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

RECITALS:

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

B. The Purchaser deposited forty million U.S. dollars ($40,000,000) (the "Escrow Amount") in escrow under the Escrow Agreement, dated as of October 17, 2006 (the "Escrow Agreement"), by and among the Company, the Purchaser and JPMorgan Chase Bank, N.A., as escrow agent (the "Escrow Agent"), which amount, plus any and all profits and accrued interest thereon from and after December 15, 2006, plus an additional twenty million U.S. dollars ($20,000,000), will be paid to the Company on the date hereof in connection with the Seller Parties' execution and delivery of this Agreement.

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

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

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

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

F. Upon the Closing, Motti Beyar and Oren Globerman (collectively, the "Entrepreneurs") and the Purchaser shall enter into a Non-Competition and Confidentiality Agreement (as defined below).

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

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

H. Upon the Closing, the Purchaser shall enter into an Outside Field License Agreement (as defined below), pursuant to which the Purchaser shall license certain of the Intellectual Property Rights (as defined below) acquired hereunder to the Company solely and exclusively for use outside the Field, on the terms and subject to the conditions set forth therein.