required to be surrendered for conversion in accordance with the provisions hereof shall, from and after the Mandatory Conversion Date, be deemed to have been retired and cancelled and the shares of Non-Voting Common Stock represented thereby converted into Common Stock for all purposes, notwithstanding the failure of the holder or holders thereof to surrender such certificates on or prior to such date. The Board of Directors of the Corporation may thereafter take such appropriate action -13-

(without the need for stockholder action) as may be necessary to reduce or eliminate the authorized Non-Voting Common Stock accordingly. (e) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Non-Voting Common Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then fair market value per share of Common Stock (determined by the Board of Directors in good faith). (f) Reservation of Common Stock. The Corporation shall at all times when the Non-Voting Common Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Non-Voting Common Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Non-Voting Common Stock. (g) Dividends and Distributions. in the event the Corporation at any time, or from time to time after the Original Issue Data shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock or other securities of the Corporation, then and in each such event provision shall be made so that the holders of Non-Voting Common Stock shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had the Non-Voting Common Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the Non-Voting Common Stock. (h) Adjustment for Reclassification, Exchange, or Substitution. If the Common Stock issuable upon the conversion of the Non-Voting Common Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of Non-Voting Common Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, by holders of the number of shares of Common Stock into which such shares of Non-Voting Common Stock might have been converted immediately prior to such reorganization, -14-

reclassification, or change, all subject to further adjustment as provided herein. (i) Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation or the sale of all or substantially all of the assets of the Corporation to another corporation, each share of Non-Voting Common Stock shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Non-Voting Common Stock would have been entitled upon such consolidation, merger or sale; and in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interest thereafter of the holders of the Non-Voting Common Stock, to the end that the provisions set forth in this Section 2 shall thereafter be applicable, as nearly as reasonably nay be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of the Non-Voting Common Stock. C. LIQUIDATION, DISSOLUTION OR WINDING UP. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the holders of shares of Common Stock and Non-Voting Common Stock then outstanding shall be entitled to be paid on a pari passu basis, out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of any other class or series of stock ranking on liquidation junior To the Common Stock and Non-Voting Common Stock by reason of their ownership thereof. (b) If upon any such liquidation, dissolution or winding-up of the corporation the remaining assets and funds legally available for distribution to its stockholders shall be insufficient to permit the payment to all holders of shares of Common Stock and Non-Voting Common stock the full aforesaid amount, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among the holders of the Common Stock and Non-Voting Common Stock in such a manner that the amount to be distributed to each holder of the Common Stock shall equal the amount obtained by multiplying the entire assets and funds of the Corporation legally available for distribution by a fraction, the numerator of which shall be the number of shares of Common Stock held by the holder and the denominator of which shall be the total number of shares of Common Stock then outstanding. (c) The merger or consolidation of the Corporation into or with another corporation or the sale of all or substantially all the assets of the Corporation shall be deemed to be a liquidation, -15-

dissolution or winding up of the Corporation for purposes of this section 2, unless, in either such case, the holders of voting securities of the Corporation immediately prior to such transaction shall, immediately thereafter, hold is a group the right to cast at least a majority of the votes of all holders of voting securities of the resulting, surviving or acquiring corporation or entity on any matters submitted to stockholders generally. The amount deemed distributed to the holders of Non-Voting Common Stock upon any such merger or consolidation shall be the cash or the value of the property, rights or securities distributed to such holders by the acquiring person, firm or other entity. The value of such property, rights or other securities shall be determined in good faith by the Board of Directors of the Corporation. D. DIVIDENDS. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors. SECOND. This Certificate of Amendment of Certificate of Incorporation was duly adopted by written consent of the shareholders of the Corporation in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware, written notice of the amendment set forth in the Certificate of Amendment of Certificate of incorporation has been sent to non-consenting shareholders in accordance with Section 228 of the General Corporation Law of the State of Delaware. *********** -16-

IN WITNESS WHEREOF, the corporation has caused its corporate seal to be affixed hereto and this certificate of Amendment to be signed by its Vice President and attested to by its secretary this 1st day of April, 1993. CYNOSURE, INC.
ATTEST: /s/ Emmanuel Crespo ----------------------------Emmanuel Crespo, Secretary By /s/ Harey Ceceon --------------------------------Harey Ceceon, Vice President

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CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF CYNOSURE, INC. CYNOSURE, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify as follows: FIRST: A resolution was duly adopted by the Board of Directors of the Corporation, pursuant to Sections 141 and 242 of the General Corporation Law of the State of Delaware, setting forth an amendment to the Certificate of Incorporation of the Corporation and declaring said amendment to be advisable. The stockholders of the Corporation duly approved said proposed amendment by written action in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware; and written notice of such consent has been given to all stockholders who have not consented in writing to said amendment. The resolution setting forth the amendment is as follows: "RESOLVED: That the first paragraph of Article FOURTH of the Certificate of Incorporation of the Corporation be and hereby is deleted and the following first paragraph of Article FOURTH is inserted in lieu thereof: FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is Fifteen Million (15,000,000) shares of Common Stock $.01 par value per share, of which Fourteen Million Six Hundred Thousand (14,600,000) shares are hereby designated Voting Common Stock and Four Hundred Thousand (400,000) shares are hereby designated Non-Voting Common Stock. All shares of Common Stock shall be considered to be Voting Common Stock unless the certificate representing such shares specifically states that such shares are shares of Non-Voting Common Stock." -18-

SECOND: This Certificate of Amendment of Certificate of Incorporation was duly adopted by written consent of the stockholders of the Corporation in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware. Written notice of the amendment set forth in the Certificate of Amendment of Certificate of Incorporation has been sent to non-consenting stockholder in accordance with Section 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by its President and attested to by its Secretary this 6th day of January, 1997. CYNOSURE, INC.
By /s/ Horace Furumoto ------------------------Horace Furumoto, President ATTEST: /s/ Emmanuel Crespo --------------------------Emmanuel Crespo, Secretary

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CERTIFICATE FOR RENEWAL AND REVIVAL OF CERTIFICATE OF INCORPORATION Cynosure, Inc., a corporation organized under the laws of Delaware, the Certificate of Incorporation of which was filed in the office of the Secretary of State on the 10th day of July, 1991 and thereafter voided for non-payment of taxes, now desiring to procure a revival of its Certificate of Incorporation, hereby certifies as follows: 1. The name borne by the corporation at the time its Certificate of Incorporation became void is Cynosure, Inc. 2. Its registered office in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle and the name of its registered agent at such address is The Corporation Trust Company. 3. The date when revival of the Certificate of Incorporation of this corporation is to commence is the 29th day of February, 2004, same being prior to the date the Certificate of Incorporation became void. Revival of the Certificate of Incorporation is to be perpetual. 4. This corporation was duly organized under the laws of Delaware and carried on the business authorized by its Certificate of Incorporation until the 1st day of March, 2004, at which time its Certificate of Incorporation became inoperative and void for non-payment of taxes and this Certificate for Renewal and Revival is filed by authority of the duly elected directors of the corporation with the laws of Delaware. -20-

IN WITNESS WHEREOF, said Cynosure, Inc. in compliance with Section 312 of Title 8 of the Delaware Code has caused this Certificate to be signed by Michael Davin, its last and acting President, this 18th day of May, 2004. CYNOSURE, INC.
By /s/ Michael R. Davin ------------------------Name: Michael R. Davin Title: President & CEO

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EXHIBIT 3.2 RESTATED CERTIFICATE OF INCORPORATION OF CYNOSURE, INC. (originally incorporated on July 10, 1991 under the name Cynosure, Inc.) FIRST: The name of the Corporation is Cynosure, Inc. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 75,000,000 shares, consisting of (i) 61,500,000 shares of Class A Common Stock, par value $0.001 per share ("Class A Common Stock"), (ii) 8,500,000 shares of Class B Common Stock, par value $0.001 per share ("Class B Common Stock" and together with the Class A Common Stock, the "Common Stock") and (ii) 5,000,000 shares of Preferred Stock, par value $0.001 per share ("Preferred Stock"). Immediately upon the filing of this Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the "Effective Time"), and without further action by the Corporation or any other person, each share of common stock, par value $0.001 per share, either issued and outstanding or held by the Corporation as treasury stock immediately prior to the Effective Time shall be and hereby is automatically reclassified as and converted into one fully paid and nonassessable share of Class B Common Stock, and upon such filing all rights of the holders of shares of such common stock so converted shall cease, certificates formerly representing shares of such common stock will thereafter be deemed to represent a like number of shares of Class B Common Stock and the person or persons in whose name or names the certificate or certificates representing the shares of Class B Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of shares of Class B Common Stock. The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof, in respect of each class of capital stock of the Corporation. A. COMMON STOCK. 1. General. Except as otherwise set forth below in this Restated Certificate of Incorporation (which, as used herein, shall mean the Restated Certificate of Incorporation of the Corporation, as amended from time to time, including the terms of any Preferred Stock Designation (as defined herein)), the powers, preferences and relative participating, optional or

other special rights, and the qualifications, limitations or restrictions of the Class A Common Stock and Class B Common Stock shall be identical in all respects. 2. Voting. (a) Except as otherwise set forth below in this Restated Certificate of Incorporation or as otherwise required by law, the holders of Common Stock shall vote together, and with the holders of shares of any other class or series of stock entitled to vote with the holders of Common Stock, as a single class, on all matters upon which such holders of Common Stock are entitled to vote under law or under this Restated Certificate of Incorporation. The holders of Class A Common Stock and the holders of Class B Common Stock shall be entitled to one vote for each share of Class A Common Stock and one vote for each share of Class B Common Stock held by such stockholders. Except as otherwise required by law or Article FOURTH, Section A.2(d) below, the holders of Class A Common Stock shall not be entitled to vote on any amendment to this Restated Certificate of Incorporation that alters or changes only the powers, preferences, rights or other terms or number of shares of the Class B Common Stock. Except as otherwise required by law, the holders of Common Stock shall not be entitled to vote on any amendment to this Restated Certificate of Incorporation that alters or changes only the powers, preferences, rights or other terms of one or more series of Preferred Stock outstanding if the holders of such series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Restated Certificate of Incorporation. There shall be no cumulative voting. (b) The number of authorized shares of Class A Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of Delaware. (c) In addition to any other vote required by law or by this Restated Certificate of Incorporation, until the first to occur of (i) the first date that El.En. beneficially owns (as defined herein) less than less than 20% of the aggregate number of shares of Class A Common Stock and Class B Common stock outstanding, (ii) the first date that El.En. beneficially owns less than 50% of the number of shares of Class B Common Stock outstanding, or (iii) the date that all outstanding shares of Class B Common Stock are converted into shares of Class A Common Stock in accordance with Article FOURTH, Section A.5(c) of this Restated Certificate of Incorporation (such earliest date referred to as the "Operative Date" for purposes of this Restated Certificate of Incorporation), the prior affirmative vote of the holders of a majority of the outstanding shares of the Class B Common Stock, voting separately as a class, shall be required to authorize the Corporation to alter, amend, terminate or repeal, or adopt any provision inconsistent with, in each case whether directly or indirectly, or by amendment, merger, consolidation or otherwise, Article FOURTH (other than an increase or decrease of the number of -2-

authorized shares of Class A Common Stock, which shall require only the authorization set forth in Section A.2(b) above) or Article NINTH of this Restated Certificate of Incorporation. (d) In addition to any other vote required by law or by this Restated Certificate of Incorporation, until the Operative Date, the prior affirmative vote of the holders of a majority of the outstanding shares of the Class A Common Stock which are not beneficially owned by any person or entity that beneficially owns 50% or more of the shares of Class B Common Stock outstanding, voting separately as a class, shall be required to authorize the Corporation to alter, amend, terminate or repeal, or adopt any provision inconsistent with, in each case whether directly or indirectly, by amendment, merger, consolidation or otherwise, the powers, preferences, rights or other terms of the Class A Common Stock or the Class B Common Stock in a manner that affects the Class A Common Stock adversely but does not similarly so affect the Class B Common Stock or that affects the Class A Common Stock differently than the effect on the Class B Common Stock. 3. Dividends. Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, the holders of Class A Common Stock and the holders of Class B Common Stock shall be entitled to share equally, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Corporation as may be declared by the Board of Directors from time to time with respect to the Common Stock out of assets or funds of the Corporation legally available therefor. In furtherance of the preceding sentence, in the event that such dividend is paid in the form of shares of Common Stock or rights to acquire Common Stock, the holders of Class A Common Stock and the holders of Class B Common Stock shall receive Class A Common Stock or rights to acquire Class A Common Stock, as the case may be (except as provided in the next sentence). In no event shall the Corporation declare or pay dividends in the form of shares of Class B Common Stock except for the issuance of shares of Class B Common Stock in connection with a stock split or subdivision in accordance with Section A.7 of this Article FOURTH. 4. Liquidation. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, the holders of Class A Common Stock and the holders of Class B Common Stock will be entitled to receive, equally, on a per share basis, all assets of the Corporation available for distribution to its stockholders, subject to any preferential or other rights of any then outstanding Preferred Stock. 5. Conversion. (a) As used in this Restated Certificate of Incorporation, the following terms shall have the following meanings: i. "Class B Stockholder" shall mean a registered holder of shares of Class B Common Stock at the Effective Time. ii. "El.En." shall mean El.En. S.p.A., a corporation organized under the laws of Italy, and all successors to El.En. S.p.A. by way of merger, -3-

consolidation or similar business combination or sale of all or substantially all of its assets. iii. "Transfer" shall mean any sale, assignment, transfer, lease, pledge, conveyance, hypothecation or other transfer or disposition of a share of Class B Common Stock, whether or not for value and whether voluntary or involuntary. iv. All references to "beneficial ownership," "beneficially owns" and "beneficially owned" shall be construed as such terms are defined under Section 13(d) of the Securities Exchange Act of 1934, as amended. (b) Each share of Class B Common Stock shall be convertible into one fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time. (c) All shares of Class B Common Stock shall automatically, without any further action, convert into fully paid and nonassessable shares of Class A Common Stock on a one for one basis upon the affirmative vote at a duly noticed stockholders meeting (or a duly executed written consent) of the holders of a majority of the shares of Class B Common Stock then outstanding in favor of the conversion of all of the shares of Class B Common Stock into shares of Class A Common Stock. (d) Each share of Class B Common Stock shall automatically, without any further action, convert into one fully paid and nonassessable share of Class A Common Stock upon the Transfer by a holder of such share of Class B Common Stock, other than a Transfer to: i. a pledgee of such holder of shares of Class B Common Stock pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee that does not grant to the pledgee the power to vote or direct the vote of the such shares or the power to dispose or direct the disposition of such shares and that does not transfer ownership of such shares; provided, however, that such shares shall remain subject to this Section A.5 of Article FOURTH and, in the event of foreclosure or other similar action by the pledgee, such pledged shares of Class B Common Stock shall automatically, without any further action, convert into shares of Class A Common Stock on a one for one basis; or ii. a nominee of such holder of shares of Class B Common Stock (without any change in beneficial ownership). (e) Each share of Class B Common Stock (i) held of record by a Class B Stockholder who is a natural person, (ii) held by a pledgee of such Class B Stockholder, or (iii) held by a nominee of such Class B Stockholder, shall in each case automatically, without any further action, convert into one fully paid and nonassessable share of Class A Common Stock upon the death of such Class B Stockholder. -4-

(f) In the event of an automatic conversion of any shares of Class B Common Stock into shares of Class A Common Stock (A) pursuant to clause (d) above, such conversion shall be deemed to have been made at the time that the Transfer of such shares occurred, and (B) pursuant to this Section A.5, all rights of the holder of shares of Class B Common Stock arising from such holder's ownership of such shares of Class B Common Stock so converted shall cease, certificates formerly representing shares of Class B Common Stock will thereafter be deemed to represent a like number of shares of Class A Common Stock, and the person or persons in whose name or names the certificate or certificates representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of shares of Class A Common Stock. (g) On the first to occur of (i) the first date that El.En. beneficially owns less than 20% of the aggregate number of shares of Class A Common Stock and Class B Common Stock outstanding or (ii) the first date that El.En. beneficially owns less than 50% of the number of shares of Class B Common Stock outstanding, all shares of Class B Common Stock (including all shares of Class B Common Stock not owned by El.En.) shall automatically, without any further action, convert into fully paid and nonassessable shares of Class A Common Stock on a one for one basis. (h) The Corporation may, from time to time, establish such policies and procedures relating to the conversion of the shares of Class B Common Stock into shares of Class A Common Stock and the general administration of this dual class common stock structure, including the issuance of separate stock certificates with respect thereto, as it may deem necessary or advisable (so long as such policies and procedures do not diminish the rights of the holders of Class B Common Stock hereunder), and may request that holders of shares of Class B Common Stock furnish affidavits or other proof to the Corporation as it deems necessary to verify the ownership of shares of Class B Common Stock, to determine whether a Transfer of shares of Class B Common Stock will result in a conversion to shares of Class A Common Stock, and to otherwise confirm that a conversion to shares of Class A Common Stock has not occurred. A determination by the Secretary of the Corporation that a Transfer of shares of Class B Common Stock results in a conversion to shares of Class A Common Stock shall be conclusive. (i) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class B Common Stock, such number of shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock into shares of Class A Common Stock. (j) If any shares of Class B Common Stock shall be converted pursuant to this Section A.5 or are otherwise acquired by the Corporation, the shares so converted -5-

or acquired shall be retired and such shares of Class B Common Stock shall not be reissued. 6. Mergers, Consolidation or Other Combination Transactions. In the event that the Corporation shall enter into any consolidation, merger, combination or other transaction in which shares of Common Stock are exchanged for or converted into other stock or securities, or the right to receive cash or any other property, then, and in such event, the shares of Class A Common Stock and Class B Common Stock shall be entitled to be exchanged for or converted into the same kind and amount of stock, securities, cash or any other property, as the case may be, into which or for which each share of the other class of Common Stock is exchanged or converted. Notwithstanding the foregoing provisions of this Section A.6, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Restated Certificate of Incorporation, the Corporation may enter into any consolidation, merger, combination or other transaction providing for an exchange or conversion that differs from the terms of this Section A.6 if such consolidation, merger, combination or other transaction is approved by the affirmative votes of a majority of the voting power of the shares of Class A Common Stock and Class B Common Stock outstanding, each voting as a separate class. 7. Splits, Subdivisions or Combinations. If the Corporation in any manner splits, subdivides or combines the shares of Class A Common Stock or Class B Common Stock outstanding, the shares of the other such class of Common Stock outstanding shall be proportionately split, subdivided or combined in the same manner and on the same basis as the shares of the other class of Common Stock outstanding that have been split, subdivided or combined. Notwithstanding the foregoing provisions of this Section A.7, but in addition to any vote of the holders of any class or series of stock of this Corporation required by law or by this Restated Certificate of Incorporation, the Corporation may effect any split, subdivision or combination of the shares of Class A Common Stock or Class B Common Stock outstanding that differs from the terms of this Section A.7 if such split, subdivision or combination is approved by the affirmative votes of a majority of the voting power of the shares of Class A Common Stock and Class B Common Stock outstanding, each voting as a separate class. 8. Restrictions on Issuance. From and after the Effective Time, the Corporation shall not issue or sell, by reclassification or otherwise, any shares of Class B Common Stock or any securities (including, without limitation, any rights, options, warrants or other securities) convertible or exercisable into shares of Class B Common Stock to any person unless such issuance or sale is approved by the affirmative vote of the holders of a majority of the shares of Class B Common Stock outstanding; provided, however, that notwithstanding the foregoing, but subject to Section A.7 of this Article FOURTH, the Corporation may issue shares of Class B Common Stock pursuant to any stock splits, subdivisions or combinations with respect to the Class B Common Stock without such vote of the holders of Class B Common Stock. B. PREFERRED STOCK. Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as -6-

hereinafter provided. Any shares of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law. Subject to any limitations prescribed by law or this Restated Certificate of Incorporation, authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate pursuant to the applicable law of the State of Delaware (such certificate referred to herein as a "Preferred Stock Designation "), to determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation Law of Delaware. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of the Preferred Stock to the extent permitted by law. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the voting power of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of Delaware. FIFTH: Except as otherwise provided herein, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Restated Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation; provided, however, that notwithstanding any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of stock of this Corporation required by law, this Restated Certificate of Incorporation may include any provision requiring for any corporate action the vote of a larger portion of the stock or of any class or series thereof, or of any other securities having voting power, or a larger number of the directors, than is required by the General Corporation Law of Delaware, and such provision requiring such greater vote shall not be altered, amended or repealed except by such greater vote. SIXTH: In furtherance and not in limitation of the powers conferred upon it by the laws of the State of Delaware, and subject to the terms of any series of Preferred Stock, the Board of Directors shall have the power to adopt, amend, alter or repeal the Corporation's By-laws. The affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present shall be required to adopt, amend, alter or repeal the Corporation's By-laws. The Corporation's By-laws also may be adopted, amended, altered or repealed by the affirmative vote of (a) the holders of at least 75% of the voting power of the capital stock issued and outstanding and entitled to vote thereon, voting together as a single class, and (b) until the Operative Date, the holders of at least a majority of the voting power of the Class B Common Stock then outstanding, voting as a separate class, in addition to -7-

any other vote required by this Restated Certificate of Incorporation. Notwithstanding any other provisions of this Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Restated Certificate of Incorporation, the affirmative vote of (a) the holders of at least 75% of the voting power of the capital stock issued and outstanding and entitled to vote thereon, voting together as a single class, and (b) until the Operative Date, the holders of at least a majority of the voting power of the Class B Common Stock then outstanding, voting as a separate class, shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article SIXTH, in each case whether directly or indirectly, whether by amendment, merger, consolidation or otherwise. SEVENTH: Except to the extent that the General Corporation Law of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. If the General Corporation Law of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of Delaware, as so amended. EIGHTH: The Corporation shall provide indemnification as follows: 1. Actions, Suits and Proceedings Other than by or in the Right of the Corporation. The Corporation shall indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity or in any other capacity while serving as a director, officer, partner, employee or trustee, against all expenses (including attorneys' fees), liability, loss, judgments, fines, ERISA taxes or penalties and amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with -8-

respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. 2. Actions or Suits by or in the Right of the Corporation. The Corporation shall indemnify any Indemnitee who was or is a party to or threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity or in any other capacity while serving as a director, officer, partner, employee or trustee, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made under this Section 2 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation, unless, and only to the extent, that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses (including attorneys' fees) which the Court of Chancery of Delaware or such other court shall deem proper. 3. Indemnification for Expenses of Successful Party. Notwithstanding any other provisions of this Article, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article EIGHTH, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, Indemnitee shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by or on behalf of Indemnitee in connection therewith. 4. Notification and Defense of Claim. As a condition precedent to an Indemnitee's right to be indemnified, such Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving such Indemnitee for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to Indemnitee. After notice from the Corporation to Indemnitee of its election so to assume such defense, the Corporation shall not be liable to Indemnitee for any legal or other expenses subsequently incurred by Indemnitee in connection with such action, suit, proceeding or investigation, other than as provided below in this Section 4. Indemnitee shall have the right to employ his or her own counsel in connection with such action, suit, proceeding or investigation, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Corporation, (ii) counsel to Indemnitee shall have reasonably concluded that there may be a conflict of interest -9-

or position on any significant issue between the Corporation and Indemnitee in the conduct of the defense of such action, suit, proceeding or investigation or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, suit, proceeding or investigation, in each of which cases the fees and expenses of counsel for Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article. The Corporation shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. The Corporation shall not be required to indemnify Indemnitee under this Article EIGHTH for any amounts paid in settlement of any action, suit, proceeding or investigation effected without its written consent. The Corporation shall not settle any action, suit, proceeding or investigation in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Corporation nor Indemnitee will unreasonably withhold or delay its consent to any proposed settlement. 5. Advance of Expenses. Subject to the provisions of Section 6 of this Article EIGHTH, in the event of any threatened or pending action, suit, proceeding or investigation of which the Corporation receives notice under this Article, any expenses (including attorneys' fees) incurred by or on behalf of Indemnitee in defending an action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter; provided, however, that if the General Corporation Law of Delaware requires, an advancement of expenses incurred by an Indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such Indemnitee, including, without limitation, service to an employee benefit plan) the payment of such expenses incurred by or on behalf of Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined by final judicial decision from which there is no further right to appeal that Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article; and further provided that no such advancement of expenses shall be made under this Article EIGHTH if it is determined (in the manner described in Section 6) that (i) Indemnitee did not act in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, or (ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe his conduct was unlawful. Such undertaking shall be accepted without reference to the financial ability of Indemnitee to make such repayment. 6. Procedure for Indemnification and Advancement. In order to obtain indemnification or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article EIGHTH, an Indemnitee shall submit to the Corporation a written request. Any such advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of Indemnitee, unless (i) the Corporation has assumed the defense pursuant to Section 4 of this Article EIGHTH (and none of the circumstances described in Section 4 of this Article EIGHTH that would nonetheless entitle the Indemnitee to indemnification for the fees and expenses of separate counsel have occurred) or (ii) the Corporation determines within such 60-day period that Indemnitee did not meet the applicable standard of conduct set forth in Section 1, 2 or 5 of this Article EIGHTH, as the case may be. Any such indemnification, unless ordered by a court, shall be made with respect to requests -10-

under Section 1 or 2 only as authorized in the specific case upon a determination by the Corporation that the indemnification of Indemnitee is proper because Indemnitee has met the applicable standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance (a) by a majority vote of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question ("disinterested directors"), whether or not a quorum, (b) by a committee of disinterested directors designated by majority vote of disinterested directors, whether or not a quorum, (c) if there are no disinterested directors, or if the disinterested directors so direct, by independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the Corporation) in a written opinion, or (d) by the stockholders of the Corporation. 7. Remedies. The right to indemnification or advancement of expenses as granted by this Article shall be enforceable by Indemnitee in any court of competent jurisdiction. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 of this Article EIGHTH that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. In any suit brought by the Indemnitee to enforce a right to indemnification, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article EIGHTH or otherwise shall be on the Corporation. Indemnitee's expenses (including attorneys' fees) reasonably incurred in connection with successfully establishing Indemnitee's right to indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation. Notwithstanding the foregoing, in (i) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Corporation to recover an advancement of expenses) it shall be a defense that, and (ii) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Indemnitee has not met any applicable standard for indemnification set forth in the General Corporation Law of Delaware. 8. Limitations. Notwithstanding anything to the contrary in this Article, except as set forth in Section 7 of this Article EIGHTH, the Corporation shall not indemnify an Indemnitee pursuant to this Article EIGHTH in connection with a proceeding (or part thereof) initiated by such Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation. Notwithstanding anything to the contrary in this Article EIGHTH, the Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the Corporation makes any indemnification payments to an Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund indemnification payments to the Corporation to the extent of such insurance reimbursement. 9. Subsequent Amendment. No amendment, termination or repeal of this Article EIGHTH or of the relevant provisions of the General Corporation Law of Delaware or any other applicable laws shall adversely affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or -11-

investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal. 10. Other Rights. The indemnification and advancement of expenses provided by this Article EIGHTH shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in Indemnitee's official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of Indemnitee. Nothing contained in this Article EIGHTH shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article EIGHTH. In addition, the Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article EIGHTH. 11. Partial Indemnification. If an Indemnitee is entitled under any provision of this Article EIGHTH to indemnification by the Corporation for some or a portion of the expenses (including attorneys' fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such expenses (including attorneys' fees), judgments, fines or amounts paid in settlement to which Indemnitee is entitled. 12. Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of Delaware. 13. Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law. 14. Definitions. Terms used herein and defined in Section 145(h) and Section 145(i) of the General Corporation Law of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i). -12-

NINTH: This Article NINTH is inserted for the management of the business and for the conduct of the affairs of the Corporation. 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. 2. Number of Directors. Subject to Section 5(b) of this Article NINTH and to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors of the Corporation shall be established exclusively by the Board of Directors, and no decrease in the number of authorized directors shall shorten the term of any incumbent director. Election of directors need not be by written ballot, except as and to the extent provided in the By-laws of the Corporation. 3. Election of Directors. With respect to the election of directors, the right to elect persons to the Board of Directors shall be allocated as follows: (a) Until the Operative Date, the holders of Class B Common Stock, voting or acting separately as a class, shall be entitled to elect the smallest number of directors which shall constitute a majority of the authorized number of directors of the Corporation (the "Class B Directors" and each, individually, a "Class B Director"); and, other than those directors who may be elected by the holders of any series of Preferred Stock under specified circumstances, the holders of the Class A Common Stock, Class B Common Stock and any Preferred Stock entitled to vote thereon, voting together as a single class, shall be entitled to elect the remaining members of the Board of Directors (such remaining members, the "Classified Directors" and each, individually, a "Classified Director"). (b) Beginning on the Operative Date, subject to the rights of the holders of any series of Preferred Stock, the holders of Class A Common Stock shall be entitled to elect all of the directors of the Corporation and each director shall be a "Classified Director." (c) Concurrently with any conversion of all of the outstanding shares of Class B Common Stock into shares of Class A Common Stock in accordance with Article FOURTH, Sections A.5(c) or A.5(g) of this Restated Certificate of Incorporation, the former holders of Class B Common Stock so converted shall cease to have the right to vote as a single class to elect any directors of the Corporation, but instead shall only have rights to elect directors that are the same as that of other holders of Class A Common Stock. 4. Classes of Directors. The Classified Directors shall be and are divided into three classes: Class I, Class II and Class III. 5. Terms of Office. (a) Except as otherwise set forth in this Restated Certificate of Incorporation, each Class B Director shall serve for a term ending on the date of the first annual meeting following the annual meeting at which such director was elected. Each -13-

Classified Director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided, that each Classified Director initially appointed to Class I shall serve for a term expiring at the Corporation's annual meeting of stockholders held in 2006; each Classified Director initially appointed to Class II shall serve for a term expiring at the Corporation's annual meeting of stockholders held in 2007; and each Classified Director initially appointed to Class III shall serve for a term expiring at the Corporation's annual meeting of stockholders held in 2008. Notwithstanding the foregoing, but subject to Section 5(b) of this Article NINTH, the term of each Class B Director and each Classified Director shall continue until the election and qualification of his successor and be subject to his earlier death, resignation or removal. (b) Notwithstanding any other provision of this Restated Certificate of Incorporation, on the Operative Date the term of each Class B Director shall end and the number of authorized directors serving on the Board of Directors shall be reduced by the number of such Class B Directors. Notwithstanding the foregoing, the Board of Directors shall retain full authority provided by Section 2 of this Article NINTH to increase the number of authorized directors following the reduction of authorized directors provided for in the previous sentence of this Section 5(b) of Article NINTH. 6. Quorum. The greater of (a) a majority of the directors at any time in office and (b) one-third of the number of directors fixed in accordance with Section 2 of this Article NINTH shall constitute a quorum. If at any meeting of the Board of Directors there shall be less than such a quorum, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present. 7. Action at Meeting. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors unless a greater number is required by law or by this Restated Certificate of Incorporation. 8. Removal. Subject to the rights of the holders of any series of Preferred Stock, directors of the Corporation may be removed only for cause and only by the affirmative vote of the holders of at least 75% of the total number of votes entitled to be cast in the election of directors; provided, however, that the Class B Directors may be removed at any time without cause by the affirmative vote of the holders of at least a majority of the voting power of the Class B Common Stock then outstanding. 9. Newly Created Directorships and Vacancies. (a) Class B Directors. Until the Operative Date, unless otherwise required by law or by resolution adopted by the affirmative vote of a majority of the Class B Directors then in office, any vacancy among the Class B Directors, however occurring, including a vacancy resulting from an enlargement of the Board of -14-

Directors, shall be filled only by a vote of a majority of the Class B Directors then in office, although less than a quorum or, if there are none, by a vote or action of the holders of Class B Common Stock, voting as a separate class. (b) Classified Directors. Unless otherwise required by law or by resolution adopted by the affirmative vote of a majority of the Classified Directors then in office, any vacancy among the Classified Directors, however occurring, including a vacancy resulting from an enlargement of the Board of Directors, shall be filled only by a vote of a majority of the Classified Directors then in office, although less than a quorum or, if there are none, by a vote of the holders of the capital stock entitled to vote in the election of such Classified Directors, voting together as a single class, and directors so chosen shall serve for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been chosen expires or until such director's successor shall have been duly elected and qualified. 10. Stockholder Nominations and Introduction of Business, Etc. Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the By-laws of the Corporation. 11. Amendments to Article. Notwithstanding any other provisions of this Restated Certificate of Incorporation or the By-laws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Restated Certificate of Incorporation, the affirmative vote of (a) the holders of at least 75% of the voting power of the capital stock issued and outstanding and entitled to vote thereon, voting together as a single class, and (b) until the Operative Date, the holders of at least a majority of the voting power of the Class B Common Stock then outstanding, voting as a separate class, shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article NINTH, in each case whether directly or indirectly, whether by amendment, merger, consolidation or otherwise. TENTH: Except for actions taken by written consent by the holders of Class B Common Stock consenting separately as a class, stockholders of the Corporation may not take any action by written consent in lieu of a meeting. Notwithstanding any other provisions of this Restated Certificate of Incorporation or the By-laws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Restated Certificate of Incorporation, the affirmative vote of (a) the holders of at least 75% of the voting power of the capital stock issued and outstanding and entitled to vote thereon, voting together as a single class, and (b) until the Operative Date, the holders of at least a majority of the voting power of the Class B Common Stock then outstanding, voting as a separate class, shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TENTH, in each case whether directly or indirectly, whether by amendment, merger, consolidation or otherwise. ELEVENTH: Special meetings of stockholders for any purpose or purposes may be called at any time only by the Board of Directors. Business transacted at any special meeting of -15-

stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. Notwithstanding any other provision of this Restated Certificate of Incorporation or the By-laws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Restated Certificate of Incorporation, the affirmative vote of the holders of at least 75% of the voting power of the capital stock issued and outstanding and entitled to vote thereon, voting together as a single class, shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article ELEVENTH, in each case whether directly or indirectly, whether by amendment, merger, consolidation or otherwise. TWELFTH: 1. Certain Acknowledgments. In recognition and anticipation of the facts that (i) the directors, officers and/or employees of El.En. Affiliated Companies may serve as directors of the Corporation, (ii) El.En. Affiliated Companies engage and may continue to engage in the same or similar activities or related lines of business as those in which Corporation Affiliated Companies, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which Corporation Affiliated Companies, directly or indirectly, may engage, and (iii) Corporation Affiliated Companies may engage in material business transactions with El.En. Affiliated Companies and that the Corporation is expected to benefit therefrom, the provisions of this Article TWELFTH are set forth to regulate and define the conduct of certain affairs of the Corporation as they may involve El.En., El.En.'s officers and directors, and the powers, rights, duties and liabilities of the Corporation and its officers, directors and stockholders in connection therewith. 2. Competition and Corporate Opportunities. Except as may be otherwise provided in a written agreement between the Corporation and El.En., El.En. Affiliated Companies shall have no duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as Corporation Affiliated Companies. Except with respect to an Express Opportunity, as defined in Article TWELFTH, Section 3 below, the Corporation renounces any interest or expectancy of Corporation Affiliated Companies in, or in being offered an opportunity to participate in, any potential transaction or matter which may be a corporate opportunity for both El.En. Affiliated Companies and Corporation Affiliated Companies, and therefore El.En. shall have no duty to communicate or offer such corporate opportunity to the Corporation or any Corporation Affiliated Companies and shall not be liable to the Corporation or its stockholders for breach of any fiduciary duty as a stockholder of the Corporation solely by reason of the fact that El.En. Affiliated Company pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another person, or does not communicate information regarding such corporate opportunity to the Corporation. 3. Allocation of Corporate Opportunities. Except as provided elsewhere in this Section 3, the Corporation hereby renounces any interest or expectancy of Corporation Affiliated Companies in, or in being offered an opportunity to participate in, any potential transaction or matter which may be a corporate opportunity for both Corporation Affiliated Companies, on the one hand, and El.En. Affiliated Companies, on the other hand, about which a director of the Corporation who is also a director or officer of an El.En. Affiliated Company acquires knowledge. Notwithstanding the immediately preceding sentence, the Corporation does not -16-

renounce any interest or expectancy of Corporation Affiliated Companies in, or in being offered an opportunity to participate in, any potential transaction or matter which may be a corporate opportunity for both Corporation Affiliated Companies, on the one hand, and El.En. Affiliated Companies, on the other hand, and about which a director of the Corporation who is also a director or officer of an El.En. Affiliated Company acquires knowledge, if such opportunity is expressly offered to such person in writing solely in, and as a direct result of, his or her capacity as a director of the Corporation (an "Express Opportunity"). 4. Certain Matters Deemed Not Corporate Opportunities. In addition to and notwithstanding the foregoing provisions of this Article TWELFTH, the Corporation renounces any interest or expectancy of Corporation Affiliated Companies in, or in being offered an opportunity to participate in, any business opportunity that the Corporation is not financially able or contractually permitted or legally able to undertake, or that is, from its nature, not in the line of business of the Corporation Affiliated Companies or is of no practical advantage to them or that is one in which Corporation Affiliated Companies have no interest or reasonable expectancy. 5. Certain Definitions. For purposes of this Article TWELFTH: "Corporation Affiliated Companies" shall mean the Corporation and all corporations, limited liability companies, joint ventures, partnerships, trusts, associations and other entities in which the Corporation (1) beneficially owns, either directly or indirectly, more then 50% of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, of such entity, or (2) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body of such entity. "El.En. Affiliated Companies" shall mean El.En. and all corporations, limited liability companies, joint ventures, partnerships, trusts, associations and other entities in which El.En. (1) beneficially owns, either directly or indirectly, more then 50% of (i) the total combined voting power of all classes of voting securities, (ii) the total combined equity interests or (iii) the capital or profit interests, in the case of a partnership, of such entity, or (2) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body of such entity, but shall not include the Corporation or any Corporation Affiliated Company. 6. Termination. The provisions of this Article TWELFTH shall terminate, expire and have no further force or effect after the Operative Date; provided, however, that any such termination shall not terminate the effect of such provisions with respect to any transaction or agreement between a Corporation Affiliated Company thereof and an El.En. Affiliated Company that was entered into before such time or any transaction entered into in the performance of such agreement, whether entered into before or after such time. 7. Amendment of this Article. Notwithstanding any other provisions of this Restated Certificate of Incorporation or the By-laws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Restated Certificate of Incorporation, the affirmative vote of (a) the holders of at least a majority of the combined -17-

voting power of the Class A Common Stock and Class B Common Stock then outstanding, voting together as a single class, and (b) until the Operative Date, the holders of at least a majority of the voting power of the Class B Common Stock then outstanding, voting as a separate class, shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TWELFTH, in each case whether directly or indirectly, whether by amendment, merger, consolidation or otherwise. No amendment or addition to or alteration or repeal of this Article TWELFTH shall eliminate or impair the effect of this Article TWELFTH with respect to any transaction or agreement between a Corporation Affiliated Company and an El.En. Affiliated Company that was entered into before such time or any transaction entered into in the performance of such agreement, whether entered into before or after such time. 8. Deemed Notice. Any person or entity purchasing or otherwise acquiring any interest in any shares of the Corporation shall be deemed to have notice and to have consented to the provisions of this Article TWELFTH. 9. Severability. The invalidity or unenforceability of any particular provision, or part of any provision, of this Article TWELFTH shall not affect the other provisions or parts hereof, and this Article TWELFTH shall be construed in all respects as if such invalid or unenforceable provisions or parts were omitted. -18-

IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which restates, integrates and amends the certificate of incorporation of the Corporation, and which has been duly adopted in accordance with Sections 228, 242 and 245 of the Delaware General Corporation Law, has been executed by its duly authorized officer this [_____] day of [_____], 2005. CYNOSURE, INC. By: Name:

Title: President -19-

EXHIBIT 3.3 BY-LAWS OF CYNOSURE, INC.

. . . BY-LAWS TABLE OF CONTENTS
Page ---1 1 1 1 1 2 2 2 2 3 3 3 3 3 4 4 4 4 4 4 4 5 5 5 5 5 5 6 6 6 6 6 7 7

ARTICLE 1 - Stockholders........................................................ Section Section Section Section Section Section Section Section Section Section 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 Place of Meetings............................................. Annual Meeting................................................ Special Meetings.............................................. Notice of Meetings............................................ Voting List................................................... Quorum........................................................ Adjournments.................................................. Voting and Proxies............................................ Action at Meeting............................................. Action without Meeting........................................

ARTICLE 2 - Directors........................................................... Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section Section 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 General Powers................................................ Number; Election and Qualification............................ Enlargement of the Board...................................... Tenure........................................................ Vacancies..................................................... Resignation................................................... Regular Meetings.............................................. Special Meetings.............................................. Notice of Special Meetings.................................... Meetings by Telephone Conference Calls........................ Quorum....................................................... Action at Meeting............................................. Action by Consent............................................. Removal....................................................... Committees.................................................... Compensation of Directors.....................................

ARTICLE 3 - Officers............................................................ Section Section Section Section Section 3.1 3.2 3.3 3.4 3.5 Enumeration................................................... Election...................................................... Qualification................................................. Tenure........................................................ Resignation and Removal.......................................

-i-

Section Section Section Section Section Section Section

3.6 3.7 3.8 3.9 3.10 3.11 3.12

Vacancies..................................................... Chairman of the Board and Vice-chairman of the Board.......... President..................................................... Vice Presidents............................................... Secretary and Assistant Secretaries........................... Treasurer and Assistant Treasurers............................ Salaries......................................................

Page ---7 7 7 8 8 8 9 9 9 9 10 10 10 11 11 11 11 11 11 11 12 12 12 12 12 13

ARTICLE 4 - Capital Stock....................................................... Section Section Section Section Section 4.1 4.2 4.3 4.4 4.5 Issuance of Stock............................................. Certificates of Stock......................................... Transfers..................................................... Lost, Stolen or Destroyed Certificates........................ Record Date...................................................

ARTICLE 5 - General Provisions.................................................. Section Section Section Section Section Section Section Section Section 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 Fiscal Year................................................... Corporate Seal................................................ Waiver of Notice.............................................. Voting of Securities.......................................... Evidence of Authority......................................... Certificate of Incorporation.................................. Transactions with Interested Parties.......................... Severability.................................................. Pronouns......................................................

ARTICLE 6 - Amendments.......................................................... Section 6.1 Section 6.2 By the Board of Directors..................................... By the Stockholders...........................................

-ii-

BY-LAWS OF CYNOSURE, INC. ARTICLE 1 -Stockholders 1.1 Place of Meetings. All meetings of stockholders shall be held at such place within or without the State of Delaware as may be designated from time to time by the Board of Directors or the President or, if not so designated, at the registered office of the corporation. 1.2 Annual Meeting. The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held on a date to be fixed by the Board of Directors or the President (which date shall not be a legal holiday in the place where the meeting is to be held) at the time and place to be fixed by the Board of Directors or the President and stated in the notice of the meeting. If no annual meeting is held in accordance with the foregoing provisions, the Board of Directors shall cause the meeting to be held as soon thereafter as convenient. If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu of the annual meeting, and any action taken at that special meeting shall have the same effect as if it had been taken at the annual meeting, and in such case all references in these By-Laws to the annual meeting of the stockholders shall be deemed to refer to such special meeting. 1.3 Special Meetings. Special meetings of stockholders may be called at any time by the President or by the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. 1.4 Notice of Meetings. Except as otherwise provided by law, written notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. The notices of all meetings shall state the place, date and hour of the meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If mailed, notice is given when deposited in the United States mail, postage prepaid,

directed to the stockholder at his address as it appears on the records of the corporation. 1.5 Voting List. The officer who has charge of the stock ledger of the corporation shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, at a place within the city where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting, and may be inspected by any stockholder who is present. 1.6 Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business. 1.7 Adjournments. Any meeting of stockholders may be adjourned to any other time and to any other place at which a meeting of stockholders may be held under these By-Laws by the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as Secretary of such meeting. It shall not be necessary to notify any stock holder of any adjournment of less than 30 days if the time and place of the adjourned meeting are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. 1.8 Voting and Proxies. Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided in the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may vote or express such consent or dissent in person or may authorize another person or persons to vote or act for him by written proxy executed by the stockholder or his authorized agent and delivered to the Secretary of the corporation. No such proxy shall be voted or acted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period. -2-

1.9 Action at Meeting. When a quorum is present at any meeting, the holders of a majority of the stock present or represented and voting on a matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, the holders of a majority of the stock of that class present or represented and voting on a matter) shall decide any matter to be voted upon by the stockholders at such meeting, except when a different vote is required by express provision of law, the Certificate of Incorporation or these By-Laws. Any election by stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election. 1.10 Action without Meeting. Any action required or permitted to be taken at any annual or special meeting of stockholders of the corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on such action were present and voted. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE 2 - Directors 2.1 General Powers. The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation except as otherwise provided by law or the Certificate of Incorporation. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board until the vacancy is filled. 2.2 Number; Election and Qualification. The number of directors which shall constitute the whole Board of Directors shall be determined by resolution of the stockholders or the Board of Directors, but in no event shall be less than one. The number of directors may be decreased at any time and from time to time either by the stockholders or by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more directors. The directors shall be elected at the annual meeting of stockholders by such stockholders as have the right to -3-

vote on such election. Directors need not be stockholders of the corporation. 2.3 Enlargement of the Board. The number of directors may be increased at any time and from time to time by the stockholders or by a majority of the directors then in office. 2.4 Tenure. Each director shall hold office until the next annual meeting and until his successor is elected and qualified, or until his earlier death, resignation or removal. 2.5 Vacancies. Unless and until filled by the stockholders, any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board, may be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, and a director chosen to fill a position resulting from an increase in the number of directors shall hold office until the next annual meeting of stockholders and until his successor is elected and qualified, or until his earlier death, resignation or removal. 2.6 Resignation. Any director may resign by delivering his written resignation to the corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. 2.7 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall be determined from time to time by the Board of Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders. 2.8 Special Meetings. Special meetings of the Board of Directors may be held at any time and place, within or without the State of Delaware, designated in a call by the Chairman of the Board, President, two or more directors, or by one director in the event that there is only a single director in office. 2.9 Notice of Special Meetings. Notice of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (i) by giving notice to such director in person or by telephone at least 48 hours in advance of the meeting, (ii) by sending a telegram or telex, or delivering written notice by hand, to his last known -4-

business or home address at least 48 hours in advance of the meeting, or (iii) by mailing written notice to his last known business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting. 2.10 Meetings by Telephone Conference Calls. Directors or any members of any committee designated by the directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting. 2.11 Quorum. A majority of the total number of the whole Board of Directors shall constitute a quorum at all meetings of the Board of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the number so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present. 2.12 Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law, the Certificate of Incorporation or these By-Laws. 2.13 Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing, and the written consents are filed with the minutes of proceedings of the Board or committee. 2.14 Removal. Except as otherwise provided by the General Corporation Law of Delaware, any one or more or all of the directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except that the directors elected by the holders of a particular class or series of stock may be removed without cause only by vote of the holders of a majority of the outstanding shares of such class or series. 2.15 Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the -5-

directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of the General Corporation Law of the State of Delaware, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these By-Laws for the Board of Directors. 2.16 Compensation of Directors. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the corporation or any of its parent or subsidiary corporations in any other capacity and receiving compensation for such service. ARTICLE 3 - Officers 3.1 Enumeration. The officers of the corporation shall consist of a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, including a Chairman of the Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate. 3.2 Election. The President, Treasurer and Secretary shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting. 3.3 Qualification. No officer need be a stockholder. Any two or more offices may be held by the same person. -6-

3.4 Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws, each officer shall hold office until his successor is elected and qualified, unless a different term is specified in the vote choosing or appointing him, or until his earlier death, resignation or removal. 3.5 Resignation and Removal. Any officer may resign by delivering his written resignation to the corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Any officer may be removed at any time, with or without cause, by vote of a majority of the entire number of directors then in office. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or by the year or otherwise, unless such compensation is expressly provided in a duly authorized written agreement with the corporation. 3.6 Vacancies. The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of President, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of his predecessor and until his successor is elected and qualified, or until his earlier death, resignation or removal. 3.7 Chairman of the Board and Vice-Chairman of the Board. The Board of Directors may appoint a Chairman of the Board and may designate the Chairman of the Board as Chief Executive Officer. If the Board of Directors appoints a Chairman of the Board, he shall perform such duties and possess such powers as are assigned to him by the Board of Directors. If the Board of Directors appoints a Vice-Chairman of the Board, he shall, in the absence or disability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board and shall perform such other duties and possess such other powers as may from time to time be vested in him by the Board of Directors. 3.8 President. The President shall, subject to the direction of the Board of Directors, have general charge and supervision of the business of the corporation. Unless otherwise provided by the Board of Directors, he shall preside at all -7-

meetings of the stockholders, if he is a director, at all meetings of the Board of Directors. Unless the Board of Directors has designated the Chairman of the Board or another officer as Chief Executive Officer, the President shall be the Chief Executive Officer of the corporation. The President shall perform such other duties and shall have such other powers as the Board of Directors may from time to time prescribe. 3.9 Vice Presidents. Any Vice President shall perform such duties and possess such powers as the Board of Directors or the President may from time to time prescribe. In the event of the absence, inability or refusal to act of the President, the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform the duties of the President and when so performing shall have all the powers of and be subject to all the restrictions upon the President. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors. 3.10 Secretary and Assistant Secretaries. The Secretary shall perform such duties and shall have such powers as the Board of Directors or the President may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents. Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the President or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary, (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary. In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the person presiding at the meeting shall designate a temporary secretary to keep a record of the meeting. 3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned to him by the Board of Directors or the President. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, -8-

including without limitation the duty and power to keep and be responsible for all funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these By-Laws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the corporation. The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the President or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer, (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer. 3.12 Salaries. Officers of the corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors. ARTICLE 4 - Capital Stock 4.1 Issuance of Stock. Unless otherwise voted by the stockholders and subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the corporation or the whole or any part of any unissued balance of the authorized capital stock of the corporation held in its treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such consideration and on such terms as the Board of Directors may determine. 4.2 Certificates of Stock. Every holder of stock of the corporation shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares owned by him in the corporation. Each such certificate shall be signed by, or in the name of the corporation by, the Chairman or Vice-Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation. Any or all of the signatures on the certificate may be a facsimile. Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, the By-Laws, applicable securities laws or any agreement -9-

among any number of shareholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction. 4.3 Transfers. Except as otherwise established by rules and regulations adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these By-Laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-Laws. 4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen, or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity as the Board of Directors may require for the protection of the corporation or any transfer agent or registrar. 4.5 Record Date. The Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders or to express consent (or dissent) to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action to which such record date relates. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, -10-

when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE 5 - General Provisions 5.1 Fiscal Year. Except as from time to time otherwise designated by the Board of Directors, the fiscal year of the corporation shall begin on the first day of January in each year and end on the last day of December in each year. 5.2 Corporate Seal. The corporate seal shall be in such form as shall be approved by the Board of Directors. 5.3 Waiver of Notice. Whenever any notice whatsoever is required to be given by law, by the Certificate of Incorporation or by these By-Laws, a waiver of such notice either in writing signed by the person entitled to such notice or such person's duly authorized attorney, or by telegraph, cable or any other available method, whether before, at or after the time stated in such waiver, or the appearance of such person or persons at such meeting in person or by proxy, shall be deemed equivalent to such notice. 5.4 Voting of Securities. Except as the directors may otherwise designate, the President or Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at, any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this corporation. 5.5 Evidence of Authority. A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action. 5.6 Certificate of Incorporation. All references in these By-Laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the corporation, as amended and in effect from time to time. -11-

5.7 Transactions with Interested Parties. No contract or transaction between the corporation and one or more of the directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of the directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors which authorizes the contract or transaction or solely because his or their votes are counted for such purpose, if: (1) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (2) The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Board of Directors, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. 5.8 Severability. Any determination that any provision of these By-Laws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these By-Laws. 5.9 Pronouns. All pronouns used in these By-Laws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. ARTICLE 6 - Amendments 6.1 By the Board of Directors. These By-Laws may be altered, amended or repealed or new by-laws may be adopted by the -12-

affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present. 6.2 By the Stockholders. These By-Laws may be altered, amended or repealed or new by-laws may be adopted by the affirmative vote of the holders of a majority of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at any regular meeting of stockholders, or at any special meeting of stockholders, provided notice of such alteration, amendment, repeal or adoption of new by-laws shall have been stated in the notice of such special meeting. -13-

EXHIBIT 3.4 AMENDED AND RESTATED BY-LAWS OF CYNOSURE, INC. (Effective as of _________________, 2005)

TABLE OF CONTENTS
Page ---1 1 1 1 1 1 2 2 2 3 3 5 7 8 10 10 10 10 10 11 11 11 11 11 11 12 12 12 12 12 13 13 13 13 13 13 13 14 14 14 14

ARTICLE I 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 ARTICLE II 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 ARTICLE III 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9

STOCKHOLDERS ........................................................ Place of Meetings ................................................... Annual Meeting ...................................................... Special Meetings .................................................... Notice of Meetings .................................................. Voting List ......................................................... Quorum .............................................................. Adjournments ........................................................ Voting and Proxies .................................................. Action at Meeting ................................................... Nomination of Directors ............................................. Notice of Business at Annual Meetings ............................... Conduct of Meetings ................................................. No Action by Consent in Lieu of a Meeting; Consent of Solicitation .. DIRECTORS ........................................................... General Powers ...................................................... Number, Election and Qualification .................................. Classes of Directors ................................................ Terms of Office ..................................................... Quorum .............................................................. Action at Meeting ................................................... Removal ............................................................. Newly Created Directorships and Vacancies ........................... Resignation ......................................................... Regular Meetings .................................................... Special Meetings .................................................... Notice of Special Meetings .......................................... Meetings by Conference Communications Equipment ..................... Action by Consent ................................................... Committees .......................................................... Compensation of Directors ........................................... OFFICERS ............................................................ Titles .............................................................. Election ............................................................ Qualification ....................................................... Tenure .............................................................. Resignation and Removal ............................................. Vacancies ........................................................... Chairman of the Board ............................................... President; Chief Executive Officer .................................. Vice Presidents .....................................................

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3.10 3.11 3.12 3.13 ARTICLE IV 4.1 4.2 4.3 4.4 4.5 ARTICLE V 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 ARTICLE VI

Secretary and Assistant Secretaries ................................. Treasurer and Assistant Treasurers .................................. Salaries ............................................................ Delegation of Authority ............................................. CAPITAL STOCK ....................................................... Issuance of Stock ................................................... Certificates of Stock ............................................... Transfers ........................................................... Lost, Stolen or Destroyed Certificates .............................. Record Date ......................................................... GENERAL PROVISIONS .................................................. Fiscal Year ......................................................... Corporate Seal ...................................................... Waiver of Notice .................................................... Voting of Securities ................................................ Evidence of Authority ............................................... Certificate of Incorporation ........................................ Severability ........................................................ Pronouns ............................................................ Reliance Upon Books, Reports And Records ............................ AMENDMENTS ..........................................................

14 15 15 15 15 15 16 16 16 16 17 17 17 17 17 17 17 18 18 18 18

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ARTICLE I STOCKHOLDERS 1.1 Place of Meetings. All meetings of stockholders shall be held at such place, if any, as may be designated from time to time by the Board of Directors or, if not so designated, at the principal office of the corporation. 1.2 Annual Meeting. The annual meeting of stockholders for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly be brought before the meeting shall be held on a date and at a time designated by the Board of Directors (which date shall not be a legal holiday in the place, if any, where the meeting is to be held). If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu of the annual meeting, and any action taken at that special meeting shall have the same effect as if it had been taken at the annual meeting. 1.3 Special Meetings. Special meetings of stockholders for any purpose or purposes may be called at any time only by the Board of Directors, as provided in Article ELEVENTH of the Certificate of Incorporation. The Board of Directors may postpone or reschedule any previously scheduled special meeting. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. 1.4 Notice of Meetings. Except as otherwise provided by law, notice of each meeting of stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by a form of electronic transmission consented to (in a manner consistent with the General Corporation Law of the State of Delaware) by the stockholder to whom the notice is given. The notices of all meetings shall state the place, if any, date and time of the meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If notice is given by mail, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the corporation. If notice is given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the General Corporation Law of the State of Delaware. 1.5 Voting List. The Secretary shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number and class of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the corporation. If the meeting is to be held at a place, then the list shall also be produced and kept at the time and place of the meeting

during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. The list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. 1.6 Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, the holders of a majority in voting power of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at the meeting, present in person, present by means of remote communication in a manner, if any, authorized by the Board of Directors in its sole discretion, or represented by proxy, shall constitute a quorum for the transaction of business; provided, however, that where a separate vote by a class or classes or series of capital stock is required by law or the Certificate of Incorporation, the holders of a majority in voting power of such class or classes or series of the capital stock of the corporation issued and outstanding and entitled to vote on such matter, present in person, present by means of remote communication in a manner, if any, authorized by the Board of Directors in its sole discretion, or represented by proxy, shall constitute a quorum entitled to take action with respect to the vote on such matter. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum. 1.7 Adjournments. Any meeting of stockholders may be adjourned from time to time to any other time and to any other place at which a meeting of stockholders may be held under these By-laws by the chairman of the meeting. It shall not be necessary to notify any stockholder of any adjournment of less than 30 days if the time and place, if any, of the adjourned meeting, and the means of remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting, are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. 1.8 Voting and Proxies. Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided by law or the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting of stockholders may vote in person (including by means of remote communications, if any, by which stockholders may be deemed to be present in person and vote at such meeting) or may authorize another person or persons to vote for such stockholder by a proxy executed or transmitted in a manner permitted by the General Corporation Law of the State of Delaware by the stockholder or such stockholder's authorized agent and delivered (including by electronic transmission) to the Secretary of the corporation. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this paragraph may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. No such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. 2

1.9 Action at Meeting. When a quorum is present at any meeting, any matter other than the election of directors to be voted upon by the stockholders at such meeting shall be decided by the affirmative vote of the holders of a majority in voting power of the shares of stock present or represented at the meeting and voting affirmatively or negatively on such matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each such class or series, the holders of a majority in voting power of the shares of stock of that class present or represented and voting affirmatively or negatively on such matter), except when a different vote is required by law, the Certificate of Incorporation or these By-laws. When a quorum is present at any meeting, any election by stockholders of directors shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. 1.10 Nomination of Directors. (a) Except for (1) any directors entitled to be elected by the holders of preferred stock, (2) any Class B Directors (as defined in the Certificate of Incorporation), (3) any directors elected in accordance with Section 2.8 hereof by the Board of Directors to fill a vacancy or newly-created directorship or (4) as otherwise required by applicable law or stock market regulation, only persons who are nominated in accordance with the procedures in this Section 1.10 shall be eligible for election as directors. Nomination for election to the Board of Directors at a meeting of stockholders may be made (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who (x) complies with the notice procedures set forth in Section 1.10(b) and (y) is a stockholder of record who is entitled to vote for the election of such nominee on the date of the giving of such notice and on the record date for the determination of stockholders entitled to vote at such meeting. For the avoidance of doubt, only holders of Class B Common Stock may nominate an individual for election as a Class B Director (as defined in the Certificate of Incorporation), however, holders of either Class A Common Stock or Class B Common Stock or holders of any class of preferred stock entitled to vote in the election of Classified Directors, may nominate an individual for election as a Classified Director (as defined in the Certificate of Incorporation). (b) To be timely, a stockholder's notice must be received in writing by the Secretary at the principal executive offices of the corporation as follows: (i) in the case of an election of directors at an annual meeting of stockholders, not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that (x) in the case of the annual meeting of stockholders of the corporation to be held in 2006 or (y) in the event that the date of the annual meeting in any other year is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the preceding year's annual meeting, a stockholder's notice must be so received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (A) the 90th day prior to such annual meeting and (B) the tenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs; or (ii) in the case of an election of directors at a special meeting of stockholders, provided that the Board of Directors has determined that directors shall be elected at such meeting, not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of (1) the 90th day prior to such special meeting and (2) the tenth day following the day on which notice of the date of such special meeting was mailed or public disclosure of the date of such special meeting was made, whichever first occurs. 3

In no event shall the adjournment or postponement of an annual meeting (or the public announcement thereof) commence a new time period (or extend any time period) for the giving of a stockholder's notice. Notwithstanding anything in the preceding paragraph of this Section 1.10(b) of Article I to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least 100 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 1.10 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 10th day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. The stockholder's notice to the Secretary shall set forth: (A) as to each proposed nominee (1) such person's name, age, business address and, if known, residence address, (2) such person's principal occupation or employment, (3) the class and number of shares of stock of the corporation which are beneficially owned by such person, and (4) any other information concerning such person that must be disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (B) as to the stockholder giving the notice (1) such stockholder's name and address, as they appear on the corporation's books, (2) the class and number of shares of stock of the corporation which are owned, beneficially and of record, by such stockholder, (3) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (4) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the person(s) named in its notice and (5) a representation whether the stockholder intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation's outstanding capital stock reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee and/or (y) otherwise to solicit proxies from stockholders in support of such nomination, and must, in either case, have included such representation in such proxy statement or solicitation materials; and (C) as to the beneficial owner, if any, on whose behalf the nomination is being made (1) such beneficial owner's name and address, (2) the class and number of shares of stock of the corporation which are beneficially owned by such beneficial owner, (3) a description of all arrangements or understandings between such beneficial owner and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made and (4) a representation whether the beneficial owner intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation's outstanding capital stock reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee and/or (y) otherwise to solicit proxies from stockholders in support of such nomination. In addition, to be effective, the stockholder's notice must be accompanied by the written consent of the proposed nominee to serve as a director if elected. The corporation may require any proposed nominee to furnish such other information as may reasonably be required to determine the eligibility of such proposed nominee to serve as a director of the corporation. A stockholder 4

shall not have complied with this Section 1.10(b) if the stockholder (or beneficial owner, if any, on whose behalf the nomination is made) solicits or does not solicit, as the case may be, proxies in support of such stockholder's nominee in contravention of the representations with respect thereto required by this Section 1.10. (c) The chairman of any meeting shall have the power and duty to determine whether a nomination was made in accordance with the provisions of this Section 1.10 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder's nominee in compliance with the representations with respect thereto required by this Section 1.10), and if the chairman should determine that a nomination was not made in accordance with the provisions of this Section 1.10, the chairman shall so declare to the meeting and such nomination shall be disregarded. (d) Except as otherwise required by law, nothing in this Section 1.10 shall obligate the corporation or the Board of Directors to include in any proxy statement or other stockholder communication distributed on behalf of the corporation or the Board of Directors information with respect to any nominee for director submitted by a stockholder. (e) Notwithstanding the foregoing provisions of this Section 1.10, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the corporation to present a nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the corporation. For purposes of this Section 1.10, to be considered a qualified representative of the stockholder, a person must be authorized by a written instrument executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such written instrument or electronic transmission, or a reliable reproduction of the written instrument or electronic transmission, at the meeting of stockholders. (f) For purposes of this Section 1.10, "public disclosure" shall include disclosure in a press release reported by the Dow Jones New Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. 1.11 Notice of Business at Annual Meetings. (a) At any annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (1) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (2) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (3) properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, (i) if such business relates to the nomination of a person for election as a director of the corporation, the procedures in Section 1.10 must be complied with and (ii) if such business relates to any other matter, the business must constitute a proper matter under Delaware law for stockholder action and the stockholder must (x) have given timely notice 5

thereof in writing to the Secretary in accordance with the procedures set forth in Section 1.11(b) and (y) be a stockholder of record on the date of the giving of such notice and on the record date for the determination of stockholders entitled to vote at such annual meeting. (b) To be timely, a stockholder's notice must be received in writing by the Secretary at the principal executive offices of the corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that (x) in the case of the annual meeting of stockholders of the corporation to be held in 2006 or (y) in the event that the date of the annual meeting in any other year is advanced by more than 20 days, or delayed by more than 60 days, from the first anniversary of the preceding year's annual meeting, a stockholder's notice must be so received not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (A) the 90th day prior to such annual meeting and (B) the tenth day following the day on which notice of the date of such annual meeting was mailed or public disclosure of the date of such annual meeting was made, whichever first occurs. In no event shall the adjournment or postponement of an annual meeting (or the public announcement thereof) commence a new time period (or extend any time period) for the giving of a stockholder's notice. The stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (1) a brief description of the business desired to be brought before the annual meeting, the text relating to the business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the By-laws, the language of the proposed amendment), and the reasons for conducting such business at the annual meeting, (2) the name and address, as they appear on the corporation's books, of the stockholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (3) the class and number of shares of stock of the corporation which are owned, of record and beneficially, by the stockholder and beneficial owner, if any, (4) a description of all arrangements or understandings between such stockholder or such beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of the stockholder or such beneficial owner, if any, in such business, (5) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting and (6) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation's outstanding capital stock required to approve or adopt the proposal and/or (y) otherwise to solicit proxies from stockholders in support of such proposal, and must, in either case, have included such representation in such proxy statement or solicitation materials. Notwithstanding anything in these By-laws to the contrary, no business shall be conducted at any annual meeting of stockholders except in accordance with the procedures set forth in this Section 1.11; provided that any stockholder proposal which complies with Rule 14a-8 of the proxy rules (or any successor provision) promulgated under the Securities Exchange Act of 1934, as amended, and is to be included in the corporation's proxy statement for an annual meeting of stockholders shall be deemed to comply with the requirements of this Section 1.11. A stockholder shall not have complied with this Section 1.11(b) if the stockholder (or beneficial owner, if any, on whose behalf the nomination is made) solicits or does not solicit, as the case 6

may be, proxies in support of such stockholder's proposal in contravention of the representations with respect thereto required by this Section 1.11. (c) The chairman of any meeting shall have the power and duty to determine whether business was properly brought before the meeting in accordance with the provisions of this Section 1.11 (including whether the stockholder or beneficial owner, if any, on whose behalf the proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder's proposal in compliance with the representation with respect thereto required by this Section 1.11), and if the chairman should determine that business was not properly brought before the meeting in accordance with the provisions of this Section 1.11, the chairman shall so declare to the meeting and such business shall not be brought before the meeting. (d) Notwithstanding the foregoing provisions of this Section 1.11, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the corporation to present business, such business shall not be considered, notwithstanding that proxies in respect of such vote may have been received by the corporation. For purposes of this Section 1.11, to be considered a qualified representative of the stockholder, a person must be authorized by a written instrument executed by the such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as a proxy at the meeting of stockholders and such person must produce such written instrument or electronic transmission, or a reliable reproduction of the written instrument or electronic transmission, at the meeting of stockholders. (e) For purposes of this Section 1.11, "public disclosure" shall include disclosure in a press release reported by the Dow Jones New Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. 1.12 Conduct of Meetings. (a) Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the Chairman's absence by the Vice Chairman of the Board, if any, or in the Vice Chairman's absence by the Chief Executive Officer, or in the Chief Executive Officer's absence, by the President, or in the President's absence by a Vice President, or in the absence of all of the foregoing persons by a chairman designated by the Board of Directors. The Secretary shall act as secretary of the meeting, but in the Secretary's absence the chairman of the meeting may appoint any person to act as secretary of the meeting. (b) The Board of Directors may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders of the corporation as it shall deem appropriate including, without limitation, such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the 7

proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxies or such other persons as shall be determined; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. (c) The chairman of the meeting shall announce at the meeting when the polls for each matter to be voted upon at the meeting will be opened and closed. After the polls close, no ballots, proxies or votes or any revocations or changes thereto may be accepted. (d) In advance of any meeting of stockholders, the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President shall appoint one or more inspectors of election to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is present, ready and willing to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Unless otherwise required by law, inspectors may be officers, employees or agents of the corporation. Each inspector, before entering upon the discharge of such inspector's duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector's ability. The inspector shall have the duties prescribed by law and shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. Every vote taken by ballots shall be counted by a duly appointed inspector or inspectors. 1.13 Action by Consent in Lieu of a Meeting; Consent Solicitation. (a) Except for actions taken by written consent by the holders of Class B Common Stock consenting separately as a class, stockholders of the corporation may not take any action by written consent in lieu of a meeting. (b) In order that the corporation may determine the holders of Class B Common Stock entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any holder of Class B Common Stock of record seeking to have the holders of Class B Common Stock authorize or take corporate action by written consent shall, by written notice to the Secretary, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within 10 days after the date on which such a request is received, adopt a resolution fixing the record date (unless a record date has previously been fixed by the Board of Directors pursuant to the first sentence of this Section 1.13(b)). If no 8

record date has been fixed by the Board of Directors pursuant to the first sentence of this Section 1.13(b) or otherwise within 10 days of the date on which such a written request is received, the record date for determining holders of Class B Common Stock entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date after the expiration of such 10-day time period on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or any officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining holders of Class B Common Stock entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. (c) In the event of the delivery, in the manner provided by this Section 1.13 and applicable law, to the corporation of a written consent or consents of holders of Class B Common Stock purporting to authorize or take corporate action and/or related revocations (such written consent or consents together with any related revocations is referred to in this section as a "Consent"), the Secretary shall provide for the safekeeping of such Consent and shall immediately appoint duly qualified and independent inspectors to: (i) conduct promptly such reasonable ministerial review as such inspectors deem necessary or appropriate for the purpose of ascertaining the sufficiency and validity of such Consent and all matters incident thereto, including whether holders of Class B Common Stock having the requisite voting power to authorize or take the action specified in the Consent have given consent; and (ii) deliver to the Secretary a written report regarding the foregoing. For the purpose of permitting the inspector or inspectors to perform such review, no action by written consent and without a meeting by holders of Class B Common Stock shall be effective until such inspector or inspectors have completed their review, determined that the requisite number of valid and unrevoked consents delivered to the corporation in accordance with this Section 1.13 and applicable law have been obtained to authorize or take the action specified in the consents, and certified such determination for entry in the records of the corporation kept for the purpose of recording the proceedings of meetings of stockholders. If after such investigation and report the Secretary shall determine that the Consent is valid and that holders of Class B Common Stock having the requisite voting power to authorize or take the action specified in the Consent have given consent, that fact shall be certified on the records of the corporation kept for the purpose of recording the proceedings of meetings of stockholders, and the Consent shall be filed in such records, at which time the Consent shall become effective as action by holders of Class B Common Stock. Nothing contained in this Section 1.13 shall in any way be construed to suggest or imply that the Board of Directors or any stockholder shall not be entitled to contest the validity of any consent or revocation thereof, whether before or after such certification by the independent inspector or inspectors, or to take any other action (including, without limitation, the commencement, prosecution or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation). 9

ARTICLE II DIRECTORS 2.1 General Powers. The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the corporation except as otherwise provided by law or the Certificate of Incorporation. 2.2 Number, Election and Qualification. Except as otherwise provided by the Certificate of Incorporation and subject to the rights of holders of any series of Preferred Stock to elect directors, the number of directors of the Corporation shall be established by the Board of Directors. Election of directors need not be by written ballot. Directors need not be stockholders of the corporation. 2.3 Classes of Directors. Except as otherwise provided by the Certificate of Incorporation and subject to the rights of holders of any series of Preferred Stock to elect directors, the Classified Directors (as defined in the Certificate of Incorporation) shall be and are divided into three classes: Class I, Class II and Class III. Except as otherwise provided by the Certificate of Incorporation, the allocation of Classified Directors among classes shall be determined by resolution of the Board of Directors. 2.4 Terms of Office. (a) Except as otherwise set forth in the Certificate of Incorporation or these By-laws, each Class B Director shall serve for a term ending on the date of the first annual meeting following the annual meeting at which such Class B Director was elected. Each Classified Director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such Classified Director was elected; provided, that each Classified Director initially appointed to Class I shall serve for a term expiring at the corporation's annual meeting of stockholders held in 2006; each Classified Director initially appointed to Class II shall serve for a term expiring at the corporation's annual meeting of stockholders held in 2007; and each Classified Director initially appointed to Class III shall serve for a term expiring at the corporation's annual meeting of stockholders held in 2008. Notwithstanding the foregoing, but subject to Section 2.4(b) below, the term of each Class B Director and each Classified Director shall continue until the election and qualification of his successor and be subject to his earlier death, resignation, retirement or removal. (b) Pursuant to Section 5(b) of Article NINTH of the Certificate of Incorporation, on the Operative Date (as defined in the Certificate of Incorporation), the term of each Class B Director shall end and the number of authorized directors serving on the Board of Directors shall be reduced by the number of such Class B Directors. Notwithstanding the foregoing, the Board of Directors shall retain full authority provided by Section 2 of Article NINTH of the Certificate of Incorporation to increase the number of authorized directors following the reduction of authorized directors provided for in the previous sentence of this Section 2.4(b). 10

2.5 Quorum. The greater of (a) a majority of the directors at any time in office and (b) one-third of the number of directors fixed in accordance with Section 2 of Article NINTH of the Certificate of Incorporation shall constitute a quorum. If at any meeting of the Board of Directors there shall be less than such a quorum, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present. 2.6 Action at Meeting. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board of Directors unless a greater number is required by law or by the Certificate of Incorporation. 2.7 Removal. Subject to the rights of holders of any series of Preferred Stock, directors of the corporation may be removed only for cause and only by the affirmative vote of the holders of at least 75% of the votes which all the stockholders would be entitled to cast in the election of directors; provided, however, that the Class B Directors may be removed at any time without cause by the affirmative vote of holders of at least a majority of the voting power of the Class B Common Stock then outstanding. 2.8 Newly Created Directorships and Vacancies. (a) Until the Operative Date, and unless otherwise required by law or by resolution adopted by the affirmative vote of a majority of the Class B Directors then in office, any vacancy among the Class B Directors, however occurring, including a vacancy resulting from an enlargement of the Board of Directors, shall be filled only by a vote of a majority of the Class B Directors then in office, although less than a quorum or, if there are none, by a vote or action of the holders of Class B Common Stock, voting as a separate class. (b) Subject to the rights of holders of any series of Preferred Stock, and unless otherwise required by law or by resolution adopted by the affirmative vote of a majority of the Classified Directors then in office, any vacancy among the Classified Directors, however occurring, including a vacancy resulting from an enlargement of the Board of Directors, shall be filled only by vote of a majority of the Classified Directors then in office, although less than a quorum, or if there are none, by a vote of the holders of the capital stock entitled to vote in the election of such Classified Directors, voting together as a single class. A Classified Director elected to fill a vacancy shall hold office for a term expiring at the next annual meeting at which the term of office of the class to which such Classified Director shall have been chosen expires or until such Classified Director's successor shall have been duly elected and qualified. 2.9 Resignation. Any director may resign by delivering a resignation in writing or by electronic transmission to the corporation at its principal office or to the Chairman of the Board, the Chief Executive Officer, the President or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some later time or upon the happening of some later event. 2.10 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place as shall be determined from time to time by the Board of 11

Directors; provided that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders. 2.11 Special Meetings. Special meetings of the Board of Directors may be held at any time and place designated in a call by the Chairman of the Board, the Chief Executive Officer, the President, two or more directors, or by one director in the event that there is only a single director in office. 2.12 Notice of Special Meetings. Notice of the date, place, if any, and time of any special meeting of directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. Notice shall be duly given to each director (a) in person or by telephone at least 24 hours in advance of the meeting, (b) by sending written notice via reputable overnight courier, telecopy, facsimile, or electronic transmission, or delivering written notice by hand, to such director's last known business, home or electronic transmission address at least 48 hours in advance of the meeting, or (c) by sending written notice via first-class mail to such director's last known business or home address at least 72 hours in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting. 2.13 Meetings by Conference Communications Equipment. Directors may participate in meetings of the Board of Directors or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting. 2.14 Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent to the action in writing or by electronic transmission, and the written consents or electronic transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. 2.15 Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation with such lawfully delegable powers and duties as the Board of Directors thereby confers, to serve at the pleasure of the Board of Directors. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation and may authorize the seal of the corporation to be affixed to all papers which may require it. Adequate 12

provision shall be made for notice to members of all meetings; one-third (1/3) of the members shall constitute a quorum unless the committee shall consist of one (1) or two (2) members, in which event one (1) member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these By-laws for the Board of Directors. Except as otherwise provided in the Certificate of Incorporation, these Bylaws, or the resolution of the Board of Directors designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee. 2.16 Compensation of Directors. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings as the Board of Directors may from time to time determine. No such payment shall preclude any director from serving the corporation or any of its parent or subsidiary entities in any other capacity and receiving compensation for such service. ARTICLE III. OFFICERS 3.1 Titles. The officers of the corporation shall consist of a Chief Executive Officer, a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, including a Chairman of the Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant Treasurers, and Assistant Secretaries. The Board of Directors may appoint such other officers as it may deem appropriate. 3.2 Election. The Chief Executive Officer, President, Treasurer and Secretary shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting. 3.3 Qualification. No officer need be a stockholder. Any two or more offices may be held by the same person. 3.4 Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, each officer shall hold office until such officer's successor is elected and qualified, unless a different term is specified in the resolution electing or appointing such officer, or until such officer's earlier death, resignation or removal. 3.5 Resignation and Removal. Any officer may be removed at any time, with or without cause, by vote of a majority of the directors then in office. Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following such officer's resignation or removal, or any right to damages on account of such removal, whether 13

such officer's compensation be by the month or by the year or otherwise, unless such compensation is expressly provided for in a duly authorized written agreement with the corporation. 3.6 Vacancies. The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of Chief Executive Officer, President, Treasurer and Secretary. Each such successor shall hold office for the unexpired term of such officer's predecessor and until a successor is elected and qualified, or until such officer's earlier death, resignation or removal. 3.7 Chairman of the Board. The Board of Directors may appoint from its members a Chairman of the Board, who need not be an employee or officer of the corporation. If the Board of Directors appoints a Chairman of the Board, such Chairman shall perform such duties and possess such powers as are assigned by the Board of Directors and, if the Chairman of the Board is also designated as the corporation's Chief Executive Officer, shall have the powers and duties of the Chief Executive Officer prescribed in Section 3.8 of these By-laws. Unless otherwise provided by the Board of Directors, the Chairman of the Board shall preside at all meetings of the Board of Directors and stockholders. 3.8 President; Chief Executive Officer. Unless the Board of Directors has designated the Chairman of the Board or another person as the corporation's Chief Executive Officer, the President shall be the Chief Executive Officer of the corporation. The Chief Executive Officer shall have general charge and supervision of the business of the Corporation subject to the direction of the Board of Directors, and shall perform all duties and have all powers which are commonly incident to the office of chief executive or which are delegated to him or her by the Board of Directors. The President shall perform such other duties and shall have such other powers as the Board of Directors or the Chief Executive Officer (if the President is not the Chief Executive Officer) may from time to time prescribe. In the event of the absence, inability or refusal to act of the Chief Executive Officer or the President (if the President is not the Chief Executive Officer), the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform the duties of the Chief Executive Officer and when so performing such duties shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. 3.9 Vice Presidents. Each Vice President shall perform such duties and possess such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors. 3.10 Secretary and Assistant Secretaries. The Secretary shall perform such duties and shall have such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the secretary, including without limitation the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to attend all meetings of stockholders and the Board of Directors and keep a record of the proceedings, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be 14

custodian of corporate records and the corporate seal and to affix and attest to the same on documents. Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary. In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the chairman of the meeting shall designate a temporary secretary to keep a record of the meeting. 3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned by the Board of Directors or the Chief Executive Officer. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including without limitation the duty and power to keep and be responsible for all funds and securities of the corporation, to deposit funds of the corporation in depositories selected in accordance with these By-laws, to disburse such funds as ordered by the Board of Directors, to make proper accounts of such funds, and to render as required by the Board of Directors statements of all such transactions and of the financial condition of the corporation. The Assistant Treasurers shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer. 3.12 Salaries. Officers of the corporation shall be entitled to such salaries, compensation or reimbursement as shall be fixed or allowed from time to time by the Board of Directors. 3.13 Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof. ARTICLE IV CAPITAL STOCK 4.1 Issuance of Stock. Subject to the provisions of the Certificate of Incorporation, the whole or any part of any unissued balance of the authorized capital stock of the corporation or the whole or any part of any shares of the authorized capital stock of the corporation held in the corporation's treasury may be issued, sold, transferred or otherwise disposed of by vote of the Board of Directors in such manner, for such lawful consideration and on such terms as the Board of Directors may determine. 15

4.2 Certificates of Stock. Every holder of stock of the corporation shall be entitled to have a certificate, in such form as may be prescribed by law and by the Board of Directors, certifying the number and class of shares owned by such holder in the corporation. Each such certificate shall be signed by, or in the name of the corporation by, the Chairman or Vice Chairman, if any, of the Board of Directors, or the President or a Vice President, and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation. Any or all of the signatures on the certificate may be a facsimile. Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, these By-laws, applicable securities laws or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction. There shall be set forth on the face or back of each certificate representing shares of such class or series of stock of the corporation a statement that the corporation will furnish without charge to each stockholder who so requests a copy of the full text of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 4.3 Transfers. Except as otherwise established by rules and regulations adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these By-laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-laws. 4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen or destroyed, upon such terms and conditions as the Board of Directors may prescribe, including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity and posting of such bond as the Board of Directors may require for the protection of the corporation or any transfer agent or registrar. 4.5 Record Date. Except as otherwise required by law, the Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action. Such record date shall not precede the date on which the resolution fixing the record date is adopted and shall not be more than 60 nor less 16

than 10 days before the date of such meeting, nor more than 60 days prior to any other action to which such record date relates. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. If no record date is fixed, the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. ARTICLE V GENERAL PROVISIONS 5.1 Fiscal Year. Except as from time to time otherwise designated by the Board of Directors, the fiscal year of the corporation shall begin on the first day of January of each year and end on the last day of December in each year. 5.2 Corporate Seal. The corporate seal shall be in such form as shall be approved by the Board of Directors. 5.3 Waiver of Notice. Whenever notice is required to be given by law, by the Certificate of Incorporation or by these By-laws, a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether given before, at or after the time of the event for which notice is to be given, shall be deemed equivalent to notice required to be given to such person. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business nor the purpose of any meeting need be specified in such a waiver. 5.4 Voting of Securities. Except as the Board of Directors may otherwise designate, the Chief Executive Officer, the President or the Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this corporation (with or without power of substitution) at any meeting of stockholders or securityholders of any other entity, the securities of which may be held by this corporation. 5.5 Evidence of Authority. A certificate by the Secretary, or an Assistant Secretary, or a temporary Secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action. 5.6 Certificate of Incorporation. All references in these By-laws to the Certificate of Incorporation shall be deemed to refer to the Restated Certificate of Incorporation of the 17

corporation, as amended and in effect from time to time, including any Preferred Stock Designation (as defined in the Certificate of Incorporation). 5.7 Severability. Any determination that any provision of these By-laws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these By-laws. 5.8 Pronouns. All pronouns used in these By-laws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. 5.9 Reliance Upon Books, Reports And Records. Each director, each member of any committee designated by the Board of Directors, and each officer of the corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the corporation and upon such information, opinions, reports or statements presented to the corporation by any of its officers or employees, or committees of the Board of Directors so designated, or by any other person as to matters which such director or committee member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the corporation. ARTICLE VI AMENDMENTS These By-laws may be altered, amended or repealed, in whole or in part, or new By-laws may be adopted by the Board of Directors or by the stockholders as provided in the Certificate of Incorporation. 18

EXHIBIT 10.1 CYNOSURE, INC. 1992 STOCK OPTION PLAN February 12, 1992 1. Purpose. The purpose of this plan (the "Plan") is to secure for Cynosure, Inc. (the "Company") and its shareholders the benefits arising from capital stock ownership by employees, officers and directors of, and consultants or advisors to, the Company and its parent and subsidiary corporations who are expected to contribute to the Company's future growth and success. Except where the context otherwise requires, the term "Company" shall include the parent and all present and future subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from time to time (the "Code"). Those provisions of the Plan which make express reference to Section 422 shall apply only to Incentive Stock Options (as that term is defined in the Plan). 2. Type of Options and Administration. (a) Types of Options. Options granted pursuant to the Plan shall be authorized by action of the Board of Directors of the Company (or a Committee designated by the Board of Directors) and may be either incentive stock options ("Incentive Stock Options") meeting the requirements of Section 422 of the Code or non-statutory options which are not intended to meet the requirements of Section 422 of the Code. (b) Administration. The Plan will be administered by the Board of Directors of the Company, whose construction and interpretation of the terms and provisions of the Plan shall be final and conclusive. The Board of Directors may in its sole discretion grant options to purchase shares of the Company's Common Stock ("Common Stock") and issue shares upon exercise of such options as provided in the Plan. The Board shall have authority, subject to the express provisions of the Plan, to construe the respective option agreements and the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective option agreements, which need not be identical, and to make all other determinations in the judgment of the Board of Directors necessary or desirable for the administration of the Plan. The Board of Directors may correct any -1-

defect or supply any omission or reconcile any inconsistency in the Plan or in any option agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. No director or person acting pursuant to authority delegated by the Board of Directors shall be liable for any action or determination under the Plan made in good faith. The Board of Directors may, to the full extent permitted by or consistent with applicable laws or regulations (including, without limitation, applicable state law and Rule 16b-3 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3")), delegate any or all of its powers under the Plan to a committee (the "Committee") appointed by the Board of Directors, and if the Committee is so appointed all references to the Board of Directors in the Plan shall mean and relate to such Committee. (c) Applicability of Rule 16b-3. Those provisions of the Plan which make express reference to Rule 16b-3 shall apply only to such persons as are required to file reports under Section 16(a) of the Exchange Act (a "Reporting Person"). 3. Eligibility. (a) General. Options may be granted to persons who are, at the time of grant, employees, officers or directors of, or consultants or advisors to, the Company; provided, that the class of employees to whom incentive Stock Options may be granted shall be limited to all employees of the Company. A person who has been granted an option may, if he or she is otherwise eligible, be granted additional options if the Board of Directors shall so determine. (b) Grant of Options to Directors and Officers. From and after the registration of the Common Stock of the Company under the Exchange Act, the selection of a director or an officer (as the terms "director" and "officer" are defined for purposes of Rule 16b-3) as a recipient of an option, the timing of the option grant, the exercise price of the option and the number of shares subject to the option shall be determined either (i) by the Board of Directors, of which all members shall be "disinterested persons" (as hereinafter defined), or (ii) by two or more directors having full authority to act in the matter, each of whom shall be a "disinterested person." For the purposes of the Plan, a director shall be deemed to be a "disinterested person" only if such person qualifies as a "disinterested person" within the meaning of Rule 16b-3, as such term is interpreted from time to time. -2-

4. Stock Subject to Plan. Subject to adjustment as provided in Section 15 below, the maximum number of shares of Common Stock of the Company which may be issued and sold under the Plan is 1,500,000 shares. If an option granted under the Plan shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject to such option shall again be available for subsequent option grants under the Plan. If shares issued upon exercise of an option under the Plan are tendered to the Company in payment of the exercise price of an option granted under the Plan, such tendered shares shall again be available for subsequent option grants under the Plan; provided, that in no event shall (i) the total number of shares issued pursuant to the exercise of Incentive Stock Options under the Plan, on a cumulative basis, exceed the maximum number of shares authorized for issuance under the Plan exclusive of shares made available for issuance pursuant to this sentence or (ii) the total number of shares issued pursuant to the exercise of options, on a cumulative basis, exceed the maximum number of shares authorized for issuance under the Plan exclusive of shares made available for issuance pursuant to this sentence. 5. Forms of Option Agreements. As a condition to the grant of an option under the Plan, each recipient of an option shall execute an option agreement in such form not inconsistent with the Plan as may be approved by the Board of Directors. Such option agreements may differ among recipients. 6. Purchase Price. (a) General. The purchase price per share of stock deliverable upon the exercise of an option shall be determined by the Board of Directors, provided, however, that in the case of an Incentive Stock Option, the exercise price shall not be less than 100% of the fair market value of such stock, as determined by the Board of Directors, at the time of grant of such option, or less than 110% of such fair market value in the case of options described in Section 11(b). (b) Payment of Purchase Price. Options granted under the Plan may provide for the payment of the exercise price by delivery of cash or a check to the order of the Company in an amount equal to the exercise price of such options, or, to the extent provided in the applicable option agreement, (i) by delivery to the Company of shares of Common Stock of the Company already owned by the optionee having a fair market value equal in amount to the exercise price of the options being exercised, -3-

(ii) by any other means (including, without limitation, by delivery of a promissory note of the optionee payable on such terms as are specified by the Board of Directors) which the Board of Directors determines are consistent with the purpose of the Plan and with applicable laws and regulations (including, without limitation, the provisions of Rule 16b-3 and Regulation T promulgated by the Federal Reserve Board) or (iii) by any combination of such methods of payment. The fair market value of any shares of the Company's Common Stock or other non-cash consideration which may be delivered upon exercise of an option shall be determined by the Board of Directors. 7. Option Period. Each option and all rights thereunder shall expire on such date as shall be set forth in the applicable option agreement, except that, in the case of an Incentive Stock Option, such date shall not be later than ten years after the date on which the option is granted and, in all cases, options shall be subject to earlier termination as provided in the Plan. 8. Exercise of Options. Each option granted under the Plan shall be exercisable either in full or in installments at such time or times and during such period as shall be set forth in the agreement evidencing such option, subject to the provisions of the Plan. 9. Nontransferability of Options. Incentive Stock Options, and all options granted to Reporting Persons, shall not be assignable or transferable by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the optionee, shall be exercisable only by the optionee; provided, however, that non-statutory options may be transferred pursuant to a qualified domestic relations order (as defined in Rule 16b-3). 10. Effect of Termination of Employment or Other Relationship. Except as provided in Section 11 (d) with respect to Incentive Stock Options, and subject to the provisions of the Plan, the Board of Directors shall determine the period of time during which an optionee may exercise an option following (i) the termination of the optionee's employment or other relationship with the Company or (ii) the death or disability of the optionee. Such periods shall be set forth in the agreement evidencing such option. -4-

11. Incentive Stock Options. Options granted under the Plan which are intended to be Incentive Stock Options shall be subject to the following additional terms and conditions: (a) Express Designation. All Incentive Stock Options granted under the Plan shall, at the time of grant, be specifically designated as such in the option agreement covering such Incentive Stock Options. (b) 10% Shareholder. If any employee to whom an Incentive Stock Option is to be granted under the Plan is, at the time of the grant of such option, the owner of stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (after taking into account the attribution of stock ownership rules of Section 424(d) of the Code), then the following special provisions shall be applicable to the Incentive Stock Option granted to such individual: (i) The purchase price per share of the Common Stock subject to such incentive Stock Option shall not be less than 110% of the fair market value of one share of Common Stock at the time of grant; and (ii) the option exercise period shall not exceed five years from the date of grant. (c) Dollar Limitation. For so long as the Code shall so provide, options granted to any employee under the Plan (and any other incentive stock option plans of the Company) which are intended to constitute Incentive Stock Options shall not constitute Incentive Stock Options to the extent that such options, in the aggregate, become exercisable for the first time in any one calendar year for shares of Common Stock with an aggregate fair market value (determined as of the respective date or dates of grant) of more than $100,000. (d) Termination of Employment, Death or Disability. No Incentive Stock Option may be exercised unless, at the time of such exercise, the optionee is, and has been continuously since the date of grant of his or her option, employed by the Company, except that: (i) an Incentive Stock Option may be exercised within the period of three months after the date the optionee ceases to be an employee of the Company (or within such lesser period as may be specified in the applicable option agreement), provided, that the agreement with respect to such option -5-

may designate a longer exercise period and that the exercise after such three-month period shall be treated as the exercise of a non-statutory option under the Plan; (ii) if the optionee dies while in the employ of the Company, or within three months after the optionee ceases to be such an employee, the Incentive Stock Option may be exercised by the person to whom it is transferred by will or the laws of descent and distribution within the period of one year after the date of death (or within such lesser period as may be specified in the applicable option agreement); and (iii) if the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code or any successor provision thereto) while in the employ of the Company, the Incentive Stock Option may be exercised within the period of one year after the date the optionee ceases to be such an employee because of such disability (or within such lesser period as may be specified in the applicable option agreement). For all purposes of the Plan and any option granted hereunder, "employment" shall be defined in accordance with the provisions of Section 1.421-7(h) of the Income Tax Regulations (or any successor regulations). Notwithstanding the foregoing provisions, no Incentive Stock Option may be exercised after its expiration date. 12. Additional Provisions. (a) Additional Option Provisions. The Board of Directors may, in its sole discretion, include additional provisions in option agreements covering options granted under the Plan, including without limitation restrictions on transfer, repurchase rights, commitments to pay cash bonuses, to make, arrange for or guaranty loans or to transfer other property to optionees upon exercise of options, or such other provisions as shall be determined by the Board of Directors; provided that such additional provisions shall not be inconsistent with any other term or condition of the Plan and such additional provisions shall not cause any Incentive Stock Option granted under the Plan to fail to qualify as an Incentive Stock Option within the meaning of Section 422 of the Code. (b) Acceleration, Extension, Etc. The Board of Directors may, in its sole discretion, (i) accelerate the date or dates on which all or any particular option or options granted under the Plan may be exercised or (ii) extend the dates during which all, or any particular, option or options granted under the Plan may be exercised; -6-

provided, however, that no such extension shall be permitted if it would cause the Plan to fail to comply with Section 422 of the Code or with Rule 16b-3. 13. General Restrictions. (a) Investment Representations. The Company may require any person to whom an option is granted, as a condition of exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the option for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws, or with covenants or representations made by the Company in connection with any public offering of its Common Stock. (b) Compliance With Securities Laws. Each option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, or that the disclosure of non-public information or the satisfaction of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval, or satisfaction of such condition shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification, or to satisfy such condition. 14. Rights as a Shareholder. The holder of an option shall have no rights as a shareholder with respect to any shares covered by the option (including, without limitation, any rights to receive dividends or non-cash distributions with respect to such shares) until the date of issue of a stock certificate to him or her for such shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. -7-

15. Adjustment Provisions for Recapitalizations and Related Transactions. (a) General. If, through or as a result of any merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, (i) the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities of the Company, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Common Stock or other securities, an appropriate and proportionate adjustment may be made in (x) the maximum number and kind of shares reserved for issuance under the Plan, (y) the number and kind of shares or other securities subject to any then outstanding options under the Plan, and (z) the price for each share subject to any then outstanding options under the Plan, without changing the aggregate purchase price as to which such options remain exercisable. Notwithstanding the foregoing, no adjustment shall be made pursuant to this Section 15 if such adjustment would cause the Plan to fail to comply with Section 422 of the Code or with Rule 16b-3. (b) Board Authority to Make Adjustments. Any adjustments under this Section 15 will be made by the Board of Directors, whose determination as to what adjustment, if any, will be made and the extent thereof will be binding and adjustment, if any, will be made and the extent thereof will be final, binding and conclusive. No fractional shares will be issued under the plan on account of any such adjustments. 16. Merger, Consolidation, Asset Sale, Liquidation, etc. (a) General. In the event of a consolidation or merger or sale of all or substantially all of the assets of the Company in which outstanding shares of Common Stock are exchanged for securities, cash or other property of any other corporation or business entity or in the event of a liquidation of the Company, the Board of Directors of the Company, or the board of directors of any corporation assuming the obligations of the Company, may, in its discretion, take any one or more of the following actions, as to outstanding options: (i) provide that such options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), provided that any such options substituted for Incentive Stock Options shall meet the requirements of Section 424(a) of the Code, (ii) upon written notice to the optionees, provide that all unexercised options will terminate immediately prior to the consummation of such transaction unless exercised by the optionee within a specified period following the date of such notice, (iii) in the event of a merger under the terms of which holders of the Common Stock of the Company will receive upon -8-

consummation thereof a cash payment for each share surrendered in the merger (the "Merger Price"), make or provide for a cash payment to the optionees equal to the difference between (A) the Merger Price times the number of shares of Common Stock subject to such outstanding options (to the extent then exercisable at prices not in excess of the Merger Price) and (B) the aggregate exercise price of all such outstanding options in exchange for the termination of such options, and (iv) provide that all or any outstanding options shall become exercisable in full immediately prior to such event. (b) Substitute Options. The Company may grant options under the Plan in substitution for options held by employees of another corporation who become employees of the Company, or a subsidiary of the Company, as the result of a merger or consolidation of the employing corporation with the Company or a subsidiary of the Company, or as a result of the acquisition by the Company, or one of its subsidiaries, of property or stock of the employing corporation. The Company may direct that substitute options be granted on such terms and conditions as the Board of Directors considers appropriate in the circumstances. 17. No Special Employment Rights. Nothing contained in the Plan or in any option shall confer upon any optionee any right with respect to the continuation of his or her employment by the Company or interfere in any way with the right of the Company at any time to terminate such employment or to increase or decrease the compensation of the optionee. 18. Other Employee Benefits. Except as to plans which by their terms include such amounts as compensation, the amount of any compensation deemed to be received by an employee as a result of the exercise of an option or the sale of shares received upon such exercise will not constitute compensation with respect to which any other employee benefits of such employee are determined, including, without limitation, benefits under any bonus, pension, profit-sharing, life insurance or salary continuation plan, except as otherwise specifically determined by the Board of Directors. 19. Amendment of the Plan. (a) The Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect, except that if at any time the approval of the shareholders of the Company is required under Section 422 of the Code or any -9-

successor provision with respect to Incentive Stock Options, or under Rule 16b-3, the Board of Directors may not effect such modification or amendment without such approval. (b) The termination or any modification or amendment of the Plan shall not, without the consent of an optionee, affect his or her rights under an option previously granted to him or her. With the consent of the optionee affected, the Board of Directors may amend outstanding option agreements in a manner not inconsistent with the Plan. The Board of Directors shall have the right to amend or modify (i) the terms and provisions of the Plan and of any outstanding Incentive Stock Options granted under the Plan to the extent necessary to qualify any or all such options for such favorable federal income tax treatment (including deferral of taxation upon exercise) as may be afforded incentive stock options under Section 422 of the Code and (ii) the terms and provisions of the Plan and of any outstanding option to the extent necessary to ensure the qualification of the Plan under Rule 16b-3. 20. Withholding. (a) The Company shall have the right to deduct from payments of any kind otherwise due to the optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any shares issued upon exercise of options under the Plan. Subject to the prior approval of the Company, which may be withheld by the Company in its sole discretion, the optionee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company to withhold shares of Common Stock otherwise issuable pursuant to the exercise of an option or (ii) by delivering to the Company shares of Common Stock already owned by the optionee. The shares so delivered or withheld shall have a fair market value equal to such withholding obligation. The fair market value of the shares used to satisfy such withholding obligation shall be determined by the Company as of the date that the amount of tax to be withheld is to be determined. An optionee who has made an election pursuant to this Section 20(a) may only satisfy his or her withholding obligation with shares of Common Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements. (b) Notwithstanding the foregoing, in the case of a Reporting Person, no election to use shares for the payment of withholding taxes shall be effective unless made in compliance with any applicable requirements of Rule 16b-3. -10-

21. Cancellation and New Grant of Options, Etc. The Board of Directors shall have the authority to effect, at any time and from time to time, with the consent of the affected optionees, (i) the cancellation of any or all outstanding options under the Plan and the grant in substitution therefor of new options under the Plan covering the same or different numbers of shares of Common Stock and having an option exercise price per share which may be lower or higher than the exercise price per share of the cancelled options or (ii) the amendment of the terms of any and all outstanding options under the Plan to provide an option exercise price per share which is higher or lower than the then-current exercise price per share of such outstanding options. 22. Effective Date and Duration of the Plan. (a) Effective Date. The Plan shall become effective when adopted by the Board of Directors, but no Incentive Stock Option granted under the Plan shall become exercisable unless and until the Plan shall have been approved by the Company's shareholders. If such shareholder approval is not obtained within twelve months after the date of the Board's adoption of the Plan, no options previously granted under the Plan shall be deemed to be Incentive Stock Options and no Incentive Stock Options shall be granted thereafter. Amendments to the Plan not requiring shareholder approval shall become effective when adopted by the Board of Directors; amendments requiring shareholder approval (as provided in Section 19) shall become effective when adopted by the Board of Directors, but no Incentive Stock Option granted after the date of such amendment shall become exercisable (to the extent that such amendment to the Plan was required to enable the Company to grant such Incentive Stock Option to a particular optionee) unless and until such amendment shall have been approved by the Company's shareholders. If such shareholder approval is not obtained within twelve months of the Board's adoption of such amendment, any Incentive Stock Options granted on or after the date of such amendment shall terminate to the extent that such amendment to the Plan was required to enable the Company to grant such option to a particular optionee. Subject to this limitation, options may be granted under the Plan at any time after the effective date and before the date fixed for termination of the Plan. (b) Termination. Unless sooner terminated in accordance with Section 16, the Plan shall terminate, with respect to Incentive Stock Options, upon the earlier of (i) the close of business on the day next preceding the tenth anniversary of the date of its adoption by the Board of Directors, or (ii) the date on which all shares available for issuance under the Plan shall have been issued pursuant to the exercise or can-11-

cellation, of options granted under the Plan. Unless sooner terminated in accordance with Section 16, the Plan shall terminate with respect to options which are not incentive Stock Options on the date specified in (ii) above. If the date of termination is determined under (i) above, then options outstanding on such date shall continue to have force and effect in accordance with the provisions of the instruments evidencing such options. 23. Provision for Foreign Participants. The Board of Directors may, without amending the Plan, modify awards or options granted to participants who are foreign nationals or employed outside the United States to recognize differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters. Adopted by the Board of Directors on February 12, 1992. Approved by the Stockholders on February 12, 1992. -12-

EXHIBIT 10.2 CYNOSURE, INC. 2004 STOCK OPTION PLAN (as amended on May 17, 2005) 1. PURPOSES OF THE PLAN. This 2004 Stock Option Plan (the "Plan") is intended to provide incentives (a) to the officers and employees of Cynosure, Inc., a Delaware corporation (the "Company"), and any parent or subsidiary of the Company, by providing such officers and employees with opportunities to purchase stock in the Company pursuant to options granted hereunder which qualify as "incentive stock options" under Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or "ISOs"); and (b) to directors, officers, employees, consultants and advisors of the Company and any present or future parent, subsidiary or affiliate of the Company (hereinafter collectively "Related Corporations") by providing them with opportunities to purchase stock in the Company pursuant to options granted hereunder which do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"). Both ISOs and Non-Qualified Options are referred to hereafter individually as an "Option" and collectively as "Options". As used herein, the terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary corporation", respectively, as those terms are defined in Section 424 of the Code. 2. ADMINISTRATION OF THE PLAN. (a) Board or Committee Administration. This Plan shall be administered by the Board of Directors of the Company (the "Board"). The Board may appoint a Compensation Committee or a Stock Incentive Plan Committee (as the case may be, the "Committee") of two (2) or more of its members to administer this Plan and to grant Options hereunder, provided such Committee is delegated such powers in accordance with applicable state law. (All references in this Plan to the "Committee" shall mean the Board if no such Compensation Committee or Stock Incentive Plan Committee has been so appointed). If the Company or any Related Corporation registers any class of any equity security pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan shall be administered in accordance with the applicable rules set forth in Rule 16b-3 or any successor provisions of the Exchange Act ("Rule 16b-3"). From and after the date the Company becomes subject to Section 162(m) of the Code with respect to compensation earned under this Plan, each member of the Committee shall also be an "outside director" within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder. (b) Authority of Board or Committee. Subject to the terms of this Plan, the Committee shall have the authority to: (i) determine the employees of the Company and any Related Corporation (from among the class of employees eligible under paragraph 3 to receive ISOs) to whom ISOs may be granted, and to determine (from among the class of individuals and entities eligible under paragraph 3 to receive Non-Qualified Options) to whom Non-Qualified Options may be granted; (ii) determine the time or times at which Options may be granted; (iii) determine the exercise price of shares subject to each Option, which price shall not be less than the minimum price specified in paragraph 6; (iv) determine whether each Option granted shall be an ISO or a Non-Qualified Option: (v) determine (subject to paragraph 8) the time or times when or what conditions must be satisfied before each Option shall become exercisable and the duration of the exercise period; (vi) determine whether restrictions such as transfer restrictions, repurchase options and "drag along" rights and rights of first -1-

refusal are to be imposed on shares subject to Options and the nature of such restrictions, if any; (vii) impose such other terms and conditions with respect to capital stock issued pursuant to Options not inconsistent with the terms of this Plan as it deems necessary or desirable; and (viii) interpret the Plan and prescribe and rescind rules and regulations relating to it. If the Committee determines to issue a Non-Qualified Option, the Committee shall take whatever actions it deems necessary, under the Code and the regulations promulgated thereunder, to ensure that such Option is not treated as an ISO. The interpretation and construction by the Committee of any provisions of the Plan or of any Option granted under it shall be final unless otherwise determined by the Board. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem best. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it. (c) Delegation of Authority to Grant Options to Officer. Without limiting the foregoing, the Board, in its discretion, may also delegate to a single officer of the Company who is a member of the Board (to the extent consistent with state law) all or part of the Board's or Committee's authority and duties with respect to the granting of Options to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act or "covered employees" within the meaning of Section 162(m) of the Code, subject to such limitations as the Board or the Committee deems appropriate, including without limitation as to the number of Options that may be granted during the period of delegation, and guidelines as to the determination of the exercise price of any Option and the setting of vesting schedules or criteria. Such officer (the "Delegated Officer") shall act as a one member committee of the Board, and shall in any event be subject to the same limitations as are applicable to the Committee. References to the Committee in this Plan shall also include the Delegated Officer, but only to the extent consistent with the authorities and duties delegated to the Delegated Officer by the Board. The Board may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Delegated Officer that were consistent with the terms of this Plan. (d) Committee Actions. The Committee may select one of its members as its chairman and shall hold meetings at such time and places as it may determine. Acts by a majority of the Committee, acting at a meeting (whether held in person or by teleconference), or acts reduced to or approved in writing by all of the members of the Committee, shall be the valid acts of the Committee. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies however caused, or remove all members of the Committee and thereafter directly administer this Plan, subject to compliance with paragraph 2(a). (e) Grant of Options to Board Members. Options may be granted to members of the Board, subject to compliance with Rule 16b-3 when required by paragraph 2(a). All grants of Options to members of the Board shall in all respects be made in accordance with the provisions of this Plan applicable to other eligible persons. 3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee of the Company or any parent or subsidiary of the Company. Those officers and directors of the Company who are not employees of the -2-

Company or any parent or subsidiary of the Company may not be granted ISOs under this Plan. Non-Qualified Options may be granted at any employee, officer or director (whether or not also an employee) of or consultant or advisor to the Company or any Related Corporation. The Committee may take into consideration a recipient's individual circumstances in determining whether to grant an Option. 4. STOCK. The stock subject to Options shall be the authorized but unissued common shares of the Company (the "Common Stock"), or shares of Common Stock reacquired by the Company in any manner. The aggregate number of shares of Common Stock which may be issued pursuant to this Plan is 1,850,000, subject to adjustment as provided in paragraph 13. Any such shares may be issued pursuant to the exercise of Options, so long as the aggregate number of shares so issued does not exceed the number of such shares authorized under this paragraph 4. 5. GRANTING OF OPTIONS. Options may be granted under this Plan at any time after November 16, 2004 and prior to November 16, 2014. The date of grant of an Option under this Plan will be the date specified by the Committee at the time it grants the Options or such date that is specified in the instrument or agreement evidencing such Options; provided, however, that such date shall not be prior to the date on which the Committee acts to approve the grant and that with respect to an ISO grant such date shall not be earlier than the date of commencement of employment of the employee granted the ISO. The Committee shall have the right, with the consent of the optionee, to convert an ISO granted under this Plan to a Non-Qualified Option pursuant to paragraph 17. 6. MINIMUM OPTION PRICE; ISO LIMITATIONS. (a) Price for ISOs. The exercise price per share specified in the agreement relating to each ISO granted under this Plan shall not be less than the fair market value per share of Common Stock on the date of such grant. In the case of an ISO to be granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, the price per share specified in the agreement relating to such ISO shall not be less than one hundred ten percent (110%) of the fair market value per share of Common Stock on the date of grant. (b) $100,000 Annual Limitation on ISOs. Each eligible employee may be granted ISOs only to the extent that, in the aggregate under this Plan and all other incentive stock option plans of the Company and any parent or subsidiary of the Company, such ISOs do not become exercisable for the first time by such employee during any calendar year in a manner which would entitle the employee to purchase more than $100,000 in fair market value (determined at the time the ISOs were granted) of Common Stock in that year. Any Options granted to an employee in excess of such amount will be granted as Non-Qualified Options. (c) Determination of Fair Market Value. If, at the time an Option is granted under the Plan, the Common Stock is publicly traded, "fair market value" shall be determined as of the last business day for which the prices or quotes discussed in this sentence are available prior to the date such Option is granted and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on -3-

which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the NASDAQ National Market List, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not then traded on a national securities exchange and is not reported on the NASDAQ National Market List. However, if the Common Stock is not publicly traded at the time an Option is granted under the Plan, "fair market value" shall be deemed to be the fair value of the Common Stock as determined by the Committee after taking into consideration all factors in good faith it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm's length, if any. 7. OPTION DURATION. Subject to earlier termination as provided in paragraphs 9, 10, and 13(b), each Option shall expire on the date specified by, or shall have such duration as may be specified by, the Committee and set forth in the original stock option agreement granting such Option, but not more than ten years from the date of grant. Notwithstanding the foregoing, in the case of ISOs granted to an employee owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, such ISOs shall expire not more than five years from the date of grant. Non-Qualified Options shall expire on the date specified in the agreement granting such Non-Qualified Options, subject to extension as determined by the Committee. ISOs, or any part thereof, that have been converted into Non-Qualified Options may be extended as provided in paragraph 17. 8. EXERCISE OF OPTIONS. Subject to the provisions of paragraphs 9 through 13, each Option granted under the Plan shall be exercisable as follows: (a) Vesting. As set forth in paragraph 2(b), and subject to paragraphs 9 and 10 with respect to ISOs, the Committee shall determine the time or times when or what conditions must be satisfied before each Option shall become exercisable and the duration of the exercise period. The Committee may also specify such other conditions precedent as it deems appropriate to the exercise of an Option. (b) Full Vesting of Installments. Once an installment becomes exercisable it shall remain exercisable until expiration or termination of the Option, unless otherwise specified by the Committee. (c) Partial Exercise. Each Option or installment may be exercised at any time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable, provided that the Committee may specify a certain minimum number or percentage of the shares issuable upon exercise of any Option that must be purchased upon any exercise. (d) Acceleration of Vesting. The Committee shall have the right to accelerate the date of exercise of any installment of any Option, despite the fact that such acceleration may (i) cause the application of Sections 280G and 4999 of the Code if a Change in Control Event, -4-

as defined below in paragraph 13(b), occurs, or (ii) disqualify all or part of the Option as an ISO. 9. TERMINATION OF EMPLOYMENT. Subject to the provisions of paragraph 13(b), if an ISO optionee ceases to be employed by the Company and all Related Corporations other than by reason of death or disability as defined in paragraph 10, no further installments of his or her ISOs shall become exercisable following the date of such cessation of employment, and his or her ISOs shall terminate after the passage of ninety (90) days from the date of termination of his or her employment, but in no event later than on their specified expiration dates, except to the extent that such ISOs (or unexercised installments thereof) have been converted into Non-Qualified Options pursuant to paragraph 17. Nothing in this Plan shall be deemed to give any grantee of any Option the right to be retained in employment or other service by the Company or any Related Corporation for any period of time. Notwithstanding anything contained in this paragraph 9 to the contrary, the Board or Committee may establish rules in particular stock option agreements with respect to Misconduct, as defined below, committed by a grantee of an Option. 10. DEATH; DISABILITY. (a) Death. If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason of his or her death, or if the employee dies within the thirty (30) day period after the employee ceases to be employed by the Company and all Related Corporations, any ISO of his or hers may be exercised, to the extent of the number of shares with respect to which he or she could have exercised it on the date of his or her death, by his or her estate, personal representative or beneficiary who has acquired the ISO by will or by the laws of descent and distribution, at any time prior to the earlier of the specified expiration date of the ISO or one hundred and eighty (180) days from the date of such optionee's death. (b) Disability. If an ISO optionee ceases to be employed by the Company and all Related Corporations by reason of his or her disability, he or she shall have the right to exercise any ISO held by the optionee on the date of termination of employment, to the extent of the number of shares with respect to which he or she could have exercised it on that date, at any time prior to the earlier of the specified expiration date of the ISO or one (1) year from the date of the termination of the optionee's employment. For the purposes of the Plan, the term "disability" shall mean "permanent and total disability" as defined in Section 22(e)(3) of the Code or successor statute. 11. ASSIGNABILITY. Except for Non-Qualified Options which may be transferred for estate planning purposes to the extent provided in the instrument or agreement granting such Non-Qualified Options, no Option shall be assignable or transferable by the grantee except by will or by the laws of descent and distribution, and during the lifetime of the grantee each Option shall be exercisable only by the optionee. No Option, and no right to exercise any portion thereof, shall be subject to execution, attachment, or similar process, assignment, or any other alienation or hypothecation. Upon any attempt so to transfer, assign, pledge, hypothecate, or otherwise dispose of any Option, or of any right or privilege conferred thereby, contrary to the -5-

provisions thereof or hereof or upon the levy of any attachment or similar process upon any Option, right or privilege, such Option and such rights and privileges shall immediately become null and void. The foregoing shall not be construed to restrict the ability to assign or transfer shares of Common Stock issued upon the exercise or award of an Option to the extent that the instrument or agreement granting such Option permits such assignment or transfer. 12. TERMS AND CONDITIONS OF OPTIONS. Option shall be evidenced by instruments (which need not be identical) in such forms as the Committee may from time to time approve. Such instruments shall conform to the terms and conditions set forth in paragraphs 6 through 11 hereof to the extent applicable and may contain such other provisions as the Committee deems advisable which are not inconsistent with this Plan. Without limiting the foregoing, such provisions may include transfer restrictions, rights of refusal, vesting provisions, repurchase rights, lock-up provisions and drag-along rights with respect to shares of Common Stock issuable upon exercise of Option, and such other restrictions applicable to shares of Common Stock as the Committee may deem appropriate. In granting any Non-Qualified Option, the Committee may specify that such Non-Qualified Option shall be subject to the restrictions set forth herein with respect to ISOs, or to such other termination, cancellation or other provisions as the Committee may determine. The Committee may from time to time confer authority and responsibility on one or more of its own members and/or one or more officers of the Company to execute and deliver such instruments. The proper officers of the Company are authorized and directed to take any and all action necessary or advisable from time to time to carry out the terms of such instruments. 13. ADJUSTMENTS. Upon the occurrence of any of the following events, an optionee's rights with respect to Options granted to the optionee hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the written agreement between the optionee and the Company relating to such Option: (a) Stock Dividends and Stock Splits. If the shares of Common Stock subject to Options granted under this Plan shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of Options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. (b) Acquisitions and Change in Control Events. If the Company is to be subject to or engage in (x) a merger (or reverse merger), consolidation, or other similar event affecting the Company in which outstanding shares of Common Stock are exchanged for cash, securities, and/or other property of another entity, or (y) the sale or lease of all or substantially all of the Company's assets to another person or entity (any such event in such clauses (x) and (y) an "Acquisition"), the Committee or the Board shall (i) provide that the entity that survives the Acquisition or purchases or leases the Company's assets in the Acquisition or any affiliate of such entity (the "Surviving Entity") shall assume the Options granted pursuant to this Plan or substitute options to purchase securities of the Surviving Entity (or an affiliate thereof) on an equitable basis, (ii) upon written notice to the optionees, provide that all Options will become exercisable in full subject to the consummation of the Acquisition as of a specified time prior -6-

to the Acquisition and will terminate immediately prior to the consummation of such Acquisition or within a specified period of time after the Acquisition, and will not be exercisable after such termination, or (iii) in the event of an Acquisition under the terms of which holders of Common Stock will receive upon consummation thereof an amount of cash, securities and/or other property for each share of Common Stock surrendered pursuant to such Acquisition (the amount of cash plus the fair market value reasonably determined by the Committee of any securities and/or other property received by holders of Common Stock in exchange for each share of Common Stock shall be the "Acquisition Price"), provide that all outstanding Options shall terminate upon consummation of such Acquisition and that each optionee shall receive, in exchange for all vested shares of Common Stock under such Option on the date of the Acquisition, a payment in cash or in kind having a fair market value reasonably determined by the Committee or the board of directors of the Surviving Entity equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of such vested shares of Common Stock exceeds (B) the aggregate exercise price of such shares. If the Committee chooses under clause (iii) in the preceding sentence that all outstanding Options shall terminate upon consummation of an Acquisition and that each optionee shall receive a payment for the optionee's vested shares, with respect to any optionee whose stock option agreement specifies that no shares are vested until the first anniversary of the commencement of the optionee's employment, if the consummation of the Acquisition occurs prior to such first anniversary, then the number of vested shares under such Option shall be deemed to be equal to the product of (x) the number of shares of stock subject to the Option that otherwise would vest on the first anniversary and (y) the quotient obtained by dividing the number of days the optionee was employed by the Company, by 365. For purposes hereof, an Option shall be considered to be assumed or substituted "on an equitable basis" (without limiting other ways in which an Option may be assumed or substituted on an equitable basis hereunder) if, following consummation of the Acquisition, the assumed or substituted option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Acquisition, the consideration received as a result of the Acquisition by the holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Acquisition (and if holders of Common Stock were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Acquisition Event is not solely common stock of the Surviving Entity (or an affiliate thereof), the Company may, with the consent of the Surviving Entity, provide for the consideration to be received upon the exercise of each share of Common Stock subject to the Option to consist solely of common stock of the Surviving Entity (or an affiliate thereof) having a fair market value as reasonably determined by the Committee or the board of directors of the Surviving Entity equal to the Acquisition Price. If a Change in Control Event, as defined below, occurs that either (a) does not also constitute an Acquisition or (b) does constitute an Acquisition and clause (i) of the preceding paragraph is elected, and the optionee's employment with the Company, the Related Corporation or the Surviving Entity is terminated on or prior to the six month anniversary of the date of the consummation of such Change in Control Event either by the optionee for Good Reason, as defined below, or by the Company, the Related Corporation or the Surviving Entity for reason(s) other than Misconduct, as defined below, then all of the Options, or the equivalent to such Options in the form of assumed or substituted options granted in the Surviving Entity, that but for such termination and such Change in Control Event would vest on or prior to the next following annual anniversary of the Grant Date thereafter shall become immediately exercisable in full and any repurchase provisions applicable to Common Stock -7-

issued upon exercise thereof shall lapse, provided, however, that in particular stock option agreements issued pursuant to this Plan, the Board may provide that the Options or assumed or substituted options covered by such agreement shall become immediately exercisable upon the consummation of such Change in Control Event without regard to termination of employment, and that any repurchase provisions applicable to Common Stock issued upon exercise thereof shall lapse. A "Change in Control Event" shall occur upon the occurrence of (i) an Acquisition after which holders of the Common Stock before the Acquisition do not beneficially own, directly or indirectly, at least 50% of the combined voting power of the then-outstanding securities of the Surviving Entity entitled to vote generally in the election of directors immediately after the consummation of the Acquisition, (ii) a single transaction or a series of transactions pursuant to which any person (within the meaning of Section 13(d) or Section 14(d)(2) of the Securities Exchange Act of 1934), excluding any employee benefit plan sponsored by the Company and any affiliates of the Company prior to such transaction or transactions, acquires the beneficial ownership, directly or indirectly, of at least 50% of the combined voting power of the then-outstanding securities of the Company or the Surviving Entity, as the case may be, entitled to vote generally in the election of directors immediately after the consummation of the transaction or transactions, except that any acquisitions of securities directly from the Company shall be disregarded for purposes of this clause (ii), or (iii) the liquidation or dissolution of the Company. If, in connection with a Change in Control Event, a tax under Section 4999 of the Code would be imposed on the grantee of any Option (after taking into account the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code), and the grantee, on an after-tax basis (taking into account such tax) would receive greater net compensation by not having any or all of such Options accelerate, then at the discretion of the Committee, the number of Options of any such grantee which shall become immediately exercisable, realizable or vested as provided in this Section 13 (or such provision of any other agreement or instrument governing such Option that provides for such an acceleration in connection with a Change in Control Event) may be reduced (or delayed), to the extent necessary to maximize such net compensation. For purposes of determining "net compensation" under this paragraph, the amount of compensation considered to be realized by the grantee of any Option as a result of the acceleration of the vesting of such Option shall be determined in accordance with the principles set forth in the proposed Treasury Regulations under Section 280G of the Code (or any final or temporary Treasury Regulations replacing such proposed Treasury Regulations) for determining the amount of any "parachute payment" resulting from the acceleration of vesting of restricted stock, a stock option or any other unvested stock right. "Misconduct" shall mean any one or more of the following: (a) the commission of an act of embezzlement, fraud, dishonesty or deliberate disregard of the rules or policies of the Company or any Related Corporation which results in material loss, damage or injury to the Company or any Related Corporation, whether directly or indirectly; (b) the unauthorized disclosure of any trade secret or confidential information of the Company or any Related Corporation; (c) the breach by the optionee of any agreement with the Company or any Related Corporation, including without limitation any noncompetition agreement between the optionee and the Company or any Related Corporation; or (d) the willful failure by the optionee to perform his or her material responsibilities to the Company or any Related Corporation. -8-

"Good Reason" shall mean (i) any material diminution in the optionee's title, authority, or responsibilities from and after such Acquisition or Change in Control Event, as the case may be, (ii) any reduction in the annual cash compensation payable to the optionee from and after such Acquisition or Change in Control Event, as the case may be or (iii) a change of more than 100 miles in the optionee's permanent workplace without the optionee's consent. (c) Recapitalization or Reorganization. If a recapitalization or reorganization of the Company (other than a transaction described in subparagraph (b) above) occurs, pursuant to which securities of the Company or another entity are issued with respect to the outstanding shares of Common Stock, an optionee, upon exercising an Option, shall be entitled to receive for the purchase price paid upon such exercise the securities he or she would have received if he or she had exercised his or her Option prior to such recapitalization or reorganization and had been the owner of the Common Stock receivable upon such exercise at such time. (d) Modification of ISOs. Notwithstanding the foregoing, any adjustments made pursuant to the foregoing subparagraphs (a), (b) or (c) with respect to ISOs shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustments would constitute a "modification" of such ISOs (as that term is defined in Section 424 of the Code or any successor thereto) or would cause any adverse tax consequences for the holders of such ISOs. If the Committee determines that such adjustments made with respect to ISOs would constitute a modification of such ISOs, it may refrain from making such adjustments. (e) Issuances of Securities and Non-Stock Dividends. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, of the Company shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company (and, in the case of securities of the Company, such adjustments shall be made pursuant to the foregoing subparagraph (a)). (f) Fractional Shares. No fractional shares shall be issued under this Plan, and the optionee shall receive from the Company cash in lieu of such fractional shares. (g) Adjustments. Upon the happening of any of the foregoing events described in subparagraphs (a), (b) or (c) above, the class and aggregate number of shares set forth in paragraph 4 hereof that are subject to Options which previously have been or subsequently may be granted under this Plan shall also be appropriately adjusted to reflect the events described in such subparagraphs. The Committee or the board of directors of the Surviving Entity (the "Successor Board"), as applicable, shall determine the specific adjustments to be made under this paragraph 13 and its determination shall be conclusive. If any person or entity owning Common Stock obtained by exercise of an Option made hereunder receives shares or securities or cash in connection with a corporate transaction described in subparagraphs (a), (b) or (c) above as a result of owning such Common Stock, except as otherwise provided in subparagraph (b), such shares or securities or cash shall be subject to all of the conditions and restrictions applicable to the Common Stock with respect to which such shares or securities or cash were issued, unless otherwise determined by the Committee or the Successor Board. -9-

14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment thereof) shall be exercised by giving written notice to the Company at its principal office address. Such notice shall identify the Option being exercised and specify the number of shares as to which such Option is being exercised, accompanied by full payment of the purchase price therefor either (a) in United States dollars in cash or by check, or (b) at the discretion of the Committee, by delivery of an irrevocable and unconditional undertaking, satisfactory in form and substance to the Company, by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price, or delivery to the Company of a copy of irrevocable and unconditional instructions, satisfactory in form and substance to the Company, to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price, or (c) at the discretion of the Committee, by delivery of the grantee's personal recourse note bearing interest payable not less than annually at no less than 100% of the applicable Federal rate, as defined in Section 1274(d) of the Code, or (d) at the discretion of the Committee, by any combination of (a), (b) and (c) above. The holder of an Option shall not have the rights of a shareholder with respect to the shares covered by his or her Option until the date of issuance of a stock certificate to the optionee for the shares subject to the Option. Except as expressly provided above in paragraph 13 with respect to changes in capitalization and stock dividends, no adjustment shall be made for dividends or similar rights for which the record date is before the date such stock certificate is issued. 15. TERM AND AMENDMENT OF PLAN. This Plan was originally adopted by the Board of Directors and approved by the stockholders of the Company as of November 16, 2004, 2004. This Plan shall expire on November 16, 2014 (except as to Options outstanding on that date). Subject to the provisions of paragraph 5 above, Options may be granted under this Plan prior to the date of stockholder approval of this Plan. The Board may terminate or amend this Plan in any respect at any time, except that (a) the provisions of paragraph 3 regarding eligibility for grants of ISOs may not be modified; (b) the provisions of paragraph 6(b) regarding the exercise price at which shares may be offered pursuant to ISOs may not be modified (except by adjustment pursuant to paragraph 13); and (c) the expiration date of this Plan may not be extended without the approval of the stockholders obtained within 12 months before or after the Board adopts a resolution authorizing any of the foregoing actions. 16. SECTION 162(m). Notwithstanding anything in this Plan to the contrary, no Option shall become exercisable, vested or realizable if such Option is granted to an employee that is a "covered employee" as defined in Section 162(m) of the Code and the Committee has determined that such Option should be structured so that it is not "applicable employee remuneration" under such Section 162(m) unless and until the terms of this Plan, including any amendment hereto, have been approved by the Company's stockholders in the manner and to the extent required under such Section 162(m). 17. AMENDMENT OF OPTIONS. The Board or Committee may amend, modify or terminate any outstanding Options including, but not limited to, substituting therefor another Option of the same or a different type, -10-

changing the date of exercise or realization, and converting an ISO to a Non-Qualified Option, provided, that, except as otherwise provided in paragraphs 9 or 10, the grantee's consent to such action shall be required unless the Board or Committee determines that the action, taking into account any related action, would not materially and adversely affect the grantee. 18. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of shares pursuant to Options issued or granted under this Plan shall be used for general corporate purposes. 19. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver shares of the Common Stock under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such shares. 20. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-Qualified Option or the making of a Disqualifying Disposition (as defined in paragraph 21), the Company, in accordance with Section 3402(a) of the Code, may require the optionee or purchaser to pay additional withholding taxes in respect of the amount that is considered compensation includible in such person's gross income. The Committee in its discretion may condition the exercise of an Option on the grantee's payment of such additional withholding taxes. 21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who receives an ISO must agree to notify the Company in writing immediately after the employee makes a Disqualifying Disposition of any Common Stock acquired pursuant to the exercise of an ISO. A "Disqualifying Disposition" is any disposition (including any sale) of such Common Stock before the later of (a) two years after the date the employee was granted the ISO, or (b) one year after the date the employee acquired Common Stock by exercising the ISO. If the employee has died before such stock is sold, these holding period requirements do not apply and no Disqualifying Disposition can occur thereafter. 22. GOVERNING LAW; CONSTRUCTION. The validity and construction of this Plan and the instruments evidencing Options shall be governed by the laws of the State of Delaware. -11-

EXHIBIT 10.3 CYNOSURE, INC. 2005 STOCK INCENTIVE PLAN 1. Purpose The purpose of this 2005 Stock Incentive Plan (the "Plan") of Cynosure, Inc., a Delaware corporation (the "Company"), is to advance the interests of the Company's stockholders by enhancing the Company's ability to attract, retain and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to align their interests with those of the Company's stockholders. Except where the context otherwise requires, the term "Company" shall include any of the Company's present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the "Code") and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the "Board"). 2. Eligibility All of the Company's employees, officers, directors, consultants and advisors are eligible to receive options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards (each, an "Award") under the Plan. Each person who receives an Award under the Plan is deemed a "Participant". 3. Administration and Delegation (a) Administration by Board of Directors. The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board's sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith. (b) Appointment of Committees. To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a "Committee"). All references in the Plan to the "Board" shall mean the Board or a Committee of the Board or the officers referred to in Section 3(c) to the extent that the Board's powers or authority under the Plan have been delegated to such Committee or officers. (c) Delegation to Officers. To the extent permitted by applicable law, the Board may delegate to one or more officers of the Company the power to grant Awards to employees or

officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of the Awards to be granted by such officers (including the exercise price of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to Awards that the officers may grant; provided further, however, that no officer shall be authorized to grant Awards to any "executive officer" of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) or to any "officer" of the Company (as defined by Rule 16a-1 under the Exchange Act). 4. Stock Available for Awards (a) Number of Shares. Subject to adjustment under Section 10, Awards may be made under the Plan for up to the number of shares of Class A Common Stock, par value 0.001 per share, of the Company (the "Class A Common Stock") that is equal to the sum of: (1) 500,000 shares of Class A Common Stock; plus (2) such additional number of shares of Class A Common Stock (up to 100,000 shares) as is equal to the sum of (x) the number of shares of Class B Common Stock reserved for issuance under the Company's 2004 Stock Option Plan (the "Existing Plan") that remain available for grant under the Existing Plan immediately prior to the closing of the Company's initial public offering and (y) the number of shares of Class B Common Stock subject to awards granted under the Existing Plan which awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right (subject, however, in the case of Incentive Stock Options (as hereinafter defined) to any limitations of the Code); plus (3) an annual increase to be added on the first day of each of the Company's fiscal years during the period beginning in fiscal year 2006 and ending on the second day of fiscal year 2015 equal to the lesser of (i) 300,000 shares of Class A Common Stock, (ii) 2.5% of the aggregate number of shares of Class A Common Stock and Class B Common Stock, par value 0.001 per share, of the Company (the "Class B Common Stock", and together with the Class A Common Stock, the "Common Stock") outstanding on such date or (iii) an amount determined by the Board. Notwithstanding clause (3) above, in no event shall the number of shares available under this Plan be increased as set forth in clause (3) to the extent such increase, in addition to any other increases proposed by the Board in the number of shares available for issuance under all other employee or director stock plans, would result in the total number of shares then available for issuance under all employee and director stock plans exceeding 25% of the outstanding shares of the Company on the first day of the applicable fiscal year. If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Class A Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Class A Common Stock not being -2-

issued, the unused Class A Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Further, shares of Class A Common Stock tendered to the Company by a Participant to exercise an Award shall be added to the number of shares of Class A Common Stock available for the grant of Awards under the Plan. However, in the case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) Per-Participant Limit. Subject to adjustment under Section 10, for Awards granted after the Class A Common Stock is registered under the Securities Exchange Act of 1934 (the "Exchange Act"), the maximum number of shares of Class A Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be 250,000 per calendar year. The per-Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code or any successor provision thereto, and the regulations thereunder ("Section 162(m)"). 5. Stock Options (a) General. The Board may grant options to purchase Class A Common Stock (each, an "Option") and determine the number of shares of Class A Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option which is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock Option". (b) Incentive Stock Options. An Option that the Board intends to be an "incentive stock option" as defined in Section 422 of the Code (an "Incentive Stock Option") shall only be granted to employees of the Company, any of the Company's present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to be an Incentive Stock Option is not an Incentive Stock Option or for any action taken by the Board pursuant to Section 11(f), including without limitation the conversion of an Incentive Stock Option to a Nonstatutory Stock Option. (c) Exercise Price. The Board shall establish the exercise price of each Option and specify such exercise price in the applicable option agreement. (d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement. (e) Exercise of Option. Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised. Shares of Class A Common -3-

Stock subject to the Option will be delivered by the Company following exercise either as soon as practicable or, subject to such conditions as the Board shall specify, on a deferred basis (with the Company's obligation to be evidenced by an instrument providing for future delivery of the deferred shares at the time or times specified by the Board). (f) Payment Upon Exercise. Class A Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows: (1) in cash or by check, payable to the order of the Company; (2) except as the Board may otherwise provide in an option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding; (3) when the Class A Common Stock is registered under the Exchange Act, by delivery of shares of Class A Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board ("Fair Market Value"), provided (i) such method of payment is then permitted under applicable law, (ii) such Class A Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its discretion and (iii) such Class A Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements; (4) to the extent permitted by applicable law and by the Board, by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or (5) by any combination of the above permitted forms of payment. (g) Substitute Options. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Options in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Options contained in the other sections of this Section 5 or in Section 2. Substitute Options shall not count against the overall share limit set forth in Section 4(a), except as may be required by reason of Section 422 and related provisions of the Code. (h) Repricing of Options. The Board may, without stockholder approval, amend any outstanding Option granted under the Plan to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Option. The Board may also, without stockholder approval, cancel any outstanding option (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan covering the same or a different number of shares of Class A Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled option. -4-

6. Restricted Stock; Restricted Stock Units. (a) General. The Board may grant Awards entitling recipients to acquire shares of Class A Common Stock ("Restricted Stock"), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award. Instead of granting Awards for Restricted Stock, the Board may grant Awards entitling the recipient to receive shares of Class A Common Stock to be delivered at the time such shares of Class A Common Stock vest ("Restricted Stock Units") (Restricted Stock and Restricted Stock Units are each referred to herein as a "Restricted Stock Award"). (b) Terms and Conditions. The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any. (c) Stock Certificates. Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant's death (the "Designated Beneficiary"). In the absence of an effective designation by a Participant, "Designated Beneficiary" shall mean the Participant's estate. 7. Other Stock-Based Awards Other Awards of shares of Class A Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Class A Common Stock or other property, may be granted hereunder to Participants ("Other Stock Unit Awards"), including without limitation Awards entitling recipients to receive shares of Class A Common Stock to be delivered in the future. Such Other Stock Unit Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock Unit Awards may be paid in shares of Class A Common Stock or cash, as the Board shall determine. Subject to the provisions of the Plan, the Board shall determine the conditions of each Other Stock Unit Award, including any purchase price applicable thereto. 8. Adjustments for Changes in Class A Common Stock and Certain Other Events. (a) Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Class A Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limit set forth in Section 4(b), (iii) the number and class of -5-

securities and exercise price per share of each outstanding Option and each Option issuable under Section 6, (iv) the share- and per-share provisions of each Stock Appreciation Right, (v) the repurchase price per share subject to each outstanding Restricted Stock Award, and (vi) the share- and per-share-related provisions of each outstanding Other Stock Unit Award, shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent determined by the Board. (b) Reorganization and Change in Control Events (1) Definitions (a) A "Reorganization Event" shall mean: (i) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled; (ii) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction; or (iii) any liquidation or dissolution of the Company. (b) A "Change in Control Event" shall mean: (i) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 50% or more of either (x) the aggregate number of shares of Common Stock then-outstanding (the "Outstanding Company Common Stock") or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (excluding, prior to the "Operative Date" (as defined in the Company's Certificate of Incorporation), "Class B Directors" (as defined in the Company's Certificate of Incorporation)) (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or -6-

exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (C) any acquisition by any corporation pursuant to a Business Combination (as defined below) which complies with clauses (x) and (y) of subsection (iii) of this definition; or (ii) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term "Continuing Director" means at any date a member of the Board (x) who was a member of the Board on the date of the initial adoption of this Plan by the Board or (y) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or (iii) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors (excluding, prior to the Operative Date, Class B Directors), respectively, of the resulting or acquiring corporation in such Business Combination -7-

(which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company's assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 50% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (excluding, prior to the Operative Date, Class B Directors) (except to the extent that such ownership existed prior to the Business Combination); or (iv) the liquidation or dissolution of the Company. (c) "Good Reason" shall mean any significant diminution in the Participant's title, authority, or responsibilities from and after such Reorganization Event or Change in Control Event, as the case may be, or any reduction in the annual cash compensation payable to the Participant from and after such Reorganization Event or Change in Control Event, as the case may be, or the relocation of the place of business at which the Participant is principally located to a location that is greater than 50 miles from its location immediately prior to such Reorganization Event or Change in Control Event. (d) "Cause" shall mean any (i) willful failure by the Participant, which failure is not cured within 30 days of written notice to the Participant from the Company, to perform his or her material responsibilities to the Company, (ii) willful misconduct by the Participant which affects the business reputation of the Company, (iii) material breach by the Participant of any employment, confidentiality, non-competition or non-solicitation agreement with the Company, (iv) conviction or plea of nolo contendere (no contest) by the Participant to a felony, or (v) commission by the Participant of any act involving fraud, theft or dishonesty with respect to the Company's business or affairs.. The Participant shall be considered to have been discharged for "Cause" if the Company -8-

determines, within 30 days after the Participant's resignation, that discharge for Cause was warranted. (2) Effect on Options (a) Reorganization Event. Upon the occurrence of a Reorganization Event (regardless of whether such event also constitutes a Change in Control Event), or the execution by the Company of any agreement with respect to a Reorganization Event (regardless of whether such event will result in a Change in Control Event), the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof); provided, however, that if such Reorganization Event also constitutes a Change in Control Event, except to the extent specifically provided to the contrary in the instrument evidencing any Option or any other agreement between a Participant and the Company, such assumed or substituted options shall become immediately exercisable in full if, on or prior to the date that is eighteen months after the date of the consummation of the Reorganization Event, the Participant's employment with the Company or the acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Cause by the Company or the acquiring or succeeding corporation. For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in value (as determined by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event. Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to -9-

assume, or substitute for, such Options, or in the event of a liquidation or dissolution of the Company, the Board shall, upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Reorganization Event and will terminate immediately prior to the consummation of such Reorganization Event, except to the extent exercised by the Participants before the consummation of such Reorganization Event; provided, however, that in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Reorganization Event (the "Acquisition Price"), then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Reorganization Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options. (b) Change in Control Event that is not a Reorganization Event. Upon the occurrence of a Change in Control Event that does not also constitute a Reorganization Event, except to the extent specifically provided to the contrary in the instrument evidencing any Option or any other agreement between a Participant and the Company, each then-outstanding Option shall continue to become vested in accordance with the original vesting schedule set forth in such Option; provided, however, that each such Option shall become immediately exercisable in full if, on or prior to the date that is eighteen months after the date of the consummation of the Change in Control Event, the Participant's employment with the Company or the acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Cause by the Company or the acquiring or succeeding corporation. (3) Effect on Restricted Stock Awards (a) Reorganization Event that is not a Change in Control Event. Upon the occurrence of a Reorganization Event that is not a Change in Control Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company's successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award. -10-

(b) Change in Control Event. Upon the occurrence of a Change in Control Event (regardless of whether such event also constitutes a Reorganization Event), except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock Award or any other agreement between a Participant and the Company, each then-outstanding Restricted Stock Award shall continue to become free from conditions or restrictions in accordance with the original schedule set forth in such Restricted Stock Award; provided, however, that each such Restricted Stock Award shall immediately become free from all conditions or restrictions if, on or prior to the date that is eighteen months after the date of the consummation of the Change in Control Event, the Participant's employment with the Company or the acquiring or succeeding corporation is terminated for Good Reason by the Participant or is terminated without Cause by the Company or the acquiring or succeeding corporation. (4) Effect on Other Stock Unit Awards The Board may specify in an Award at the time of the grant the effect of a Reorganization Event and Change in Control Event on any Other Stock Unit Award. 9. General Provisions Applicable to Awards (a) Transferability of Awards. Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. (b) Documentation. Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan. (c) Board Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly. (d) Termination of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant's legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award. (e) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Company for payment of, any taxes required by law to be withheld in -11-

connection with an Award to such Participant. Except as the Board may otherwise provide in an Award, for so long as the Class A Common Stock is registered under the Exchange Act, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Class A Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company's minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares surrendered to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements. The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant. (f) Amendment of Award. The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. (g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Class A Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations. (h) Acceleration. The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be. 10. Miscellaneous (a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) No Rights As Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Class A Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a -12-

split of the Class A Common Stock by means of a stock dividend and the exercise price of and the number of shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Class A Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend. (c) Effective Date and Term of Plan. The Plan shall become effective on the date on which the Securities and Exchange Commission declares the registration statement on Form S-1 for the initial public offering of the Company's Class A Common Stock effective (the "Effective Date"). No Awards shall be granted under the Plan after the completion of 10 years from the earlier of (i) the Effective Date or (ii) the date the Plan was approved by the Company's stockholders, but Awards previously granted may extend beyond that date. (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time; provided, however, that, to the extent determined by the Board, no amendment requiring stockholder approval under any applicable legal, regulatory or listing requirement shall become effective until such stockholder approval is obtained. (e) Authorization of Sub-Plans. The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to this Plan containing (i) such limitations on the Board's discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement. (f) Compliance with Code Section 409A. No Award shall provide for deferral of compensation that does not comply with Section 409A of the Code, unless the Board, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. (g) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than such state. -13-

EXHIBIT 10.4 CYNOSURE, INC. EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of _ September 2003 by and between Cynosure, Inc., a Delaware corporation (the "Company") and Michael Davin ("Employee"). BACKGROUND A. The Company desires to retain the services of Employee as Chief Executive Officer of the Company from the date of this Agreement (the "Effective Date"). The Company also desires to provide employment security to Employee, thereby inducing Employee to continue employment with the Company and enhancing Employee's ability to perform effectively. B. Employee is willing to be employed by the Company on the terms and subject to the conditions set forth in this Agreement. THE PARTIES AGREE AS FOLLOWS: 1. EMPLOYMENT. Company hereby employs Employee, and Employee hereby accepts such employment, upon the terms and conditions set forth herein. 2. DUTIES. 2.1 Position. Employee is employed as the Chief Executive Officer of the Company and shall have the duties and responsibilities assigned by the Board of Directors of the Company, both upon initial hire and as may be reasonably assigned from time to time. Employee shall perform faithfully and diligently all duties assigned to Employee. 2.2 Best Effort/Full-time. Employee will expend Employee's best efforts on behalf of Company, and will abide by all policies and decisions made by Company, as well as all applicable federal, state and local laws, regulations or ordinances. Employee will act in the best interest of Company at all times, Employee shall devote Employee's full business time and efforts to the performance of Employee's assigned duties for Company, unless Employee notifies Company in advance of Employee's intent to engage in other paid work and receives Company's express written consent to do so. 2.3 Work Location. Employee's principal place of work shall be located in Chelmsford, Massachusetts or such other location as the parties may agree upon from time to time. 2.4 Change of Location. In the event that the Company relocates its operations to a location outside of a one hundred mile radius of Chelmsford, Massachusetts within two years following the date hereof and Employee elects not to continue employment with the Company, the Company shall pay to Employee an amount equal to Employee's then Base Salary, accrued bonus and fringe benefits for a twelve month period. -1-

3. TERM. The employment relationship pursuant to this Agreement shall be without a term, and can be terminated in accordance with Section 7 below. 4. COMPENSATION. 4.1 Base Salary. As compensation for Employee's performance of Employee's duties hereunder, Company shall pay to Employee an initial Base Salary of $205,000 per year, reduced to $180,000 for the first 12 months, subject to annual review and adjustment by the Board of Directors, payable in accordance with the normal payroll practices of Company, less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions. In the event Employee's employment under this Agreement is terminated by either party, for any reason, Employee will earn the Base Salary then in effect, accrued bonus and fringe benefits prorated to the date of termination. 4.2 Incentive Compensation. Employee will be eligible to earn incentive compensation. (a) Bonus: Upon fulfillment of the goals outlined in annex (1), $10,000 bonus payments will be made 6, 12, 18 months after the Effective Date. All bonus payments will be made less required deductions for state and federal withholding tax, social security, and other employment taxes and payroll deductions. (b) Share in profit: from fiscal year 2004 Employee will be eligible to receive payment of 10% of the Adjusted Net Profit, if positive, (as defined in Annex (2)) for the first 2 years of employment and of 5% of the Adjusted Net Profit, if positive, for the following years. Payments will be made less required deductions for state and federal withholding tax, social security, and other employment taxes and payroll deductions. 4.3 Performance and Salary Review. After the first two years of employment, Company will periodically review Employee's performance on no less than an annual basis. Adjustments to salary or other compensation, if any, will be made by Company in its sole and absolute discretion. 4.4 Stock Compensation. Employee will be granted stock purchase rights under the Cynosure Stock Compensation Plan in accordance with the draft Stock Compensation Plan, Stock Purchase Rights Agreement, and Tax Bonus attached hereto, as soon as possible after approval by the Company's shareholders and directors. 5. EMPLOYEE FRINGE BENEFITS AND OTHERS. 5.1 Customary Fringe Benefits. Employee will be eligible for all customary and usual fringe benefits generally available to executives of the Company, including but not limited to medical, dental and life insurance and participation in the Company's 401k plan, subject to the terms and conditions of the Company's benefit plan documents. The Company reserves the right to change or eliminate the fringe benefits on a prospective basis, at any time, effective upon notice to Employee. -2-

5.2 Vacation. Employee is entitled to a total of three weeks paid leave per year. 6. BUSINESS EXPENSES. Employee will be reimbursed for all reasonable, out-of pocket business expenses incurred in accordance with the Company's travel policies in the Performance of Employee's duties on behalf of Company. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with Company's policies. 7. TERMINATION OF EMPLOYEE'S EMPLOYMENT. 7.1 Termination for Cause by Company. Although Company anticipates a mutually rewarding employment relationship with Employee, Company may terminate Employee's employment immediately at any time for Cause. For purposes of this Agreement, "Cause" is defined as: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Employee with respect to Employee's obligations to the Company or otherwise relating to the business of Company, in each case as determined in good faith by the Company; (b) Employee's material breach of this Agreement or the Company's Employee Innovations and Proprietary Rights Agreement; (c) Employee's conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; (d) Employee's willful neglect of duties as determined in the good faith by Company; (e) Employee's failure to perform the essential functions of Employee's position, with reasonable accommodation, due to a mental or physical disability (f) Employee's knowingly withholding material information (in his or her area of responsibility)from the Board of Directors. In the event Employee's employment is terminated in accordance with this subsection 7.1, Employee shall be entitled to receive only the Base Salary then in effect, prorated to the date of termination. All other Company obligations to Employee pursuant to this Agreement will become automatically terminated and completely extinguished. In addition, Employee will not be entitled to receive the Severance Payment described in subsection 7.2 below. 7.2 Termination Without Cause by Company/Severance. Company may terminate Employee's employment under this Agreement without Cause at any time on thirty (30) days' advance written notice to Employee. In the event any such termination shall occur, Employee will receive the Base Salary, accrued bonus and fringe benefits then in effect, prorated to the date of termination, and a "Severance Payment" equivalent to TWENTY FOUR (_24_) months of Employee's Base Salary then in effect on the date of termination; provided that Employee, (a) complies with all surviving provisions of this Agreement as specified in subsection 14.8 below; and (b) executes a full general release, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee's employment or termination of employment with Company. Notwithstanding anything in this agreement to the contrary, the Company's obligation to make severance payments to Employee shall terminate if Employee accepts an offer of employment or an offer to render consulting services to a competitor of Company, or otherwise breaches this Agreement. -3-

7.3 Resignation by Employee for Good Cause. Employee may resign Employee's position with the Company at any time for Good Reason as defined below. In the event of such termination, Employee will receive from the Company the Base Salary and fringe benefits then in effect, prorated to the date of termination, and a Severance Payment as set forth in Section 7.2. For purposes of this Agreement, "Good Reason" is defined as a good faith determination by Employee that there has (i) a diminution in Employee's position, authority or responsibilities and a reduction by 10% in Employee's salary or benefits; (ii) a breach by the Company of this Agreement. 7.4 Voluntary Resignation by Employee. Employee may voluntarily resign Employee's position with Company at any time on thirty (30) days' advance written notice. In the event of such resignation, Employee will be entitled to receive only the Base Salary, and fringe benefits for the thirty-day notice period, and Employee will not be entitled to receive the Severance Payment described in subsection 7.2 above. 8. NO CONFLICT OF INTEREST. During the term of Employee's employment with Company, Employee must not engage in any work, paid or unpaid, that creates an actual or potential conflict of interest with Company. Such work shall include, but is not limited to, directly or indirectly competing with Company in any way, or acting as an officer, director, employee, consultant, stockholder (in excess of 5% of publicly traded companies), volunteer, lender, or agent of any business enterprise of the same nature as, or which is in direct competition with, the business in which Company is now engaged or in which Company becomes engaged during the term of Employee's employment with Company, as may be determined by Company in its sole discretion, if Company believes such a conflict exists during the term of this Agreement, Company may ask Employee to choose to discontinue the other work or resign employment with Company. In addition, Employee agrees not to refer any client or potential client of Company to competitors of Company, without obtaining Company's prior written consent, during the term of Employee's employment. 9. POST-TERMINATION NON-COMPETITION. 9.1 Consideration For Promise To Refrain From Competing. Employee agrees that Employee's services are special and unique, that Company's disclosure of confidential, proprietary information and specialized training and knowledge to Employee, and that Employee's level of compensation and benefits and post-termination severance, as applicable, are partly in consideration of and conditioned upon Employee not competing with Company. Employee acknowledges that such consideration for Employee's services under this Agreement is adequate consideration for Employee's promises contained within this Section 9. 9.2 Promise To Refrain From Competing. Employee understands Company's need for Employee's promise not to compete with Company is based on the following: (a) Company has expended, and will continue to expend, substantial time, money and effort in developing its confidential and proprietary information; (b) Employee will in the course of Employee's employment develop, be personally entrusted with and exposed to such confidential and proprietary information; (c) both during and after the term of -4-

Employee's employment, Company will be engaged in the highly competitive laser manufacturing industry; (d) Company provides products and services nationally and may provide products and services internationally in the future; and (e) Company will suffer great loss and irreparable harm if Employee were to enter into competition with Company. Therefore, in exchange for the consideration described in subsection 9.1 above, Employee agrees that for the period of two (2) years following the date Employee is terminated or resigns for good cause (as described in Section 7.3) and ceases to render services to Company (the "Covenant Period"), Employee will not either directly or indirectly, whether as a owner, director, officer, manager, consultant, agent or employee: (i) work for a competitor, which is defined to include any individual, firm, entity or business enterprise that manufactures, sells or distributes lasers, "IPL" and "LED" devices with cosmetic and/or competing medical applications, other than Company (or such parent, affiliate or subsidiary), in any geographical area where Company is now engaged in business, or becomes engaged, during the term of Employee's employment ("Restricted Business"); or (ii) make or hold any investment in any Restricted Business in the United States, whether such investment be by way of loan, purchase of stock or otherwise, provided that there shall be excluded from the foregoing the ownership of not more than four percent (4%) of the listed or traded stock of any publicly held corporation. In the case of a voluntary resignation by Employee in which Employee receives no Severance Payments, the Covenant Period shall be limited to one (1) year. For purposes of this Section 9, the term "Company" shall mean and include Company, any successor to the business of Company (by merger, consolidation, sale of assets or stock or otherwise) and any other corporation or entity of which Employee may serve as a director, officer or employee at the request of Company or any successor of Company. 9.3 Reasonableness of Restrictions. Employee represents and agrees that the restrictions on competition, as to time, geographic area, and scope of activity, required by this Section 9 are reasonable, do not impose a greater restraint than is necessary to protect the goodwill and business interests of Company, and are not unduly burdensome to Employee. Employee expressly acknowledges that Company competes on a worldwide basis and that the geographical scope of these limitations is reasonable and necessary for the protection of Company's trade secrets and other confidential and proprietary information. Employee further agrees that these restrictions allow Employee an adequate number and variety of employment alternatives, based on Employee's varied skills and abilities. Employee represents that Employee is willing and able to compete in other employment not prohibited by this Agreement. 9.4 Reformation if Necessary. In the event a court of competent jurisdiction determines that the geographic area, duration, or scope of activity of any restriction under this Section 9 and its subsections is unenforceable, the restrictions under this Section and its subsections shall not be terminated but shall be reformed and modified to the extent required to render them valid and enforceable. Employee further agrees that the court may reform this Agreement to extend the two (2) year period or one (1) year period of this covenant not to compete, whichever is applicable, by an amount of time equal to any period in which Employee is in breach of this covenant. -5-

10. CONFIDENTIALITY AND PROPRIETARY RIGHTS. Employee agrees to read, sign and abide by Company's [EMPLOYEE INNOVATIONS AND PROPRIETARY RIGHTS ASSIGNMENT AGREEMENT], which is incorporated herein by reference. 11. NON-SOLICITATION. 11.1 Nonsolicitation of Customers or Prospects. Employee acknowledges that information about Company's customers is confidential and constitutes trade secrets. Accordingly, Employee agrees that during the term of this Agreement and for a period of two (2) years after the termination of this Agreement, or one (1) year in the case of a voluntary resignation, Employee will not either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage Company's relationship with any of its customers or customer prospects by soliciting or encouraging others to solicit any of them for the purpose of diverting or taking away business from Company. 11.2 Nonsolicitation of Company's Employees, Employee agrees that during the term of this Agreement and for a period of two (2) years after the termination of this Agreement, or one (1) year in the case of a voluntary resignation, Employee will not, either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage Company's business by soliciting, encouraging or attempting to hire any of Company's employees or causing others to solicit or encourage any of Company's employees to discontinue their employment with Company. 12. INJUNCTIVE RELIEF. Employee acknowledges that Employee's breach of any of the covenants contained in sections 8-11 (collectively "Covenants") would cause irreparable injury to Company and agrees that in the event of any such breach, Company shall be entitled to seek temporary, preliminary and permanent injunctive relief without the necessity of proving actual damages or posting any bond or other security. 13. AGREEMENT TO ARBITRATE. To the fullest extent permitted by law, Employee and Company agree to arbitrate any controversy, claim or dispute between them arising out of or in any way related to this Agreement, the employment relationship between Company and Employee and any disputes upon termination of employment, including but not limited to breach of contract tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medical leave, compensation or benefits claims, constitutional claims; and any claims for violation of any local, state or federal law, statute, regulation or ordinance or common law. Claims for workers' compensation, unemployment insurance benefits, breach of the Company's Employee Innovations and Proprietary Rights Agreement and Company's right to obtain injunctive relief pursuant to Section 12 above are excluded. For the purpose of this Agreement to arbitrate, references to "Company" include all parent, subsidiary or related entities and their employees, supervisors, officers, directors, agents, fiduciaries, administrators, affiliates and all successors and assigns of any of them, and this Agreement shall apply to them to the extent Employee's claims arise out of or relate to their actions on behalf of Company. -6-

13.1 Consideration. The mutual promise by Company and Employee to arbitrate any and all disputes between them (except for those referenced above) rather than litigate them before the courts or other bodies, provides the consideration for this Agreement to arbitrate. 13.2 Initiation of Arbitration. Either party may exercise the right to arbitrate by providing the other party with written notice of any and all claims forming the basis of such right in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution of legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations. 13.3 Arbitration Procedure. The arbitration will be conducted in Boston, Massachusetts by a single neutral arbitrator and in accordance with the then current rules for resolution of employment disputes of the American Arbitration Association ("AAA"). The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the State of Massachusetts, and only such power, and shall follow the law. In the event the arbitrator does not follow the law, the arbitrator will have exceeded the scope of his or her authority and the parties may, at their option, file a motion to vacate the award in court. Subject to the foregoing, the parties agree to abide by and perform any award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof. 13.4 Costs of Arbitration. Each party shall bear one half the cost of the arbitration filing and hearing fees, and the cost of the arbitrator. 14. GENERAL PROVISIONS. 14.1 Successors and Assigns. The rights and obligations of Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Company. Employee shall not be entitled to assign any of Employee's rights or obligations under this Agreement. 14.2 Waiver. Either party's failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement. 14.3 Attorneys' Fees. Each side will bear its own attorneys' fees in any dispute unless a statutory Section at issue, if any, authorizes the award of attorneys' fees to the prevailing party. 14.4 Severability. In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed -7-

deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby. 14.5 Interpretation; Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Company, but Employee has participated in the negotiation of its terms. Furthermore, Employee acknowledges that Employee has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 14.6 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of Massachusetts. 14.7 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated, (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt: (c) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission, or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth below, or such other address as either party may specify in writing. 14.8 Survival. Sections 9 ("Post-Termination Non-Competition"), 10 ("Confidentiality and Proprietary Rights"), 11 ("Non-Solicitation"), 12 ("Injunctive Relief"), 13 ("Agreement to Arbitrate"), 14 ("General Provisions") and 15 ("Entire Agreement") of this Agreement shall survive Employee's employment by Company. 15. ENTIRE AGREEMENT. This Agreement, including the Company Employee Innovations and Proprietary Rights Assignment Agreement incorporated herein by reference, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This Agreement may be amended or modified only with the written consent of both Employee and the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW. [Remainder of page left blank intentionally] -8-

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date set forth in the first paragraph. CYNOSURE, INC.
By: /s/ Horace W. Furumoto -----------------------------Horace W. Furumoto President

Address: 10 Elizabeth Drive Chelmsford, MA 01824
/s/ Michael Davin -------------------------------------Michael Davin

Address: 92 Kimball Rd Carlisle, MA 01741 -9-

ANNEX (1) Bonus targets 6 MONTHS Reorganization of domestic sales force (increase force) Reorganization of company: meet current budget, substantially above break even New development lines for R&D 12 MONTHS Completion of reorganization of sales force Completion of development of reference sites, including results (pay-back) 20% increase of domestic revenues Reorganization of international subsidiaries: break even and increase revenues 18 MONTHS To hit $30 millions consolidated Net Revenues for the previous 12 months, and achieve profitability in terms of Adjusted Net Profit as defined in annex (2) -10-

ANNEX (2) Definition of "Adjusted Net Profit" ANP ANP will be yearly calculated as follows according to the consolidated audited financials of the Company. ANP will include all entries related to the operation under direct control of the CEO, and not include items such as one time write offs and Sona equity loss or gain. Tax impact will be calculated at a standard rate in order the incentive not to be affected by the company's fiscal policies + (A) Profit before taxation +- (B) Sona equity loss +- (C) One time write off or earnings +- (D) minority interest (China sub) Adjusted Gross Profit = A +- B +- C +- D Adjusted Net Profit = Gross Adjusted Profit x (1 - 34%) For the sake of clarity in case ANP had to be calculated on 2002 financials: (A)= -$2,193,189 (B) = $158,535 loss not to be considered (C) NA (D) = -$70,114 profit share of minority, to be taken out AGP = -$2,104,760. If AGP was positive ANP=$1,389,147 = 66% of AGP -11-

EXHIBIT 10.5 CYNOSURE, INC. EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of 1 January 2003 by and between Cynosure, Inc., a Delaware corporation, (the "Company") and George Cho ("Employee"). BACKGROUND A. The Company desires to retain the services of Employee as Senior Vice-President of Medical Technology of the Company from the date of this Agreement (the "Effective Date"). The Company also desires to provide employment security to Employee, thereby inducing Employee to continue employment with the Company and enhancing Employee's ability to perform effectively. B. Employee is willing to be employed by the Company on the terms and subject to the conditions set forth in this Agreement. THE PARTIES AGREE AS FOLLOWS: 1. EMPLOYMENT. Company hereby employs Employee, and Employee hereby accepts such employment, upon the terms and conditions set forth herein. 2. DUTIES. 2.1 Position. Employee is employed as the Senior Vice-President of Medical Technology of the Company and shall have the duties and responsibilities assigned by the Board of Directors of the Company, both upon initial hire and as may be reasonably assigned from time to time. Employee shall perform faithfully and diligently all duties assigned to Employee. Company reserves the right to modify Employee's position and duties at any time in its sole and absolute discretion. 2.2 Best Effort/Full-time. Employee will expend Employee's best efforts on behalf of Company, and will abide by all policies and decisions made by Company, as well as all applicable federal, state and local laws, regulations or ordinances. Employee will act in the best interest of Company at all times, Employee shall devote Employee's full business time and efforts to the performance of Employee's assigned duties for Company, unless Employee notifies Company in advance of Employee's intent to engage in other paid work and receives Company's express written consent to do so. 2.3 Work Location. Employee's principal place of work shall be located in Chelmsford, Massachusetts or such other location as the parties may agree upon from time to time. 2.4 Change of Location. In the event that the Company relocates its operations to a location outside of a one hundred mile radius of Chelmsford, Massachusetts, within two years following the date hereof and Employee elects not to continue employment with the

Company, the Company shall pay to Employee an amount equal to Employee's then Base Salary, accrued bonus and fringe benefits for a twelve month period. 3. TERM. 3.1 Initial Term. The employment relationship pursuant to this Agreement shall be for an initial term commencing on the Effective Date set forth above and continuing for a period of three (3) years following such date (the "Initial Term"), unless sooner terminated in accordance with Section 7 below. 3.2 Renewal. On completion of the Initial Term specified in subsection 3.1 above, this Agreement will automatically renew for subsequent three (3) year terms unless either party provides three hundred (300) days' advance written notice to the other that Company/ Employee does not wish to renew the Agreement for a subsequent three (3)-year term. In the event either party gives notice of nonrenewal pursuant to this subsection 3.2, this Agreement will expire at the end of the then current term. 4. COMPENSATION. 4.1 Base Salary. As compensation for Employee's performance of Employee's duties hereunder, Company shall pay to Employee an initial Base Salary of $130,000 per year, currently reduced by $13,000 subject to at least annual review and adjustment by the Board of Directors, payable in accordance with the normal payroll practices of Company, less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions. In the event Employee's employment under this Agreement is terminated by either party, for any reason, Employee will earn the Base Salary, accrued bonus and fringe benefits prorated to the date of termination. 4.2 Incentive Compensation. Employee will be eligible to earn incentive compensation. All bonus payments will be made less required deductions for state and federal withholding tax, social security, and other employment taxes and payroll deductions. 4.3 Performance and Salary Review. Company will periodically review Employee's performance on no less than an annual basis. Adjustments to salary or other compensation, if any, will be made by Company in its sole and absolute discretion. 4.4 Stock Compensation. Employee will be granted stock purchase rights under the Cynosure Stock Compensation Plan in accordance with the draft Stock Compensation Plan, Stock Purchase Rights Agreement, and Tax Bonus attached hereto, as soon as possible after approval by the Company's shareholders and directors. 5. EMPLOYEE FRINGE BENEFITS. 5.1 Customary Fringe Benefits. Employee will be eligible for all customary and usual fringe benefits generally available to executives of the Company, including but not limited to medical, dental and life insurance and participation in the Company's 401k plan, subject to the terms and conditions of the Company's benefit plan documents. 2

5.2 The Company reserves the right to change or eliminate the fringe benefits on a prospective basis, at any time, effective upon notice to Employee. 6. BUSINESS EXPENSES. Employee will be reimbursed for all reasonable, out-of pocket business expenses incurred in accordance with the Company's travel policies in the Performance of Employee's duties on behalf of Company. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with Company's policies. 7. TERMINATION OF EMPLOYEE'S EMPLOYMENT. 7.1 Termination for Cause by Company. Although Company anticipates a mutually rewarding employment relationship with Employee, Company may terminate Employee's employment immediately at any time for Cause. For purposes of this Agreement, "Cause" is defined as: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Employee with respect to Employee's obligations to the Company or otherwise relating to the business of Company, in each case as determined in good faith by the Company; (b) Employee's material breach of this Agreement or the Company's Employee Innovations and Proprietary Rights Agreement; (c) Employee's conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; (d) Employee's willful neglect of duties as determined in the good faith by Company; (e) Employee's failure to perform the essential functions of Employee's position, with reasonable accommodation, due to a mental or physical disability (f) Employee's knowingly withholding material information (in his or her area of responsibility) from the CEO and the Board of Directors. In the event Employee's employment is terminated in accordance with this subsection 7.1, Employee shall be entitled to receive only the Base Salary then in effect, prorated to the date of termination. All other Company obligations to Employee pursuant to this Agreement will become automatically terminated and completely extinguished. In addition, Employee will not be entitled to receive the Severance Payment described in subsection 7.2 below. 7.2 Termination Without Cause by Company/Severance. Company may terminate Employee's employment under this Agreement without Cause at any time after the Initial Term on thirty (30) days' advance written notice to Employee. In the event any such termination shall occur within 540 days following the date hereof, such employee shall receive the payments set forth in Section 6.1 of the Subscription Agreement between El. En. and the Company, dated May 3rd, 2002. In the event any such termination shall occur thereafter, Employee will receive the Base Salary, accrued bonus and fringe benefits then in effect, prorated to the date of termination, and a "Severance Payment" equivalent to TWELVE (_12_) months of Employee's Base Salary, accrued bonus and fringe benefits then in effect on the date of termination, provided that Employee, (a) complies with all surviving provisions of this Agreement as specified in subsection 14.8 below; and (b) executes a full general release, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee's employment or termination of employment with Company. 3

7.3 Resignation by Employee for Good Cause. Employee may resign Employee's position with the Company at any time for Good Reason (as defined below. In the event of such termination, Employee will receive from the Company the Base Salary, accrued bonus and fringe benefits then in effect, prorated to the date of termination, and a Severance Payment as set forth in Section 7.2. For purposes of this Agreement, "Good Reason" is defined as a good faith determination by Employee that there has (i) a diminution in Employee's position, authority or responsibilities and a reduction by 10% in Employee's salary or benefits; (ii) a breach by the Company of this Agreement. 7.4 Voluntary Resignation by Employee. Employee may voluntarily resign Employee's position with Company at any time on thirty (30) days' advance written notice. In the event of such resignation, Employee will be entitled to receive only the Base Salary, accrued bonus and fringe benefits for the thirty-day notice period, and Employee will not be entitled to receive the Severance Payment described in subsection 7.2 above. 7.5 Termination of Employment Upon Nonrenewal. In the event either party decides not to renew this Agreement for a subsequent three (3)-year term in accordance with subsection 3.2 above, the Agreement will expire, Employee's employment with Company will terminate and Employee will only be entitled to Employee's Base Salary, accrued bonus and fringe benefits paid through the last day of the then current term. All other Company obligations to Employee pursuant to this Agreement will become automatically terminated and completely extinguished, except for the repurchase of accrued stock purchase rights or shares underlying options. In addition, Employee will not be entitled to the Severance Payment described in subsection 7.2 above. 8. NO CONFLICT OF INTEREST. During the term of Employee's employment with Company, Employee must not engage in any work, paid or unpaid, that creates an actual or potential conflict of interest with Company. Such work shall include, but is not limited to, directly or indirectly competing with Company in any way, or acting as an officer, director, employee, consultant, stockholder (in excess of 5% of publicly traded companies), volunteer, lender, or agent of any business enterprise of the same nature as, or which is in direct competition with, the business in which Company is now engaged or in which Company becomes engaged during the term of Employee's employment with Company, as may be determined by Company in its sole discretion, if Company believes such a conflict exists during the term of this Agreement, Company may ask Employee to choose to discontinue the other work or resign employment with Company. In addition, Employee agrees not to refer any client or potential client of Company to competitors of Company, without obtaining Company's prior written consent, during the term of Employee's employment. 9. POST-TERMINATION NON-COMPETITION. 9.1 Consideration For Promise To Refrain From Competing. Employee agrees that Employee's services are special and unique, that Company's disclosure of confidential, proprietary information and specialized training and knowledge to Employee, and that Employee's level of compensation and benefits and post-termination severance, as applicable, are partly in consideration of and conditioned upon Employee not competing 4

with Company. Employee acknowledges that such consideration for Employee's services under this Agreement is adequate consideration for Employee's promises contained within this Section 9. 9.2 Promise To Refrain From Competing. Employee understands Company's need for Employee's promise not to compete with Company is based on the following: (a) Company has expended, and will continue to expend, substantial time, money and effort in developing its confidential and proprietary information; (b) Employee will in the course of Employee's employment develop, be personally entrusted with and exposed to such confidential and proprietary information; (c) both during and after the term of Employee's employment, Company will be engaged in the highly competitive laser manufacturing industry; (d) Company provides products and services nationally and may provide products and services internationally in the future; and (e) Company will suffer great loss and irreparable harm if Employee were to enter into competition with Company. Therefore, in exchange for the consideration described in subsection 9.1 above, Employee agrees that for the period of one (1) year following the date Employee ceases to render services to Company (the "Covenant Period"), Employee will not either directly or indirectly, whether as a owner, director, officer, manager, consultant, agent or employee: (i) work for a competitor, which is defined to include any individual, firm, entity or business enterprise that manufactures, sells or distributes lasers with cosmetic and/or competing medical applications, other than Company (or such parent, affiliate or subsidiary, in any geographical area where Company is now engaged in business, or becomes engaged, during the term of Employee's employment ("Restricted Business"); or (ii) make or hold any investment in any Restricted Business in the United States, whether such investment be by way of loan, purchase of stock or otherwise, provided that there shall be excluded from the foregoing the ownership of not more than one percent (5%) of the listed or traded stock of any publicly held corporation. For purposes of this Section 9, the term "Company" shall mean and include Company, any successor to the business of Company (by merger, consolidation, sale of assets or stock or otherwise) and any other corporation or entity of which Employee may serve as a director, officer or employee at the request of Company or any successor of Company. 9.3 Reasonableness of Restrictions. Employee represents and agrees that the restrictions on competition, as to time, geographic area, and scope of activity, required by this Section 9 are reasonable, do not impose a greater restraint than is necessary to protect the goodwill and business interests of Company, and are not unduly burdensome to Employee. Employee expressly acknowledges that Company competes on a worldwide basis and that the geographical scope of these limitations is reasonable and necessary for the protection of Company's trade secrets and other confidential and proprietary information. Employee further agrees that these restrictions allow Employee an adequate number and variety of employment alternatives, based on Employee's varied skills and abilities. Employee represents that Employee is willing and able to compete in other employment not prohibited by this Agreement. 9.4 Reformation if Necessary. In the event a court of competent jurisdiction determines that the geographic area, duration, or scope of activity of any restriction under this Section 9 and its subsections is unenforceable, the restrictions under this Section and its 5

subsections shall not be terminated but shall be reformed and modified to the extent required to render them valid and enforceable. Employee further agrees that the court may reform this Agreement to extend the one (1) year period of this covenant not to compete by an amount of time equal to any period in which Employee is in breach of this covenant. 10. CONFIDENTIALITY AND PROPRIETARY RIGHTS. Employee agrees to read, sign and abide by Company's [EMPLOYEE INNOVATIONS AND PROPRIETARY RIGHTS ASSIGNMENT AGREEMENT], which is incorporated herein by reference. 11. NON-SOLICITATION. 11.1 Nonsolicitation of Customers or Prospects. Employee acknowledges that information about Company's customers is confidential and constitutes trade secrets. Accordingly, Employee agrees that during the term of this Agreement and for a period of two (2) years after the termination of this Agreement, Employee will not either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage Company's relationship with any of its customers or customer prospects by soliciting or encouraging others to solicit any of them for the purpose of diverting or taking away business from Company. 11.2 Nonsolicitation of Company's Employees. Employee agrees that during the term of this Agreement and for a period of two (2) years after the termination of this Agreement, Employee will not, either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage Company's business by soliciting, encouraging or attempting to hire any of Company's employees or causing others to solicit or encourage any of Company's employees to discontinue their employment with Company. 12. INJUNCTIVE RELIEF. Employee acknowledges that Employee's breach of any of the covenants contained in sections 8-11 (collectively "Covenants") would cause irreparable injury to Company and agrees that in the event of any such breach, Company shall be entitled to seek temporary, preliminary and permanent injunctive relief without the necessity of proving actual damages or posting any bond or other security. 13. AGREEMENT TO ARBITRATE. To the fullest extent permitted by law, Employee and Company agree to arbitrate any controversy, claim or dispute between them arising out of or in any way related to this Agreement, the employment relationship between Company and Employee and any disputes upon termination of employment, including but not limited to breach of contract tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medical leave, compensation or benefits claims, constitutional claims; and any claims for violation of any local, state or federal law, statute, regulation or ordinance or common law. Claims for workers' compensation, unemployment insurance benefits, breach of the Company's Employee Innovations and Proprietary Rights Agreement and Company's right to obtain injunctive relief pursuant to Section 12 above are excluded. For the purpose of this Agreement to arbitrate, references to "Company" include all parent, subsidiary or related entities and 6

their employees, supervisors, officers, directors, agents,, fiduciaries, administrators, affiliates and all successors and assigns of any of them, and this Agreement shall apply to them to the extent Employee's claims arise out of or relate to their actions on behalf of Company. 13.1 Consideration. The mutual promise by Company and Employee to arbitrate any and all disputes between them (except for those referenced above) rather than litigate them before the courts or other bodies, provides the consideration for this Agreement to arbitrate. 13.2 Initiation of Arbitration. Either party may exercise the right to arbitrate by providing the other party with written notice of any and all claims forming the basis of such right in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution of legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations. 13.3 Arbitration Procedure. The arbitration will be conducted in Boston, Massachusetts by a single neutral arbitrator and in accordance with the then current rules for resolution of employment disputes of the American Arbitration Association ("AAA"). The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the State of Massachusetts, and only such power, and shall follow the law. In the event the arbitrator does not follow the law, the arbitrator will have exceeded the scope of his or her authority and the parties may, at their option, file a motion to vacate the award in court. Subject to the foregoing, the parties agree to abide by and perform any award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof. 13.4 Costs of Arbitration. Each party shall bear one half the cost of the arbitration filing and hearing fees, and the cost of the arbitrator. 14. GENERAL PROVISIONS. 14.1 Successors and Assigns. The rights and obligations of Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Company. Employee shall not be entitled to assign any of Employee's rights or obligations under this Agreement. 14.2 Waiver. Either party's failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement. 14.3 Attorneys Fees. Each side will bear its own attorneys' fees in any dispute unless a statutory Section at issue, if any, authorizes the award of attorneys' fees to the prevailing party. 7

14.4 Severability. In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby. 14.5 Interpretation; Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Company, but Employee has participated in the negotiation of its terms. Furthermore, Employee acknowledges that Employee has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 14.6 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of Massachusetts. 14.7 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated, (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt: (c) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission, or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth below, or such other address as either party may specify in writing. 14.8 Survival. Sections 9 ("Post-Termination Non-Competition"), 10 ("Confidentiality and Proprietary Rights"), 11 ("Non-Solicitation"), 12 ("Injunctive Relief"), 13 ("Agreement to Arbitrate"), 14 ("General Provisions") and 15 ("Entire Agreement") of this Agreement shall survive Employee's employment by Company. 15. ENTIRE AGREEMENT. This Agreement, including the Company Employee Innovations and Proprietary Rights Assignment Agreement incorporated herein by reference, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This Agreement may be amended or modified only with the written consent of both Employee and the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW. 8

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date set forth in the first paragraph. CYNOSURE, INC.
By: /s/ Horace W. Furumoto -----------------------------Horace W. Furumoto President Address: 10 Elizabeth Drive Chelmsford, MA 01824 /s/ George Cho ----------------------------George Cho

Address: 2 Jordan Road Hopkinton, MA 01748 9

EXHIBIT 10.6 CYNOSURE, INC. EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of ___________September 2003 by and between Cynosure, Inc., a Delaware corporation (the "Company") and Douglas Delaney ("Employee"). BACKGROUND A. The Company desires to retain the services of Employee as National Sales Director(for the U.S. only) of the Company from the date of this Agreement (the "Effective Date"). The Company also desires to provide employment security to Employee, thereby inducing Employee to continue employment with the Company and enhancing Employee's ability to perform effectively. B. Employee is willing to be employed by the Company on the terms and subject to the conditions set forth in this Agreement. THE PARTIES AGREE AS FOLLOWS: 1. EMPLOYMENT. Company hereby employs Employee, and Employee hereby accepts such employment, upon the terms and conditions set forth herein. 2. DUTIES. 2.1 Position. Employee is employed as the National Sales Director (for the U.S. only) of the Company and shall have the duties and responsibilities assigned by the Board of Directors or the Chief Executive Officer of the Company, both upon initial hire and as may be reasonably assigned from time to time. Employee shall perform faithfully and diligently all duties assigned to Employee. 2.2 Best Effort/Full-time. Employee will expend Employee's best efforts on behalf of Company, and will abide by all policies and decisions made by Company, as well as all applicable federal, state and local laws, regulations or ordinances. Employee will act in the best interest of Company at all times, Employee shall devote Employee's full business time and efforts to the performance of Employee's assigned duties for Company, unless Employee notifies Company in advance of Employee's intent to engage in other paid work and receives Company's express written consent to do so. 2.3 Work Location. Employee's principal place of work shall be located in New Jersey or such other location as the parties may agree upon from time to time. 3. TERM. The employment relationship pursuant to this Agreement shall be without a term, and can be terminated in accordance with Section 7 below. -1-

4. COMPENSATION. 4.1 Base Salary. As compensation for Employee's performance of Employee's duties hereunder, Company shall pay to Employee an initial Base Salary of $100,000 Per year, subject to annual review and adjustment by the Board of Directors, payable in accordance with the normal payroll practices of Company, less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions. Notwithstanding the foregoing, for the period ending December 31, 2003, employee will be eligible to receive a monthly base salary of $12,666, and to the bonus compensation defined in section 4.3 below. In the event Employee's employment under this Agreement is terminated by either party, for any reason, Employee will earn the Base Salary, accrued bonus and fringe benefits prorated to the date of termination. 4.2 Incentive Compensation. Employee will be eligible to earn incentive compensation beginning January 1st, 2004. (a) Sales incentive: Employee will be eligible an incentive based on yearly National (U.S. only) revenues for Laser Systems ("Revenues") For 2004, Employee will receive a 1% commission for all Revenues within Budget ($10 Million), 2% commission for all Revenues over Budget up to $12.5 Million, and 2.5% commission for all Revenues over 125% of budget. Payments for the first six months will be effected monthly on the assumption of monthly Revenues equal to (1/12) of yearly Budget, and will be considered in account. After the first six months, an adjustment will be effected based on actual sales for the 6 months, and from then on payments will be effected according to actual revenues of the previous month. All commission payments will be made less required deductions for state and federal withholding tax, social security, and other employment taxes and payroll deductions. (b) Margin Incentive: For 2004, Employee will be eligible to receive payment of $10,000 bonus upon achievement of the National Sales budget and an increase of 2% (points) of the Gross margin percentage on National Revenues with respect to the Gross margin percentage on National Sales for year 2003. Upon achievement of the bonus target, $10,000 of extra bonus will be assigned for every further 2% increase of the Gross margin percentage on National sales with respect to the year 2003 benchmark. Payment will be made less required deductions for state and federal withholding tax, social security, and other employment taxes and payroll deductions. -2-

4.3 Bonus incentive. For the period ending December 31, 2003, employee will be eligible to receive a bonus compensation for a maximum of $12,000 based upon achievement of selected targets to be agreed upon with the CEO. All bonus payments will be made less required deductions for state and federal withholding tax, social security, and other employment taxes and payroll deductions. 4.4 Performance and Salary Review. After the first year of employment, Company will periodically review Employee's performance on no less than an annual basis. Adjustments to salary or other compensation, if any, will be made by Company in its sole and absolute discretion. 4.4 Stock Compensation. Employee will be granted stock purchase rights under the Cynosure Stock Compensation Plan in accordance with the draft Stock Compensation Plan, Stock Purchase Rights Agreement, and Tax Bonus attached hereto, as soon as possible after approval by the Company's shareholders and directors. 5. EMPLOYEE FRINGE BENEFITS AND OTHERS. 5.1 Customary Fringe Benefits. Employee will be eligible for all customary and usual fringe benefits generally available to executives of the Company, including but not limited to medical, dental and life insurance and participation in the Company's 401k plan, subject to the terms and conditions of the Company's benefit plan documents. The Company reserves the right to change or eliminate the fringe benefits on a prospective basis, at any time, effective upon notice to Employee. 5.2 Vacation. Employee is entitled to a total of two weeks paid leave per year. 5.3 Car Allowance. Employee is entitled to a monthly car allowance of $700.00. 6. BUSINESS EXPENSES. Employee will be reimbursed for all reasonable, out-of pocket business expenses incurred in accordance with the Company's travel policies in the Performance of Employee's duties on behalf of Company. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with Company's policies. 7. TERMINATION OF EMPLOYEE'S EMPLOYMENT. 7.1 Termination for Cause by Company. Although Company anticipates a mutually rewarding employment relationship with Employee, Company may terminate Employee's employment immediately at any time for Cause. For purposes of this Agreement, "Cause" is defined as: (a) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Employee with respect to Employee's obligations to the Company or otherwise relating to the business of Company, in each case as determined in good faith by the Company; (b) Employee's material breach of this Agreement or the Company's Employee Innovations and Proprietary Rights Agreement; (c) Employee's conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, or any felony or crime of moral turpitude; -3-

(d) Employee's willful neglect of duties as determined in the good faith by Company; (e) Employee's failure to perform the essential functions of Employee's position, with reasonable accommodation, due to a mental or physical disability (f) Employee's knowingly withholding material information (in his or her area of responsibility) from the CEO or the Board of Directors. In the event Employee's employment is terminated in accordance with this subsection 7.1, Employee shall be entitled to receive only the Base Salary then in effect, prorated to the date of termination. All other Company obligations to Employee pursuant to this Agreement will become automatically terminated and completely extinguished. In addition, Employee will not be entitled to receive the Severance Payment described in subsection 7.2 below. 7.2 Termination Without Cause by Company/Severance. Company may terminate Employee's employment under this Agreement without Cause at any tune on thirty (30) days' advance written notice to Employee In the event any such termination shall occur, Employee will receive the Base Salary and fringe benefits then in effect, prorated to the date of termination, and a "Severance Payment" equivalent to TWELVE (_12_) months of Employee's Base Salary then in effect on the date of termination, provided that Employee, (a) complies with all surviving provisions of this Agreement as specified in subsection 14.8 below; and (b) executes a full general release, releasing all claims, known or unknown, that Employee may have against Company arising out of or any way related to Employee's employment or termination of employment with Company. 7.3 Resignation by Employee for Good Cause. Employee may resign Employee's position with the Company at any time for Good Reason as defined below. In the event of such termination, Employee will receive from the Company the Base Salary and fringe benefits then in effect, prorated to the date of termination, and a Severance Payment as set forth in Section 7.2. For purposes of this Agreement, "Good Reason" is defined as a good faith determination by Employee that there has (i) a diminution in Employee's position, authority or responsibilities and a reduction by 10% in Employee's salary or benefits; (ii) a breach by the Company of this Agreement. 7.4 Voluntary Resignation by Employee. Employee may voluntarily resign Employee's position with Company at any time on thirty (30) days' advance written notice. In the event of such resignation, Employee will be entitled to receive only the Base Salary, and fringe benefits for the thirty-day notice period, and Employee will not be entitled to receive the Severance Payment described in subsection 7.2 above. 8. NO CONFLICT OF INTEREST. During the term of Employee's employment with Company, Employee must not engage in any work, paid or unpaid, that creates an actual or potential conflict of interest with Company. Such work shall include, but is not limited to, directly or indirectly competing with Company in any way, or acting as an officer, director, employee, consultant, stockholder (in excess of 5% of publicly traded companies), volunteer, lender, or agent of any business enterprise of the same nature as, or which is in direct competition with, the business in which Company is now engaged or in which Company becomes engaged during the term of Employee's, employment with Company, as may be determined by Company in its sole discretion, if Company believes such a conflict exists during the term of this Agreement, Company may ask Employee to choose -4-

to discontinue the other work or resign employment with Company. In addition, Employee agrees not to refer any client or potential client of Company to competitors of Company, without obtaining Company's prior written consent, during the term of Employee's employment. 9. POST-TERMINATION NON-COMPETITION. 9.1 Consideration For Promise To Refrain From Competing. Employee agrees that Employee's services are special and unique, that Company's disclosure of confidential, proprietary information and specialized training and knowledge to Employee, and that Employee's level of compensation and benefits and post-termination severance, as applicable, are partly in consideration of and conditioned upon Employee not competing with Company. Employee acknowledges that such consideration for Employee's services under this Agreement is adequate consideration for Employee's promises contained within this Section 9. 9.2 Promise To Refrain From Competing. Employee understands Company's need for Employee's promise not to compete with Company is based on the following: (a) Company has expended, and will continue to expend, substantial time, money and effort in developing its confidential and proprietary information; (b) Employee will in the course of Employee's employment develop, be personally entrusted with and exposed to such confidential and proprietary information; (c) both during and after the term of Employee's employment, Company will be engaged in the highly competitive laser manufacturing industry; (d) Company provides products and services nationally and may provide products and services internationally in the future; and (e) Company will suffer great loss and irreparable harm if Employee were to enter into competition with Company. Therefore, in exchange for the consideration described in subsection 9.1 above, Employee agrees that for the period of one (1) year following the date Employee ceases to render services to Company (the "Covenant Period"), Employee will not either directly or indirectly, whether as a owner, director, officer, manager, consultant, agent or employee: (i) work for a competitor, which is defined to include any individual, firm, entity or business enterprise that manufactures, sells or distributes lasers, "IPL" and "LED" devices with cosmetic and/or competing medical applications, other than Company (or such parent, affiliate or subsidiary, in any geographical area where Company is now engaged in business, or becomes engaged, during the term of Employee's employment ("Restricted Business"); or (ii) make or hold any investment in any Restricted Business in the United States, whether such investment be by way of loan, purchase of stock or otherwise, provided that there shall be excluded from the foregoing the ownership of not more than one percent (1%) of the listed or traded stock of any publicly held corporation. For purposes of this Section 9, the term "Company" shall mean and include Company, any successor to the business of Company (by merger, consolidation, sale of assets or stock or otherwise) and any other corporation or entity of which Employee may serve as a director, officer or employee at the request of Company or any successor of Company. 9.3 Reasonableness of Restrictions. Employee represents and agrees that the restrictions on competition, as to time, geographic area, and scope of activity, required by this -5-

Section 9 are reasonable, do not impose a greater restraint than is necessary to protect the goodwill and business interests of Company, and are not unduly burdensome to Employee. Employee expressly acknowledges that Company competes on a worldwide basis and that the geographical scope of these limitations is reasonable and necessary for the protection of Company's trade secrets and other confidential and proprietary information. Employee further agrees that these restrictions allow Employee an adequate number and variety of employment alternatives, based on Employee's varied skills and abilities. Employee represents that Employee is willing and able to compete in other employment not prohibited by this Agreement. 9.4 Reformation if Necessary. In the event a court of competent jurisdiction determines that the geographic area, duration, or scope of activity of any restriction under this Section 9 and its subsections is unenforceable, the restrictions under this Section and its subsections shall not be terminated but shall be reformed and modified to the extent required to render them valid and enforceable. Employee further agrees that the court may reform this Agreement to extend the one (1) year period of this covenant not to compete by an amount of time equal to any period in which Employee is in breach of this covenant. 10. CONFIDENTIALITY AND PROPRIETARY RIGHTS. Employee agrees to read, sign and abide by Company's [EMPLOYEE INNOVATIONS AND PROPRIETARY RIGHTS ASSIGNMENT AGREEMENT], which is incorporated herein by reference. 11. NON-SOLICITATION. 11.1 Nonsolicitation of Customers or Prospects. Employee acknowledges that information about Company's customers is confidential and constitutes trade secrets. Accordingly, Employee agrees that during the term of this Agreement and for a period of one (1) year after the termination of this Agreement, Employee will not either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage Company's relationship with any of its customers or customer prospects by soliciting or encouraging others to solicit any of them for the purpose of diverting or taking away business from Company. 11.2 Nonsolicitation of Company's Employees. Employee agrees that during the term of this Agreement and for a period of one (1) year after the termination of this Agreement, Employee will not, either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage Company's business by soliciting, encouraging or attempting to hire any of Company's employees or causing others to solicit or encourage any of Company's employees to discontinue their employment with Company. 12. INJUNCTIVE RELIEF. Employee acknowledges that Employee's breach of any of the covenants contained in sections 8-11 (collectively "Covenants") would cause irreparable injury to Company and agrees that in the event of any such breach, Company shall be entitled to seek temporary, preliminary and permanent injunctive relief without the necessity of proving actual damages or posting any bond or other security. -6-

13. AGREEMENT TO ARBITRATE. To the fullest extent permitted by law, Employee and Company agree to arbitrate any controversy, claim or dispute between them arising out of or in any way related to this Agreement, the employment relationship between Company and Employee and any disputes upon termination of employment, including but not limited to breach of contract tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medical leave, compensation or benefits claims, constitutional claims; and any claims for violation of any local, state or federal law, statute, regulation or ordinance or common law. Claims for workers' compensation, unemployment insurance benefits, breach of the Company's Employee Innovations and Proprietary Rights Agreement and Company's right to obtain injunctive relief pursuant to Section 12 above are excluded. For the purpose of this Agreement to arbitrate, references to "Company" include all parent, subsidiary or related entities and their employees, supervisors, officers, directors, agents, fiduciaries, administrators, affiliates and all successors and assigns of any of them, and this Agreement shall apply to them to the extent Employee's claims arise out of or relate to their actions on behalf of Company. 13.1 Consideration. The mutual promise by Company and Employee to arbitrate any and all disputes between them (except for those referenced above) rather than litigate them before the courts or other bodies, provides the consideration for this Agreement to arbitrate. 13.2 Initiation of Arbitration. Either party may exercise the right to arbitrate by providing the other party with written notice of any and all claims forming the basis of such right in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution of legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations. 13.3 Arbitration Procedure. The arbitration will be conducted in Boston, Massachusetts by a single neutral arbitrator and in accordance with the then current rules for resolution of employment disputes of the American Arbitration Association ("AAA"). The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the State of Massachusetts, and only such power, and shall follow the law. In the event the arbitrator does not follow the law, the arbitrator will have exceeded the scope of his or her authority and the parties may, at their option, file a motion to vacate the award in court. Subject to the foregoing, the parties agree to abide by and perform any award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof. 13.4 Costs of Arbitration. Each party shall bear one half the cost of the arbitration filing and hearing fees, and the cost of the arbitrator. 14. GENERAL PROVISIONS. 14.1 Successors and Assigns. The rights and obligations of Company under this -7-

Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Company. Employee shall not be entitled to assign any of Employee's rights or obligations under this Agreement. 14.2 Waiver. Either party's failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement. 14.3 Attorneys' Fees. Each side will bear its own attorneys' fees in any dispute unless a statutory Section at issue, if any, authorizes the award of attorneys' fees to the prevailing party. 14.4 Severability. In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby. 14.5 Interpretation; Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing Company, but Employee has participated in the negotiation of its terms. Furthermore, Employee acknowledges that Employee has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement. 14.6 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the United States and the Commonwealth of Massachusetts. 14.7 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated, (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt: (c) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission, or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth below, or such other address as either party may specify in writing. 14.8 Survival. Sections 9 ("Post-Termination Non-Competition"), 10 ("Confidentiality and Proprietary Rights"), 11 ("Non-Solicitation"), 12 ("Injunctive Relief'), 13 ("Agreement to Arbitrate"), 14 ("General Provisions") and 15 ("Entire Agreement") of this Agreement shall survive Employee's employment by Company. 15. ENTIRE AGREEMENT. This Agreement, including the Company Employee Innovations and Proprietary Rights Assignment Agreement incorporated herein by reference, constitutes -8-

the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This Agreement may be amended or modified only with the written consent of both Employee and the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW. [Remainder of page left blank intentionally] -9-

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date set forth in the first paragraph. CYNOSURE, INC.
By: /s/ Horace Furumoto --------------------------Name: Horace Furumoto Title: President

Address: 10 Elizabeth Drive Chelmsford, MA 01824
/s/ Douglas J. Delaney ---------------------------Douglas J. Delaney

Address: 331 Kensington Dr.

Ridgewood, N.J. 07450 -10-

Exhibit 10.7 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. EXCLUSIVE DISTRIBUTION AGREEMENT (for the Cynergy Product Line) THIS AGREEMENT is made by and between El. En. S.p.A., a company organized under the laws of Italy whose address is Via Baldanzese 17, 50041 Calenzano, Firenze, Italy (hereafter referred to as "El En"), and Cynosure, Inc., a Delaware corporation whose address is 10 Elizabeth Drive, Chelmsford, MA 01824 (hereinafter referred to as "Cynosure"). This Agreement shall be effective as of January 1, 2005 (hereinafter the "Effective Date"). (Both El En and Cynosure are sometimes collectively referred to as the "Parties", and each may be referred to in the singular as a "Party".) The Parties hereby agree to the following: 1. DEFINITIONS The terms used in this Agreement shall have the following meaning: 1.1 "Territory" shall mean worldwide. 1.2 "Products" shall mean those El En products set forth in Exhibit A to this Agreement. The term "Products" may be modified from time to time by written agreement of the parties to include additional El En products. 1.3 "Affiliate" shall mean, with respect to either party, a corporation or entity that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such party. El En and Cynosure shall be deemed not to be Affiliates for purposes of this Agreement. 2. APPOINTMENT AND ACCEPTANCE 2.1 Subject to Cynosure's compliance with all the terms of this Agreement, El En hereby appoints Cynosure as its distributor for marketing, sales and delivery of the Products in the Territory as long as this Agreement remains in full force and effect, and Cynosure accepts such appointment. 2.2 This appointment of Cynosure as El En's distributor for the Products in the Territory is an exclusive appointment. During the term of this Agreement and so long as Cynosure is not in default under this Agreement, El En shall not appoint any other distributor for the Products in the Territory: 2.3 This appointment shall automatically terminate upon the expiration or termination of this Agreement. 2.4 Cynosure shall have the right, without the prior written consent of El En, to appoint sub-distributors or sub-dealers to sell the Products in the Territory. Notwithstanding the foregoing, should El En reasonably object to any such appointment, Cynosure shall refrain therefrom.

2.5 Neither this Agreement nor any right granted by this Agreement is a property right. Except as provided in Section 2.4, neither this Agreement nor any right or responsibility under this Agreement may be transferred, assigned, delegated or sold by Cynosure or by operation of law. 2.6 No rights or licenses with respect to the Products are granted or deemed granted under this Agreement or in connection herewith, other than those rights expressly granted in this Agreement. 3 OBLIGATIONS OF EL EN 3.1 El En shall provide such marketing and other sales support to Cynosure as the parties may agree from time to time Cynosure shall pay for all travel, lodging, meals and related expenses incurred by El En in providing such support. 3.2 El En reserves the right in its sole discretion to discontinue the sale or production of any Product. El En reserves the right in its sole discretion to modify, alter, improve or change any Product. El En shall make reasonable efforts to provide Cynosure with one year's prior written notice of any decision to discontinue the sale or production of any Product and ninety (90) days prior written notice of any decision to change any Product, but any changes made for safety reasons or to accommodate regulatory requirements shall be effective upon notice to Cynosure. 3.3 El En will provide annual training sessions (at locations to be determined by El En) for Cynosure sales and service personnel at no cost to Cynosure. Notwithstanding the foregoing, Cynosure shall be responsible for all travel, lodging, meals and related expenses associated with attendance by its personnel at these training sessions. 4. SALES TO CYNOSURE 4.1 Each order for the Products will be submitted by Cynosure on the Purchase Order form set forth at Exhibit B to this Agreement (hereinafter the "Purchase Order") and will be processed by El En in a timely fashion. Each Purchase Order submitted by Cynosure shall specify the quantity of each Product which Cynosure desires to purchase and the delivery date for such Product(s). The express terms of this Agreement, including the Purchase Order, supersede any contrary provisions in any purchase order, agreement or other document used by Cynosure. Contracts for the sale of the Product by Cynosure to its customers shall automatically incorporate, to the extent applicable, the terms and conditions of this Agreement, including the Purchase Order. El En will accept or reject the Purchase Order in writing within ten (10) working days of El En's receipt of the Purchase Order from Cynosure. Any failure on the part of El En to acknowledge a Purchase Order within such ten (10) working day period shall be deemed to be a rejection of such Purchase Order. 4.2 Cynosure's orders for the Products shall not be binding on El En until 2

accepted by El En and may be canceled by Cynosure only until that time. Orders shall be deemed accepted by El En when Cynosure is so notified in writing by El En. In the event of a shortage of any Product, El En will make reasonable efforts to allocate such Product among its distributors and sales representatives in a fair and equitable manner, but El En shall have no liability to Cynosure whatsoever as the result of its inability to meet Cynosure's orders for such Product or any allocation made by El En among its distributors and sales representatives. 4.3 The prices applicable to the Products are set forth in Exhibit C to this Agreement. The price applicable to each Product may be changed by El En only upon reasonable notice (not less than thirty (30) days) to Cynosure. Any change in the price of a Product will not apply to any orders for such Product from Cynosure accepted in writing by El En prior to the effective date of such change. All amounts under this Agreement shall be calculated and paid in U.S. Dollars. 4.4 Cynosure will deliver to El En, not later than the first day of each March, June, September and December in each year during the term of this Agreement, a forecast of Cynosure's anticipated requirements for each Product during the following calendar quarter, specifying quantities and shipment dates therefore. The forecast shall not be binding upon Cynosure. Upon acceptance in writing of such forecast by El En, El En shall make reasonable commercial efforts to maintain sufficient inventory to fill Cynosure's requirements based on such forecasts. Product shall, however, only be shipped against purchase orders accepted by El En. 4.5 Cynosure shall examine each shipment of the Products to determine whether any item or items included in the shipment are in short supply, defective or damaged. Within five (5) business days of receipt of the shipment, Cynosure shall notify El En in writing of any shortages, defects or damage which Cynosure claims existed at the time of delivery and are not a result of shipping. Within twenty (20) days of receipt of such notice, El En will investigate the claim of shortage, defects or damage, and inform Cynosure of its findings. If El En determines that a shortage, defect or damages existed at the time of delivery and was not a result of shipping, El En will promptly deliver replacement Product to Cynosure. Unless notice is given as provided in this Section 4.5, Cynosure shall be deemed to have accepted each shipment of the Products and to have waived all claims for shortages, defects or damage. 5. DISTRIBUTORSHIP OPERATIONS 5.1 Cynosure agrees to use best efforts to sell the Products in the Territory and to promote, through Cynosure's own advertising and sales promotion activities, the purchase and use of the Products by customers located in the Territory. Cynosure agrees to establish a sales program for the Products that will include the following responsibilities: 5.1.1 Cynosure shall maintain one or more sales offices in the Territory and shall use best efforts and devote such time as necessary to sell and promote the sale of the 3

Products in the Territory. Cynosure shall solely determine its hours of operation, its staffing for its offices, its employment policies and benefits and where and when to make sales calls. 5.1.2 Cynosure shall ensure that all personnel whom Cynosure assigns to sell the Products are adequately trained on the Product to provide a satisfactory level of sales service to customers and provide effective sales presentations and training in the use of the Products to customers. 5.3 As security for the payment by Cynosure of the purchase price for Products ordered under this Agreement, Cynosure hereby grants to El En a purchase money security interest in all Products sold or delivered by El En to Cynosure or to third parties on Cynosure's behalf, whether presently or after-acquired, in any and all purchase contracts for Products entered into between Cynosure and a customer, in any and all payments for Products due and payable from Cynosure's customers, and in any and all proceeds from the sale or delivery of such Products collected by Cynosure. Cynosure agrees to execute all necessary documents and financing statements requested by El En in order to perfect and enforce such security interest. 6. ADDITIONAL CYNOSURE OBLIGATIONS 6.1 Cynosure shall promptly report to El En all complaints and product problems communicated by customers with respect to the Products. Cynosure shall be responsible for providing El En with a written report of all Product complaints and problems. Cynosure shall assist El En in complying with the then current Medical Device Reporting/Adverse Event/Product Problem Regulations promulgated and amended by the U.S. Food and Drug Administration ("FDA"). To the extent applicable to relationships of this nature and required by applicable law, Cynosure shall be responsible for maintaining traceability of all Products purchased and resold by Cynosure. 6.2 Cynosure shall make no warranties or representations, whether oral or written, with respect to the Products, including without limitation, sales literature, without the prior written consent of El En. Cynosure shall accurately and completely represent the Products, and promote the Products in a manner consistent with its labeling, FDA cleared or approved indications, and FDA regulations. 6.3 Cynosure shall, at its sole expense, comply with all the laws and regulations applicable to its operations and to its performance of its obligations under this Agreement. 6.4 Except as provided in this Section 6.4, El En does not grant to Cynosure any license or rights to any intellectual property of El En. El En hereby grants Cynosure the non-exclusive and non-transferable right to display trade names and trademarks associated with the Products in the Territory solely in connection with the performance of its obligations under this Agreement. Upon termination of this Agreement, Cynosure shall terminate all use of such trade names and trademarks. Cynosure shall not, directly or indirectly, infringe or contest the validity of or the title to any patents, copyrights, trademarks or trade names owned by El En or under which El En is licensed, or otherwise 4

impair the interests of El En in such intellectual property. 6.5 Cynosure will conduct all of its business in its own name and in a manner consistent with its obligations under this Agreement. Cynosure will be solely responsible for the payment of all the expenses of its office and activities and will be solely responsible for the acts and expenses of its employees and independent contractors, if any. Neither Cynosure nor any of its employees or consultants shall be considered to be employees of El En for any purpose whatsoever, including, without limitation, social security, unemployment compensation, workers' compensation, income tax withholding, or any other such taxes or obligations. Cynosure understands and agrees that it is solely responsible for payment of all such taxes and obligations. 6.6 Nothing in this Agreement shall be construed to constitute either party as a partner, employee, franchisee, or agent of the other party, nor shall either party have any authority to bind the other in any respect. Neither party has the power to make contracts in the name of the other or to incur any liabilities whatsoever in the name of the other. Each party shall remain an independent contractor responsible only for its own actions. Neither party nor any of their respective employees or consultants shall be entitled to participate in any plans, arrangements, or distributions of the other party under any pension, stock, bonus, profit sharing, medical plan, or any other benefit plans offered or provided to the employees or consultants of the other party. 6.7 Each party represents and warrants to the other party that its execution of this Agreement and performance of its obligations under this Agreement do not and will not contravene, violate or constitute a breach of, any law, rule, regulation or the provisions of any court order or contractual agreement or other obligation to which it is a party or by which it is bound. 6.8 Each party represents and warrants to the other party that it shall not disclose, use, have used, make available to or transfer to the other party any information, including without limitation, any data, concepts, formula or trade secrets, which is proprietary or confidential to a third party. 6.9 At all times during the term of this Agreement or any renewal thereof, Cynosure shall refrain from promoting or selling any competitive product that has substantially the same specifications as the Products or is substantially similar to any Product, except this provision shall not prevent Cynosure from continuing to sell its existing product line or any product introduced by Cynosure as a successor to any existing product. 7. TERM AND TERMINATION 7.1 This Agreement is effective on the Effective Date and shall continue in force for a period of seven years unless sooner terminated as herein provided. This Agreement shall be automatically renewed for additional terms of one year each unless either party shall have given notice of termination to the other party not less than one year prior to the 5

expiration of the initial term or an renewal term. 7.2 Either party may terminate this Agreement in the event (a) the other party commits a material breach of this Agreement, which breach remains uncured for a period of thirty (30) days following written notice of such material breach; or (b) the other party becomes insolvent, fails generally to pay its debts as they become due, makes an assignment for the benefit of creditors, is the subject of any voluntary or involuntary case commenced under the federal bankruptcy laws, as now constituted or hereafter amended (which, in the case of involuntary bankruptcy, is not dismissed within ninety (90) days), or of any other proceeding under other applicable laws of any jurisdiction regarding bankruptcy, insolvency, reorganization, adjustment of debt or other forms of relief for debtors, has a receiver, trustee, liquidator, assignee, custodian or similar official appointed for it or for any substantial part of its property, or is the subject of any dissolution or liquidation proceeding. Without limiting the generality of the foregoing, failure by Cynosure to make any payment due to El En under this Agreement, subject to applicable cure periods set forth in this Section 7.2, shall constitute a material breach for purposes hereof and shall attribute to El En at its sole option, the right to revoke the exclusivity of Cynosure's rights within the Territory or to terminate this Agreement. 7.3 After termination or expiration of this Agreement, any amounts owed by one party to the other for transactions occurring during the term of the Agreement shall be paid in accordance with this Agreement. El En shall have no obligation to Cynosure for any sales or other activities of Cynosure after termination or expiration of this Agreement, unless expressly agreed in writing signed by both parties. 7.4 After termination or expiration of this Agreement, each Party shall promptly return to the other Party all copies of confidential and/or proprietary information previously disclosed by the other Party, and Cynosure shall remove and not thereafter use any advertisements, brochures and other items in its possession or under its control, that contain El En's trademarks and/or service marks, and shall return to El En any and all property of El En in Cynosure's possession, including, without limitation, all spare parts, products and technical documentation owned by El En. All rights and licenses granted to Cynosure under this Agreement shall terminate and revert back to El En. 7.5 The following provisions of this Agreement shall survive the termination or expiration of this Agreement: Sections 6.4, 6.5, 7.3, 7.4, 8, 9, 11, 15 and 16. 8. CONFIDENTIALITY With respect to any information disclosed by either Party to the other Party, which information is identified by the disclosing Party as confidential or proprietary at the time of disclosure, the receiving Party will treat such information as strictly confidential, and use the same degree of care to protect such information as it as the receiving Party uses to protect its own highest level confidential information, which shall not be less than due care. All customer lists, customer files, market and sales data, discounting and pricing data, competitive analyses, market potential information and Product information shall be deemed 6

confidential and proprietary. Each Party agrees not to use for its own benefit, nor to disclose to third parties, any such information received from the other Party during the term of this Agreement or thereafter. These restrictions shall not apply to information that (a) was in the possession of the receiving prior to its disclosure by the disclosing Party; (b) at the time of disclosure is in the public domain, or which later becomes part of the public domain through no breach of the terms of this Agreement; or (c) was received by the receiving Party from a source other than the disclosing Party, who did not acquire such information directly or indirectly from the disclosing Party. 9 FORCE MAJEURE Neither party shall not be liable in any manner for failure or delay to fulfill all or part of this Agreement as the result of any act of God, governmental orders or restriction, war, threat of war, warlike conditions, acts of terror, hostilities, sanctions, mobilization, blockade, embargo, detention, revolution, riot, looting, strike, lockout, labor action, accident, or any other causes or circumstances beyond the such party's reasonable control. Upon the occurrence of a force majeure event, the party suffering such event shall immediately provide written notice to the other party of the existence and details of such force majeure event and its anticipated duration. 10. WAIVER OF BREACH Failure of either party to require performance of any term of this Agreement or the waiver by either party of any default under this Agreement shall not be deemed a waiver of any subsequent default nor of the provision of this Agreement allegedly breached as a result of such default. 11. GOVERNING LAWS This Agreement shall be governed by and construed in accordance with the laws of the Republic of Italy , without reference to its principles of conflicts of laws. 12. ASSIGNMENT This Agreement shall not be assignable by either Party hereto without the prior written consent of the nonassigning Party, except that either party may assign this Agreement in connection with a sale or transfer of all or substantially all of its business or assets. 13. NO CHANGES OF AGREEMENT VALID No modification of this Agreement shall be valid or binding upon either Party without its written consent. 7

14. OTHER AGREEMENTS All prior oral or written agreements or understandings between the Parties with respect to the subject matter of this Agreement are hereby terminated, except for those agreements or understandings which, by their nature, are intended to survive termination. 15. NOTICES All notices pertaining to this Agreement shall be confirmed in writing, and shall be delivered to the Party concerned, by registered or certified mail, or by recognized overnight air courier service, to the address first set forth above. Either Party may change its address for notice by written notice to the other Party. Notice is deemed effective upon mailing or upon delivery to a recognized international air courier service. 16. DISPUTE RESOLUTION The parties agree that any and all disputes regarding the interpretation or application of this agreement (Including any schedule or exhibit hereof) shall be submitted to the exclusive jurisdiction of the tribunal of Milan, Italy. 17. COUNTERPARTS/ENTIRE AGREEMENT This Agreement may be executed in duplicate and when so executed, each executed copy shall be deemed an original. All Exhibits referenced in this Agreement are deemed incorporated by reference. 18. CAPTIONS The captions in this Agreement have been inserted for convenience of reference only, are not to be considered a part of this Agreement, and shall in no way modify or restrict any of the terms or provisions of this Agreement. IN WITNESS WHEREOF, the Parties have hereto caused this Agreement to be executed by their duly authorized representatives, on the day and year first above written.
EL.EN. S.p.A. By: /s/ ANDREA CANGIOLI ----------------------Name: Andrea Cangioli Title: Consigliere Delegato CYNOSURE, INC. BY: /s/ TIMOTHY W. BAKER ----------------------Name: Timothy W. Baker Title: CFO

8

Exhibit A List of Products The Cynergy Product Line 9

Exhibit B Form of Purchase Order Purchase Order No. Date: TO: El. En. S.p.A. [insert address] Tel: FROM: Cynosure, Inc. 10 Elizabeth Drive Chelmsford, Massachusetts 01824 Tel:

Fax: Fax: PRODUCT(S) ORDERED: QUANTITY: REQUESTED DELIVERY DATE(S): DELIVERY LOCATION: TOTAL PURCHASE PRICE: $ Standard Conditions of Purchase are attached and are made part of this Purchase Order. Cynosure, Inc. By: Name: Title: 10

STANDARD CONDITIONS OF PURCHASE These conditions apply to the attached Purchase Order. FORMATION OF CONTRACT The Purchase Order is an offer by you to purchase from El. En. S.p.A. the Product(s) described in the Purchase Order. By submitting the Purchase Order to us, you agree to purchase the Product(s) on the terms and conditions specified in the Purchase Order and these Standard Conditions of Purchase. We accept your offer by the signature of a duly authorized officer of El. En. S.p.A.. The Purchase Order and these Standard Conditions of Purchase (together with the Distribution Agreement dated as of January 1, 2005 (the Distribution Agreement)) are intended to be the complete and exclusive statement of the terms of the contract between us. Please understand that our acceptance of your offer is expressly made conditional on your assent to all of our terms. No prior proposals, statements, course of dealing or usage of the trade will be part of the contract. After the contract has been formed, it may be modified only by written document signed by our respective authorized representatives. No order accepted by us may be terminated, canceled, modified or assigned by you without our prior written permission. PRICE AND TAXES The price you will pay is stated in the Purchase Order. The price includes the Product(s) described in the Purchase Order, standard packaging and shipping. You shall be responsible for all taxes (including without limitation any sales use, excise or similar tax), custom fees and duties, VAT and other related governmental fees and costs, transportation to the site specified in the Purchase Order, special packaging and insurance. Any applicable taxes will be added to the price, unless we receive a tax exemption certificate from you which is acceptable to the taxing authorities. PAYMENT The payment terms are as follows: Net 30 days from shipment. Past due balances are subject to a service charge up to the maximum amount permitted by applicable law. If any payment depends on an event which is delayed for a reason for which you are responsible, you will make the payment when the event was first scheduled to occur. 11

DELIVERY Delivery dates are approximate. We will not be not responsible for any delay in performance or delivery which is due to unforeseen circumstances, or to causes beyond our reasonable control, including, without limitation, strike, lockout, riot, war, act of God, or compliance with any governmental law, regulation or order (including U.S. Export regulations), or any delay in vendors supplying materials and equipment. If such a delay occurs, we may extend the performance or delivery date for a period of time equal to the delay. TRANSPORTATION, TITLE AND RISK OF LOSS Except as otherwise provided below, all shipments are Ex Works Calenzano, our manufacturing facility in Italy. You are be responsible for all transportation and insurance. Title and risk of loss or damage to the equipment shall pass upon delivery to the shipper. For equipment shipped outside the United States and its possessions, title and risk of loss or damage shall pass to you when the Product(s) arrives at the country of destination, notwithstanding any shipment terms to the contrary. ACCEPTANCE OF PRODUCT You shall be responsible for examining each shipment of Product(s) to determine whether any item or items included in the shipment are in short supply, defective or damaged. Within five (5) business days of receipt of the shipment, you shall notify us in writing of any shortages, defects or damage which you claim existed at the time of delivery and are not a result of shipping. Within twenty (20) days of receipt of such notice, we will investigate the claim of shortage, defects or damage, and inform you of our findings. If we determine that a shortage, defect or damages existed at the time of delivery and was not a result of shipping, we will promptly deliver replacement Product(s) to you. Unless notice is given as provided in this paragraph, you shall be deemed to have accepted each shipment of Product(s) and to have waived all claims for shortages, defects or damage. LIMITED WARRANTY We warrant that each Product sold by us will not infringe any patents, trade secrets, trademarks, or other intellectual property rights of any third party, and that the Product, when delivered to you, shall be free from defects in materials and workmanship for a period of 360 days after receipt of the Product We makes no warranty (express, implied or statutory) for any Product that are modified or subjected to unusual physical stress, misuse, improper storage or handling, or used in any manner or medical procedure for which the Product(s) are not indicated. We shall promptly replace any Product that fails to meet this limited warranty at the time of delivery. This constitutes our sole liability to end users for breach of the foregoing warranty. 12

EXCLUSIVITY AND DISCLAIMER THE LIMITED WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTY ARISING OUT OF A COURSE OF DEALING OR OF PERFORMANCE, CUSTOM OR USAGE IN THE TRADE. YOUR EXCLUSIVE REMEDY FOR A DEFECT IN ANY PRODUCT SHALL BE THAT STATED IN THE LIMITED WARRANTY. LIMITATION OF LIABILITY Our responsibility for any claims, damages, losses or liabilities arising out of or related to our performance under the Purchase Order shall not exceed the aggregate consideration paid to us pursuant to the Purchase Order. In addition, in no event shall we be liable to you, your employees or agents or to any other third party for any indirect, special, exemplary, incidental or consequential damages, including but not limited to damages resulting from loss of use, loss of data, loss of profits or any harm or damage to persons or property arising out of or in connection with the Purchase Order or any equipment, materials or services provided under the Purchase Order. GENERAL MATTERS ASSIGNMENT. Any assignment of the Purchase Order or these Standard Conditions of Purchase will be void without the other party's prior written consent, which will not be unreasonably withheld. VALIDITY. If any provision of the Purchase Order or these Standard Conditions of Purchase is found invalid, the remaining portion will be effective. GOVERNING LAW. The Purchase Order and these Standard Conditions of Purchase are to be interpreted in accordance with, and its administration and performance governed by, the laws of the Republic of Italy without reference to its principles of conflicts of law. 13

Exhibit C Product Pricing Base Unit US $ [**] UPL handpiece US $ [**] The price for each Product is set forth below. Such price does not include the taxes and other amounts specified in the form of Purchase Order. The price may be adjusted from time to time by El En as set forth in Section 4.3 of this Agreement. 14

Exhibit 10.8 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. EXCLUSIVE DISTRIBUTION AGREEMENT (for TriActive(TM) LaserDermology(TM) Systems, Photolight Pulsed Light Systems and PhotoSilk Plus Pulsed Light Systems) THIS AGREEMENT is made by and between El. En. S.p.A., a company organized under the laws of Italy whose address is Via Baldanzese 17, 50041 Calenzano, Firenze, Italy (hereafter referred to as "El En"), and Cynosure, Inc., a Delaware corporation whose address is 10 Elizabeth Drive, Chelmsford, MA 01824 (hereinafter referred to as "Cynosure"). This Agreement shall be effective as of January 1, 2005 (hereinafter the "Effective Date"). (Both El En and Cynosure are sometimes collectively referred to as the "Parties", and each may be referred to in the singular as a "Party".) The Parties hereby agree to the following: 1. DEFINITIONS The terms used in this Agreement shall have the following meaning: 1.1 "Territory" shall mean North America, which includes the United States (including Alaska and Hawaii), Canada, Puerto Rico and Mexico and their respective territories and possessions. 1.2 "Products" shall mean those El En products set forth in Exhibit A to this Agreement. The term "Products" may be modified from time to time by written agreement of the parties hereto to include additional El En products. 1.3 "Affiliate" shall mean, with respect to either party, a corporation or entity that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such party. El En and Cynosure shall be deemed not to be Affiliates for purposes of this Agreement. 2. APPOINTMENT AND ACCEPTANCE 2.1 Subject to Cynosure's compliance with all the terms of this Agreement, El En hereby appoints Cynosure as its distributor for the marketing, sale and delivery of the Products in the Territory, and Cynosure accepts such appointment. Cynosure shall not sell, lease, license or install, directly or indirectly, any Products outside the Territory and shall promptly refer to El En any requests therefore. 2.2 With the exception of Mexico, this appointment of Cynosure as El En's distributor for the Products in the Territory is an exclusive appointment. During the term of this Agreement and so long as Cynosure is not in default under this Agreement, El En shall not appoint any other distributor for the Products in the United States (including Alaska and Hawaii) Canada or Puerto Rico or their respective territories and possessions 2.3 This appointment shall automatically terminate upon the expiration or termination of this Agreement.

2.4 Cynosure shall not actively seek customers for the Products outside the Territory, nor establish any branch or representative office outside the Territory, nor maintain any distribution depot outside the Territory. Cynosure shall not engage in any advertising or promotional activities relating to the Products directed primarily to customers located outside the Territory. Cynosure shall have the right, without the prior written consent of El En, to appoint sub-distributors or sub-dealers to sell the Products in the Territory. Notwithstanding the foregoing, should El En reasonably object to any such appointment, Cynosure shall refrain therefrom. 2.5 Neither this Agreement nor any right granted by this Agreement is a property right. Except as provided in Section 2.4, neither this Agreement nor any right or responsibility under this Agreement may be transferred, assigned, delegated or sold by Cynosure or by operation of law. 2.6 No rights or licenses with respect to the Products are granted or deemed granted under this Agreement or in connection herewith, other than those rights expressly granted in this Agreement. 3 OBLIGATIONS OF EL EN 3.1 El En shall provide such marketing and other sales support to Cynosure as the parties may agree from time to time Cynosure shall pay for all travel, lodging, meals and related expenses incurred by El En in providing such support. 3.2 El En reserves the right in its sole discretion to discontinue the sale or production of any Product. El En reserves the right in its sole discretion to modify, alter, improve or change any Product. El En shall make reasonable efforts to provide Cynosure with one year's prior written notice of any decision to discontinue the sale or production of any Product and ninety (90) days' prior written notice of any decision to change any Product, but any changes made for safety reasons or to accommodate regulatory requirements shall be effective upon notice to Cynosure. 3.3 El En will provide annual training sessions (at locations to be determined by El En) for Cynosure sales and service personnel at no cost to Cynosure. Notwithstanding the foregoing, Cynosure shall be responsible for all travel, lodging, meals and related expenses associated with attendance by its personnel at these training sessions. 4. SALES TO CYNOSURE 4.1 Each order for the Products will be submitted by Cynosure on the Purchase Order form set forth at Exhibit B to this Agreement (hereinafter the "Purchase Order") and will be processed by El En in a timely fashion. Each Purchase Order submitted by Cynosure shall specify the quantity of each Product which Cynosure desires to purchase and the delivery date for such Product(s). The express terms of this Agreement, including the Purchase Order, supersede any contrary provisions in any purchase order, agreement 2

or other document used by Cynosure. Contracts for the sale of the Product by Cynosure to its customers shall automatically incorporate, to the extent applicable, the terms and conditions of this Agreement, including the Purchase Order. El En will accept or reject the Purchase Order in writing within ten (10) working days of El En's receipt of the Purchase Order from Cynosure. Any failure on the part of El En to acknowledge a Purchase Order within such ten (10) working day period shall be deemed to be a rejection of such Purchase Order. 4.2 Cynosure's orders for the Products shall not be binding on El En until accepted by El En and may be canceled by Cynosure only until that time. Orders shall be deemed accepted by El En when Cynosure is so notified in writing by El En. In the event of a shortage of any Product, El En will make reasonable efforts to allocate such Product among its distributors and sales representatives in a fair and equitable manner, but El En shall have no liability to Cynosure whatsoever as the result of its inability to meet Cynosure's orders for such Product or any allocation made by El En among its distributors and sales representatives. 4.3 The prices applicable to the Products are set forth in Exhibit C to this Agreement. The price applicable to each Product may be changed by El En only upon reasonable notice (not less than thirty (30) days) to Cynosure. Any change in the price of a Product will not apply to any orders for such Product from Cynosure accepted in writing by El En prior to the effective date of such change. All amounts under this Agreement shall be calculated and paid in U.S. Dollars. 4.4 Cynosure will deliver to El En, not later than the first day of each March, June, September and December in each year during the term of this Agreement, a forecast of Cynosure's anticipated requirements for each Product during the following calendar quarter, specifying quantities and shipment dates therefor. The forecast shall not be binding upon Cynosure. Upon acceptance in writing of such forecast by El En, El En shall make reasonable commercial efforts to maintain sufficient inventory to fill Cynosure's requirements based on such forecasts. Product shall, however, only be shipped against purchase orders accepted by El En. 4.5 Cynosure shall examine each shipment of the Products to determine whether any item or items included in the shipment are in short supply, defective or damaged. Within five (5) business days of receipt of the shipment, Cynosure shall notify El En in writing of any shortages, defects or damage which Cynosure claims existed at the time of delivery and are not a result of shipping. Within twenty (20) days of receipt of such notice, El En will investigate the claim of shortage, defects or damage, and inform Cynosure of its findings. If El En determines that a shortage, defect or damages existed at the time of delivery and was not a result of shipping, El En will promptly deliver replacement Product to Cynosure. Unless notice is given as provided in this Section 4.5, Cynosure shall be deemed to have accepted each shipment of the Products and to have waived all claims for shortages, defects or damage. 3

5. DISTRIBUTORSHIP OPERATIONS 5.1 Cynosure agrees to use best efforts to sell the Products in the Territory and to promote, through Cynosure 's own advertising and sales promotion activities, the purchase and use of the Products by customers located in the Territory. Cynosure agrees to establish a sales program for the Products that will include the following responsibilities: 5.1.1 Cynosure shall maintain one or more sales offices in the Territory and shall use best efforts and devote such time as necessary to sell and promote the sale of the Products in the Territory. Cynosure shall solely determine its hours of operation, its staffing for its offices, its employment policies and benefits and where and when to make sales calls. 5.1.2 Cynosure shall ensure that all personnel whom Cynosure assigns to sell the Products are adequately trained on the Product to provide a satisfactory level of sales service to customers and provide effective sales presentations and training in the use of the Products to customers. 5.3 Cynosure will purchase and carry spare parts for Products out of warranty in order to provide a prompt service to its customers in the Territory. Cynosure shall purchase from El En such special tools as El En reasonably deems necessary to service and repair the Products. 5.4 Cynosure agrees to purchase from El En the minimum number of Products per year as set forth in Exhibit D attached hereto and made a part hereof. In the event Cynosure fails to purchase at least the minimum number per year of any of the Products as set forth in Exhibit D, El En at its sole option shall have the right to terminate this Agreement for such Product or Products pursuant to Section 7 of this Agreement. Cynosure will purchase and carry spare parts for Products out of warranty in order to provide a prompt service. Cynosure shall purchase from El En such special tools as El En reasonably deems necessary to service and repair the Products. 5.4 As security for the payment by Cynosure of the purchase price for Products ordered under this Agreement, Cynosure hereby grants to El En a purchase money security interest in all Products sold or delivered by El En to Cynosure or to third parties on Cynosure's behalf, whether presently or after-acquired, in any and all purchase contracts for Products entered into between Cynosure and a customer, in any and all payments for Products due and payable from Cynosure's customers, and in any and all proceeds from the sale or delivery of such Products collected by Cynosure. Cynosure agrees to execute all necessary documents and financing statements requested by El En in order to perfect and enforce such security interest. 6. ADDITIONAL CYNOSURE OBLIGATIONS 6.1 Cynosure shall promptly report to El En all complaints and product problems 4

communicated by customers with respect to the Products. Cynosure shall be responsible for providing El En with a written report of all Product complaints and problems. Cynosure shall assist El En in complying with the then current Medical Device Reporting/Adverse Event/Product Problem Regulations promulgated and amended by the U.S. Food and Drug Administration ("FDA"). To the extent applicable to relationships of this nature and required by applicable law, Cynosure shall be responsible for maintaining traceability of all Products purchased and resold by Cynosure. 6.2 Cynosure shall make no warranties or representations, whether oral or written, with respect to the Products, including without limitation, sales literature, without the prior written consent of El En. Cynosure shall accurately and completely represent the Products, and promote the Products in a manner consistent with its labeling, FDA cleared or approved indications, and FDA regulations. 6.3 Cynosure shall, at its sole expense, comply with all the laws and regulations applicable to its operations and to its performance of its obligations under this Agreement. 6.4 Except as provided in this Section 6.4, El En does not grant to Cynosure any license or rights to any intellectual property of El En. El En hereby grants Cynosure the non-exclusive and non-transferable right to display trade names and trademarks associated with the Products in the Territory solely in connection with the performance of its obligations under this Agreement. Upon termination of this Agreement, Cynosure shall terminate all use of such trade names and trademarks. Cynosure shall not, directly or indirectly, infringe or contest the validity of or the title to any patents, copyrights, trademarks or trade names owned by El En or under which El En is licensed, or otherwise impair the interests of El En in such intellectual property. 6.5 Cynosure will conduct all of its business in its own name and in a manner consistent with its obligations under this Agreement. Cynosure will be solely responsible for the payment of all the expenses of its office and activities and will be solely responsible for the acts and expenses of its employees and independent contractors, if any. Neither Cynosure nor any of its employees or consultants shall be considered to be employees of El En for any purpose whatsoever, including, without limitation, social security, unemployment compensation, workers' compensation, income tax withholding, or any other such taxes or obligations. Cynosure understands and agrees that it is solely responsible for payment of all such taxes and obligations. 6.6 Nothing in this Agreement shall be construed to constitute either party as a partner, employee, franchisee, or agent of the other party, nor shall either party have any authority to bind the other in any respect. Neither party has the power to make contracts in the name of the other or to incur any liabilities whatsoever in the name of the other. Each party shall remain an independent contractor responsible only for its own actions. Neither party nor any of their respective employees or consultants shall be entitled to participate in any plans, arrangements, or distributions of the other party under any pension, stock, bonus, profit sharing, medical plan, or any other benefit plans offered or provided to the employees or consultants of the other party. 5

6.7 Each party represents and warrants to the other party that its execution of this Agreement and performance of its obligations under this Agreement do not and will not contravene, violate or constitute a breach of, any law, rule, regulation or the provisions of any court order or contractual agreement or other obligation to which it is a party or by which it is bound. 6.8 Each party represents and warrants to the other party that it shall not disclose, use, have used, make available to or transfer to the other party any information, including without limitation, any data, concepts, formula or trade secrets, which is proprietary or confidential to a third party. 6.9 At all times during the term of this Agreement or any renewal thereof, Cynosure shall refrain from promoting or selling any competitive product that has substantially the same specifications as the Products or is substantially similar to any Product except this provision shall not prevent Cynosure from continuing to sell its existing product line or any product introduced by Cynosure as a successor to any existing product. 7. TERM AND TERMINATION 7.1 This Agreement is effective on the Effective Date and shall continue in force for a period of seven years unless sooner terminated as herein provided. This Agreement shall be automatically renewed for additional terms of one year each unless either party shall have given notice of termination to the other party not less than six months prior to the expiration of the initial term or an renewal term. 7.2 Either party may terminate this Agreement in the event (a) the other party commits a material breach of this Agreement, which breach remains uncured for a period of thirty (30) days following written notice of such material breach; or (b) the other party becomes insolvent, fails generally to pay its debts as they become due, makes an assignment for the benefit of creditors, is the subject of any voluntary or involuntary case commenced under the federal bankruptcy laws, as now constituted or hereafter amended (which, in the case of involuntary bankruptcy, is not dismissed within ninety (90) days), or of any other proceeding under other applicable laws of any jurisdiction regarding bankruptcy, insolvency, reorganization, adjustment of debt or other forms of relief for debtors, has a receiver, trustee, liquidator, assignee, custodian or similar official appointed for it or for any substantial part of its property, or is the subject of any dissolution or liquidation proceeding. Without limiting the generality of the foregoing, failure by Cynosure to make any payment due to El En under this Agreement, subject to applicable cure periods set forth in this Section 7.2, shall constitute a material breach for purposes hereof and shall attribute to El En at its sole option, the right to revoke the exclusivity of Cynosure's rights within the Territory or to terminate this Agreement. 7.3 After termination or expiration of this Agreement, any amounts owed by one party to the other for transactions occurring during the term of the Agreement shall be paid 6

in accordance with this Agreement. El En shall have no obligation to Cynosure for any sales or other activities of Cynosure after termination or expiration of this Agreement, unless expressly agreed in writing signed by both parties. 7.4 After termination or expiration of this Agreement, each Party shall return to the other Party all copies of confidential and/or proprietary information previously disclosed by the other Party, and Cynosure shall remove and not thereafter use any advertisements, brochures and other items in its possession or under its control, that contain El En's trademarks and/or service marks, and shall return to El En any and all property of El En in Cynosure's possession, including, without limitation, spare parts, products and technical documentation owned by El En. All rights and licenses granted to Cynosure under this Agreement shall terminate and revert back to El En. 7.5 The following provisions of this Agreement shall survive the termination or expiration of this Agreement: Sections 6.4, 6.5, 7.3, 7.4, 8, 9, 11, 15 and 16. 8. CONFIDENTIALITY With respect to any information disclosed by either Party to the other Party, which information is identified by the disclosing Party as confidential or proprietary at the time of disclosure, the receiving Party will treat such information as strictly confidential, and use the same degree of care to protect such information as it as the receiving Party uses to protect its own highest level confidential information, which shall not be less than due care. All customer lists, customer files, market and sales data, discounting and pricing data, competitive analyses, market potential information and Product information shall be deemed confidential and proprietary. Each Party agrees not to use for its own benefit, nor to disclose to third parties, any such information received from the other Party during the term of this Agreement or thereafter. These restrictions shall not apply to information that (a) was in the possession of the receiving prior to its disclosure by the disclosing Party; (b) at the time of disclosure is in the public domain, or which later becomes part of the public domain through no breach of the terms of this Agreement; or (c) was received by the receiving Party from a source other than the disclosing Party, who did not acquire such information directly or indirectly from the disclosing Party. 9 FORCE MAJEURE Neither party shall not be liable in any manner for failure or delay to fulfill all or part of this Agreement as the result of any act of God, governmental orders or restriction, war, threat of war, warlike conditions, acts of terror, hostilities, sanctions, mobilization, blockade, embargo, detention, revolution, riot, looting, strike, lockout, labor action, accident, or any other causes or circumstances beyond the such party's reasonable control. Upon the occurrence of a force majeure event, the party suffering such event shall immediately provide written notice to the other party of the existence and details of such force majeure event and its anticipated duration. 7

10. WAIVER OF BREACH Failure of either party to require performance of any term of this Agreement or the waiver by either party of any default under this Agreement shall not be deemed a waiver of any subsequent default nor of the provision of this Agreement allegedly breached as a result of such default. 11. GOVERNING LAWS This Agreement shall be governed by and construed in accordance with the laws of the Republic of Italy, without reference to its principles of conflicts of laws. 12. ASSIGNMENT This Agreement shall not be assignable by either Party hereto without the prior written consent of the nonassigning Party, except that either party may assign this Agreement in connection with a sale or transfer of all or substantially all of its business or assets. 13. NO CHANGES OF AGREEMENT VALID No modification of this Agreement shall be valid or binding upon either Party without its written consent. 14. OTHER AGREEMENTS All prior oral or written agreements or understandings between the Parties with respect to the subject matter of this Agreement are hereby terminated, except for those agreements or understandings which, by their nature, are intended to survive termination. 15. NOTICES All notices pertaining to this Agreement shall be confirmed in writing, and shall be delivered to the Party concerned, by registered or certified mail, or by recognized overnight air courier service, to the address first set forth above. Either Party may change its address for notice by written notice to the other Party. Notice is deemed effective upon mailing or upon delivery to a recognized international air courier service. 16. DISPUTE RESOLUTION The parties agree that any and all disputes regarding the interpretation or application of this agreement (Including any schedule or exhibit hereof) shall be submitted to the exclusive jurisdiction of the tribunal of Milan, Italy. 8

17. COUNTERPARTS/ENTIRE AGREEMENT This Agreement may be executed in duplicate and when so executed, each executed copy shall be deemed an original. All Exhibits referenced in this Agreement are deemed incorporated by reference. 18. CAPTIONS The captions in this Agreement have been inserted for convenience of reference only, are not to be considered a part of this Agreement, and shall in no way modify or restrict any of the terms or provisions of this Agreement. IN WITNESS WHEREOF, the Parties have hereto caused this Agreement to be executed by their duly authorized representatives, on the day and year first above written.
EL.EN. S.p.A. By: /s/ ANDREA CANGIOLI ----------------------Name: Andrea Cangioli Title: Consigliere CYNOSURE, INC. BY: /s/ TIMOTHY W. BAKER ----------------------Name: Timothy W. Baker Title: CFO

9

Exhibit A List of Products TriActive(TM) LaserDermology(TM) Systems Photolight Pulsed Light Systems PhotoSilk Plus Pulsed Light Systems 10

Exhibit B Form of Purchase Order Purchase Order No. Date: TO: El. En. S.p.A. [insert address] Tel: FROM: Cynosure, Inc. 10 Elizabeth Drive Chelmsford, Massachusetts 01824 Tel:

Fax: Fax: PRODUCT(S) ORDERED: QUANTITY: REQUESTED DELIVERY DATE(S): DELIVERY LOCATION: TOTAL PURCHASE PRICE: $ Standard Conditions of Purchase are attached and are made part of this Purchase Order. Cynosure, Inc. By: Name: Title: 11

STANDARD CONDITIONS OF PURCHASE These conditions apply to the attached Purchase Order. FORMATION OF CONTRACT The Purchase Order is an offer by you to purchase from El. En. S.p.A. the Product(s) described in the Purchase Order. By submitting the Purchase Order to us, you agree to purchase the Product(s) on the terms and conditions specified in the Purchase Order and these Standard Conditions of Purchase. We accept your offer by the signature of a duly authorized officer of El. En. S.p.A.. The Purchase Order and these Standard Conditions of Purchase (together with the Distribution Agreement dated as of January 1, 2005 (the Distribution Agreement)) are intended to be the complete and exclusive statement of the terms of the contract between us. Please understand that our acceptance of your offer is expressly made conditional on your assent to all of our terms. No prior proposals, statements, course of dealing or usage of the trade will be part of the contract. After the contract has been formed, it may be modified only by written document signed by our respective authorized representatives. No order accepted by us may be terminated, canceled, modified or assigned by you without our prior written permission. PRICE AND TAXES The price you will pay is stated in the Purchase Order. The price includes the Product(s) described in the Purchase Order, standard packaging and shipping. You shall be responsible for all taxes (including without limitation any sales use, excise or similar tax), custom fees and duties, VAT and other related governmental fees and costs, transportation to the site specified in the Purchase Order, special packaging and insurance. Any applicable taxes will be added to the price, unless we receive a tax exemption certificate from you which is acceptable to the taxing authorities. PAYMENT The payment terms are as follows: Net 30 days from shipment. Past due balances are subject to a service charge up to the maximum amount permitted by applicable law. If any payment depends on an event which is delayed for a reason for which you are responsible, you will make the payment when the event was first scheduled to occur. 12

DELIVERY Delivery dates are approximate. We will not be not responsible for any delay in performance or delivery which is due to unforeseen circumstances, or to causes beyond our reasonable control, including, without limitation, strike, lockout, riot, war, act of God, or compliance with any governmental law, regulation or order (including U.S. Export regulations), or any delay in vendors supplying materials and equipment. If such a delay occurs, we may extend the performance or delivery date for a period of time equal to the delay. TRANSPORTATION, TITLE AND RISK OF LOSS Except as otherwise provided below, all shipments are Ex Works: Calenzano, our manufacturing facility in Italy. You are be responsible for all transportation and insurance. Title and risk of loss or damage to the equipment shall pass upon delivery to the shipper. For equipment shipped outside the United States and its possessions, title and risk of loss or damage shall pass to you when the Product(s) arrives at the country of destination, notwithstanding any shipment terms to the contrary. ACCEPTANCE OF PRODUCT You shall be responsible for examining each shipment of Product(s) to determine whether any item or items included in the shipment are in short supply, defective or damaged. Within five (5) business days of receipt of the shipment, you shall notify us in writing of any shortages, defects or damage which you claim existed at the time of delivery and are not a result of shipping. Within twenty (20) days of receipt of such notice, we will investigate the claim of shortage, defects or damage, and inform you of our findings. If we determine that a shortage, defect or damages existed at the time of delivery and was not a result of shipping, we will promptly deliver replacement Product(s) to you. Unless notice is given as provided in this paragraph, you shall be deemed to have accepted each shipment of Product(s) and to have waived all claims for shortages, defects or damage. LIMITED WARRANTY We warrant that each Product sold by us will not infringe any patents, trade secrets, trademarks, or other intellectual property rights of any third party, and that the Product, when delivered to you, shall be free from defects in materials and workmanship for a period of 360 days after receipt of the Product We makes no warranty (express, implied or statutory) for any Product that are modified or subjected to unusual physical stress, misuse, improper storage or handling, or used in any manner or medical procedure for which the Product(s) are not indicated. We shall promptly replace any Product that fails to meet this limited warranty at the time of delivery. This constitutes our sole liability to end users for breach of the foregoing warranty. 13

EXCLUSIVITY AND DISCLAIMER THE LIMITED WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY IMPLIED WARRANTY ARISING OUT OF A COURSE OF DEALING OR OF PERFORMANCE, CUSTOM OR USAGE IN THE TRADE. YOUR EXCLUSIVE REMEDY FOR A DEFECT IN ANY PRODUCT SHALL BE THAT STATED IN THE LIMITED WARRANTY. LIMITATION OF LIABILITY Our responsibility for any claims, damages, losses or liabilities arising out of or related to our performance under the Purchase Order shall not exceed the aggregate consideration paid to us pursuant to the Purchase Order. In addition, in no event shall we be liable to you, your employees or agents or to any other third party for any indirect, special, exemplary, incidental or consequential damages, including but not limited to damages resulting from loss of use, loss of data, loss of profits or any harm or damage to persons or property arising out of or in connection with the Purchase Order or any equipment, materials or services provided under the Purchase Order. GENERAL MATTERS ASSIGNMENT. Any assignment of the Purchase Order or these Standard Conditions of Purchase will be void without the other party's prior written consent, which will not be unreasonably withheld. VALIDITY. If any provision of the Purchase Order or these Standard Conditions of Purchase is found invalid, the remaining portion will be effective. GOVERNING LAW. The Purchase Order and these Standard Conditions of Purchase are to be interpreted in accordance with, and its administration and performance governed by, the laws of Republic of Italy without reference to its principles of conflicts of law. 14

Exhibit C Product Pricing The price for each Product is set forth below. Such price does not include the taxes and other amounts specified in the form of Purchase Order. The price may be adjusted from time to time by El En as set forth in Section 4.3 of this Agreement.
TRIACTIVE PHOTOLIGHT: Base system UPL Handpiece PHOTLSILK PLUS: Base System UPL handpiece Nd:YAG Handpiece Er:YAG Handpiece Nd:YAG Q-switched handpiece US $ [**] US $ [**] US $ [**] US $ US $ US $ US $ US $ [**] [**] [**] [**] [**]

15

EXHIBIT D MINIMUM PURCHASE REQUIREMENTS
TRIACTIVE --------YEAR YEAR YEAR YEAR YEAR YEAR YEAR 1 2 3 4 5 6 7 [**] [**] [**] [**] [**] [**] [**] PHOTOLIGHT ---------[**] [**] [**] [**] [**] [**] [**] PHOTOSILK --------PLUS ---[**] [**] [**] [**] [**] [**] [**]

16

EXHIBIT 10.9 PROMISSORY NOTE U.S. $275,000 October 1st, 2004 After the payment effected on June 30 2004 and September 30 2004, related to the following promissory notes:
January 2nd, 2003 February 3rd, 2003 March 3rd, 2003 April 1st, 2003 May 1st, 2003 June 2nd, 2003 July 29th, 2003 October 20, 2003 December 31st, 2003 February 24th, 2004 $ 359,788 $ 8,595 $ 2,313.50 $ 107,187 $ 21,683 $ 2,231.98 $ 600,000 $ 500,000 $291,180.76 $ 500,000

the total outstanding principal on the listed promissory notes is $ 275,000. This document summarizes the listed promissory notes within a single residual one: FOR VALUE RECEIVED, CYNOSURE, INC., a corporation organized under the laws of Delaware ("Borrower"), 10 Elizabeth Drive, Chelmsfoid, MA 01824, agrees to pay to El En SpA (Lender"), Via Baldanzese 17, 50041 Calenzano, Firenze, Italy, or order, the principal sum of Two Hundred Seventy Five Thousand U.S. Dollars ($275,000), on demand, together with interest from the date hereof on the unpaid principal balance at the rate specified below, until repaid in full. Prepayment of principal, together with accrued interest, may be made at any time without penalty. Interest hereon shall accrue from the date hereof at the rate of five (5%) percent per annum. All accrued and unpaid interest and the unpaid principal amount of this Note shall be due and payable upon the earlier of (a) written demand for payment delivered by Lender to Borrower, or (b) the consummation of any Financing by Borrower, as such term is defined below (the "Maturity Date"). For purposes of this Note, the term "Financing" shall mean any equity or debt financing or financings consummated by Borrower after the date of this Note in which the Borrower raises a cumulative total of $10,000,000. In the event that any amount of principal hereof, or (to the extent permitted by applicable law) any interest hereon or any other amount payable hereunder is not paid in full when due (whether at stated maturity, by acceleration or otherwise), Borrower shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on such unpaid amount to Lender, from the date such amount becomes due until the date such amount is paid in full, payable on demand of Lender at a rate per annum equal at all times to 12% per annum (the "Default Rate"). Additionally, and without limiting the foregoing, following the occurrence and during the continuance of any Event of Default (as defined below), at the option of Lender, the interest rate shall be the Default Rate. Such interest on overdue amounts shall be payable on demand. All computations of interest shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Each determination by Lender of any applicable rate of interest, and of any change therein, in the absence of manifest error shall be conclusive and binding on the parties hereto. Payment shall be made in lawful tender of the United States unconditionally in full without set-off, counterclaim or, to the extent permitted by applicable law, other defense, all of which rights of Borrower are hereby expressly waived by Borrower. All payments hereunder shall be made to Lender at his address set forth above (or to such other place as Lender shall designate in a written notice to Borrower), and, unless Borrower has obtained Lender's written consent to another form of payment, such payment shall be made by wire transfer of immediately available funds by no later than 12:00 noon (Boston time) on the due date of the payment, in accordance with Lender's payment instructions. -1-

Whenever any payment hereunder shall be stated to be due, or whenever any interest payment date or any other date specified hereunder would otherwise occur, on a day other than a Business Day (as defined below), then such payment shall be made, and such interest payment date or other date shall occur, on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest hereunder. As used herein, "Business Day" means a day (i) other than Saturday or Sunday, and (ii) on which commercial banks are open for business in Boston, Massachusetts. Borrower represents and warrants to Lender that: (i) Organization and Powers. Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite power and authority to own its assets and carry on its business and to execute, deliver and perform its obligations under this Note. (ii) Authorization; No Conflict. The execution, delivery and performance by Borrower of this Note have been duly authorized by all necessary corporate action of Borrower and do not and will not (A) contravene the terms of the constitutional documents of Borrower; or (B) result in a breach of or constitute a default under any material lease, instrument, contract or other agreement to which Borrower is a party or by which it or its properties may be bound or affected; or (C) violate any provision of any law, rule, regulation, order, judgment, decree or the like binding on or affecting Borrower. (iii) Binding Obligations. This Note constitutes the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms. (iv) Consents. No authorization, consent, approval, license, exemption of, or filing or registration with, any governmental authority or agency, or approval or consent of any other person or entity is required for the due execution, delivery or performance by Borrower of this Note. Any of the following events which shall occur shall constitute an "Event of Default": (a) Payments. Borrower shall fail to pay when due any amount of principal hereof, or interest hereon or other amount payable hereunder, and such failure shall continue unremedied for five (5) days. (b) Representations and Warranties. Any representation or warranty by Borrower under or in connection with this Note shall prove to have been incorrect in any material respect when made or deemed made. (c) Insolvency, (i) Borrower shall (A) admit in writing its inability to, or shall fail generally or be generally unable to, pay its debts (including its payrolls) as such debts become due, (B) make a general assignment for the benefit of creditors, (C) be dissolved, liquidated, wound up or cease its corporate existence, or (D) commence any voluntary proceeding or case seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, intervention, suspension of payments, or composition of it or its debt under any law relating to bankruptcy, insolvency, suspension of payments or reorganization or relief of debtors, or seeking appointment of a receiver, trustee, intervenor or liquidator, or other similar official for it or for any substantial part of its property, (ii) an involuntary proceeding or case shall be commenced against Borrower seeking any of the foregoing relief and remain undismissed for a period of 30 days; (iii) an order for relief or other order or adjudication shall be entered against Borrower under any such bankruptcy, insolvency or similar law; (iv) any receiver, trustee, or other official or Person shall be appointed to take possession of any property of Borrower; or (v) Borrower shall take any corporate action to authorize, or shall consent to, any of the actions or events set forth above in this paragraph. If any Event of Default shall occur and be continuing, Lender may, by notice to Borrower, declare the entire unpaid principal amount of this Note, all interest accrued and unpaid hereon and all other amounts due hereunder to be forthwith due and payable, whereupon the principal hereof, all such accrued interest and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower, provided that if an event described in paragraph (c) above shall -2-

occur, the result which would otherwise occur only upon giving of notice by Lender to Borrower as specified above shall occur automatically, without the giving of any such notice. Borrower agrees to pay on demand the costs and expenses of Lender, and fees and disbursements of Lender's counsel, in connection with any Event of Default, the enforcement or attempted enforcement of, and preservation of any rights or interests under, this Note, and any out-of-court workout or other refinancing or restructuring or any bankruptcy or insolvency case or proceeding. No single or partial exercise of any power under this Note shall preclude any other or further exercise of such power or exercise of any other power. No delay or omission on the part of Lender in exercising any right under this Note shall operate as a waiver of such right or any other right thereunder. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing and mailed, sent or delivered to the respective parties hereto at or to their respective addresses set forth herein, or at or to such other address as shall be designated by any party in a written notice to the other party hereto. All such notices and communications shall be effective (i) if delivered by hand, when delivered; (ii) if sent by overnight courier service, when delivered; and (iii) if sent by mail, upon the earlier of the date of receipt or five Business Days after deposit in the mail, first class (or air mail, with respect to communications to be sent to or from the United States), postage prepaid. This Note shall be binding on Borrower and its successors and assigns, and shall be binding upon and inure to the benefit of Lender, any future holder of this Note and their respective successors and assigns. Borrower may not assign or transfer this Note or any of its obligations hereunder without Lender's prior written consent. This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. Borrower hereby (a) submits to the non-exclusive jurisdiction of the courts of the Commonwealth of Massachusetts and the Federal courts of the United States sitting in the District of Massachusetts (collectively, the "Massachusetts Courts"), for the purpose of any action or proceeding arising out of or relating to this Note, (b) irrevocably waives (to the extent permitted by applicable law) any objection which it now or hereafter may have to the laying of venue of any such action or proceeding brought in any of the Massachusetts Courts, and any objection on the ground that any such action or proceeding in any Massachusetts Court has been brought in an inconvenient forum, and (c) agrees that (to the extent permitted by applicable law) a final judgment in any such action or proceeding brought in a Massachusetts Court shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner permitted by law. IN WITNESS WHEREOF, Borrower signing below by its duly authorized legal representative(s) has executed this Note as of the date first above mentioned. Cynosure Inc.,
By: /s/ Michael Davin --------------------------------Name: Michael Davin Title: Chief Executive Officer

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. . . EXHIBIT 10.10 TABLE OF CONTENTS
1. 2. 3. 4. 5. 6. LEASE OF PREMISES................................................................ DEFINITIONS...................................................................... EXHIBITS AND ADDENDA............................................................. DELIVERY OF POSSESSION........................................................... INTENDED USE OF THE PREMISES..................................................... RENT............................................................................. 6.1. Payment of Rent........................................................ 6.2. Adjusted Base Rent..................................................... 6.3. Additional Rent for Increases in Tax Costs and Operating Expenses...... 6.4. Determination and Payment of Tax Costs and Operating Expenses.......... 6.5. Definition of Rent..................................................... 6.6. Taxes on Tenant's Use and Occupancy.................................... LATE CHARGES..................................................................... SECURITY DEPOSIT................................................................. TENANTS USE OF THE PREMISES...................................................... 9.1. Use.................................................................... 9.2. Observance of Law...................................................... 9.3. Insurance.............................................................. 9.4. Nuisance and Waste..................................................... 9.5. Load and Equipment Limits.............................................. 9.6. Hazardous Material..................................................... SERVICES AND UTILITIES........................................................... REPAIRS AND MAINTENANCE.......................................................... 11.1. Landlord's Obligations................................................. 11.2. Tenant's Obligations................................................... 11.3. Compliance with Law.................................................... 11.4. Notice of Defect....................................................... 11.5. Landlord's Liability................................................... CONSTRUCTION, ALTERATIONS AND ADDITIONS.......................................... 12.1. Landlord's Construction Obligations.................................... 12.2. Tenant's Construction Obligations...................................... 12.3. Tenant's Alterations and Additions..................................... 12.4. Payment................................................................ 12.5. Property of Landlord................................................... LEASEHOLD IMPROVEMENTS; TENANTS PROPERTY......................................... 13.1. Leasehold Improvements................................................. 13.2. Tenant's Property...................................................... INDEMNIFICATION................................. ................................ 14.1. Tenant Indemnification................................................. 14.2. Landlord Not Liable.................................................... TENANT'S INSURANCE............................................................... 15.1. Insurance Requirement.................................................. 15.2. Minimum scope of Coverage............................................. 15.3. Minimum Limits of Insurance............................................ 15.4. Deductible and Self-Insured Retention.................................. 15.5. Increases in Insurance Policy Limits................................... 15.6. Waiver of Subrogation.................................................. 15.7. Landlord's Right to Obtain Insurance for Tenant........................ DAMAGE OR DESTRUCTION............................................................ 16.1. Damage................................................................. 16.2. Repair of Premises in Excess of One Hundred Eighty Days................ 16.3. Repair Outside Premises................................................ 16.4. Tenant Repair.......................................................... 16.5. Election Not to Perform Landlord's Work................................ 16.6. Express Agreement...................................................... EMINENT DOMAIN................................................................... 17.1. Whole Taking........................................................... 17.2. Partial Taking......................................................... 17.3. Proceeds............................................................... 17.4. Landlord's Restoration................................................. ASSIGNMENT AND SUBLETTING........................................................ 18.1. No Assignment or Subletting............................................ 1 1 2 2 3 3 3 3 3 5 5 5 6 6 6 6 7 7 7 7 7 8 9 9 9 9 9 9 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 13 13 14 14

7. 8. 9.

10. 11.

12.

13.

14.

15.

16.

17.

18.

i

18.2. 18.3. 18.4. 18.5. 19.

Landlord's Consent..................................................... Tenant Remains Responsible............................................. Conversion to a Limited Liability Entity............................... Payment of Fees........................................................

14 15 15 15 16 16 16 17 17 17 17 17 18 18 18 18 18 18 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 21 21 21 21 21 21 22 22 22 22 22 22 22 22 22 22 22 23 23 23 23 23 23 23 23 23 23

DEFAULT.......................................................................... 19.1. Tenant's Default....................................................... 19.2. Landlord Remedies...................................................... 19.3. Damages Recoverable.................................................... 19.4. Landlord's Right to Cure Tenant's Default.............................. 19.5. Landlord's Default..................................................... 19.6. Mortgage Protection.................................................... 19.7. Tenant's Right to Cure Landlord's Default.............................. WAIVER........................................................................... SUBORDINATION AND ATTORNMENT..................................................... TENANT ESTOPPEL CERTIFICATES..................................................... 22.1. Landlord Request for Estoppel Certificate.............................. 22.2. Failure to Execute..................................................... NOTICE........................................................................... TRANSFER OF LANDLORD'S INTEREST.................................................. SURRENDER 25.1. 25.2. 25.3. OF PREMISES............................................................ Clean and Same Condition............................................... Failure to Deliver Possession.......................................... Property Abandoned.....................................................

20. 21. 22.

23. 24. 25.

26. 27. 28.

HOLDING OVER..................................................................... RULES AND REGULATIONS............................................................ CERTAIN RIGHTS RESERVED BY LANDLORD.............................................. 28.1. Name................................................................... 28.2. Signage................................................................ 28.3. Access................................................................. 28.4. Physical Changes....................................................... 28.5. Inspection............................................................. 28.6. Entry.................................................................. 28.7. Common Area Regulation........................... ..................... ADVERTISEMENTS AND SIGNS......................................................... RELOCATION OF PREMISES........................................................... GOVERNMENT ENERGY OR UTILITY CONTROLS............................................ FORCE MAJEURE.................................................................... BROKERAGE FEES................................................................... QUIET ENJOYMENT.................................................................. TELECOMMUNICATIONS............................................................... 35.1. Telecommunications Companies........................................... 35.2. Tenant's Obligations................................................... 35.3. Landlord's Consent..................................................... 35.4. Indemnification........................................................ 35.5. Landlord's Operation of Building Telecommunications Lines and Systems.. MISCELLANEOUS.................................................................... 36.1. Accord and Satisfaction; Allocation of Payments........................ 36.2. Addenda................................................................ 36.3. Attorneys' Fees...................... ................................. 36.4. Captions and Section Numbers........................................... 36.5. Changes Requested by Lender............................................ 36.6. Choice of Law.......................................................... 36.7. Consent................................................................ 36.8. Authority.............................................................. 36.9. Waiver of Right to Jury Trial.......................................... 36.10. Counterparts........................................................... 36.11. Execution of Lease; No Option.......................................... 36.12. Furnishing of Financial Statements; Tenant's Representations........... 36.13. Further Assurances..................................................... 36.14. Prior Agreements; Amendments........................................... 36.15. Recording.............................................................. 36.16. Severability........................................................... 36.17. Successors and Assigns................................................. 36.18. Time Is of the Essence.................................................

29. 30. 31. 32. 33. 34. 35.

36.

ii

LEASE This lease between Glenborough Fund V, Limited Partnership, a Delaware limited partnership (herein Landlord), and Cynosure, Inc., a Delaware corporation (herein Tenant), is dated for reference purposes only as of this 31 day of January, 2005. 1. LEASE OF PREMISES. In consideration of the Rent (as defined in Section 6.) and the provisions of this Lease, Landlord leases to Tenant and Tenant leases from Landlord the Premises shown by diagonal lines on the floor plan attached hereto as Exhibit "A", and further described in Section 2.13. The Premises are located within the Building and Project (as described in Sections 2.13. and 2.14.). Tenant shall have the nonexclusive right (unless otherwise provided herein) in common with Landlord, other tenants, subtenants and invitees, to use the Common Area (as defined in Section 2.5.). This Lease confers no rights either to the subsurface of the land below the ground level of the Building in which the Premises is located or to airspace, interior or exterior, above the ceiling of the Building. 2. DEFINITIONS. As used in this Lease the following terms shall have the following meanings: 2.1. ADJUSTMENT DATE: INTENTIONALLY OMITTED. 2.2. ANNUAL BASE RENT: $697,712.50 beginning April 1, 2005 ending March 31, 2006 $711,666.75 beginning April 1, 2006 ending March 31, 2007 $767,483.75 beginning April 1, 2007 ending March 31, 2009 $823,300.75 beginning April 1, 2009 ending March 31, 2011 $879,117.75 beginning April 1, 2011 ending March 31, 2012 2.3. BASE YEAR: Calendar Year 2005 for Operating Expenses; Fiscal Year 2005 for Tax Costs. 2.4. COMMENCEMENT DATE: April 1, 2005. If the Commencement Date is other than the first day of a month, then the Expiration Date of the Lease shall be extended to the last day of the month in which the Lease expires. 2.5. COMMON AREA: The building lobbies, common corridors and hallways, rest rooms, parking areas and other generally understood public or common areas. 2.6. EXPIRATION DATE: March 31, 2012, unless otherwise sooner terminated in accordance with the provisions of this Lease. 2.7. INDEX (Section 6.2.): INTENTIONALLY OMITTED 2.8. LANDLORD'S ADDRESS FOR NOTICE: c/o Glenborough Realty Trust Incorporated 400 South El Camino Real, Suite 1100 San Mateo, CA 94402-1708 ATTN: Legal Department RENT PAYMENT ADDRESS: Glenborough Fund V, Limited Partnership PO Box 6022 Hicksville, NY 11802-6022 TENANTS MAILING ADDRESS: Cynosure, Inc. 10 Elizabeth Drive Chelmsford, MA 01824 With a courtesy copy to: Hanify & King P.C. 1 Beacon Street, 21st Floor Boston, MA 02108 Attn: Daniel J. Lyne, Esq. 2.9. LISTING AND LEASING AGENT(S): Grubb & Ellis and CB Richard Ellis/Whitter Partners. 2.10. MONTHLY INSTALLMENTS OF BASE RENT: $58,142.71 beginning April 1, 2005 ending March 31, 2006

Page 1

$59.305.56 beginning April 1, 2006 ending March 31, 2007 $63,956.98 beginning April 1, 2007 ending March 31, 2009 $68.608.40 beginning April 1, 2009 ending March 31, 2011 $73,259.81 beginning April 1, 2011 ending March 31, 2012 2.11. NOTICE: Except as otherwise provided herein, Notice shall mean any notices, approvals and demands permitted or required to be given under this Lease. Notice shall be given in the form and manner set forth in Section 23. 2.12. PARKING: Tenant shall be entitled to the nonexclusive use of one hundred ninety-five (195) parking spaces. The charge for parking shall be $0.00 per month per parking space for the initial term of this Lease. Landlord may permit Tenant to rent additional spaces, if available, at the then current parking rate. Each such additional parking space, however, shall not be a part of this Lease, and Landlord reserves the right to adjust the parking rate for each additional parking space at any time and to terminate the rental of such additional parking spaces at any time. 2.13. PREMISES: That portion of the entire first lst floor and a portion of the second 2nd floor(s) of the Building located at 5 Carlisle Road. Westford. Massachusetts, commonly referred to as suite 100 and suite 200, as shown by diagonal lines on Exhibit "A". For purposes of this Lease, the Premises is deemed to contain approximately 55,817 square feet of Rentable Area. 2.14. PROJECT: The building of which the Premises are a part (the Building) and any other buildings or improvements on the real property (the Property) located at 5 Carlisle Road. Westford, Massachusetts and further described in Exhibit "B". The Project is commonly known as Westford Corporate Center. 2.15. RENTABLE AREA: As to both the Premises and the Project, the respective measurements of floor area as may from time to time be subject to lease by Tenant and all tenants of the Project, respectively, as determined by Landlord and applied on a consistent basis throughout the Project. 2.16. SECURITY DEPOSIT (Section 8.): $200,000.00, subject to section 41 of this lease. 2.17. STATE: The Commonwealth of Massachusetts. 2.18. TENANT'S FIRST ADJUSTMENT DATE (Section 6.2.): INTENTIONALLY OMITTED. 2.19. TENANT'S PROPORTIONATE SHARE: 68.4%. Such share is a fraction, the numerator of which is the Rentable Area of the Premises, and the denominator of which is the Rentable Area of the Project, as determined by Landlord from time to time. The Project consists of one (1) Building, and, for purposes of this Lease, the Building is deemed to contain approximately 81,632 square feet of Rentable Area. 2.20. TENANT'S USE (Section 9.): Executive office and research and development use for a medical and aesthetic laser company and assembly of laser devices. 2.21. TERM: The period commencing on the Commencement Date and expiring at midnight on the Expiration Date. 3. EXHIBITS AND ADDENDA. The exhibits and addenda listed below (unless lined out) are attached hereto and incorporated by reference in this Lease: 3.1. Exhibit A - Floor Plan showing the Premises. 3.2. Exhibit B - Site Plan of the Project. 3.3. Exhibit C - Building Standard Tenant Improvements. 3.4. Exhibit D - Work Letter and Drawings. 3.5. Exhibit E - Rules and Regulations. 3.6. Exhibit F - Sign Criteria. Addenda: Attached hereto and made a part of this Lease by reference are Sections 37-41. 4. DELIVERY OF POSSESSION. If for any reason Landlord does not deliver possession of the Premises to Tenant on the Commencement Date, and such failure is not caused by an act or omission of Tenant, the Expiration Date shall be extended by the number of days the Commencement Date has been delayed and the validity of this Lease shall not be impaired nor shall Landlord be subject to any liability for such failure; but Rent shall be abated until delivery of Page 2

possession. Provided, however, if the Commencement Date has been delayed by an act or omission of Tenant then Rent shall not be abated until delivery of possession and the Expiration Date shall not be extended. Notwithstanding the foregoing to the contrary, if Landlord has not delivered the Premises to Tenant, with all of Landlord's Work substantially complete, on or before August 1, 2005, for any reason other than delays caused by Tenant and force majeure, then Landlord shall reimburse Tenant for any holdover rent that Tenant's current landlord charges Tenant and that Tenant actually pays for not vacating Tenant's current space up and until Landlord delivers possession. Delivery of possession shall be deemed to occur on the earlier of the date Landlord receives a Certificate of Occupancy or upon substantial completion of the Premises (as certified by Landlord's architect) but not earlier than April 1, 2005. If Landlord permits Tenant to enter into possession of the Premises before the Commencement Date, such possession shall be subject to the provisions of this Lease, including, without limitation, the payment of Rent (unless otherwise agreed in writing). Following the full execution of the Lease and Landlord's receipt of Certificates of Insurance evidencing coverage as required under the Lease, Tenant shall be entitled to enter the Premises prior to the Commencement Date solely for the purpose of installing its wiring, trade fixtures, equipment and personal property therein (provided however, such installation activities shall not interfere with the completion of Landlord's Work.) Within ten (10) days of delivery of possession Landlord shall deliver to Tenant and Tenant shall execute an Acceptance of Premises in which Tenant shall certify, among other things, that (a) Landlord has satisfactorily completed Landlord's Work to the Premises pursuant to Exhibit "D", unless written exception is set forth thereon, and (b) that Tenant accepts the Premises. Tenant's failure to execute and deliver the Acceptance of Premises shall be conclusive evidence, as against Tenant, that Landlord has satisfactorily completed Landlord's Work to the Premises pursuant to Exhibit "D". In the event Tenant fails to take possession of the Premises following execution of this Lease, Tenant shall reimburse Landlord promptly upon demand for all costs incurred by Landlord in connection with entering into this Lease including, but not limited to, broker fees and commissions, sums paid for the preparation of a floor and/or space plan for the Premises, costs incurred in performing Landlord's Work pursuant to Exhibit "D", loss of rental income, attorneys' fees and costs, and any other damages for breach of this Lease established by Landlord. 5. INTENDED USE OF THE PREMISES. The statement in this Lease of the nature of the business to be conducted by Tenant in the Premises does not constitute a representation or guaranty by the Landlord as to the present or future suitability of the Premises for the conduct of such business in the Premises, or that it is lawful or permissible under the Certificate of Occupancy issued for the Building, or is otherwise permitted by law. Tenant's taking possession of the Premises shall be conclusive evidence, as against Tenant, that, at the time such possession was taken, the Premises were satisfactory for Tenant's intended use. 6. RENT. 6.1. Payment of Rent. Tenant shall pay Rent for the Premises. Monthly Installments of Rent shall be payable in advance on the first day of each calendar month of the Term. If the Term begins (or ends) on other than the first (or last) day of a calendar month, Rent for the partial month shall be prorated based on the number of days in that month. Rent shall be paid to Landlord at the Rent Payment Address set forth in Section 2.8., or to such other person at such place as Landlord may from time to time designate in writing, without any prior demand therefor and without deduction or offset, in lawful money of the United States of America. Tenant shall pay Landlord the first Monthly Installment of Base Rent upon execution of this Lease. 6.2. Adjusted Base Rent. INTENTIONALLY OMITTED. 6.3. Additional Rent for Increases in Tax Costs and Operating Expenses. If, in any calendar year during the Term of this Lease, Landlord's Tax Costs and Operating Expenses (as hereinafter defined) for the Project (hereinafter sometimes together referred to as Direct Costs) shall be higher than in the Base Year specified in Section 2.3., Additional Rent for such Direct Costs payable hereunder shall be increased by an amount equal to Tenant's Proportionate Share of the difference between Landlord's actual Direct Costs for such calendar year and the actual Direct Costs of the Base Year. However, if during any calendar year of the Term the occupancy of the Project is less than ninety-five percent (95%), then Landlord shall make an appropriate adjustment of the variable components of Operating Expenses, as reasonably determined by Landlord, to determine the amount of Operating Expenses that would have been incurred had the Project been ninety-five percent (95%) occupied during that calendar year. This estimated amount shall be deemed the amount of Operating Expenses for that calendar year. For purposes hereof, "variable components' shall include only those Operating Expenses that are affected by variations in occupancy levels. 6.3.1. Definitions. As used in this Section 6.3.1., the following terms shall have the following meanings: 6.3.1.1. Tax Costs shall mean any and all real estate taxes, other similar charges on real property or improvements, assessments, water and sewer charges and all other charges (but in no event Landlord's income or estate taxes) assessed, levied, imposed or becoming a lien upon part or all of the Project or the appurtenances thereto, or Page 3

attributable thereto, or on the rents, issues, profits or income received or derived therefrom which may be imposed, levied, assessed or charged by the United States or the State, County or City in which the Project is located, or any other local government authority Agency or political subdivision thereof. Tax Costs for each tax year shall be apportioned to determine the Tax Costs for the subject calendar years. Landlord at Landlord's sole discretion, may contest any taxes levied or assessed against the Building or Project during the Term. If Landlord contests any taxes levied or assessed during the Term, Tenant shall pay Landlord Tenant's Proportionate Share of all costs incurred by Landlord in connection with the contest. 6.3.1.2. Operating Expenses shall mean any and all expenses incurred by Landlord in connection with the management, maintenance, operation, and repair of the Project, the equipment, adjacent walks, Common Area, parking areas, the roof, landscaped areas, including, but not limited to, salaries, wages, benefits, pension payments, payroll taxes, worker's compensation, and other costs related to employees engaged in the management, operation, maintenance and/or repair of the Project; any and all assessments or costs incurred with respect to Covenants, Conditions and/or Restrictions, Reciprocal Easement Agreements or similar documents affecting the Building or Project, if any; the cost of all charges to Landlord for electricity, natural gas, air conditioning, steam, water, and other utilities furnished to the Project including any taxes thereon; reasonable attorneys' fees and/or consultant fees incurred by Landlord in contracting with a company or companies to provide electricity (or any other utility) to the Project, any fees for the installation, maintenance, repair or removal of related equipment, and any exit fees or stranded cost charges mandated by the State; the cost and expense for third-party consultants, accountants and attorneys; a management fee not greater than five percent (5%) of the gross Base Rent and Additional Rent received for the project; energy studies and the amortized cost of any energy or other cost saving equipment used by Landlord to provide services pursuant to the terms of the Lease (including the amortized cost to upgrade the efficiency or capacity of Building telecommunication lines and systems if responsibility therefor is assumed by Landlord as discussed in Section 35. hereof); reasonable reserves for replacements as may be customary in the geographic area in which the Project is located; the cost of license fees related to the Project; the cost of all charges for property (all risk), liability, rent loss and all other insurance for the Project to the extent that such insurance is required to be carried by Landlord under any lease, mortgage or deed of trust covering the whole or a substantial part of the Project or the Building, or, if not required under any such lease, mortgage or deed of trust, then to the extent such insurance is carried by owners of properties comparable to the Project; the cost of all building and cleaning supplies and materials; the cost of all charges for security services, cleaning, maintenance and service contracts and other services with independent contractors, including but not limited to the maintenance, operation and repair of all electrical, plumbing and mechanical systems of the Project and maintenance, repair and replacement of any intra-building cabling network ("ICN"); and the cost of any janitorial, utility or other services to be provided by Landlord. Notwithstanding the foregoing, the following shall not be included within Operating Expenses: (i) costs of capital improvements, including to the roof and foundation (except any improvements that might be deemed "capital improvements" related to the enhancement or upgrade of the ICN and related equipment) and costs of curing design or construction defects; (ii) depreciation; (iii) interest and principal payments on mortgages and other debt costs and ground lease payments, if any, and any penalties assessed as a result of Landlord's late payments of such amounts; (iv) real estate broker leasing commissions or compensation; (v) any cost or expenditure (or portion thereof) for which Landlord is reimbursed, whether by insurance proceeds or otherwise; (vi) attorneys' fees, costs, disbursements, advertising and marketing and other expenses incurred in connection with the negotiation of leases with prospective tenants of the Building; (vii) rent for space which is not actually used by Landlord in connection with the management and operation of the Building; (viii) all costs or expenses (including fines, penalties and legal fees) incurred due to the violation by Landlord, its employees, agents, contractors or assigns of the terms and conditions of the Lease, or any valid, applicable building code, governmental rule, regulation or law; (ix) except for the referenced management compensation, any overhead or profit increments to any subsidiary or affiliate of Landlord for services on or to the Building, to the extent that the costs of such services exceed competitive costs for such services; (x) the cost of constructing tenant improvements for Tenant or any other tenant of the Building or Project; (xi) Operating Expenses specially charged to and paid by any other tenant of the Building or Project; (xii) the cost of special services, goods or materials provided to any other tenant of the Building or Project (xiii) any cost incurred by Landlord to test, survey, clean up, contain, abate, remove or otherwise remedy any Hazardous Materials not caused or brought into the Building by Tenant or any of Tenant's agents, assigns or invitees (as defined in Section 9.6 herein) which was in violation of applicable laws at time of introduction; (xiv) costs incurred by Landlord to rectify any violation of the Americans with Disabilities Act of 1990 (including amendments) which violation is in effect on the date hereof; (xv) other than specifically with respect to Building operations, Page 4

costs relating to maintaining Landlord's existence, either as a corporation, partnership, or other entity such as trustee's fees, annual fees, partnership or organization or administration expenses and deed recordation expenses. 6.4. Determination and Payment of Tax Costs and Operating Expenses. 6.4.1. On or before the last day of each December during the Term of this Lease, Landlord shall furnish to Tenant a written statement showing in reasonable detail Landlord's projected Direct Costs for the succeeding calendar year. If such statement of projected Direct Costs indicates the Direct Costs will be higher than in the Base Year, then the Rent due from Tenant hereunder for the next succeeding year shall be increased by an amount equal to Tenant's Proportionate Share of the difference between the projected Direct Costs for the calendar year and the Base Year. If during the course of the calendar year Landlord determines that actual Direct Costs will vary from its estimate by more than five percent (5%), Landlord may deliver to Tenant a written statement showing Landlord's revised estimate of Direct Costs. On the next payment date for Monthly Installments of Rent following Tenant's receipt of either such statement, Tenant shall pay to Landlord an additional amount equal to such monthly Rent increase adjustment (as set forth on Landlord's statement). Thereafter, the monthly Rent adjustment payments becoming due shall be in the amount set forth in such projected Rent adjustment statement from Landlord. Neither Landlord's failure to deliver nor late delivery of such statement shall constitute a default by Landlord or a waiver of Landlord's right to any Rent adjustment provided for herein. 6.4.2. On or before the first day of each April during the Term of this Lease, Landlord shall furnish to Tenant a written statement of reconciliation (the Reconciliation) showing in reasonable detail Landlord's actual Direct Costs for the prior year, together with a full statement of any adjustments necessary to reconcile any sums paid as estimated Rent adjustments during the prior year with those sums actually payable for such prior year. In the event such Reconciliation shows that additional sums are due from Tenant, Tenant shall pay such sums to Landlord within thirty (30) days of receipt of such Reconciliation. In the event such Reconciliation shows that a credit is due Tenant, such credit shall be credited against the sums next becoming due from Tenant, unless this Lease has expired or been terminated pursuant to the terms hereof (and all sums due Landlord have been paid), in which event such sums shall be refunded to Tenant. Neither Landlord's failure to deliver nor late delivery of such Reconciliation to Tenant by April first shall constitute a default by Landlord or operate as a waiver of Landlord's right to collect all Rent due hereunder. 6.4.3. So long as Tenant is not in default under the terms of the Lease and provided Notice of Tenant's request is given to Landlord within thirty (30) days after Tenant's receipt of the Reconciliation, Tenant may inspect Landlord's Reconciliation accounting records relating to Direct Costs at Landlord's corporate office, during normal business hours, for the purpose of verifying the charges contained in such statement. The audit must be completed within sixty (60) days of Landlord's receipt of Tenant's Notice, unless such period is extended by Landlord (in Landlord's reasonable discretion). Before conducting any audit however, Tenant must pay in full the amount of Direct Costs billed. Tenant may only review those records that specifically relate to Direct Costs. Tenant may not review any other leases or Landlord's tax returns or financial statements. In conducting an audit, Tenant must utilize an independent certified public accountant experienced in auditing records related to commercial property operations. The proposed accountant is subject to Landlord's reasonable prior approval. The audit shall be conducted in accordance with generally accepted rules of auditing practices. Tenant may not conduct an audit more often than once each calendar year. Tenant may audit records relating to a calendar year only one time. No audit shall cover a period of time other than the calendar year from which Landlord's Reconciliation was generated. Upon receipt thereof, Tenant shall deliver to Landlord a copy of the audit report and all accompanying data. Tenant and Tenant's auditor shall keep confidential any agreements involving the rights provided in this section and the results of any audit conducted hereunder. As a condition precedent to Tenant's right to conduct an audit, Tenant's auditor shall sign a confidentiality agreement in a form reasonably acceptable to Landlord. However, Tenant shall be permitted to furnish information to its attorneys, accountants and auditors to the extent necessary to perform their respective services for Tenant. In the event Tenant's audit of Landlord's books and records reveals an error in Landlord's computation of Direct Costs such that Direct Costs for the Building for the year in question were overstated in an amount greater than five percent (5%) Landlord shall promptly reimburse Tenant for the reasonable costs expended by Tenant in performing such audit, excluding travel expenses. If such audit reveals that Landlord has over-charged Tenant, then Landlord shall promptly reimburse to Tenant the amount of such over-charge. 6.5. Definition of Rent. All costs and expenses other than Base Rent, that Tenant assumes or agrees or is obligated to pay to Landlord under this Lease shall be deemed Additional Rent (which, together with the Base Rent, is sometimes referred to as Rent). 6.6. Taxes on Tenant's Use and Occupancy. In addition to the Rent and any other charges to be paid by Tenant hereunder, Tenant shall pay Landlord upon demand for any and all taxes payable by Landlord (other than net income taxes) which are not otherwise reimbursable under this Lease, whether or not now customary or within the contemplation of the parties, where such taxes are upon, measured by or reasonably attributable to (a) the cost or value of Tenant's equipment, furniture, fixtures and other personal property located in the Premises, or the cost or value of any leasehold improvements made in or to the Page 5

Premises by or for Tenant, other than Building Standard Tenant Improvements made by Landlord, regardless of whether title to such improvements is held by Tenant or Landlord; (b) the gross or net Rent payable under this Lease, including, without limitation, any rental or gross receipts tax levied by any taxing authority with respect to the receipt of the Rent hereunder; (c) the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof; or (d) this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. If it becomes unlawful for Tenant to reimburse Landlord for any costs as required under this Lease, the Base Rent shall be revised to net Landlord the same net Rent after imposition of any tax or other charge upon Landlord as would have been payable to Landlord but for the reimbursement being unlawful. 7. LATE CHARGES. If Tenant fails to pay when due any Rent or other amounts or charges which Tenant is obligated to pay under the terms of this Lease, then Tenant shall pay Landlord a late charge equal to ten percent (10%) of each such installment if any such installment is not received by Landlord within five (5) days from the date it is due. Tenant acknowledges that the late payment of any Rent will cause Landlord to lose the use of that money and incur costs and expenses not contemplated under this Lease including, without limitation, administrative costs and processing and accounting expenses, the exact amount of which is extremely difficult to ascertain. Landlord and Tenant agree that this late charge represents a reasonable estimate of such costs and expenses and is fair compensation to Landlord for the loss suffered as a result of such late payment by Tenant. However, the late charge is not intended to cover Landlord's attorneys' fees and costs relating to delinquent Rent. Acceptance of any late charge shall not constitute a waiver of Tenant's default with respect to such late payment by nor prevent Landlord from exercising any other rights or remedies available to Landlord under this Lease. Late charges are deemed Additional Rent. In no event shall this provision for the imposition of a late charge be deemed to grant to Tenant a grace period or an extension of time within which to pay any Rent due hereunder or prevent Landlord from exercising any right or remedy available to Landlord upon Tenant's failure to pay such Rent when due. 8. SECURITY DEPOSIT. Upon execution of this Lease, Tenant agrees to deposit with Landlord a Security Deposit in the amount set forth in Section 2.16. as security for Tenant's performance of its obligations under this Lease. Landlord and Tenant agree that the Security Deposit may be commingled with funds of Landlord and Landlord shall have no obligation or liability for payment of interest on such deposit. Tenant shall not mortgage, assign, transfer or encumber the Security Deposit without the prior written consent of Landlord and any attempt by Tenant to do so shall be void, without force or effect and shall not be binding upon Landlord. If Tenant fails to timely pay any Rent or other amount due under this Lease, or fails to perform any of the terms hereof, Landlord may, at its option and without prejudice to any other remedy which Landlord may have, appropriate and apply or use all or any portion of the Security Deposit for Rent payments or any other amount then due and unpaid, for payment of any amount for which Landlord has become obligated as a result of Tenant's default or breach, and for any loss or damage sustained by Landlord as a result of Tenant's default or breach. If Landlord so uses any of the Security Deposit, Tenant shall, within ten (10) business days after written demand therefor, restore the Security Deposit to the full amount originally deposited. Tenant's failure to do so shall constitute an act of default hereunder and Landlord shall have the right to exercise any remedy provided for in Section 19 hereof. If Tenant defaults under this Lease more than two (2) times during any calendar year, irrespective of whether such default is cured, then, without limiting Landlord's other rights and remedies, Landlord may, in Landlord's sole discretion, modify the amount of the required Security Deposit. Within ten (10) business days after Notice of such modification, Tenant shall submit to Landlord the required additional sums. Tenant's failure to do so shall constitute an act of default, and Landlord shall have the right to exercise any remedy provided for in Section 19 hereof. If Tenant complies with all of the terms and conditions of this Lease, and Tenant is not in default on any of its obligations hereunder, then upon the earlier of (i) thirty (30) days from the Expiration Date or (ii) within the time period statutorily prescribed after Tenant vacates the Premises, Landlord shall return to Tenant (or, at Landlord's option, to the last subtenant or assignee of Tenant's interest hereunder) the Security Deposit less any expenditures made by Landlord to repair damages to the Premises caused by Tenant and to clean the Premises upon expiration or earlier termination of this Lease. 9. TENANT'S USE OF THE PREMISES. The provisions of this Section are for the benefit of the Landlord and are not nor shall they be construed to be for the benefit of any tenant of the Building or Project. 9.1. Use. Tenant shall use the Premises solely for the purposes set forth in Section 2.20. No change in the Use of the Premises shall be permitted, except as provided in this Section 9. Page 6

9.1.1. If, at any time during the Term hereof, Tenant desires to change the Use of the Premises, including any change in Use associated with a proposed assignment or sublet of the Premises, Tenant shall provide Notice to Landlord of its request for approval of such proposed change in Use. Tenant shall promptly supply Landlord with such information concerning the proposed change in Use as Landlord may reasonably request. Landlord shall have the right to approve such proposed change in Use, which approval shall not be unreasonably withheld. Landlord's consent to any change in Use shall not be construed as a consent to any subsequent change in Use. 9.2. Observance of Law. Tenant shall not use or occupy the Premises or permit anything to be done in or about the Premises in violation of any declarations, covenant, condition or restriction, or law, statute, ordinance or governmental rules, regulations or requirements now in force or which may hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense, upon Notice from Landlord, immediately discontinue any use of the Premises which is declared by any governmental authority having jurisdiction to be a violation of law or of the Certificate of Occupancy. Tenant shall promptly comply, at its sole cost and expense, with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be imposed which shall by reason of Tenant's Use or occupancy of the Premises, impose any duty upon Tenant or Landlord with respect to Tenant's Use or occupation. Further, Tenant shall, at Tenant's sole cost and expense, bring the Premises into compliance with all such laws, including the Americans With Disabilities Act of 1990, as amended (ADA), whether or not the necessity for compliance is triggered by Tenant's Use, and Tenant shall make, at its sole cost and expense, any changes to the Premises required to accommodate Tenant's employees with disabilities (any work performed pursuant to this Section shall be subject to the terms of Section 12. hereof). Landlord agrees to construct the Landlord's Work to be performed in the Premises pursuant to Section 12.1 of this Lease (subject to the Allowance), in compliance with all applicable laws, including the ADA. The judgment of any court of competent jurisdiction or the admission by Tenant in any action or proceeding against Tenant, whether Landlord is a party thereto or not, that Tenant has violated any such law, statute, ordinance, or governmental regulation, rule or requirement in the use or occupancy of the Premises, Building or Project shall be conclusive of that fact as between Landlord and Tenant. Landlord, at its sole cost and expense (except to the extent properly included in Operating Expenses), shall be responsible for correcting any violations of the ADA with respect to the Premises and the Common Areas of the Building, provided that Landlord's obligation with respect to the Premises shall be limited to violations that arise out of the Landlord's Work (as defined in Section 37 of the Addendum) to be performed pursuant to Exhibit "D" attached hereto and/or the condition of the Premises prior to the installation of any furniture, equipment and other personal property to Tenant. Notwithstanding the foregoing, Landlord may contest any alleged violations, including, without limitation, the right to apply for and obtain a waiver or deferment of compliance, may assert any and all defenses permitted by law and may appeal any decisions, judgments or rulings as permitted by law. 9.3. Insurance. Tenant shall not do or permit to be done anything which will contravene, invalidate or increase the cost of any insurance policy covering the Building or Project and/or property located therein, and shall comply with all rules, orders, regulations, requirements and recommendations of Landlord's insurance carrier(s) or any board of fire insurance underwriters or other similar body now or hereafter constituted, relating to or affecting the condition, use or occupancy of the Premises, excluding structural changes not related to or affected by Tenant's improvements or acts. Tenant shall promptly upon demand reimburse Landlord for any additional premium charged for violation of this Section. 9.4. Nuisance and Waste. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or Project, or injure or annoy them, or use or allow the Premises to be used for any improper, unlawful or objectionable purpose. Tenant shall not cause, maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. 9.5. Load and Equipment Limits. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry as determined by Landlord or Landlord's structural engineer. The cost of any such determination made by Landlord's structural engineer in connection with Tenant's occupancy shall be paid by Tenant upon Landlord's demand. Tenant shall not install business machines or mechanical equipment which will in any manner cause noise objectionable to or injure other tenants in the Project. Tenant shall have reasonable access to two (2) shared loading docks located on the first (1st) floor of the Premises. 9.6. Hazardous Material. Unless Tenant obtains the prior written consent of Landlord, Tenant shall not create, generate, use, bring, allow, emit, dispose, or permit on the Premises, Building or Project any toxic or hazardous gaseous, liquid, or solid material or waste, or any other hazardous material defined or listed in any applicable federal, state or local law, rule, regulation or ordinance ("Hazardous Material"). If Landlord grants its consent, Tenant shall comply with all applicable laws with respect to such Hazardous Material, including all laws affecting the use, storage and disposal thereof. If the presence of any Hazardous Material brought to the Premises, Building or Project by Tenant or Tenant's employees, agent or contractors results in contamination, Tenant shall promptly take all actions necessary, at Tenant's sole cost and expense, to remediate the contamination and restore the Premises, Building or Project to the condition that existed before introduction of such Hazardous Material. Tenant shall first obtain Landlord's approval of the proposed remedial action and shall keep Landlord informed during the process of remediation. Page 7

Tenant shall indemnify, defend and hold Landlord harmless from any claims, liabilities, costs or expenses incurred or suffered by Landlord arising from such bringing, allowing, using, permitting, generating, creating, emitting, or disposing of toxic or Hazardous Material whether or not consent to same has been granted by Landlord. Tenant's duty to defend, hold-harmless and indemnify Landlord hereunder shall survive the expiration or termination of this Lease. The consent requirement contained herein shall not apply to ordinary office products that may contain de minimis quantities of Hazardous Material; however, Tenant's indemnification obligations are not diminished with respect to the presence of such products. Tenant acknowledges that Tenant has an affirmative duty to immediately notify Landlord of any release or suspected release of Hazardous Material in the Premises or on or about the Project. Landlord represents that, to its actual knowledge and without the requirement of further investigation, any emission, handling, transportation, storage, treatment or usage of hazardous materials that has occurred on the Premises prior to the execution date of the Lease has been substantially in compliance with all applicable federal state, and local laws, regulations and ordinances. Notwithstanding the foregoing, Landlord shall indemnify Tenant for any damages, costs, liability, etc. to the extent arising from any hazardous materials existing in the Premises as of the date of execution hereof, as well as any hazardous materials introduced onto the Premises by Landlord after the date of execution of the Lease. Medical waste and any other waste, the removal of which is regulated, shall be contracted for and disposed of by Tenant, at Tenant's expense, in accordance with all applicable laws and regulations. No material shall be placed in Project trash boxes, receptacles or Common Areas if the material is of such a nature that it cannot be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the State without being in violation of any law or ordinance. 10. SERVICES AND UTILITIES. Landlord agrees to furnish services and utilities to the Premises during normal business hours on generally recognized business days subject to the Rules and Regulations of the Building or Project and provided that Tenant is not in default hereunder. Services and utilities shall include reasonable quantities of electricity, heating, ventilation and air conditioning (HVAC) as required in Landlord's reasonable judgment for the comfortable use and occupancy of the Premises; lighting replacement for building standard lights; window washing and janitor services in a manner that such services are customarily furnished to comparable office buildings in the area. Landlord shall supply common area water for drinking, cleaning and restroom purposes only. Tenant, at Tenant's sole cost and expense, shall supply all paper and other products used within the Premises. During normal business hours on generally recognized business days, Landlord shall also maintain and keep lighted the common stairs, common entries and restrooms in the Building and shall furnish elevator service and restroom supplies. Landlord may provide telecommunications lines and systems as discussed in Section 35, hereof. Landlord represents that it previously replaced two (2) of the roof top HVAC units and that Landlord shall replace the two (2) non-dedicated primary rooftop HVAC units within two (2) years of the date of execution of this Lease, at Landlord's sole cost and expense. If permitted by law, Landlord shall have the right, in Landlord's reasonable discretion, at any time and from time to time during the Term, to contract for the provision of electricity (or any other utility) with, and to switch from, any company providing such utility. Tenant shall cooperate with Landlord and any such utility provider at all times, and, as reasonably necessary, Tenant shall allow such parties access to the electric (or other utility) lines, feeders, risers, wiring and other machinery located within the Premises. Landlord shall not be in default hereunder or be liable for any damages directly or indirectly resulting from, nor shall Rent be abated by reason of (a) the installation, use or interruption of use of any equipment in connection with the furnishing of any of the foregoing services, or (b) failure to furnish or delay in furnishing any such services where such failure or delay is caused by accident or any condition or event beyond the reasonable control of Landlord, or by the making of necessary repairs or improvements to the Premises, Building or Project, or (c) any change, failure, interruption, disruption or defect in the quantity or character of the electricity (or other utility) supplied to the Premises or Project, or (d) the limitation, curtailment or rationing of, or restrictions on, use of water, electricity, gas or any other form of energy serving the Premises, Building or Project. Landlord shall not be liable under any circumstances for a loss of or injury to property or business, however occurring, through, in connection with or incidental to the failure to furnish any such services. Notwithstanding the foregoing, if the HVAC and electrical services Landlord is required to provide to the Premises hereunder are not provided to the Premises for a period of more than five (5) consecutive days following Landlord's notice from Tenant of the absence of such service(s), and if a materially adverse effect on Tenant's ability to conduct its business in the Premises results from the absence of such service(s), such that Tenant is prevented from using and does not use the Premises or any portion thereof, then all rental under this Lease shall abate starting of the sixth (6th) consecutive day and continuing during the period such service(s) is not provided in proportion to the portion of the Premises that Tenant is prevented from using and does not use and such abatement shall continue until such date and time as such service(s) is re-established. Tenant shall not, without the prior written consent of Landlord, use any apparatus or device in the Premises, including, without limitation, electronic data processing machines, punch card machines, word processing equipment, personal computers, or machines using in excess of 220 volts, which consumes more electricity than is usually furnished or supplied for the use of desk top office equipment and photocopy equipment ordinarily in use in premises designated as general office space, as determined by Landlord. Page 8

Tenant shall not connect any apparatus to electric current except through existing electrical outlets in the Premises. Notwithstanding anything contained herein to the contrary, if Tenant is granted the right to purchase electricity from a provider other than the company or companies used by Landlord, Tenant shall indemnify, defend, and hold harmless Landlord from and against all losses, claims, demands, expenses and judgments caused by, or directly or indirectly arising from, the acts or omissions of Tenant's electricity provider (including, but not limited to, expenses and/or fines incurred by Landlord in the event Tenant's electricity provider fails to provide sufficient power to the Premises, as well as damages resulting from the improper or faulty installation or construction of facilities or equipment in or on the Premises by Tenant or Tenant's electricity provider. Tenant acknowledges and agrees that separate metering of utilities is currently furnished to the Premises and accounts for all such separately metered utilities shall be in Tenant's name and paid for by Tenant. If Tenant uses heat generating machines or equipment in the Premises that affects the temperature otherwise maintained by the HVAC system, Landlord reserves the right to install supplementary air conditioning units in the Premises and the cost thereof, including the cost of installation, operation and maintenance thereof, shall be paid by Tenant to Landlord upon demand therefor. Tenant shall not dispose of more than five (5) gallons of water from manufacturing operations in any consecutive three (3) hour time period. 11. REPAIRS AND MAINTENANCE. 11.1. Landlord's Obligations. Landlord shall make structural repairs except as specified herein and shall maintain in good order, condition and repair the Building and all other portions of the Premises not the obligation of Tenant or of any other tenant in the Building. If applicable, Landlord shall also maintain in good order, condition and repair the ICN, the cost of which is a reimbursable expense unless responsibility therefor is assigned to a particular tenant. 11.2. Tenant's Obligations. 11.2.1. Tenant shall, at Tenant's sole expense and except for services furnished by Landlord pursuant to Section 10. hereof, maintain the Premises in good order, condition and repair. For the purposes of this Section 11.2.1., the term Premises shall be deemed to include all items and equipment installed by or for the benefit of or at the expense of Tenant, including without limitation the interior surfaces of the ceilings, walls and floors; all doors; all interior and exterior windows; dedicated heating, ventilating and air conditioning equipment; all plumbing, pipes and fixtures; electrical switches and fixtures; internal wiring as it connects to the ICN, if applicable; and Building Standard Tenant Improvements, if any. 11.2.2. Tenant shall be responsible for all repairs and alterations in and to the Premises, Building and Project and the facilities and systems thereof to the satisfaction of Landlord, the need for which arises out of (a) Tenant's use or occupancy of the Premises, (b) the installation, removal, use or operation of Tenant's Property (as defined in Section 13.) in the Premises, (c) the moving of Tenant's Property into or out of the Building, or (d) the act, omission, misuse or negligence of Tenant, its agents, contractors, employees or invitees. 11.2.3. If Tenant fails to maintain the Premises in good order, condition and repair, Landlord shall give Notice to Tenant to do such acts as are reasonably required to so maintain the Premises. If Tenant fails to promptly commence such work and diligently prosecute it to completion, then Landlord shall have the right to do such acts and expend such funds at the expense of Tenant as are reasonably required to perform such work. 11.3. Compliance with Law. Landlord and Tenant shall each do all acts necessary to comply with all applicable laws, statutes, ordinances, and rules of any public authority relating to their respective maintenance obligations as set forth herein. The provisions of Section 9.2. are deemed restated here. 11.4. Notice of Defect. If it is Landlord's obligation to repair, Tenant shall give Landlord prompt Notice, regardless of the nature or cause, of any damage to or defective condition in any part or appurtenance of the Building's mechanical, electrical, plumbing, HVAC or other systems serving, located in, or passing through the Premises. 11.5. Landlord's Liability. Except as otherwise expressly provided in this Lease, Landlord shall have no liability to Tenant nor shall Tenant's obligations under this Lease be reduced or abated in any manner by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord's making any repairs or changes which Landlord is required or permitted by this Lease or by any other tenant's lease or required by law to make in or to any portion of the Project, Building or Premises. Landlord shall nevertheless use reasonable efforts to minimize any interference with Tenant's conduct of its business in the Premises. Page 9

12. CONSTRUCTION, ALTERATIONS AND ADDITIONS. 12.1. Landlord's Construction Obligations. Landlord shall perform Landlord's Work to the Premises as described in Exhibit "D". 12.2. Tenant's Construction Obligations. NONE. 12.3. Tenant's Alterations and Additions. Except as provided in Section 12.2. above, Tenant shall not make any other additions, alterations or improvements to the Premises without obtaining the prior written consent of Landlord. Landlord's consent may be conditioned, without limitation, on Tenant removing any such additions, alterations or improvements upon the expiration of the Term and restoring the Premises to the same condition as on the date Tenant took possession. All of Tenant's Work described in Exhibit "D", as well as any addition, alteration or improvement, shall comply with all applicable laws, ordinances, codes and rules of any public authority (including, but not limited to the ADA) and shall be done in a good and professional manner by properly qualified and licensed personnel approved by Landlord. All work shall be diligently prosecuted to completion. Upon completion, Tenant shall furnish Landlord "as-built" plans. Prior to commencing any such work, Tenant shall furnish Landlord with plans and specifications; names and addresses of contractors; copies of all contracts; copies of all necessary permits; evidence of contractor's and subcontractor's insurance coverage for Builder's Risk at least as broad as Insurance Services Office (ISO) special causes of loss form CP 10 30, Commercial General Liability at least as broad as ISO CG 00 01, workers' compensation, employer's liability and auto liability, all in amounts reasonably satisfactory to Landlord; and indemnification in a form reasonably satisfactory to Landlord. The work shall be performed in a manner that will not interfere with the quiet enjoyment of the other tenants in the Building in which the Premises is located. Landlord may require, in Landlord's sole discretion and at Tenant's sole cost and expense, that Tenant provide Landlord with a lien and completion bond in an amount equal to at least one and one-half (1-1/2) times the total estimated cost of any additions, alterations or improvements to be made in or to the Premises. Nothing contained in this Section 12.3. shall relieve Tenant of its obligation under Section 12.4. to keep the Premises, Building and Project free of all liens. 12.4. Payment. Tenant shall pay the costs of any work done on the Premises pursuant to Sections 12.2. and 12.3., and shall keep the Premises, Building and Project free and clear of liens of any kind. Tenant hereby indemnifies, and agrees to defend against and keep Landlord free and harmless from all liability, loss, damage, costs, attorneys' fees and any other expense incurred on account of claims by any person performing work or furnishing materials or supplies for Tenant or any person claiming under Tenant. Tenant shall give Notice to Landlord at least ten (10) business days prior to the expected date of commencement of any work relating to alterations, additions or improvements to the Premises. Landlord retains the right to enter the Premises and post such notices as Landlord deems proper at any reasonable time. 12.5. Property of Landlord. Except as otherwise set forth herein, all additions, alterations and improvements made to the Premises shall become the property of Landlord and shall be surrendered with the Premises upon the expiration of the Term unless their removal is required by Landlord as provided in Section 12.3., provided, however, Tenant's equipment, machinery and trade fixtures shall remain the Property of Tenant and shall be removed, subject to the provisions of Section 12.2. 13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY. 13.1. Leasehold Improvements. All fixtures, equipment (including air-conditioning or heating systems), improvements and appurtenances attached to or built into the Premises at the commencement or during the Term of the Lease (Leasehold Improvements), whether or not by or at the expense of Tenant, shall be and remain a part of the Premises, shall be the property of Landlord and shall not be removed by Tenant, except as expressly provided in Section 12.5 and 13.2. unless Landlord, by Notice to Tenant not later than thirty (30) days prior to the expiration of the Term, elects to have Tenant remove any Leasehold Improvements installed by Tenant. In such case, Tenant, at Tenant's sole cost and expense and prior to the expiration of the Term, shall remove the Leasehold Improvements and repair any damage caused by such removal. 13.2. Tenant's Property. All signs, notices, displays, movable partitions, business and trade fixtures, machinery and equipment (excluding air-conditioning or heating systems, whether installed by Tenant or not), personal telecommunications equipment and office equipment located in the Premises and acquired by or for the account of Tenant, without expense to Landlord, which can be removed without structural damage to the Building, and all furniture, furnishings and other articles of movable personal property owned by Tenant and located in the Premises (collectively, Tenant's Property) shall be and shall remain the property of Tenant and may be removed by Tenant at any time during the Term; provided that if any of Tenant's Property is removed, Tenant shall promptly repair any damage to the Premises or to the Building resulting from such removal, including without limitation repairing the flooring and patching and painting the walls where required by Landlord to Landlord's reasonable satisfaction, all at Tenant's sole cost and expense. Page 10

14. INDEMNIFICATION. 14.1. Tenant Indemnification. Tenant shall indemnify and hold Landlord harmless from and against any and all liability and claims of any kind for loss or damage to any person or property arising out of: (a) Tenant's use and occupancy of the Premises, or the Building or Project, or any work, activity or thing done, allowed or suffered by Tenant in, on or about the Premises, the Building or the Project; (b) any breach or default by Tenant of any of Tenant's obligations under this Lease; or (c) any negligent or otherwise tortious act or omission of Tenant, its agents, employees, subtenants, licensees, customers, guests, invitees or contractors (including agents or contractors who perform work outside of the Premises for Tenant). At Landlord's request, Tenant shall, at Tenant's expense, and by counsel satisfactory to Landlord, defend Landlord in any action or proceeding arising from any such claim. Tenant shall indemnify Landlord against all costs, attorneys' fees, expert witness fees and any other expenses or liabilities incurred in such action or proceeding. As a material part of the consideration for Landlord's execution of this Lease, Tenant hereby assumes all risk of damage or injury to any person or property in, on or about the Premises from any cause and Tenant hereby waives all claims in respect thereof against Landlord, except in connection with damage or injury resulting solely from the gross negligence or willful misconduct of Landlord or its authorized agents. 14.2. Landlord Not Liable. Landlord shall not be liable for injury or damage which may be sustained by the person or property of Tenant, its employees, invitees or customers, or any other person in or about the Premises, caused by or resulting from fire, steam, electricity, gas, water or rain which may leak or flow from or into any part of the Premises, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning, lighting fixtures or mechanical or electrical systems, whether such damage or injury results from conditions arising upon the Premises or upon other portions of the Building or Project or from other sources, unless the condition was the sole result of Landlord's gross negligence or willful misconduct. Landlord shall not be liable for any damages arising from any act or omission of any other tenant of the Building or Project or for the acts of persons in, on or about the Premises, Building or the Project who are not the authorized agents of Landlord or for losses due to theft, vandalism or like causes. Tenant acknowledges that Landlord's election to provide mechanical surveillance or to post security personnel in the Building or on the Project is solely within Landlord's discretion. Landlord shall have no liability in connection with the decision whether or not to provide such services, and, to the extent permitted by law, Tenant hereby waives all claims based thereon. 15. TENANT'S INSURANCE. 15.1.Insurance Requirement. Tenant shall procure and maintain insurance coverage in accordance with the terms hereof, either as specific policies or within blanket policies. Coverage shall begin on the date Tenant is given access to the Premises for any purpose and shall continue until expiration of the Term, except as otherwise set forth in the Lease. The cost of such insurance shall be borne by Tenant. Insurance shall be with insurers licensed to do business in the State, and acceptable to Landlord. The insurers must have a current A.M. Best's rating of not less than A: VII, or equivalent (as reasonably determined by Landlord) if the Best's rating system is discontinued. Tenant shall furnish Landlord with original certificates and amendatory endorsements effecting coverage required by this Section 15. before the date Tenant is first given access to the Premises. All certificates and endorsements are to be received and approved by Landlord before any work commences. Landlord reserves the right to inspect and/or copy any insurance policy required to be maintained by Tenant hereunder, or to require complete, certified copies of all required insurance policies, including endorsements effecting the coverage required herein at any time. Tenant shall comply with such requirement within thirty (30) days of demand therefor by Landlord. Tenant shall furnish Landlord with renewal certificates and amendments or a "binder" of any such policy at least twenty (20) days prior to the expiration thereof. Each insurance policy required herein shall be endorsed to state that coverage shall not be canceled, except after thirty (30) days prior written notice to Landlord and Landlord's lender (if such lender's address is provided). The Commercial General Liability policy, as hereinafter required, shall contain, or be endorsed to contain, the following provisions: (a) Landlord and any parties designated by Landlord shall be covered as additional insureds as their respective interests may appear; and (b) Tenant's insurance coverage shall be primary insurance as to any insurance carried by the parties designated as additional insureds. Any insurance or self-insurance maintained by Landlord shall be excess of Tenant's insurance and shall not contribute with it. 15.2.Minimum Scope of Coverage. Coverage shall be at least as broad as set forth herein. However, if, because of Tenant's Use or occupancy of the Premises, Landlord determines, in Landlord's reasonable judgment, that additional insurance coverage or different types of insurance are necessary, then Tenant shall obtain such insurance at Tenant's expense in accordance with the terms of this Section 15. 15.2.1. Commercial General Liability (ISO occurrence form CG 00 01) which shall cover liability arising from Tenant's Use and occupancy of the Premises, its operations therefrom, Tenant's independent contractors, products-completed operations, personal injury and advertising injury, and liability assumed under an insured contract. Page 11

15.2.2. Workers' Compensation insurance as required by law, and Employers Liability insurance. 15.2.3. Commercial Property Insurance (ISO special causes of loss form CP 10 30) against all risk of direct physical loss or damage (including flood, if applicable), earthquake excepted, for: (a) all leasehold improvements (including any alterations, additions or improvements made by Tenant pursuant to the provisions of Section 12. hereof) in, on or about the Premises; and (b) trade fixtures, merchandise and Tenant's Property from time to time in, on or about the Premises. The proceeds of such property insurance shall be used for the repair or replacement of the property so insured. Upon termination of this Lease following a casualty as set forth herein, the proceeds under (a) shall be paid to Landlord, and the proceeds under (b) above shall be paid to Tenant. 15.2.4. Business Auto Liability. Landlord shall, during the Term hereof, maintain in effect similar insurance on the Building and Common Area. 15.2.5. Business Interruption and Extra Expense Insurance. 15.3. Minimum Limits of Insurance. Tenant shall maintain limits not less than: 15.3.1. Commercial General Liability: $1,000,000 per occurrence. If the insurance contains a general aggregate limit, either the general aggregate limit shall apply separately to this location or the general aggregate limit shall be at least twice the required occurrence limit. 15.3.2. Employer's Liability: $1,000,000 per accident for bodily injury or disease. 15.3.3. Commercial Property Insurance: 100% replacement cost with no coinsurance penalty provision. 15.3.4. Business Auto Liability: $1,000,000 per accident. 15.3.5. Business Interruption and Extra Expense Insurance: In a reasonable amount and comparable to amounts carried by comparable tenants in comparable projects. 15.4. Deductible and Self-Insured Retention. Any deductible or self-insured retention in excess of $25,000 per occurrence must be declared to and approved by Landlord. At the option of Landlord, either the insurer shall reduce or eliminate such deductible or self-insured retention or Tenant shall provide separate insurance conforming to this requirement. 15.5. Increases in Insurance Policy Limits. If the coverage limits set forth in this Section 15. are deemed inadequate by Landlord or Landlord's lender, then Tenant shall increase the coverage limits to the amounts reasonably recommended by either Landlord or Landlord's lender. Landlord agrees that any such required increases in coverage limits shall not occur more frequently than once every three (3) years. 15.6. Waiver of Subrogation. Landlord and Tenant each hereby waive all rights of recovery against the other and against the officers, employees, agents and representatives, contractors and invitees of the other, on account of loss by or damage to the waiving party or its property or the property of others under its control, to the extent that such loss or damage is insured against under any insurance policy which may have been in force at the time of such loss or damage. 15.7. Landlord's Right to Obtain Insurance for Tenant. If Tenant is in default for failing to obtain the insurance coverage or provide certificates and endorsements as required by this Lease, Landlord may, at its option, obtain such insurance for Tenant. Tenant shall pay, as Additional Rent, the reasonable cost thereof together with a twenty-five percent (25%) service charge. 16. DAMAGE OR DESTRUCTION. 16.1. Damage. If, during the Term of this Lease, the Premises or the portion of the Building necessary for Tenant's occupancy is damaged by fire or other casualty covered by fire and extended coverage insurance carried by Landlord, Landlord shall promptly repair the damage provided (a) such repairs can, in Landlord's opinion, be completed, under applicable laws and regulations, within one hundred eighty (180) days of the date a permit for such construction is issued by the governing authority, (b) insurance proceeds are available to pay eighty percent (80%) or more of the cost of restoration, and (c) Tenant performs its obligations pursuant to Section 16.4, hereof. In such event, this Lease shall continue in full force and effect, except that if such damage is not the result of the negligence or willful misconduct of Tenant, its agents or employees, Tenant shall be entitled to a proportionate reduction of Rent to the extent Tenant's use of the Premises is impaired, commencing with the date of damage and continuing until completion of the repairs required of Landlord under Section 16.4. If the damage is due to the fault or neglect of Tenant, its agents or employees and loss of rental income insurance is denied as a result, there shall be no abatement of Rent. Notwithstanding anything contained in the Lease to the contrary, in the event of partial or total damage or destruction of the Premises during the last twelve (12) months of the Term, either party shall Page 12

have the option to terminate this Lease upon thirty (30) days prior Notice to the other party provided such Notice is served within thirty (30) days after the damage or destruction. For purposes of this Section 16.1., "partial damage or destruction" shall mean the damage or destruction of at least thirty-three and one-third percent (33 and 1/3%) of the Premises, as determined by Landlord in Landlord's reasonable discretion. 16.2. Repair of Premises in Excess of One Hundred Eighty Days. If in Landlord's opinion, such repairs to the Premises or portion of the Building necessary for Tenant's occupancy cannot be completed under applicable laws and regulations within one hundred eighty (180) days of the date a permit for such construction is issued by the governing authority, Landlord may elect, upon Notice to Tenant given within thirty (30) days after the date of such fire or other casualty, to repair such damage, in which event this Lease shall continue in full force and effect, but Rent shall be partially abated as provided in this Section 1. If Landlord does not so elect to make such repairs, this Lease shall terminate as of the date of such fire or other casualty. 16.3. Repair Outside Premises. If any other portion of the Building or Project is totally destroyed or damaged to the extent that in Landlord's opinion repair thereof cannot be completed under applicable laws and regulations within one hundred eighty (180) days of the date a permit for such construction is issued by the governing authority, Landlord may elect upon Notice to Tenant given within thirty (30) days after the date of such fire or other casualty, to repair such damage, in which event this Lease shall continue in full force and effect, but Rent shall be partially abated as provided in this Section 16. If Landlord does not elect to make such repairs, this Lease shall terminate as of the date of such fire or other casualty. 16.4. Tenant Repair. If the Premises are to be repaired under this Section 16., Landlord shall repair at its cost any injury or damage to the Building and Building Standard Tenant Improvements, if any. Notwithstanding anything contained herein to the contrary, Landlord shall not be obligated to perform work other than Landlord's Work performed previously pursuant to Section 12.1. hereof. Tenant shall be responsible at its sole cost and expense for the repair, restoration and replacement of any other Leasehold Improvements and Tenant's Property (as well as reconstructing and reconnecting Tenant's internal telecommunications wiring and related equipment). Landlord shall not be liable for any loss of business, inconvenience or annoyance arising from any repair or restoration of any portion of the Premises, Building or Project as a result of any damage from fire or other casualty. 16.5. Election Not to Perform Landlord's Work. Notwithstanding anything to the contrary contained herein, Landlord shall provide Notice to Tenant of its intent to repair or replace the Premises (if Landlord elects to perform such work), and, within ten (10) days of its receipt of such Notice, Tenant shall provide Notice to Landlord of its intent to reoccupy the Premises. Should Tenant fail to provide such Notice to Landlord, then such failure shall be deemed an election by Tenant not to re-occupy the Premises and Landlord may elect not to perform the repair or replacement of the Premises. Such election shall not result in a termination of this Lease and all obligations of Tenant hereunder shall remain in full force and effect, including the obligation to pay Rent. 16.6. Express Agreement. This Lease shall be considered an express agreement governing any case of damage to or destruction of the Premises, Building or Project by fire or other casualty, and any present or future law which purports to govern the rights of Landlord and Tenant in such circumstances in the absence of an express agreement shall have no application. 17. EMINENT DOMAIN. 17.1. Whole Taking. If the whole of the Building or Premises is lawfully taken by condemnation or in any other manner for any public or quasi-public purpose, this Lease shall terminate as of the date of such taking, and Rent shall be prorated to such date. 17.2. Partial Taking. If less than the whole of the Building or Premises is so taken, this Lease shall be unaffected by such taking, provided that (a) Tenant shall have the right to terminate this Lease by Notice to Landlord given within ninety (90) days after the date of such taking if twenty percent (20%) or more of the Premises is taken and the remaining area of the Premises is not reasonably sufficient for Tenant to continue operation of its business, and (b) Landlord shall have the right to terminate this Lease by Notice to Tenant given within ninety (90) days after the date of such taking. If either Landlord or Tenant so elects to terminate this Lease, the Lease shall terminate on the thirtieth (30th) calendar day after either such Notice. Rent shall be prorated to the date of termination. If this Lease continues in force upon such partial taking, Base Rent and Tenant's Proportionate Share shall be equitably adjusted. 17.3. Proceeds. In the event of any taking, partial or whole, all of the proceeds of any award, judgment or settlement payable by the condemning authority shall be the exclusive property of Landlord, and Tenant hereby assigns to Landlord all of its right, title and interest in any award, judgment or settlement from the condemning authority; however, Tenant shall have the right, to the extent that Landlord's award is not reduced or prejudiced, to claim from the condemning authority (but not from Landlord) such compensation as may be recoverable by Tenant in its own right for relocation expenses and damage to Tenant's Property and damage to Leasehold Improvements installed at the sole expense of Tenant. 17.4. Landlord's Restoration. In the event of a partial taking of the Premises which does not result in a termination of this Lease, Landlord shall restore the remaining portion of the Premises as nearly as practicable to its condition prior to the condemnation or taking; provided however, Landlord shall not be Page 13

obligated to perform work other than Landlord's Work performed previously pursuant to Section 12.1. hereof. Tenant shall be responsible at its sole cost and expense for the repair, restoration and replacement of Tenant's Property and any other Leasehold Improvements. 18. ASSIGNMENT AND SUBLETTING. No assignment of this Lease or sublease of all or any part of the Premises shall be permitted, except as provided in this Section 18. 18.1. No Assignment or Subletting. Tenant shall not, without the prior written consent of Landlord, assign or hypothecate this Lease or any interest herein or sublet the Premises or any part thereof, or permit the use of the Premises or any part thereof by any party other than Tenant. Any of the foregoing acts without such consent shall be voidable and shall, at the option of Landlord, constitute a default hereunder. This Lease shall not, nor shall any interest of Tenant herein, be assignable by operation of law without the prior written consent of Landlord. 18.1.1. For purposes of this Section 18., the following shall be deemed an assignment: 18.1.1.1. If Tenant is a partnership, any withdrawal or substitution (whether voluntary, involuntary, or by operation of law, and whether occurring at one time or over a period of time) of any partner(s) owning twenty-five (25%) or more (cumulatively) of any interest in the capital or profits of the partnership, or the dissolution of the partnership; 18.1.1.2. If Tenant is a corporation, any dissolution, merger, consolidation, or other reorganization of Tenant, any sale or transfer (or cumulative sales or transfers) of the capital stock of Tenant in excess of twenty-five percent (25%), or any sale (or cumulative sales) or transfer of fifty-one (51%) or more of the value of the assets of Tenant provided, however, the foregoing shall not apply to corporations the capital stock of which is publicly traded. Notwithstanding the foregoing, so long as Tenant's Use does not change. Tenant shall have the right to assign the Lease without Landlord's consent to: i) Tenant's wholly-owned subsidiary; ii) Tenant's parent corporation, or subsidiary of parent corporation: iii) the surviving entity if Tenant merges or consolidates (it being agreed that such merger or consolidation shall be permitted subject to the provisions of this clause (iii)), provided that the surviving entity has a net worth at least equal to that of Tenant prior to such merger or consolidation: iv) in the event of a public offering of Tenant's shares on a major national stock exchange, or (v) in the event of a sale of substantially all assets of the Tenant. In the event of such an assignment. Tenant shall provide Landlord prior written notice of the assignment, which notice shall include the identity of the assignee, the anticipated date of the assignment and the forwarding address of the assignor, if applicable. Nothing contained herein shall relieve Tenant (or the assignor, as the case may be) of its obligations under the Lease. 18.2. Landlord's Consent. If, at any time or from time to time during the Term hereof, Tenant desires to assign this Lease or sublet all or any part of the Premises, and if Tenant is not then in default under the terms of the Lease, Tenant shall submit to Landlord a written request for approval setting forth the terms and provisions of the proposed assignment or sublease, the identity of the proposed assignee or subtenant, and a copy of the proposed form of assignment or sublease. Tenant's request for consent shall be submitted to Landlord at least thirty (30) days prior to the intended date of such transfer. Tenant shall promptly supply Landlord with such information concerning the business background and financial condition of such proposed assignee or subtenant as Landlord may reasonably request. Landlord shall have the right to approve such proposed assignee or subtenant, which approval shall not be unreasonably withheld. In no event however, shall Landlord be required to consent to any assignment or sublease (a) to an existing tenant in the Project or (b) that may violate any restrictions contained in any mortgage, lease or agreement affecting the Project. Landlord's consent to any assignment shall not be construed as a consent to any subsequent assignment, subletting, transfer of partnership interest or stock, occupancy or use. 18.2.1. Landlord's approval shall be conditioned, among other things, on Landlord's receiving adequate assurances of future performance under this Lease and any sublease or assignment. In determining the adequacy of such assurances, Landlord may base its decision on such factors as it deems appropriate, including but not limited to: 18.2.1.1. that the source of rent and other consideration due under this Lease, and, in the case of assignment, that the financial condition and operating performance and business experience of the proposed assignee and its guarantors, if any, shall be equal to or greater than the financial condition and operating performance and experience of Tenant and its guarantors, if any, as of the time Tenant became the lessee under this Lease; 18.2.1.2. that any assumption or assignment of this Lease will not result in increased cost or expense, wear and tear, greater traffic or demand for services and Page 14

utilities provided by Landlord pursuant to Section 10. hereof and will not disturb or be detrimental to other tenants of Landlord; 18.2.1.3. whether the proposed assignee's use of the Premises will include the use of Hazardous Material, or will in any way increase any risk to Landlord relating to Hazardous Material; and 18.2.1.4. 18.2.2. The assignment or sublease shall be on the same terms and conditions set forth in the written request for approval given to Landlord, or, if different, upon terms and conditions consented to by Landlord; 18.2.3. No assignment or sublease shall be valid and no assignee or sublessee shall take possession of the Premises or any part thereof until an executed counterpart of such assignment or sublease has been delivered to Landlord; 18.2.4. No assignee or sublessee shall have a further right to assign or sublet except on the terms herein contained; 18.2.5. Any sums or other economic considerations received by Tenant as a result of such assignment or subletting, however denominated under the assignment or sublease, which exceed, in the aggregate (a) the total sums which Tenant is obligated to pay Landlord under this Lease (prorated to reflect obligations allocable to any portion of the Premises subleased), plus (b) any real estate brokerage commissions or fees payable to third parties in connection with such assignment or subletting, shall be shared equally by Tenant and Landlord as Additional Rent under this Lease without effecting or reducing any other obligations of Tenant hereunder. If Landlord consents to the proposed transfer, Tenant shall deliver to Landlord three (3) fully executed original documents (in the form previously approved by Landlord) and Landlord shall attach its consent thereto. Landlord shall retain one (1) fully executed original document. No transfer of Tenant's interest in this Lease shall be deemed effective until the terms and conditions of this Section 18. have been fulfilled. 18.3. Tenant Remains Responsible. No subletting or assignment shall release Tenant of Tenant's obligations under this Lease or alter the primary liability of Tenant to pay the Rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of Rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by an assignee or subtenant of Tenant or any successor of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee, subtenant or successor. Landlord may consent to subsequent assignments or sublets of the Lease or amendments or modifications to the Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto and any such actions shall not relieve Tenant of liability under this Lease. 18.4. Conversion to a Limited Liability Entity. Notwithstanding anything contained herein to the contrary, if Tenant is a limited or general partnership (or is comprised of two (2) or more persons, individually or as co-partners, or entities), the change or conversion of Tenant to (a) a limited liability company, (b) a limited liability partnership, or (c) any other entity which possesses the characteristics of limited liability (any such limited liability entity is collectively referred to herein as a "Successor Entity") shall be prohibited unless the prior written consent of Landlord is obtained, which consent may be withheld in Landlord's sole discretion. 18.4.1. Notwithstanding the preceding paragraph, Landlord agrees not to unreasonably withhold or delay such consent provided that: 18.4.1.1. The Successor Entity succeeds to all or substantially all of Tenant's business and assets; 18.4.1.2. The Successor Entity shall have a tangible net worth (Tangible Net Worth), determined in accordance with generally accepted accounting principles, consistently applied, of not less than the greater of the Tangible Net Worth of Tenant on (a) the date of execution of the Lease, or (b) the day immediately preceding the proposed effective date of such conversion; and 18.4.1.3. Tenant is not in default of any of the terms, covenants, or conditions of this Lease on the propose effective date of such conversion. 18.5. Payment of Fees. If Tenant assigns the Lease or sublets the Premises or requests the consent of Landlord to any assignment, subletting or conversion to a limited liability entity, then Tenant shall, upon demand, pay Landlord, whether or not consent is ultimately given, an administrative fee not to exceed Three Hundred and 00/100 Dollars ($300.00) so long as Tenant does not request changes to the Lease or Landlord's standard form of consent. Page 15

19. DEFAULT. 19.1. Tenant's Default. The occurrence of any one or more of the following events shall constitute a default and breach of this Lease by Tenant. 19.1.1. If Tenant abandons the Premises or vacates the Premises for three (3) consecutive months. 19.1.2. If Tenant fails to pay any Rent or Additional Rent or any other charges required to be paid by Tenant under this Lease and such failure continues for three (3) days after receipt of Notice thereof from Landlord to Tenant. 19.1.3. If Tenant fails to promptly and fully perform any other covenant, condition or agreement contained in this Lease and such failure continues for thirty (30) days after Notice thereof from Landlord to Tenant, or, if such default cannot reasonably be cured within thirty (30) days, if Tenant fails to commence to cure within that thirty (30) day period and diligently prosecute to completion. 19.1.4. Tenant's failure to occupy the Premises within sixty (60) days after delivery of possession (as defined in Section 4. hereof). 19.1.5. Tenant's failure to provide any document, instrument or assurance as required by Sections 12., 15., 18. and/or 35. if the failure continues for seven (7) days after receipt of Notice from Landlord to Tenant. 19.1.6. To the extent provided by law: 19.1.6.1. If a writ of attachment or execution is levied on this Lease or on substantially all of Tenant's Property; or 19.1.6.2. If Tenant or Tenant's Guarantor makes a general assignment for the benefit of creditors; or 19.1.6.3. If Tenant files a voluntary petition for relief or if a petition against Tenant in a proceeding under the federal bankruptcy laws or other insolvency laws is filed and not withdrawn or dismissed within ninety (90) days thereafter, or if under the provisions of any law providing for reorganization or winding up of corporations, any court of competent jurisdiction assumes jurisdiction, custody or control of Tenant or any substantial part of its property and such jurisdiction, custody or control remains in force unrelinquished, unstayed or unterminated for a period of ninety (90) days; or 19.1.6.4. If in any proceeding or action in which Tenant is a party, a trustee, receiver, agent or custodian is appointed to take charge of the Premises or Tenant's Property (or has the authority to do so); or 19.1.6.5. If Tenant is a partnership or consists of more than one (1) person or entity, if any partner of the partnership or other person or entity is involved in any of the acts or events described in Sections 19.1.6.1. through above. 19.2. Landlord Remedies. In the event of Tenant's default hereunder, then, in addition to any other rights or remedies Landlord may have under any law or at equity, Landlord shall have the right to collect interest on all past due sums (at the maximum rate permitted by law to be charged by an individual), and, at Landlord's option and without further notice or demand of any kind, to do the following: 19.2.1. Terminate this Lease and Tenant's right to possession of the Premises and reenter the Premises and take possession thereof, and Tenant shall have no further claim to the Premises or under this Lease; or 19.2.2. Continue this Lease in effect, reenter and occupy the Premises for the account of Tenant, and collect any unpaid Rent or other charges which have or thereafter become due and payable; or 19.2.3. Reenter the Premises under the provisions of Section 19.2.2., and thereafter elect to terminate this Lease and Tenant's right to possession of the Premises. If Landlord reenters the Premises under the provisions of Sections 19.2.2. or 19.2.3. above, Landlord shall not be deemed to have terminated this Lease or the obligation of Tenant to pay any Rent or other charges thereafter accruing unless Landlord notifies Tenant in writing of Landlord's election to terminate this Lease. Acts of maintenance, efforts to relet the Premises or the appointment of a receiver on Landlord's initiative to protect Landlord's interest under this Lease shall not constitute a termination of Tenant's obligations under the Lease. In the event of any reentry or retaking of possession by Landlord, Landlord shall have the right, but not the obligation, to remove all or any part of Tenant's Property in the Premises and to place such property in storage at a public warehouse at the expense and risk of Tenant. If Landlord elects to relet Page 16

the Premises for the account of Tenant, the rent received by Landlord from such reletting shall be applied as follows: first, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; second, to the payment of any costs of such reletting; third, to the payment of the cost of any alterations or repairs to the Premises; fourth to the payment of Rent due and unpaid hereunder; and the balance, if any, shall be held by Landlord and applied in payment of future Rent as it becomes due. If that portion of Rent received from the reletting which is applied against the Rent due hereunder is less than the amount of the Rent due, Tenant shall pay the deficiency to Landlord promptly upon demand by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as determined, any costs and expenses incurred by Landlord in connection with such reletting or in making alterations and repairs to the Premises which are not covered by the rent received from the reletting. Provided, however, (i) Landlord shall be obligated to use reasonable efforts to mitigate all damages due to Landlord as a result of any event of default and (ii) any and all of Landlord's remedies described herein below resulting from any event of default shall be exercised only in accordance with, and to the extent permitted by applicable law. 19.3. Damages Recoverable. Should Landlord elect to terminate this Lease under the provisions of Section 19.2., Landlord may recover as damages from Tenant the following: 19.3.1. Past Rent. The worth at the time of the award of any unpaid Rent that had been earned at the time of termination including the value of any Rent that was abated during the Term of the Lease (except Rent that was abated as a result of damage or destruction or condemnation); plus 19.3.2. Rent Prior to Award. The worth at the time of the award of the amount by which the unpaid Rent that would have been earned between the time of the termination and the time of the award exceeds the amount of unpaid Rent that Tenant proves could reasonably have been avoided; plus 19.3.3. Rent After Award. The worth at the time of the award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of the unpaid Rent that Tenant proves could be reasonably avoided; plus 19.3.4. Proximately Caused Damages. Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, any costs or expenses (including attorneys' fees), incurred by Landlord in (a) retaking possession of the Premises, (b) maintaining the Premises after Tenant's default, (c) preparing the Premises for reletting to a new tenant, including any repairs or alterations, and (d) reletting the Premises, including brokers' commissions. "The worth at the time of the award" as used in Sections 19.3.1. and 19.3.2. above, is to be computed by allowing interest at the maximum rate permitted by law to be charged by an individual. "The worth at the time of the award" as used in Section 19.3.3. above, is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank situated nearest to the Premises at the time of the award plus one percent (1%). 19.4. Landlord's Right to Cure Tenant's Default. If Tenant defaults in the performance of any of its obligations under this Lease and Tenant has not timely cured the default after Notice, Landlord may (but shall not be obligated to), without waiving such default, perform the same for the account and at the expense of Tenant. Tenant shall pay Landlord all costs of such performance immediately upon written demand therefor, and if paid at a later date these costs shall bear interest at the maximum rate permitted by law to be charged by an individual. 19.5. Landlord's Default. If Landlord fails to perform any covenant, condition or agreement contained in this Lease within thirty (30) days after receipt of Notice from Tenant specifying such default, or, if such default cannot reasonably be cured within thirty (30) days if Landlord fails to commence to cure within that thirty (30) day period and diligently prosecute to completion, then Landlord shall be liable to Tenant for any damages sustained by Tenant as a result of Landlord's breach; provided, however, it is expressly understood and agreed that if Tenant obtains a money judgment against Landlord resulting from any default or other claim arising under this Lease, that judgment shall be satisfied only out of the rents, issues, profits, and other income actually received on account of Landlord's right, title and interest in the Premises, Building or Project, and no other real, personal or mixed property of Landlord (or of any of the partners which comprise Landlord, if any), wherever situated, shall be subject to levy to satisfy such judgment. 19.6. Mortgagee Protection. Tenant agrees to send by certified or registered mail to any first mortgagee or first deed of trust beneficiary of Landlord whose address has been furnished to Tenant, a copy of any notice of default served by Tenant on Landlord. If Landlord fails to cure such default within the time provided for in this Lease, then such mortgagee or beneficiary shall have such additional time to cure the default as is reasonably necessary under the circumstances. 19.7. Tenant's Right to Cure Landlord's Default. If, after Notice to Landlord of default, Landlord (or any first mortgagee or first deed of trust beneficiary of Landlord) fails to cure the default as provided herein, then Tenant shall have the right to cure that default at Landlord's expense. Tenant shall not have the right to terminate this Lease or to withhold, reduce or offset any amount against any payments of Page 17

Rent or any other charges due and payable under this Lease except as otherwise specifically provided herein. Tenant expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford Tenant the right to make repairs at Landlord's expense or to terminate this Lease because of Landlord's failure to keep the Premises in good order, condition and repair. 20. WAIVER. No delay or omission in the exercise of any right or remedy of Landlord upon any default by Tenant shall impair such right or remedy or be construed as a waiver of such default. The receipt and acceptance by Landlord of delinquent Rent shall not constitute a waiver of any other default: it shall constitute only a waiver of timely payment for the particular Rent payment involved (excluding the collection of a late charge or interest). No act or conduct of Landlord, including, without limitation, the acceptance of keys to the Premises, shall constitute an acceptance of the surrender of the Premises by Tenant before the expiration of the Term. Only written acknowledgement from Landlord to Tenant shall constitute acceptance of the surrender of the Premises and accomplish a termination of this Lease. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval shall not be deemed to waive or render unnecessary Landlord's consent to or approval of any subsequent act by Tenant. Any waiver by Landlord of any default must be in writing and shall not be a waiver of any other default concerning the same or any other provision of this Lease. 21. SUBORDINATION AND ATTORNMENT. This Lease is and shall be subject and subordinate to all ground or underlying leases (including renewals, extensions, modifications, consolidations and replacements thereof) which now exist or may hereafter be executed affecting the Building or the land upon which the Building is situated, or both, and to the lien of any mortgages or deeds of trust in any amount or amounts whatsoever (including renewals, extensions, modifications, consolidations and replacements thereof) now or hereafter placed on or against the Building or on or against Landlord's interest or estate therein, or on or against any ground or underlying lease, without the necessity of the execution and delivery of any further instruments on the part of Tenant to effectuate such subordination. Nevertheless, Tenant covenants and agrees to execute and deliver upon demand, without charge therefor, such further instruments evidencing such subordination of this Lease to such ground or underlying leases, and to the lien of any such mortgages or deeds of trust as may be required by Landlord. Notwithstanding anything contained herein to the contrary, if any mortgagee, trustee or ground lessor shall elect that this Lease is senior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust, or ground lease, or the date of the recording thereof. In the event of any foreclosure sale, transfer in lieu of foreclosure or termination of the lease in which Landlord is lessee, Tenant shall attorn to the purchaser, transferee or lessor as the case may be, and recognize that party as Landlord under this Lease, provided such party acquires and accepts the Premises subject to this lease. Upon written request of Tenant as a condition precedent to the future subordination of this Lease to a future mortgage. Landlord shall use reasonable efforts to secure, at no cost to Landlord, a subordination, nondisturbance and attornment agreement, in form and substance reasonably acceptable to Tenant, to Landlord and to the lender, from any future lender on the Building. 22. TENANT ESTOPPEL CERTIFICATES. 22.1. Landlord Request for Estoppel Certificate. Within ten (10) days after receipt of a written request from Landlord, Tenant shall execute and deliver to Landlord or Landlord's designee, in the form requested by Landlord, a written statement certifying, among other things, (a) that this Lease is unmodified and in full force and effect, or that it is in full force and effect as modified and stating the modifications; (b) the amount of Base Rent and the date to which Base Rent and Additional Rent have been paid in advance; (c) the amount of any security deposited with Landlord; and (d) that Landlord is not in default hereunder or, if Landlord is claimed to be in default, stating the nature of any claimed default. Any such statement may be conclusively relied upon by a prospective purchaser, assignee or encumbrancer of the Premises. 22.2. Failure to Execute. Tenant's failure to execute and deliver such statement within the reasonable time required shall at Landlord's election be a default under this Lease and shall also be conclusive upon Tenant that: (a) this Lease is in full force and effect and has not been modified except as represented by Landlord; (b) there are no uncured defaults in Landlord's performance and that Tenant has no right of offset, counter-claim or deduction against Rent and (c) not more than one month's Rent has been paid in advance. 23. NOTICE. Notice shall be in writing and shall be deemed duly served or given if personally delivered, sent by certified or registered U.S. Mail, postage prepaid with a return receipt requested, or sent by overnight courier service, fee prepaid with a return receipt requested, as follows: (a) if to Landlord, to Landlord's Address for

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Notice with a copy to the Building manager, and (b) if to Tenant, to Tenant's Mailing Address; provided, however, Notices to Tenant shall be deemed duly served or given if delivered or sent to Tenant at the Premises. Landlord and Tenant may from time to time by Notice to the other designate another place for receipt of future Notice. Notwithstanding anything contained herein to the contrary, when an applicable State statute requires service of Notice in a particular manner, service of that Notice in accordance with those particular requirements shall replace rather than supplement any Notice requirement set forth in the Lease. 24. TRANSFER OF LANDLORD'S INTEREST. In the event of any sale or transfer by Landlord of the Premises, Building or Project, and assignment of this Lease by Landlord, Landlord shall be and is her