ASSET PURCHASE AGREEMENT

Page

ARTICLE 1 PURCHASE AND SALE OF ASSETS

2

Purchase and Sale of Assets

2

Excluded Assets

4

Assumption and Retention of Liabilities

5

Purchase Price

7

Post-Closing Adjustment

7

Allocation of Purchase Price

11

Closing

11

ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER

13

Corporate Organization and Power

13

Subsidiaries

14

Authorization

15

Non-Contravention

15

Consents and Approvals

16

Financial Statement Matters

16

No Undisclosed Liabilities

17

Absence of Certain Changes

17

Receivables

18

Purchased Assets

18

Sufficiency of Purchased Assets; Operation of Aesthetics Business

18

Assigned Contracts

18

Real Property

19

FDA and Global Regulation Compliance in Connection with the Aesthetics Business

19

Compliance with Applicable Laws

22

Litigation

22

Contracts

22

Labor and Employment Matters Concerning the Employees

23

Aesthetics Business Intellectual Property

27

Insurance

29

Tax Matters

29

Brokers

31

Environmental Matters

31

Affiliate Transactions

33

Customers and Suppliers

33

Product and Service Warranties

33

Service Parts

34

Stock Consideration

34

Scope of Representations and Warranties

34

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER

34

Corporate Organization and Power; Stock Consideration

35

Authorization

35

Non-Contravention

36

Consents and Approvals

36

Litigation

36

Brokers

36

SEC Filings; No Material Adverse Change

36

Funds

37

Page

Inspections; Limitation of Parent’s and Seller’s Representations and Warranties

37

ARTICLE 4 COVENANTS

38

Confidentiality

38

Preparation of Tax Returns; Tax Matters

39

Pre-Closing Covenants

41

Post-Closing Covenants

43

Updated Disclosure; Breaches

48

ARTICLE 5 EMPLOYEE MATTERS

50

Scope of Article

50

Employees

50

ARTICLE 6 TERMINATION

53

Termination

53

Procedure and Effect of Termination

54

ARTICLE 7 CONDITIONS

54

Conditions to Obligations of Each Party

54

Conditions to Obligations of Purchaser

55

Conditions to Obligations of Parent and Seller

56

ARTICLE 8 SURVIVAL AND INDEMNIFICATION

57

Survival

57

Indemnification by Parent and Seller

57

Indemnification by Purchaser

58

Claims for Indemnification

58

Indemnification Limits and Calculation of Damages

59

Exclusive Remedy

60

Subrogation

61

Adjustment of Purchase Price

61

ARTICLE 9 DISPUTE RESOLUTION

61

Injunctive Relief

61

Dispute

61

Notice

61

Arbitration

61

ARTICLE 10 DEFINITIONS

62

Definitions

62

ARTICLE 11 MISCELLANEOUS

70

Notices

70

Amendments; No Waivers

71

Expenses

72

Successors and Assigns

72

Governing Law

72

Counterparts; Effectiveness

72

Entire Agreement

72

Captions

72

Severability

72

Construction

72

Cumulative Remedies

73

Third Party Beneficiaries

73

1.1

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

(i)

Laserscope (UK) Ltd., a British private limited company incorporated in England and Wales with registered number 02420543 (“ Laserscope UK ”); and

(ii)

Laserscope France, S.A., a French société anonyme (“ Laserscope France ” and, together with Laserscope UK, the “ Subsidiaries ”, and the equity interests in the Subsidiaries so transferred, the “ Transferred Equity Interests ”),

(i)

Service Parts . All components or parts in inventory as of the Closing Date that could be used exclusively to provide service with respect to Seller Product sold prior to the Closing Date (the “ Service Parts ”).

(j)

Business Information. All business and tax information and related books and records, including files, computer discs and tapes, invoices, credit and sales records, personnel records (subject to Applicable Law), customer lists, supplier lists (including supplier cost information), manuals, drawings, business plans and other plans and specifications, accounting books and records, sales literature, current price lists and discounts, promotional signs and literature, marketing and sales programs and manufacturing and quality control records and procedures, in all cases to the extent such information is (a) reasonably and readily (i) identifiable, (ii) capable of segregation from Seller’s other business information, books and records, and (iii) transferable by Seller, and (b) exclusively related to, or is exclusively used or employed in, the Aesthetics Business; provided , however , that Seller shall be entitled to retain copies of any of the foregoing to the extent reasonably necessary for, and may use such copies solely in connection with, tax or accounting matters or for the defense or prosecution of any action or claim not assigned hereunder;

(k)

Claims . All claims, credits, causes of action, and rights to damages, profits or set-off whatsoever to the extent relating to any of the foregoing, whether known or unknown, including for infringement of any Transferred Intellectual Property, but in any case only to the extent related to the operation of the Aesthetics Business; and

1.2

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

(c)

Real Property . All real property or interests in real property and all buildings, structures, fixtures and improvements located thereon, and all privileges, rights, easements and appurtenances belonging to or for the benefit thereof, owned or leased by Seller (excluding, for the avoidance of doubt, the Real Estate Leases);

(d)

Tax Refunds . Federal or state income tax refunds relating to taxes paid by Seller, for all periods or portions of periods ending on or prior to the Closing Date;

1.3

Assumption and Retention of Liabilities .

(i)

The ownership, use or possession of the Purchased Assets and operation of the Aesthetics Business after the effective time of the Closing (the “ Effective Time ”), including, without limitation, any claim that a product used, manufactured, sold or offered for sale by Purchaser after the Effective Time infringes any rights in Intellectual Property of any third party (not affiliated with Parent or Seller);

(ii)

Employee and employee benefits matters assumed by Purchaser under Article 5;

(iii)

Liabilities first arising in the ordinary course of the Aesthetics Business after the Closing Date under the Assigned Contracts, specifically excluding any liabilities or obligations arising from or in connection with any breach, violation, default or failure of performance of Seller arising prior to the Effective Time and any Liabilities, obligations and responsibilities of Seller arising out of or relating to the Ancillary Agreements;

(iv)

All Product Warranty Claims;

(v)

Those customer service contracts set forth on Exhibit 1.3(a)(v) hereto, as such exhibit is updated as of the Closing Date to reflect those additional customer service contracts entered into between the date hereof and the Closing Date (collectively, the “ Assumed Service Contracts ”); and

(vi)

Any Transfer Taxes and Straddle Period Taxes attributable to Purchaser pursuant to Sections 4.2(c) and 4.2(e) of this Agreement.

(b)

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

1.4

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

(a)

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

(i)

“ Balance Sheet Items ” means (i) the book value all Equipment, Finished Goods Inventory, Accounts Receivable and Prepaid Expenses, aggregated with all such similar balances of the Subsidiaries, and all other inventory items of the Subsidiaries, all after giving effect to the Pre-Closing Transactions, less (ii) Seller’s reserves for Product Warranty Claims and the unearned service revenue accrued with respect to the Assumed Service Contracts, in each case, aggregated with all such similar balances of the Subsidiaries after giving effect to the Pre-Closing Transactions.

(ii)

“ Cash of the Subsidiaries ” means all cash and cash equivalents of the Subsidiaries.

(iii)

“ Adjusted Liabilities of the Subsidiaries ” means (A) all Liabilities of the Subsidiaries, except for (w) Income Tax Liability, (x) liability for Taxes attributable to the Pre-Closing Transactions, (y) Liabilities described in clause (ii) of the definition of, and taken into account in the calculation of, Balance Sheet Items and (z) any liability described in clauses (ii) through (vi), inclusive, of Section 1.3(a), less (B) the amount, if any, by which input Value Added Taxes paid by the relevant Subsidiary prior to the Closing Date exceeds the amount of output Value Added Taxes payable by such Subsidiary prior to the Closing to the extent that such amount can be used to reduce the future liability of the Subsidiaries for Value Added Taxes, less (C) the amount of any Liability that establishes a reserve against any Tax asset included on the Final Subsidiary Closing Balance Sheet created by any net operating loss or net operating loss carryover.

(iv)

“ Income Tax Liability of the Subsidiaries ” means any Liability accrual for Income Tax, but shall expressly not include any Liability that establishes a reserve against any Tax asset included on the Final Subsidiary Closing Balance Sheet created by any net operating loss or net operating loss carryover.

(v)

“ Subsidiary Closing Balance Sheet ” means the combined balance sheet of the Subsidiaries as of the close of business on the Closing Date, after giving effect to the Pre-Closing Transactions (including any Tax liability arising therefrom).

(vi)

“ Adjusted Purchase Price ” means the Purchase Price as adjusted pursuant to this Section 1.5.

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

(i)

If the amount calculated under Section 1.5(a) above results in a net decrease to the Purchase Price, within five Business Days of the final determination of the Final Closing Balance Sheet Item Statement and the Final Subsidiary Closing Balance Sheet, Seller shall pay such net decrease to Purchaser.

(ii)

If the amount calculated under Section 1.5(a) above results in a net increase to the Purchase Price, within five Business Days of the final determination of the Final Closing Balance Sheet Item Statement and the Final Subsidiary Closing Balance Sheet, Purchaser shall pay such net increase to Seller.

(iii)

Any amount paid under this Section 1.5 will be accompanied by interest thereon at the rate of LIBOR plus 0.25% per annum from (but excluding) the Closing Date through and including the date of payment. Such payment shall be made by a wire transfer of immediately available funds in US currency to a bank account designated in writing by Purchaser or Seller, as applicable.

(a)

At the Closing, Seller shall deliver to Purchaser the following:

(b)

At the Closing, Purchaser shall deliver to Seller the following:

2.1

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

(a)

Laserscope UK is a private limited company duly organized, validly existing and in good standing under the laws of England and Wales, and has all requisite corporate power and authority, and all Government Authority licenses, authorizations, consents and approvals, required to carry on its business as now conducted and to own, lease and operate the assets and properties of Laserscope UK as now owned, leased and operated.

(b)

Laserscope France is a société anonyme duly organized, validly existing and in good standing under the laws of the Republic of France and has all requisite corporate power and authority, and all Governmental Authority licenses, authorizations, consents and approvals, required to carry on its business as now conducted and to own, lease and operate the assets and properties of Laserscope France as now owned, leased and operated.

(c)

All of the outstanding equity interests in the Subsidiaries (i) have been duly authorized and were validly issued, are fully paid and nonassessable, are not subject to any right of rescission, are not subject to preemptive rights by statute or otherwise, and (ii) will be, as of the Closing, owned directly by Seller, free and clear of all Liens other than Permitted Liens. Except with respect to Purchaser’s rights to acquire all of Seller’s equity ownership interest in the Subsidiaries under this Agreement, there are no options, warrants or other rights, agreements, arrangements or commitments to which the Subsidiaries or Seller is a party of any character relating to the issued or unissued equity interests in the Subsidiaries or obligating the Subsidiaries to grant, issue or sell any equity interests in the Subsidiaries. Neither Subsidiary owns, or has the right to acquire, any equity interest in any other entity and nor does either Subsidiary operate or have any branch, agency, place of business or establishment outside the country of its incorporation.

(d)

The Transferred Equity Interests represent all of the authorized Equity Interests of each Subsidiary which are clear of any Lien or Encumbrances.

(e)

The assets or good will (“ fonds de commerce”) of the Subsidiaries are not the subject of any Lien or Encumbrances. The Subsidiaries have not guaranteed in any manner the obligations of third parties.

(f)

There has been no formal request for the annulment or the dissolution of any of the Subsidiaries nor has any petition been filed with any competent authority requesting the initiation of any restructuring or liquidation or winding up procedures with respect to the Subsidiaries and the accounts of Laserscope France as of December 31, 2005 recorded a net equity amount equal to at least one half of its “share capital.”

(a)

Each of Parent and Seller has the corporate power and authority to enter into this Agreement and, to the extent a party thereto, the Ancillary Agreements, and to carry out the transactions contemplated herein and therein.

(b)

The Boards of Directors of Seller and Parent, and Parent, as the sole shareholder of Seller, have taken all action required by law and Seller’s Articles of Incorporation and otherwise to duly and validly authorize and approve the execution, delivery and performance by Seller of this Agreement, the Ancillary Agreements and the consummation by Seller of the transactions contemplated herein and therein and no other corporate proceedings on the part of Seller are, or will be, necessary to authorize this Agreement, the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby.

(c)

The Board of Directors of Parent has taken all action required by law and Parent’s Certificate of Incorporation and otherwise to duly and validly authorize and approve the execution, delivery and performance by Parent of this Agreement, the Ancillary Agreements and the consummation by Parent of the transactions contemplated herein and therein and no other corporate proceedings on the part of Parent are, or will be, necessary to authorize this Agreement or to consummate the transactions contemplated hereby.

(d)

To the extent a party thereto, this Agreement and the Ancillary Agreements have been duly and validly executed and delivered by each of Parent and Seller and, assuming the due authorization, execution and delivery by Purchaser of this Agreement and the Ancillary Agreements, constitute the legal, valid and binding obligations of Parent and Seller, enforceable against each of Parent and Seller in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and rules of law governing specific performance, injunctive relief or other equitable remedies.

(a)

Statement of Balance Sheet Items . Attached hereto as Schedule 2.6(a) is an unaudited statement, as of September 30, 2006, of the Balance Sheet Items, which statement (i) has been compiled from and is in all material respects in accordance with the books and records of Seller to the extent relating to the Aesthetics Business, (ii) was prepared in accordance with GAAP in all material respects consistently applied, subject to: (A) the failure to include comparative amounts for previous periods; (B) the failure to include footnotes; (C) the failure to include income tax expense; (D) the failure to include the effect of certain intercompany transactions; (E) the inclusion of the effect of the elimination of the intercompany payables and receivables, including by making an assumption that the contribution of amounts owed with respect to the Aesthetics Business to Seller and its Affiliates into “additional paid in capital” of Seller; (F) the inclusion of the operations of certain entities within the Aesthetics Business whose inclusion may not otherwise be permitted by GAAP; and (G) the inclusion of certain reasonable estimates for items that had not previously been identified specific to the Aesthetics Business.

(b)

Financial Statements of Subsidiaries . Attached hereto as Schedule 2.6(b) are unaudited balance sheets (the “ Subsidiary Balance Sheets ” or the “ Subsidiary Financial Statements ”) as of September 30, 2006 (the “ Subsidiary Balance Sheet Date ”). The Subsidiary Financial Statements (i) have been compiled from and are in all material respects in accordance with the books and records of each of the Subsidiaries, (ii) fairly present the financial position of each Subsidiary as of their respective dates (and, as such, include the financial position not specifically related to the Aesthetics Business), and (iii) were prepared in accordance with GAAP in all material respects consistently applied, subject to: (A) the failure to include comparative amounts for previous periods; (B) the failure to include footnotes; (C) the failure to include income tax expense; (D) the failure to include the effect of certain intercompany transactions; (E) the failure to include “other income and expenses” including, for example, foreign exchange gains and losses and interest income and expense; (F) the inclusion of the effect of the elimination of the intercompany payables and receivables.

2.7

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

(a)

experienced any change which has had a Material Adverse Effect or experienced any event or failed to take any action which reasonably could be expected to result in a Material Adverse Effect;

(b)

permitted or allowed any of its property or assets (real, personal or mixed, tangible or intangible) to be subjected to any Lien, other than Permitted Liens;

(c)

sold, transferred, or otherwise disposed of any of its properties or assets (real, personal or mixed, tangible or intangible), except in the ordinary course of business and consistent with past practice;

(d)

disposed of or permitted to lapse any rights to the use of any patent, trademark, trade name or copyright, or disposed of or disclosed (except as necessary in the conduct of its business) to any person or entity other than representatives of Purchaser any trade secrets, process or know-how not theretofore a matter of public knowledge;

(e)

granted any general increase in the compensation of officers or employees (including any such increase pursuant to any bonus, pension, profit sharing or other plan or commitment) or any increase in the compensation payable or to become payable to any officer or employee;

(f)

made any change in any method of financial or Tax accounting or financial or Tax accounting practice other than pursuant to GAAP;

(g)

paid, loaned or advanced any amount to, or sold, transferred or leased any properties or assets (real, personal or mixed, tangible or intangible) to, or entered into any agreement or arrangement with, any of its officers or directors or any Affiliate of any of its officers or directors;

(h)

settled or compromised any material Proceeding; or

(i)

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

2.10

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

2.12

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

2.14

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

manufacturing registration and device listing, annual reports and similar regulatory filing requirements that are required to be filed within six months after the Termination Date in order to maintain Business Permits and manufacturing facility licenses and where failure to timely file would result in a Seller Material Adverse Effect. Neither Seller nor the Subsidiaries has received any notice or written communication with respect to the Business from any Governmental Authority regarding, and, there are no facts or circumstances that are likely to give rise to, (i) any material adverse change in any Business Permit, or any failure to materially comply with any Applicable Law or any term or requirement of any Business Permit or (ii) any revocation, withdrawal, suspension, cancellation, limitation, termination or modification of any Business Permit. No such Business Permit will be terminated or impaired, or will become terminable, in whole or in part, as a result of the consummation of the transactions contemplated by this Agreement.

(b)

The operation of the Business, including the manufacture, import, export, testing, development, processing, packaging, labeling, storage, marketing, and distribution of all Seller Products, is and at all times has been in material compliance with all Applicable Laws including but not limited to regulation applicable to public tenders and sale of material and equipment to medical entities, Business Permits, Governmental Authorities and orders including those administered by the FDA for products sold in the United States. There is no actual or, to the Knowledge of Seller, threatened material action or investigation in respect of the Business by the FDA or any other Governmental Authority which has jurisdiction over the operations, properties, products or processes of the Business or the Subsidiaries, or, to the Knowledge of Seller, by any third parties acting on their behalf. Seller has no Knowledge that any Governmental Authority is considering such action or of any facts or circumstances that are likely to give rise to any such action or investigation.

(c)

Except as set forth in Schedule 2.14(c) of the Disclosure Schedule, during the three (3) year period ending on October 31, 2006, neither Seller nor any Subsidiary has had any product or manufacturing site subject to a Governmental Authority (including the FDA) shutdown or import or export prohibition, nor received any FDA Form 483 or other Governmental Authority notice of inspectional observations, “warning letters,” “untitled letters” or, to the Knowledge of Seller, requests or requirements to make changes to the operations of the Aesthetics Business or Seller Products that if not complied with would reasonably be expected to result in a Seller Material Adverse Effect, or similar correspondence or written notice from the FDA or other Governmental Authority in respect of the Business and alleging or asserting noncompliance with any applicable Laws, Business Permits or such requests or requirements of a Governmental Authority, and, to the Knowledge of Seller, neither the FDA nor any Governmental Authority is considering such action. Except as set forth in Schedule 2.14(b) of the Disclosure Schedule, no vigilance report or medical device report with respect to the Aesthetics Business or the Seller Products has been reported to Seller during the 90 day period ending on October 31, 2006, and to the Knowledge of Seller, as of October 31, 2006 no vigilance report or medical device report is under investigation by any Governmental Authority with respect to the Seller Products or the Aesthetics Business.

(d)

All studies, tests and preclinical and clinical trials in respect of the Business being conducted by or on behalf of Seller or any Subsidiary that have been or will be submitted to any Governmental Authority, including the FDA and its counterparts worldwide, including in the European Union, in connection with any Business Permit, are being or have been conducted in compliance in all material respects with the required experimental protocols, procedures and controls pursuant to accepted professional scientific standards and applicable local, state, federal and foreign Laws, rules and regulations. Neither Seller nor any Subsidiary has received any notices, correspondence or other communication in respect of the Business from the FDA or any other Governmental Authority requiring the termination or suspension of any clinical trials conducted by, or on behalf of, Seller or in which Seller has participated, and to the Knowledge of Seller neither the FDA nor any other Governmental Authority is considering such action. During the six month period ending on October 31, 2006, neither Seller nor any Subsidiary has received specific written notification from a Governmental Authority of the rejection of data obtained from any clinical trials conducted by, or on behalf of, Seller or in which Seller has participated with respect to the Aesthetics Business or Seller Products, which data was submitted to the Governmental Authority and which was necessary to obtain regulatory approval of a particular Seller Product.

(e)

The manufacture of Seller Products by, or on behalf of, Seller or any Subsidiary is being conducted in compliance in all material respects with all applicable Laws including the FDA’s Quality Systems Regulation at 21 CFR Part 820 for products sold in the United States, and the respective counterparts thereof promulgated by Governmental Authorities in countries outside the United States. Seller and each of the Transferred Subsidiaries, and, to the Knowledge of Seller, any third party assembler, sterilizer or manufacturer of Seller Products, components or accessories, are in material compliance with all applicable Laws and certifications currently held by Seller.

(f)

Neither Seller nor any Subsidiaries is the subject of any pending or, to the Knowledge of Seller, threatened investigation in respect of the Aesthetics Business or Seller Products, by the FDA pursuant to its “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” Final Policy set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto. Neither Seller nor any Subsidiaries has committed any act, made any statement or failed to make any statement, in each case in respect of the Aesthetics Business or Seller Products, that has resulted in FDA invoking, or to Seller’s Knowledge intending to invoke, its policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities” and any amendments thereto. Neither Seller nor any Subsidiaries or any of their respective officers, Employees or agents has been convicted of any crime or engaged in any conduct that could

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

2.16

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

(a)

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

(iv)

Each material consulting, development, joint development, research and development or similar Contract, and each contract under which Seller or any Subsidiary has granted or obtained a license to Intellectual Property, other than commercial software licenses;

(v)

All acquisition, partnership, joint venture, teaming arrangements or other similar Contracts;

(vi)

Any Contract under which Seller or any Subsidiary has agreed not to compete or has granted to a third party an exclusive right that restricts or otherwise adversely affects the ability of Seller or any Subsidiary to conduct its Aesthetics Business;

(vii)

All Contracts for clinical or marketing trials relating to Aesthetics Devices and all Contracts with physicians, hospitals or other healthcare providers, or other scientific or medical advisors.

2.18

Labor and Employment Matters Concerning the Employees .

(i)

All Employee Plans and Employee Agreements;

(2)

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

(b)

Schedule 2.18(b) hereto lists, as of the date of this Agreement, with respect to the Aesthetics Business and to the extent that Purchaser will be required, following the Closing, to maintain similar, in the aggregate, employee benefit plans (as defined in Section 3(3) of ERISA) and all written bonus, incentive, pension, health insurance, life insurance, severance or other benefit plans, programs or arrangements, which are maintained, contributed to or sponsored by Seller with respect to any Employees of the Aesthetics Business (collectively, the “ Benefit Plans ”).

(c)

Seller has made available to Purchaser a complete and accurate copy of each Benefit Plan (and a written summary of any unwritten Benefit Plan) and the most recently distributed summary plan description and summary of material modifications relating to a Benefit Plan. Neither the Seller nor any ERISA Affiliate has any plan or commitment to establish any new Employee Plan or Employee Agreement, to modify any Employee Plan or Employee Agreement (except to the extent required by law or to conform any such Employee Plan or Employee Agreement to the requirements of any applicable law, in each case as previously disclosed to Purchaser in writing, or as required by this Agreement, or to adopt or enter into any Employee Plan or Employee Agreement.

(d)

No Pension or Welfare Plans . Neither the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in, or contributed to, any (i) Employee Plan which is subject to Title IV of ERISA or Section 412 of the Code, (ii) any Employee which is a “multiemployer plan,” as defined in Section 3(37) of ERISA, (iii) “multiple employer plan” as defined in ERISA or the Code, or (iv) a “funded welfare plan” within the meaning of Section 419 of the Code. No Employee Plan provides health benefits that are not fully insured through an insurance contract, in each case, that would be assumed by Purchaser.

(e)

Each of the Benefit Plans has been maintained in all material respects in substantial compliance with their terms and Applicable Law. There are no actions, suits or claims pending, or, to the knowledge of the Seller or Parent, threatened or reasonably anticipated (other than routine claims for benefits) against any Employee Plan or against the assets of any Employee Plan. Each Company Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to Purchaser or any of its ERISA Affiliates (other than ordinary administration expenses). There are no audits, inquiries or proceedings pending or, to the knowledge of the Seller or Parent or any ERISA Affiliates, threatened by the IRS or DOL, or any other governmental entity with respect to any Employee Plan.

(f)

Section 409A. Each “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) that is being assumed by Purchaser has been operated since January 1, 2005 in good faith compliance with Section 409A of the Code and IRS Notice 2005-1. No nonqualified deferred compensation plan that provides deferred compensation benefits that were accrued and vested prior to January 1, 2005 has been “materially modified” (within the meaning of IRS Notice 2005-1) at any time after October 3, 2004.

(g)

There are no audits, inquiries or proceedings pending or threatened by the Tax Authorities, URSSAF or Labor Authorities with respect to any Employee Plan or Benefit Plan. The Subsidiaries are not subject to any penalty or Tax with respect to any Employee Plan or Benefit Plan. The Subsidiaries have timely made all contributions and other payments required by and due under the terms of each Employee Plan or Benefit Plan. All social contributions, pension fund, benefit plan or similar payments due by the Subsidiaries in favor of the employees under the law for any period ending before Closing have been fully paid or provided for in the Financial Statements of Subsidiaries.

(h)

Subsidiary Pension Plans. Laserscope France has never maintained, established, sponsored, participated in, or contributed to, any Pension Plan (“retraite chapeau”). Laserscope UK has never maintained, established, sponsored, participated in or contributed to any pension plan where the level of pension benefits payable are defined, underwritten or guaranteed in any way by Laserscope UK.

(i)

No Post-Employment Obligations within the Subsidiaries. No Employee Plan or Employee Agreement provides, or reflects or represents any liability to provide, post-termination or retiree life insurance, health or other employee welfare benefits to ay person for any reason and the Subsidiaries have never represented, promised or contracted (whether in oral or written form) to any Employee (either individually or to Employees as a group) or any other person that such Employee(s) or other person would be provided with life insurance, health or other employee welfare benefits, except to the extent required by Law in France and/or in the United Kingdom.

(j)

Effect of Transaction. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby or any termination of employment or service in connection therewith will (i) result in any payment (including severance, golden parachute, bonus or otherwise), becoming due to any Employee, (ii) result in any forgiveness of indebtedness owed by any Employee, (iii) materially increase any benefits of any Employee or (iv) result in the acceleration of the time of payment or vesting of any such benefits.

(k)

Parachute Payments. There is no agreement, plan, arrangement or other contract covering any employee of a Subsidiary that, considered individually or considered collectively with any other such agreements, plans, arrangements or other contracts, will, or could reasonably be expected to, give rise directly or indirectly to the payment of any amount that would be characterized as a severance plan/agreement in the United States (hereafter referred to as a “parachute payment”).

(l)

Employment Matters. The Subsidiaries are in compliance with all applicable laws, rules and regulations respecting employment, employment practices, terms and conditions of employment, employee safety and health and wages and hours including with respect to the recording of time worked effectively by employees and with respect to the payment of overtime, and in each case, with respect to Employees: (i) have withheld and reported all amounts required by law or by agreement to be withheld and reported with respect to wages, salaries and other payments to Employees, (ii) are not liable for any arrears of wages, severance pay or any Taxes or any penalty for failure to comply with any of the foregoing, and (iii) are not liable for any payment to any authority with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the normal course of business and consistent with past practice). There are no pending or threatened or reasonably anticipated claims or actions against the Subsidiaries in respect of social matters. The Subsidiaries have no direct or indirect liability with respect to any misclassification of any person as an independent contractor rather than as an employee, or with respect to any employee leased from another employer.

(m)

Labor. No employee has a notice period longer than three months nor is there a termination compensation payable for termination on due notice, which would exceed the equivalent of 3 months’ salary.

(n)

The Subsidiaries complied fully with all obligations arising out of Laws and regulation applicable to Employees, labor, health and safety matters and arising out of the statutory regulation or the applicable collective bargaining agreements and any other law or regulation. There are no current disputes with any Governmental Authority, any works council or other employee representatives. No mass dismissals, in particular those which would give rise to any notification to public or administrative authorities, have been announced or are being planned.

(o)

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

(a)

The Disclosure Schedule lists all Aesthetics Business Intellectual Property that is registered with, has been applied for, or has been issued by the U.S. Patent and Trademark Office, U.S. Copyright Office or a corresponding foreign governmental or public authority, or that is licensed to or from any third party. Seller has delivered or made available to Purchaser complete and accurate copies of publicly available file histories and office actions that are in the possession of Seller and that relate to the patents and patent applications listed in the Disclosure Schedule. The Seller does not possess any documents pertaining to litigation involving the Aesthetics Business Intellectual Property. Each item of Aesthetics Business Intellectual Property owned, licensed or used by Seller immediately prior to the Effective Time hereunder will be owned, licensed or available for use by Purchaser or its Subsidiaries on identical terms and conditions immediately after the Effective Time pursuant to this Agreement or the License Agreement, except for such limitations as imposed by the express terms of the License Agreement. Neither the consummation of the transaction contemplated by this Agreement nor the transfer to Buyer of any contracts, licenses, agreements or Aesthetics Business Intellectual Property will cause or obligate Buyer (i) to grant to any third party any rights or licenses with respect to any Intellectual Property of Buyer; or (ii) pay any royalties or other amounts in excess of those being paid by Seller prior to the Closing; nor result in the loss of, or otherwise adversely affect, any ownership rights of Seller in any Aesthetics Business Intellectual Property or result in the breach or termination of any license, contract or agreement to which Seller is a party respecting any material Aesthetics Business Intellectual Property.

(b)

Seller owns, free and clear of any Lien other than Permitted Liens, and possesses all right, title and interest, or holds a license, in and to all Aesthetics Business Intellectual Property, and has taken all reasonable action to protect the Aesthetics Business Intellectual Property. All necessary registration, maintenance and renewal fees currently due in connection with any currently registered or applied for Aesthetics Business Intellectual Property, have been paid, all formal legal requirements (including the timely post-registration applications) relating to any Aesthetics Business Intellectual Property currently registered or applied for have been made, and all necessary documents, recordations and certificates in connection with Aesthetics Business Intellectual Property have been filed with the

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