ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (“Agreement”) , dated as of October 2, 2006 (“Effective Date”), is entered into by and between Bovie Medical Corporation, a Delaware corporation (the "Buyer"), and Lican Developments, Ltd., an Ontario, Canada corporation ("Seller").

WITNESSETH:

WHEREAS , Seller is in the business of creating, engineering and developing intellectual property related to medical devices, for commercialization in the United States, Canada, and elsewhere in the world, and is to transfer certain Assets (as such term and each other capitalized term used herein without definition is defined in Section 7.1) to the Buyer pursuant to this Agreement; and

WHEREAS , the Buyer wishes, on or about November 10, 2006 (“Expected Closing Date”) to purchase or acquire (directly or indirectly through subsidiaries) from Seller, and Seller wishes to sell, assign and transfer to the Buyer, certain Fixed Assets and Intangible Assets (as such terms are defined below) held in connection with, necessary for, or material to Seller’s business and operations (the "Business"), and the Buyer has agreed to assume (directly or indirectly through its subsidiaries) the Assumed Liabilities, all for the Purchase Price and upon the terms and subject to the conditions hereinafter set forth;

NOW, THEREFORE , in consideration of the mutual covenants, representations and warranties made herein, and of the mutual benefits to be derived hereby, the sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

1.1. Assets . Subject to and upon the terms and conditions set forth in this Agreement, at the Closing, Seller will sell, transfer, convey, assign and deliver to the Buyer, and the Buyer will purchase or acquire from Seller, all right, title and interest of Seller in and to (i) the fixed assets listed on schedule 1.1 (the “Fixed Assets”) and (ii) the intangible assets (including goodwill) listed on Schedule 1.1 (the “Intangible Assets”), whether real, personal or mixed, whether accrued, contingent or otherwise and whether now existing or hereinafter acquired primarily relating to or used or held for use in connection with the Business as the same may exist on the Closing Date (collectively, the "Assets"), including all those items described below, as further set forth on Schedule 1.1:

(a) all machinery, equipment, furniture, furnishings, tools, dies, molds and parts and similar property (including, but not limited to, any of the foregoing purchased subject to any conditional sales or title retention agreement in favor of any other Person);

(b) all inventories of raw materials, work in process, finished products, goods, spare parts, replacement and component parts, and office and other supplies (collectively, the "Inventories"), including Inventories held at any location controlled by Seller, Inventories previously purchased and in transit to Seller at such locations;

(c) all Intellectual Property and all rights thereunder or in respect thereof primarily relating to or used or held for use in connection with the Business, including, but not limited to, rights to sue for and remedies against past, present and future infringements thereof, and rights of priority and protection of interests therein under the laws of any jurisdiction worldwide and all tangible embodiments thereof (together with all Intellectual Property rights included in the other clauses of this Section 1.1, the "Intellectual Property Assets");

(d) all books, records, files, manuals and other materials (in any form or medium), including, without limitation, correspondence, photographs, production data, purchasing materials and records, personnel records, manufacturing and quality control records and procedures, blueprints, research and development files, records, data and laboratory books, Intellectual Property disclosures, accounting records, and other files, related to the Assets;

(e) to the extent their transfer is permitted by law, all Governmental Approvals (including but not limited to Seller’s manufacturing ISO certifications), including all applications therefor;

 (f) all rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by Seller with respect to the Business or the ownership, use, function or value of any Asset, whether arising by way of counterclaim or otherwise;

(g) all guarantees, warranties, indemnities and similar rights in favor of Seller with respect to any Asset;

(h) Seller’s permission for, cooperation with, and support of Buyer’s hiring and employing Seller’s organized, ISO-certified workforce consisting of Seller’s former and current Employees; and

(i) Henvil Corp.’s assignable right to all or any portion of the commercial space leased by Henvil Corp. from L&M COCO Construction Ltd. (“Landlord”) being approximately 4,375 square feet municipally located at 3180 Grand Marais Blvd. E., Windsor, Ontario, N8W 4W5 (“Lease”);

Subject to the terms and conditions hereof, at the Closing, the Assets shall be transferred or otherwise conveyed to the Buyer free and clear of all liabilities, obligations, liens and encumbrances excepting only Assumed Liabilities, Liens listed on Schedule 3.1.11, and Permitted Liens.

(a) the assets listed on Schedule 1.2;

(b) the name and mark "Lican Developments, Ltd.," in whole or in part;

(c) all cash and cash equivalents held by Seller on the Effective Date;

(d) any and all accounts receivable of the Seller; and

(e) any other assets of the Seller not otherwise set out in Section 1.1.

2.1. Place and Date . The closing of the sale and purchase of the Assets (the “Closing”) shall take place on the 2nd day of October, 2006, at the offices of Buyer, or at such other time, place, and manner, as the Parties may agree.  The day on which the Closing actually occurs is herein sometimes referred to as the "Closing Date."

2.2. Purchase Price . On the terms and subject to the conditions set forth in this Agreement, the Buyer agrees to pay or cause to be paid to Seller: (i) an aggregate of Three Hundred and Fifty Thousand Dollars ($350,000), (ii) subject to American Stock Exchange listing approval, a grant to Seller of Two Hundred Thousand (200,000) shares of Bovie Medical Corporation (AMEX:BVX) restricted stock, subject to the vesting schedule described below, (iii) a grant to Seller of up to an aggregate of One Hundred and Fifty Thousand (150,000) BVX shares of restricted stock (conditioned on terms set forth below), (iv) royalty payments of Two-and-One-Half Percent (2.5%) on Buyer’s Net Sales of “Tip on Tube” Products and “RF Skin Resurfacing” Products, as set forth below, and (vi) royalty payments of Three Percent (3%) on Buyer’s Net Sales of “SEAL-N-CUT” Products and “MODULLION” Products, as set forth below (collectively, the "Purchase Price"), and to assume or cause Buyer’s subsidiary to assume, the Assumed Liabilities as provided in Section 2.4.  The Purchase Price shall be payable to Seller as follows:

(a) On the Closing Date, by wire transfer, One Hundred and Fifty Thousand Dollars ($150,000) in immediately available funds to Seller’s bank account set forth on Schedule 2.2(a);

(b) No later than thirty (30) days after each of the first four (4) anniversaries of the Closing Date, by wire transfer, Fifty Thousand Dollars ($50,000) in immediately available funds to Seller’s bank account set forth on Schedule 2.2(a); provided, however, that if Buyer fails to render the payments set forth in this Section 2.2(b) after a thirty (30) day grace period immediately following the due date of each such payment, Seller shall be entitled to an immediate vesting of all remaining unvested shares of restricted BVX stock set forth in Section 2.2(c);

(c) Subject to the provisions of Section 7.7(d), no later than thirty (30) days after the Closing Date, Two Hundred Thousand (200,000) shares of restricted BVX stock, vesting over a four (4) year period as follows: Forty Percent (40%) or 80,000 shares immediately vested, and Twenty Percent (20%) or 40,000 shares vested at each of the first three (3) anniversaries of the Closing Date; provided, however, Seller shall hold all such vested shares for a period of at least one (1) year before Seller may sell or transfer them;

(d) No later than forty-five (45) days after each of the events set forth in subsections (i)-(vi), below (the occurrence of which vests the corresponding number of shares of restricted BVX stock), the number of such shares specified, for an aggregate of up to One Hundred and Fifty Thousand (150,000) such shares; provided, however, Seller shall hold all such vested shares for a period of at least one (1) year before Seller may sell or transfer them :

(i)   Forty Thousand (40,000) shares upon Buyer obtaining a 510(k) FDA marketing clearance for the “SEAL-N-CUT” Product;

(ii)   Forty Thousand (40,000) shares upon Buyer obtaining a 510(k) FDA marketing clearance for the “MODULLION” Product;

(iii)  Seventeen Thousand Five Hundred (17,500) shares upon Buyer attaining a total of One Million Dollars ($1,000,000) in Net Sales of the “SEAL-N-CUT” Product;

(iv)  Seventeen Thousand Five Hundred (17,500) shares upon Buyer attaining a total of One Million Dollars ($1,000,000) in Net Sales of the “MODULLION” Product;

(v)   Seventeen Thousand Five Hundred (17,500) shares upon Buyer attaining a total of Three Million Dollars ($3,000,000) in Net Sales of the “SEAL-N-CUT” Product; and

(vi)  Seventeen Thousand Five Hundred (17,500) shares upon Buyer attaining a total of Three Million Dollars ($3,000,000) in Net Sales of the “MODULLION” Product.

(e) Royalty payments of Two-and-One-Half Percent (2.5%) on Buyer’s Net Sales of “Tip on Tube” Products, as further set forth in Schedule 2.2(e);

(f) Royalty payments of Two-and-One-Half Percent (2.5%) on Buyer’s Net Sales of “RF Skin Resurfacing” Products, as further set forth in Schedule 2.2(f);

(g) Royalty payments of Three Percent (3%) on Buyer’s Net Sales of “SEAL-N-CUT” Products, as further set forth in Schedule 2.2(g); and

(h) Royalty payments of Three Percent (3%) on Buyer’s Net Sales of “MODULLION” Products, as further set forth in Schedule 2.2(h).

(i) In addition to the foregoing, after Buyer obtains the applicable 510(k) FDA marketing clearances, Buyer shall pay Seller royalty payments of Two Percent (2%) on Buyer’s Net Sales of “Morscellator” Products and “Focused Ultrasonic Energy” Skin and Tissue Products, as further set forth in Schedule 2.2(i).

The Parties agree and acknowledge that Steve Livneh’s on-going personal services, and fulfillment of his obligations, under the “Livneh Employment Agreement” (set forth in Section 5.2.5(a), below) are (w) a material inducement for Buyer to enter into this Agreement, (x) a condition precedent to the Seller’s attainment of each of the elements of the Purchase Price set forth in this Section 2.2 (including all subsections (a)-(i), except (b)), (y) a condition precedent to the vesting of shares of restricted BVX stock under subsections 2.2(c) and 2.2(d), and (z) a condition subsequent to the right to receive royalty payments under subsections 2.2(e)-(i) hereof.  With regard to Seller’s right to receive royalty payments hereunder, a failure of the condition subsequent in the preceding subsection (z) (i.e., termination for cause or non-renewal of the Livneh Employment Agreement resulting in less than a total of five (5) years of continuous service thereunder) will permit Buyer to reduce such royalty payments by Fifty Percent (50%).

The provisions of the foregoing paragraph concerning Steve Livneh’s performance under the Livneh Employment Agreement shall not apply if Buyer (or its Affiliate employing Steve Livneh under that agreement) (i) terminates the Livneh Employment Agreement without cause, (ii) fails to renew the Livneh Employment Agreement for an additional two (2) years beyond the initial 3-year term, as provided therein, or (iii) both materially and adversely modifies Steve Livneh’s title, location of employment, definitions or compensation, under the Livneh Employment Agreement, without his written consent.  In the event of a termination of the Livneh Employment Agreement due to Steve Livneh’s death as set forth under Section 11(a) thereof, Buyer shall (1) pay to Seller Fifty Percent (50%) of the royalty payments due and payable under this Section 2.2, which royalty payments are earned and in effect as of the date of such termination for death, and Buyer shall immediately accelerate the vesting of any remaining unvested shares of restricted BVX stock set forth in Section 2.2(c), if any.

From and after the Effective Date the Buyer shall be solely responsible for any and all costs and expenses associated with all provisional patent applications being purchased hereunder.

2.3. Allocation of Purchase Price . (a) The Parties agree to allocate the aggregate of the Purchase Price and the Assumed Liabilities acquired from Seller in accordance with an allocation schedule to be prepared by the Buyer.  Such allocation schedule shall be prepared in accordance with section 1060 of the Code.

(b) The Purchase Price allocated to Assets in the United States pursuant to Section 2.3(a) shall be allocated among the Assets in accordance with an allocation schedule to be prepared by the Buyer.  Such allocation schedule shall be prepared in accordance with section 1060 of the Code.  The Purchase Price allocated to the Assets in Canada pursuant to Section 2.3(a) shall be allocated among the Assets in such country in accordance with an allocation schedule to be prepared by the Buyer.  Such allocation schedule shall be prepared in accordance with the requirements of the applicable tax laws of Canada and the United States.

(c) In connection with the determination of the foregoing allocation schedules, the Parties shall cooperate with each other and provide such information as any of them shall reasonably request. The Parties will each report the federal, state and local and other Tax consequences of the purchase and sale contemplated hereby (including the filing of Internal Revenue Service Form 8594 by the Buyer) in a manner consistent with such allocation schedules.

2.4. Assumption of Liabilities . Subject to the terms and conditions set forth herein, at the Closing, the Buyer shall assume and agree to pay, honor and discharge when due all of the following liabilities relating to the Assets and arising on or after the Closing Date (collectively, the "Assumed Liabilities"):

(a) any and all liabilities, obligations and commitments relating exclusively to the Assets that are incurred after the Closing Date except   for (A) liabilities related to product liability claims, (B) liabilities for Taxes relating to or arising out of the Business accruing, or with respect to any event or time period occurring, at or prior to Closing, (C) liabilities in respect of Employees;

(b) any and all liabilities, obligations and commitments (x) arising out of the agreements, contracts and commitments set forth on the Schedule 3.1.12(a) (or not required to be set forth therein because of the amount involved), but not including any obligation or liability for any breach thereof occurring prior to the Closing Date or (y) listed on Schedule 2.4(b);

(c) liabilities in respect of Transferred Employees to the extent specifically and expressly assumed by Buyer pursuant to Article VI of this Agreement; and

(d) any and all liabilities, obligations and commitments of the Seller relating to the Lease of the premises from which the Business is currently being conducted including, without limitation, the payment of rent and all utilities.

2.5. Excluded Liabilities . Notwithstanding the provisions of Section 2.4 or any other provision hereof or any schedule or exhibit hereto and regardless of any disclosure to the Buyer, the Buyer shall not assume any liabilities, obligations or commitments of Seller relating to or arising out of either the operation of the Business or the ownership of the Assets prior to the Closing Date other than the Assumed Liabilities (the "Excluded Liabilities").

2.6. Consent of Third Parties . Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute an agreement to assign or transfer any Governmental Approval, instrument, contract, lease, permit or other agreement or arrangement (collectively, “Party Right”) or any claim, right or benefit arising thereunder or resulting therefrom if an assignment or transfer or an attempt to make such an assignment or transfer without the consent of a third party would constitute a breach or violation thereof or affect adversely the rights of the Buyer or Seller thereunder; and any transfer or assignment to the Buyer by Seller of any interest under any such Party Right that requires the consent of a third party shall be made subject to such consent or approval being obtained. In the event any such consent or approval is not obtained on or prior to the Closing Date, Seller shall continue to use all reasonable efforts to obtain any such approval or consent after the Closing Date until such time as such consent or approval has been obtained, or Seller has reasonably determined, in good faith, that it cannot obtain such consent or approval, and Seller will cooperate with the Buyer in any lawful and economically feasible arrangement to provide that the Buyer shall receive the interest of Seller, as the case may be, in the benefits under any such Party Right, including performance by Seller, as the case may be, as agent, if economically feasible, provided that the Buyer shall undertake to pay or satisfy the corresponding liabilities for the enjoyment of such benefit to the extent the Buyer would have been responsible therefor hereunder if such consent or approval had been obtained. Seller shall pay and discharge, and shall indemnify and hold the Buyer harmless from and against, any and all out-of-pocket costs of seeking to obtain or obtaining any such consent or approval whether before or after the Closing Date. Nothing in this Section 2.6 shall be deemed a waiver by the Buyer of its right to have received on or before the Closing an effective assignment of all of the Assets nor shall this Section 2.6 be deemed to constitute an agreement to exclude from the Assets any assets described under Section 1.1.

3.1.1. Authorization . Seller has the corporate power and authority to execute and deliver this Agreement and each of the Collateral Agreements to which it will be a party, to perform fully its obligations hereunder and thereunder, and to consummate the transactions contemplated thereby. The execution and delivery by Seller of this Agreement, and the consummation of the transactions contemplated hereby, have been, and on the Closing Date, the execution and delivery of the Collateral Agreements to which it will be a party and the consummation of the transactions contemplated thereby will have been, duly authorized by all requisite corporate action of Seller. This Agreement is, and on the Closing Date each of the Collateral Agreements to which Seller is a party will be, legal, valid and binding obligations of Seller, enforceable against it in accordance with their respective terms.

3.1.2. Corporate Status . (a) Seller is a corporation duly organized, validly existing and in good standing under the laws of the Province of Ontario, Canada, with full corporate power and authority to carry on its business and to own or lease and to operate its properties as and in the places where such business is conducted and such properties are owned, leased or operated.

(b) Seller is duly qualified or licensed to do business and is in good standing in the Province of Ontario, Canada, where it does business or owns property, which is the only jurisdiction in which the operation of the Business or the character of the properties owned, leased or operated by it in connection with the Assets makes such qualification or licensing necessary.

(c) Seller has delivered to the Buyer complete and correct copies of its certificate of incorporation and by-laws or other organizational documents, as amended and in effect on the date hereof.  Seller is not in violation of any of the provisions of its certificate of incorporation or by-laws or other organizational documents.

3.1.3. No Conflicts . The execution, delivery and performance by Seller of this Agreement and each of the Collateral Agreements to which it is a party, and the consummation of the transactions contemplated thereby, do not and will not conflict with, result in a violation or breach of or default under (with or without the giving of notice or the lapse of time or both), give rise to a right or claim of termination, amendment, modification, vesting, acceleration or cancellation of any right or obligation or loss of any material benefit under, or result in the creation of any Lien (or any obligation to create any Lien) upon any of the Assets under (i) any Applicable Law applicable to Seller or any Affiliate thereof or any of the properties or assets of Seller (including but not limited to the Assets), (ii) the certificate of incorporation or by-laws or other organizational documents of Seller or (iii) except as set forth in Schedule 3.1.3, any Contract or other contract, agreement or other instrument to which Seller or any Affiliate thereof is a party or by which Seller or any of their properties or assets, including but not limited to the Assets, may be bound or affected. Except as specified in Schedule 3.1.3, no Governmental Approval or other Consent is required to be obtained or made by Seller in connection with the execution and delivery of this Agreement and the Collateral Agreements or the consummation of the transactions contemplated thereby.

3.1.4. Financial Statements . Seller has delivered to the Buyer Seller’s unaudited consolidated financial statements as of and for the period ended August 29, 2006 (the "Unaudited Balance Sheet Date"), together with a report thereon by Seller's Accountants (the "Unaudited Financial Statements"), including a balance sheet, statements of income and retained earnings and a statement of cash flows (all parts of the Unaudited Financial Statements collectively known as the "Financial Statements"). The Unaudited Financial Statements have been prepared. From February 1, 2006 forward, the balance sheets included in the Financial Statements do not include any material assets or liabilities not intended to constitute a part of the Business or the Assets after giving effect to the transactions contemplated hereby, and present fairly the financial condition of the Business as at their respective dates. The statements of income and retained earnings and statements of cash flows included in the Financial Statements do not reflect the operations of any entity or business not intended to constitute a part of the Business after giving effect to all such transactions, reflect all costs that historically have been incurred by the Business (other than the Excluded Liabilities) and present fairly the results of operations and cash flows of the Business for the periods indicated.

3.1.5. Absence of Undisclosed Liabilities . To Seller’s Knowledge, Seller has no liabilities or obligations of any nature, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or to become due, arising out of or relating to the Business or Assets, except (a) as set forth in Schedule 3.1.5, (b) as and to the extent disclosed or reserved against in the Unaudited Balance Sheet and (c) for liabilities and obligations that (i) were incurred after the date of the Unaudited Balance Sheet in the ordinary course of business consistent with prior practice and (ii) individually and in the aggregate are not material to the Business and have not had or resulted in, and will not have or result in, a Material Adverse Effect. None of Seller’s employees is now, or will by the passage of time, hereinafter become entitled to receive any vacation time, vacation pay or severance pay attributable to services rendered prior to such date except as disclosed on the Unaudited Balance Sheet.

3.1.6. Taxes . (a) Seller has (or by the Closing Date will have) duly and timely filed all Tax Returns relating to the Business with respect to Covered Taxes required to be filed on or before the Closing Date ("Covered Returns"). Except for Covered Taxes set forth on Schedule 3.1.6(a), which are being contested in good faith and by appropriate proceedings, the following Covered Taxes have (or by the Closing Date will have) been duly and timely paid: (i) all Covered Taxes shown to be due on the Covered Returns, (ii) all deficiencies and assessments of Covered Taxes of which notice has (or by the Closing Date will have) been received by Seller that are or may become payable by the Buyer or chargeable as a lien upon the Business or the Assets, and (iii) all other Covered Taxes due and payable on or before the Closing Date for which neither filing of Covered Returns nor notice of deficiency or assessment is required, of which Seller is or reasonably should be (or by the Closing Date will be or reasonably should be) aware that are or may become payable by the Buyer or chargeable as a lien upon the Business or Assets. All Taxes required to be withheld by or on behalf of Seller in connection with amounts paid or owing to any employee, independent contractor, creditor or other party with respect to the Business or the Assets ("Withholding Taxes") have been withheld, and such withheld taxes have either been duly and timely paid to the proper Governmental Authorities or set aside in accounts for such purpose.

(b) Except as set forth on Schedule 3.1.6(b), no agreement or other document extending, or having the effect of extending, the period of assessment or collection of any Covered Taxes or Withholding Taxes, and no power of attorney with respect to any such Taxes, has been filed with any Governmental Authority (including, but not limited to, the IRS).

(c) Except as set forth on Schedule 3.1.6(c), (i) there are no Covered Taxes or Withholding Taxes asserted in writing by any Governmental Authority to be due and (ii) no issue has been raised in writing by any Governmental Authority in the course of any audit with respect to Covered Taxes or Withholding Taxes. Except as set forth on Schedule 3.1.6(c), no Covered Taxes and no Withholding Taxes are currently under audit by any Governmental Authority. Except as set forth on Schedule 3.1.6(c), neither the IRS nor any other Governmental Authority is now asserting or, to the best Knowledge of Seller, threatening to assert against Seller any deficiency or claim for additional Covered Taxes or any adjustment of Covered Taxes that would, if paid by the Buyer, have a Material Adverse Effect, and there is no reasonable basis for any such assertion of which Seller is or reasonably should be aware.

(d) Except as set forth on Schedule 3.1.6(d), there is no litigation or administrative appeal pending or, to the best Knowledge of Seller, threatened against or relating to Seller in connection with Covered Taxes.

3.1.7. Absence of Changes . Except as set forth in Schedule 3.1.7, since the Unaudited Balance Sheet Date, Seller has conducted the Business only in the ordinary course consistent with prior practice and, to the Seller’s Knowledge, has not, on behalf of, in connection with or relating to the Business or the Assets:

(a) suffered any Material Adverse Effect;

(b) incurred any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, except current liabilities for trade or business obligations incurred in connection with the purchase of goods or services in the ordinary course of business consistent with prior practice, none of which liabilities, in any case or in the aggregate, could have a Material Adverse Effect;

(c) discharged or satisfied any Lien other than those then required to be discharged or satisfied, or paid any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, other than current liabilities shown on the Unaudited Balance Sheet and current liabilities incurred since the date thereof in the ordinary course of business consistent with prior practice;

(d) assigned, mortgaged, pledged or otherwise subjected to Lien, any property, business or assets (including Assets), tangible or intangible, held in connection with the Business;

(e) sold, transferred, leased to others or otherwise disposed of any of the Assets, except for inventory sold in the ordinary course of business, or forgiven, canceled or compromised any debt or claim, or waived or released any right of substantial value;

(f) received any notice of termination of any contract, lease or other agreement or suffered any damage, destruction or loss (whether or not covered by insurance) which, in any case or in the aggregate, has had a Material Adverse Effect;

(g) transferred or granted any rights or licenses under, or entered into any settlement regarding the breach or infringement of, any Intellectual Property, or modified any existing rights with respect thereto;

(h) made any change in the rate of compensation, commission, bonus or other direct or indirect remuneration payable, or paid or agreed or orally promised to pay, conditionally or otherwise, any bonus, incentive, retention or other compensation, retirement, welfare, fringe or severance benefit or vacation pay, to or in respect of any shareholder, director, officer, employee, salesman, distributor or agent of Seller relating to the Business or the Assets;

(i) encountered any labor union organizing activity, had any actual or threatened employee strikes, work stoppages, slowdowns or lockouts, or had any material change in its relations with its employees, agents, customers or suppliers;

(j) instituted, settled or agreed to settle any litigation, action or proceeding before any court or governmental body relating to the Business or the Assets;

(k) (i) entered into any transaction, contract or commitment other than in the ordinary course of business, (ii) breached any contract or commitment or (iii) paid or agreed to pay any brokerage, finder's fee, Taxes or other expenses in connection with, or incurred any severance pay obligations by reason of, this Agreement or the transactions contemplated hereby;

(l) made any material changes in policies or practices relating to selling practices, returns, discounts or other terms of sale or accounting therefor or in policies of employment;

(m) made any prepayment of any accounts payable, delayed payment of any trade payables or other obligations other than in the ordinary course of business consistent with past practice, or made any other cash payments other than in the ordinary course of business;

(n) failed to maintain all of the tangible Assets and all other tangible properties and assets owned, leased, occupied, operated or used in connection with the Business in good repair, working order and operating condition subject only to ordinary wear and tear;

(o) failed to use best efforts to keep in full force and effect insurance comparable in amount and scope of coverage to insurance now carried in connection with the Business; or

(p) taken any action or omitted to take any action that would result in the occurrence of any of the foregoing.

3.1.8. Litigation . To Seller’s Knowledge, except as set forth on Schedule 3.1.8, there is no action, claim, demand, suit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending or threatened against or relating to Seller in connection with the Assets or the Business or against or relating to the transactions contemplated by this Agreement, and Seller does not know or have reason to be aware of any basis for the same. Except as set forth in such Schedule 3.1.8, no citations, fines or penalties have been asserted against Seller since February 1, 2006, under any foreign, federal, state or local law relating to occupational health or safety.

3.1.9. Compliance with Laws; Governmental Approvals and Consents; Governmental Contracts . (a) Except as disclosed in Schedule 3.1.9(a) since February 1, 2006, Seller has complied in all material respects with all Applicable Laws applicable to the Business or the Assets, and Seller has not received any notice alleging any such conflict, violation, breach or default.

(b) Schedule 3.1.9(b) sets forth all Governmental Approvals and other Consents necessary for, or otherwise material to, the conduct of the Business and the ownership and use of the Assets. Except as set forth in Schedule 3.1.9(b), all such Governmental Approvals and Consents have been duly obtained and are in full force and effect, and Seller is in compliance with each of such Governmental Approvals and Consents held by it with respect to the Assets and the Business.

(c) Schedule 3.1.9(c) sets forth all Contracts with any Governmental Authority.

(d) To Seller’s Knowledge, there are no proposed laws, rules, regulations, ordinances, orders, judgments, decrees, governmental takings, condemnations or other proceedings which would be applicable to the business, operations or properties of Seller and which might adversely affect the properties, assets, liabilities, operations or prospects of Seller, either before or after the Closing Date.

3.1.10. Operation of the Business . Except as set forth in Schedule 3.1.10, (a) Seller has conducted the Business only through Seller and not through any other divisions or any direct or indirect subsidiary or affiliate of Seller and (b) no part of the Business is operated by Seller through any entity other than Seller.

3.1.11. Assets . Except as disclosed in Schedule 3.1.11, Seller has good title to all the Assets free and clear of any and all Liens other than Permitted Liens. The Assets, together with the services and arrangements described in Section 5.2.5, comprise all assets and services required for the continued conduct of the Business, by the Buyer, as now being conducted. The Assets, taken as a whole, constitute all the properties and assets relating to or used or held for use in connection with the Business during the past twelve (12) months.  Except for Excluded Assets, there are no assets or properties used in the operation of the Business and owned by any Person other than Seller that will not be leased or licensed to the Buyer under valid, current leases or license arrangements. As of the Effective Date, the Assets are in all material respects adequate for the purposes for which such assets were then currently used or were held for use, and were in reasonably good repair and operating condition (subject to normal wear and tear) and, to the Knowledge of Seller, there are no facts or conditions affecting the Assets which could, individually or in the aggregate, interfere in any material respect with the use, occupancy or operation thereof as currently used, occupied or operated, or their adequacy for such use.

3.1.12. Contracts . (a) Schedule 3.1.12(a) contains a complete and correct list of all agreements, contracts, commitments and other instruments and arrangements (whether written or oral) of the types described below (x) by which any of the Assets are bound or affected or (y) to which Seller is a party or by which it is bound in connection with the Business or the Assets (the "Contracts"):

(i) leases, licenses, permits, franchises, insurance policies, Governmental Approvals and other contracts concerning or relating to the Real Property;

(ii) employment, consulting, agency, collective bargaining or other similar contracts, agreements, and other instruments and arrangements relating to or for the benefit of current, future or former employees, officers, directors, sales representatives, distributors, dealers, agents, independent contractors or consultants;

(iii) loan agreements, indentures, letters of credit, mortgages, security agreements, pledge agreements, deeds of trust, bonds, notes, guarantees, and other agreements and instruments relating to the borrowing of money or obtaining of or extension of credit;

(iv) licenses, licensing arrangements and other contracts providing in whole or in part for the use of, or limiting the use of, any Intellectual Property;

(v) brokerage or finder's agreements;

(vi) joint venture, partnership and similar contracts involving a sharing of profits or expenses (including but not limited to joint research and development and joint marketing contracts);

(vii) stock purchase agreements, asset purchase agreements and other acquisition or divestiture agreements, including but not limited to any agreements relating to the acquisition, sale, lease or disposal of any Assets (other than sales of inventory in the ordinary course of business) or involving continuing indemnity or other obligations;

(viii) orders and other contracts for the purchase or sale of materials, supplies, products or services, each of which involves aggregate payments in excess of Ten Thousand Dollars ($10,000) in the case of purchases;

(ix) contracts with respect to which the aggregate amount that could reasonably expected to be paid or received thereunder in the future exceeds Ten Thousand Dollars ($10,000);

(x) sales agency, manufacturer's representative, marketing or distributorship agreements;

(xi) contracts, agreements or arrangements with respect to the representation of the Business in foreign countries;

(xii) lease agreements providing for the leasing of both (A) personal property primarily used in, or held for use primarily in connection with, the Business and (B) other personal property;

(xiii) contracts, agreements or commitments with any employee, director, officer, stockholder or Affiliate of Seller; and

(xiv) any other contracts, agreements or commitments that are or will be material to the Business.

(b) Seller has delivered to Buyer complete and correct copies of all written Contracts, together with all amendments thereto, and accurate descriptions of all material terms of all oral Contracts, set forth or required to be set forth in Schedule 3.1.12(a).

(c) All Contracts are in full force and effect and enforceable against each party thereto. There does not exist under any Contract any event of default or event or condition that, after notice or lapse of time or both, would constitute a violation, breach or event of default thereunder on the part of Seller or, to the best Knowledge of Seller, any other party thereto except as set forth in Schedule 3.1.12(c) and except for such events or conditions that, individually and in the aggregate, (i) have not had or resulted in, and will not have or result in, a Material Adverse Effect and (ii) have not and will not materially impair the ability of Seller to perform their respective obligations under this Agreement and under the Collateral Agreements. Except as set forth in Schedule 3.1.12(c), no consent of any third party is required under any Contract as a result of or in connection with, and the enforceability of any Contract will not be affected in any manner by, the execution, delivery and performance of this Agreement or any of the Collateral Agreements or the consummation of the transactions contemplated thereby.

(d) Seller has no outstanding power of attorney relating to the Business or the Assets.

3.1.13. Territorial Restrictions . Seller is not restricted by any written agreement or understanding with any other Person from carrying on the Business anywhere in the world. To Seller’s Knowledge, the Buyer, solely as a result of its purchase of the Assets from Seller pursuant hereto and the assumption of the Assumed Liabilities, will not thereby become restricted in carrying on any business anywhere in the world.

3.1.14. Inventories . All Inventories are of good, usable and merchantable quality in all material respects and, except as set forth on Schedule 3.1.14, do not include obsolete or discontinued items. Except as set forth on Schedule 3.1.14, (a) all Inventories are of such quality as to meet the quality control standards of Seller and any applicable governmental quality control standards, (b) all Inventories that are finished goods are saleable as current inventories at the current prices thereof in the ordinary course of business, (c) all Inventories are recorded on the books of the Business at the lower of cost or market value determined in accordance with GAAP, and (d) no write-down in inventory has been made or should have been made pursuant to GAAP during the past two years. Schedule 3.1.14 lists the locations of all Inventories.

3.1.15. Suppliers; Raw Materials . Schedule 3.1.15 sets forth the names and addresses of all suppliers from which Seller ordered raw materials, supplies, merchandise and other goods and services with an aggregate purchase price for each such supplier of One Thousand Dollars ($1,000) or more during the twelve-month period immediately preceding the Unaudited Balance Sheet Date. Seller has neither received any notice nor has any reason to believe that there has been any material adverse change in the price of such raw materials, supplies, merchandise or other goods or services, or that any such supplier will not sell raw materials, supplies, merchandise and other goods to the Buyer at any time after the Closing Date on terms and conditions similar to those used in its current sales to Seller, subject to general and customary price increases. To the best Knowledge of Seller, no supplier of Seller described hereinabove has otherwise threatened to take any action described in the preceding sentence as a result of the consummation of the transactions contemplated by this Agreement and the Collateral Agreements.

3.1.16. Products . (a) Warranties . Seller has neither manufactured nor sold any products, to any customers, for which there are or could be any product liability claims.  Except as required by Applicable Law or as set forth on Schedule 3.1.16(a), no product manufactured, sold, or delivered by, or service rendered by or on behalf of, Seller is subject to any guaranty, warranty or other indemnity, express or implied, beyond such standard terms and conditions.

(b) Product Liability . Except as set forth on Schedule 3.1.16(b), Seller has no liability or obligation of any nature (whether known or unknown, accrued, absolute, contingent or otherwise, and whether due or to become due), whether based on strict liability, negligence, breach of warranty (express or implied), breach of contract or otherwise, in respect of any product, component or other item manufactured, sold, designed or produced prior to the Closing by, or service rendered prior to the Closing by or on behalf of, Seller or any predecessor thereto, that (i) is not fully and adequately covered by policies of insurance or by indemnity, contribution, cost sharing or similar agreements or arrangements by or with other Persons, and (ii) is not otherwise fully and adequately reserved against as reflected in the Financial Statements.

(c) Rebates . Except as set forth on Schedule 3.1.16(c), Seller has not entered into, or offered to enter into, any agreement, contract commitment or other arrangement (whether written or oral) pursuant to which Seller is or will be obligated to make any rebates, discounts, promotional allowances or similar payments or arrangements to any customer ("Rebate Obligations"). All Rebate Obligations are reflected in the Unaudited Financial Statements or have been incurred after the date thereof in the ordinary course of business.

3.1.17. Absence of Certain Business Practices . To Seller’s Knowledge, neither Seller nor any of its officers, employees or agents, or any other person acting on their behalf, has, directly or indirectly, within the past five (5) years, given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other person who is or may be in a position to help or hinder the Business (or assist Seller in connection with any actual or proposed transaction relating to the Business) (i) which subjected or might have subjected Seller to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) which if not given in the past, might have had a Material Adverse Effect, (iii) which if not continued in the future, might have a Material Adverse Effect or subject Seller to suit or penalty in any private or governmental litigation or proceeding, (iv) for any of the purposes described in or equivalent to Section 162(c) of the Code or (v) for the purpose of establishing or maintaining any concealed fund or concealed bank account.

3.1.18. Intellectual Property . (a) Title . Schedule 3.1.18(a) contains a complete and correct list of all Intellectual Property that is owned by Seller and primarily related to, used in, held for use in connection with, or necessary for the conduct of, or otherwise material to the Business (the "Owned Intellectual Property"). Seller owns or has the exclusive right to use pursuant to license, sublicense, agreement or permission all Intellectual Property Assets, free from any Liens and free from any requirement of any past, present or future royalty payments, license fees, charges or other payments, or conditions or restrictions whatsoever. As of the Effective Date, the Intellectual Property Assets comprise all of the Intellectual Property necessary for the Buyer to conduct and operate the Business as now being conducted by Seller.

(b) Transfer . Immediately after the Closing, Buyer will own all of the Owned Intellectual Property and will have a right to use all other Intellectual Property Assets, free from any Liens and on the same terms and conditions as in effect prior to the Closing Date.

(c) No Infringement . To Seller’s Knowledge, the conduct of the Business does not infringe or otherwise conflict with any rights of any Person in respect of any Intellectual Property. To Seller’s Knowledge, none of the Intellectual Property Assets is being infringed or otherwise used or available for use, by any other Person.

(d) Licensing Arrangements . Schedule 3.1.18(d) sets forth all agreements, arrangements or laws (i) pursuant to which Seller has licensed Intellectual Property Assets to, or the use of Intellectual Property Assets is otherwise permitted (through non-assertion, settlement or similar agreements or otherwise) by, any other Person and (ii) pursuant to which Seller has had Intellectual Property licensed to it, or has otherwise been permitted to use Intellectual Property (through non-assertion, settlement or similar agreements or otherwise). All of the agreements or arrangements set forth on Schedule 3.1.18(d) (x) are in full force and effect in accordance with their terms and no default exists thereunder by Seller, or to the Knowledge of Seller after due inquiry, by any other party thereto, (y) are free and clear of all Liens, and (z) do not contain any change in control or other terms or conditions that will become applicable or inapplicable as a result of the consummation of the transactions contemplated by this Agreement. Seller has delivered to the Buyer true and complete copies of all licenses and arrangements (including amendments) set forth on Schedule 3.1.18(d). All royalties, license fees, charges and other amounts payable by, on behalf of, to, or for the account of, Seller in respect of any Intellectual Property are disclosed in the Unaudited Financial Statements.

(e) No Intellectual Property Litigation . To Seller’s Knowledge, no claim or demand of any Person has been made nor is there any proceeding that is pending or threatened, nor is there a reasonable basis therefor, nor has Seller received any written notice of a claim, demand or proceeding, which (i) challenges the rights of Seller in respect of any Intellectual Property Assets, (ii) asserts t