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:




ARTICLE
I




SALE
AND PURCHASE OF THE ASSETS




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;




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(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.




1.2.
Excluded
Assets. The Seller will retain and not transfer, and Buyer will not
purchase or acquire, the following assets (collectively, the "Excluded
Assets"):




(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.




ARTICLE
II




THE
CLOSING




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);




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(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%).




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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




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(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.




ARTICLE
III




REPRESENTATIONS
AND WARRANTIES




3.1.
Representations and
Warranties of Seller. As of the Effective Date and as of the Closing
Date, Seller represents and warrants to the Buyer as follows:




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.




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(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.




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(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;




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(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.




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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;




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(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.




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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.




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(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 that Seller is
infringing or otherwise in conflict with, or is, except as set forth in Schedule
3.1.18(d), required to pay any royalty, license fee, charge or other amount with
regard to, any Intellectual Property, or (iii) claims that any default exists
under any agreement or arrangement listed on Schedule 3.1.18(d). To Seller’s
Knowledge, none of the Intellectual Property Assets is subject to any
outstanding order, ruling, decree, judgment or stipulation by or with any court,
arbitrator, or administrative agency, or has been the subject of any litigation
within the last five (5) years, whether or not resolved in favor of
Seller.




(f) Due Registration.
Except for trade secrets, the Owned Intellectual Property has been duly
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office, United States Copyright Office or such other filing
offices, domestic or foreign, and Seller has taken such other actions (including
such other actions as may apply to trade secrets), to ensure full protection
under any applicable laws or regulations, and such registrations, filings,
issuances and other actions remain in full force and effect, in each case to the
extent material to the Business and the Assets.




(g) Use of Name and Mark.
To Seller’s Knowledge, except as set forth in Schedule 3.1.18(g), there are, and
immediately after the Closing will be, no contractual restriction or limitations
pursuant to any orders, decisions, injunctions, judgments, awards or decrees of
any Governmental Authority, on Buyer's right to use the names and marks
"SEAL-N-CUT" and “MODULLION” (and all respective close variants thereof) in its
conduct of the Business as presently carried on by Seller or as such Business
may be extended or pursued by the Buyer.




3.1.19.
Insurance.
Schedule 3.1.19 contains a complete and correct list and summary description of
all insurance policies maintained by Seller for the benefit of or in connection
with the Assets or the Business. Seller has delivered to the Buyer complete and
correct copies of all such policies together with all riders and amendments
thereto. Such policies are in full force and effect, and all premiums due
thereon have been paid. Seller has complied in all material respects with the
terms and provisions of such policies. The insurance coverage provided by such
policies is adequate and customary for the Business and the Assets, and is on
such terms (including without limitation as to deductibles and self-insured
retentions), covers such risks, contains such deductibles and retentions, and is
in such amounts, as the insurance customarily carried by comparable companies of
established reputation similarly situated and carrying on the same or similar
business. Schedule 3.1.19 sets out all claims made by Seller under any policy of
insurance during the past two years with respect to the Business or the
Assets.




3.1.20.
Employees, Labor
Matters. Except as set forth in Schedule 3.1.20, Seller is not a party to
nor bound by any collective bargaining agreement and there are no labor unions
or other organizations representing, purporting to represent or attempting to
represent any employees employed in the operation of the Business. Since
February 1, 2006 there has not occurred or, to the best Knowledge of Seller,
been threatened any material strike, slowdown, picketing, work stoppage,
concerted refusal to work overtime or other similar labor activity with respect
to any employees employed in the operation of the Business. There are no labor
disputes currently subject to any grievance procedure, arbitration or litigation
and there is no representation petition pending or, to the best Knowledge of
Seller after due inquiry, threatened with respect to any employee employed in
the operation of the Business. Seller has complied with all provisions of
Applicable Law pertaining to the employment of employees, including, without
limitation, all such Laws relating to labor relations, equal employment, fair
employment practices, entitlements, prohibited discrimination or other similar
employment practices or acts, except for any failure so to comply that,
individually or together with all such other failures, has not and will not
result in a material liability or obligation on the part of the Buyer, and has
not had or resulted in, and will not have or result in, a Material Adverse
Effect.




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3.1.21.
Confidentiality.
Except as set forth on Schedule 3.1.21, Seller has taken reasonable steps
necessary to protect the confidential nature of all material confidential
information (including, without limitation, any proprietary information and
Seller’s Intellectual Property) with respect to the Business and the
Assets.




3.1.22.
No Guarantees.
None of the obligations or liabilities of the Business or of Seller incurred in
connection with the operation of the Business (including the use of the Assets)
is guaranteed by or subject to a similar contingent obligation of any other
Person. Seller has not guaranteed or become subject to a similar contingent
obligation in respect of the obligations or liabilities of any other Person.
There are no outstanding letters of credit, surety bonds or similar instruments
of Seller or any of its Affiliates in connection with the Business or the
Assets.




3.1.23.
Records. The
books of account of Seller, insofar as they relate to or affect the Business and
the Assets, are sufficient to prepare the Financial Statements in accordance
with GAAP.




3.1.24.
Brokers,
Finders. All negotiations relating to this Agreement, the Collateral
Agreements, and the transactions contemplated thereby, have been carried on
without the participation of any Person acting on behalf of Seller or its
Affiliates in such manner as to give rise to any valid claim against the Buyer
or any of its subsidiaries for any brokerage or finder's commission, fee or
similar compensation, or for any bonus payable to any officer, director,
employee, agent or sales representative of or consultant to Seller or their
respective Affiliates upon consummation of the transactions contemplated hereby
or thereby.




3.1.25.
Disclosure. No
representation or warranty by Seller contained in this Agreement nor any
statement or certificate furnished or to be furnished by or on behalf of Seller
to the Buyer or its representatives in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact required to make the statements contained
herein or therein not misleading. To Seller’s Knowledge, there is no fact (other
than matters of a general economic or political nature which do not affect the
Business uniquely) known to Seller that has not been disclosed by Seller to the
Buyer that might reasonably be expected to have or result in a Material Adverse
Effect.




3.2.
Representations and
Warranties of the Buyer. As of the Effective Date and as of the Closing
Date, the Buyer represents and warrants to Seller as follows:




3.2.1.
Corporate Status;
Authorization. Buyer is a corporation duly organized, validly existing
and in good standing, under the laws of the jurisdiction of its incorporation
with full corporate power and authority to execute and deliver this Agreement
and the Collateral Agreements to which it is a party, to perform its obligations
thereunder, and to consummate the transactions contemplated thereby. The
execution and delivery by the Buyer 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 is a party will
have been, duly authorized by all requisite corporate action of Buyer. The Buyer
has duly executed and delivered this Agreement. This Agreement is, and on the
Closing Date each of the Collateral Agreements to which the Buyer is a party
will be, valid and legally binding obligations of the Buyer, enforceable against
the Buyer in accordance with their respective terms.




3.2.2.
No Conflicts.
The execution, delivery and performance by Buyer 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 or result
in a violation or breach of or default under (with or without the giving of
notice or the lapse of time, or both) (i) the certificate of incorporation or
by-laws or other organizational documents of Buyer, (ii) any Applicable Law
applicable to Buyer or any of its Affiliates or any of its or their properties
or assets or (iii) any contract, agreement or other instrument applicable to
Buyer or any of its Affiliates or any of its or their properties or assets,
except, in the case of clause (iii), for violations and defaults that,
individually and in the aggregate, have not and will not materially impair the
ability of Buyer to perform its obligations under this Agreement or under any of
the Collateral Agreements to which it is a party. Except as specified in
Schedule 3.2.2, no Governmental Approval or other Consent is required to be
obtained or made by Buyer in connection with the execution and delivery of this
Agreement or the Collateral Agreements or the consummation of the transactions
contemplated thereby.




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3.2.3.
Litigation. To
Buyer’s Knowledge, there is no action, claim, suit, proceeding, arbitration,
grievance, citation, summons, subpoena, inquiry or investigation pending or
threatened, by or against or affecting Buyer, in connection with or relating to
the transactions contemplated by this Agreement or of any action taken or to be
taken in connection herewith or the consummation of the transactions
contemplated hereby.




3.2.4.
Brokers,
Finders. All negotiations relating to this Agreement, the Collateral
Agreements, and the transactions contemplated hereby and thereby, have been
carried on without the participation of any Person acting on behalf of the Buyer
in such manner as to give rise to any valid claim against Seller for any
brokerage or finder's commission, fee or similar compensation.




ARTICLE
IV




COVENANTS




4.1.
Covenants of
Seller.




4.1.1.
Conduct of
Business. From the Effective Date to the Closing Date, except as
expressly permitted or required by this Agreement or as otherwise consented to
by the Buyer in writing, Seller shall:




(a) carry
on the Business in, and only in, the ordinary course, in substantially the same
manner as heretofore conducted, and use all reasonable efforts to preserve
intact its present business organization, maintain its properties in good
operating condition and repair, keep available the services of its present
officers and significant employees, and preserve its relationship with
customers, suppliers and others having business dealings with it, to the end
that its goodwill and going business shall be in all material respects
unimpaired following the Closing;




(b) pay
accounts payable and other obligations of the Business when they become due and
payable in the ordinary course of business consistent with prior
practice;




(c)
perform in all material respects all of its obligations under all Contracts and
other agreements and instruments relating to or affecting the Business or the
Assets, and comply in all material respects with all Applicable Laws applicable
to it, the Assets or the Business;




(d) not
enter into or assume any material agreement, contract or instrument relating to
the Business, or enter into or permit any material amendment, supplement, waiver
or other modification in respect thereof;




(e) not
grant (or commit to grant) any increase in the compensation (including incentive
or bonus compensation) of any employee employed in the operation of the Business
or institute, adopt or amend (or commit to institute, adopt or amend) any
compensation or benefit plan, policy, program or arrangement or collective
bargaining agreement applicable to any such employee; and




(f) not
take any action or omit to take any action, which action or omission would
result in a breach of any of the representations and warranties set forth in
Section 3.1.7.




4.1.2.
No
Solicitation. During the term of this Agreement, Seller, its Affiliates
and any Person acting on their behalf shall not (i) solicit or encourage any
inquiries or proposals for, or enter into any discussions with respect to, the
acquisition of any properties and assets held for use in connection with,
necessary for the conduct of, or otherwise material to, the Business or (ii)
furnish or cause to be furnished any non-public information concerning the
Business to any Person (other than the Buyer and its agents and
representatives), other than in the ordinary course of business or pursuant to
Applicable Law and after prior written notice to the Buyer. Seller shall not
sell, transfer or otherwise dispose of, grant any option or proxy to any Person
with respect to, create any Lien upon, or transfer any interest in, any Asset,
other than in the ordinary course of business and consistent with this
Agreement.




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4.1.3.
Access and
Information. (a) So long as this Agreement remains in effect, Seller will
give the Buyer and its accountants, attorneys, consultants, employees and
agents, full access during normal business hours to, and furnish them with, all
documents, records, work papers and information with respect to Seller’s
properties, assets, books, contracts, commitments, reports and records relating
to the Assets or the Business, as the Buyer shall from time to time reasonably
request. In addition, Seller will permit the Buyer and its accountants,
attorneys, consultants, employees and agents, reasonable access to such
personnel of Seller during normal business hours as may be reasonably necessary
to the Buyer in its review of the properties, assets and business affairs of the
Assets and the Business and the above-mentioned documents, records and
information; provided, however, that such access is undertaken by the Buyer
without undue interference to or with the business of the Seller and under the
direct supervision of an officer of the Seller or its nominee.




(b)
Seller will retain all books and records relating to the Assets and the Business
in accordance with Seller's record retention policies as presently in effect.
During the seven (7) year period beginning on the Closing Date, Seller shall not
dispose of or permit the disposal of any such books and records not required to
be retained under such policies without first giving sixty (60) days' prior
written notice to the Buyer offering to surrender the same to the Buyer at the
Buyer's expense.




4.1.4.
{RESERVED}




4.1.5.
Public
Announcements. Except as required by Applicable Law, Seller shall
not make any public announcement in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of the
Buyer.




4.1.6.
Further
Actions. (a) Seller agrees to use all reasonable good faith efforts to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated hereby by the Expected Closing
Date.




(b)
Seller will, as promptly as practicable, file or supply, or cause to be filed or
supplied, all applications, notifications and information required to be filed
or supplied by it pursuant to Applicable Law in connection with this Agreement,
the Collateral Agreements, the sale and transfer of the Assets pursuant to this
Agreement and the consummation of the other transactions contemplated
thereby.




(c)
Seller, as promptly as practicable, will use all reasonable efforts to obtain,
or cause to be obtained, all Consents (including, without limitation, all
Governmental Approvals and any Consents required under any Contract) necessary
to be obtained by it to consummate the sale and transfer of the Assets pursuant
to this Agreement and the consummation of the other transactions contemplated
thereby.




(d)
Seller will coordinate and cooperate with the Buyer in exchanging such
information and supplying such assistance as may be reasonably requested by the
Buyer in connection with the filings and other actions contemplated by Section
4.2.2.




(e) At
all times prior to the Closing, Seller shall promptly notify the Buyer in
writing of any fact, condition, event or occurrence that will or may result in
the failure of any of the conditions contained in Sections 5.1 and 5.2 to be
satisfied, promptly upon becoming aware of the same.




4.1.7.
Further
Assurances. Following the Closing, Seller shall, and shall cause each of
its Affiliates to, from time to time, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other actions as
shall be necessary, or otherwise reasonably requested by the Buyer, to confirm
and assure the rights and obligations provided for in this Agreement and in the
Collateral Agreements and render effective the consummation of the transactions
contemplated thereby.




4.1.8.
Liability for Transfer
Taxes. Except as prohibited by Applicable Law, Seller shall indemnify and
hold harmless the Buyer against, all sales (including, without limitation, bulk
sales), use, value added, documentary, stamp, gross receipts, registration,
transfer, conveyance, excise, recording, license and other similar Taxes and
fees ("Transfer Taxes"), arising out of or in connection with or attributable to
the transactions effected pursuant to this Agreement and the Collateral
Agreements. Seller shall prepare and timely file all Tax Returns required to be
filed in respect of Transfer Taxes (including, without limitation, all notices
required to be given with respect to bulk sales taxes), provided that the Buyer
shall be permitted to prepare any such Tax Returns that are the primary
responsibility of the Buyer under Applicable Law. The Buyer's preparation of any
such Tax Returns shall be subject to Seller's approval, which approval shall not
be withheld unreasonably nor delayed.




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4.1.9.
{RESERVED}




4.2.
Covenants of the
Buyer.




4.2.1.
Public
Announcements. Prior to the Closing, except as required by Applicable
Law, the Buyer shall not, and shall not permit its Affiliates to, make any
public announcement in respect of this Agreement or the transactions
contemplated hereby without the prior written consent of Seller.




4.2.2.
Further
Actions. (a) Buyer agrees to use all reasonable good faith efforts to
take all actions and to do all things necessary, proper or advisable to
consummate the transactions contemplated hereby by the Expected Closing
Date.




(b) Buyer
will, as promptly as practicable, file or supply, or cause to be filed or
supplied, all applications, notifications and information required to be filed
or supplied by Buyer pursuant to Applicable Law in connection with this
Agreement, the Collateral Agreements, the Buyer' acquisition of the Assets
pursuant to this Agreement, and the consummation of the other transactions
contemplated thereby.




(c) Buyer
will coordinate and cooperate with Seller in exchanging such information and
supplying such reasonable assistance as may be reasonably requested by Seller in
connection with the filings and other actions contemplated by Section
4.1.5.




(d) At
all times prior to the Closing, the Buyer shall promptly notify Seller in
writing of any fact, condition, event or occurrence that will or may result in
the failure of any of the conditions contained in Sections 5.1 and 5.3 to be
satisfied, promptly upon becoming aware of the same.




(e)
Buyer, as promptly as practicable, will use all reasonable efforts to obtain, or
cause to be obtained, all Consents (including, without limitation, all
Governmental Approvals and consents required under any document) necessary to be
obtained by it to consummate the purchase and acquisition of the Assets pursuant
to this Agreement, and the consummation of the other transactions contemplated
thereby.




4.2.3.
Further
Assurances. Following the Closing, the Buyer shall, and shall cause its
Affiliates to, from time to time, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other actions as
shall be necessary, or otherwise reasonably requested by Seller, to confirm and
assure the rights and obligations provided for in this Agreement and in the
Collateral Agreements and render effective the consummation of the transactions
contemplated thereby.




ARTICLE
V




CONDITIONS
PRECEDENT




5.1.
Conditions to
Obligations of Each Party. The obligations of the Parties to consummate
the transactions contemplated hereby shall be subject to the fulfillment on or
prior to the Closing Date of the following conditions:




5.1.1.
{RESERVED}




5.1.2.
No Injunction.
Consummation of the transactions contemplated hereby shall not have been
restrained, enjoined or otherwise prohibited by any Applicable Law, including
any order, injunction, decree or judgment of any court or other Governmental
Authority. No court or other Governmental Authority shall have determined any
Applicable Law to make illegal the consummation of the transactions contemplated
hereby or the Collateral Agreements and no proceeding with respect to the
application of any such Applicable Law to such effect shall be
pending.




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5.2.
Conditions to
Obligations of the Buyer. The obligations of the Buyer to consummate the
transactions contemplated hereby shall be subject to the fulfillment (or waiver
by the Buyer) on or prior to the Closing Date of the following additional
conditions, which Seller agrees to use reasonable good faith efforts to cause to
be fulfilled:




5.2.1.
Representations,
Performance. The representations and warranties of Seller contained in
this Agreement and in the Collateral Agreements (i) shall be true and correct in
all respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) at and as of
the Effective Date, and (ii) shall be repeated and shall be true and correct in
all respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) on and as of
the Closing Date with the same effect as though made on and as of the Closing
Date. Seller shall have duly performed and complied in all material respects
with all agreements and conditions required by this Agreement and each of the
Collateral Agreements to be performed or complied with by it prior to or on the
Closing Date. Seller shall have delivered to the Buyer a certificate, dated the
Closing Date and signed by its duly authorized officer(s), to the foregoing
effect.




5.2.2.
Financing. The
Buyer shall have obtained funds sufficient to enable the Buyer to consummate the
transactions contemplated by this Agreement.




5.2.3.
Consents.
Seller shall have obtained and shall have delivered to the Buyer copies of (i)
all Governmental Approvals required to be obtained by Seller in connection with
the execution and delivery of this Agreement and the Collateral Agreements and
the consummation of the transactions contemplated hereby or thereby and (ii) all
Consents (including, without limitation, all Consents required under any
Contract) necessary to be obtained in order to consummate the sale and transfer
of the Assets pursuant to this Agreement and the consummation of the other
transactions contemplated thereby and by the Collateral Agreements, unless the
failure to obtain such Consent would not, individually or in the aggregate, have
a Material Adverse Effect.




5.2.4.
No Material Adverse
Effect. Except as set forth in Schedule 3.1.8, no event, occurrence,
fact, condition, change, development or effect shall have occurred, exist or
come to exist since February 1, 2006 that, individually or in the aggregate, has
constituted or resulted in, or could reasonably be expected to constitute or
result in, a Material Adverse Effect.




5.2.5.
Collateral
Agreements. Seller shall have entered into each of the following
agreements with the Buyer:




(a)  an
employment agreement between Buyer (or its subsidiary guaranteed by Buyer) and
Steve Livneh for a duration of three (3) years, subject to the approval of
Buyer’s Board of Directors (the “Livneh Employment Agreement”), attached hereto
as Schedule 5.2.5(a);




(b) an
employment agreement between Buyer (or its subsidiary guaranteed by Buyer) and
Howard Stallard for a duration of three (3) years, subject to the approval of
Buyer’s Board of Directors, attached hereto as Schedule 5.2.5(b);




(c) a
release and consent agreement from Henvil, in favor of Buyer and its Affiliates,
officers, directors, employees, agents, advisors, attorneys, accountants, and
consultants, permitting the immediate cancellation of all Buyer purchase orders
pending with Henvil as of the Effective Date, attached hereto as Schedule
5.2.5(c);




(d) an
assignment of lease agreement, in the form attached hereto in Schedule 5.2.5(d),
pursuant to which Buyer (or its subsidiary) shall lease the commercial space of
the Lease; and




(e) a
non-competition agreement, in the form attached hereto as Schedule 5.2.5(e),
pursuant to which Seller agrees not to engage, either directly or indirectly, in
any business competitive with Buyer anywhere in the world for a period of five
(5) years.




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5.2.6.
Corporate
Proceedings. All corporate and other proceedings of Seller in connection
with this Agreement and the Collateral Agreements and the transactions
contemplated thereby, and all documents and instruments incident thereto, shall
be reasonably satisfactory in substance and form to the Buyer and its counsel,
and the Buyer and its counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be reasonably
requested.




5.2.7.
Transfer
Documents. Seller shall have delivered to the Buyer at the Closing all
documents, certificates and agreements necessary to transfer to the Buyer good
and marketable title to the Assets, free and clear of any and all Liens thereon,
other than Permitted Liens, including without limitation:




(a) a
bill of sale, assignment and general conveyance, in form and substance
reasonably satisfactory to the Buyer, dated the Closing Date, with respect to
the Fixed Assets, as set forth in Schedule 5.2.7(a);




(b)
assignments of all Intellectual Property and any other agreements and
instruments constituting Intangible Assets, dated the Closing Date, assigning to
the Buyer all of Seller's right, title and interest therein and thereto, with
any required Consent endorsed thereon, as set forth in Schedule
5.2.7(b);




(c) an
assignment of lease agreement to Buyer (or its subsidiary), dated as of the
Closing Date or other mutually agreeable date, with respect to the Lease in the
form attached as Schedule 5.2.5(d).




5.2.8.
Consents. Buyer
has received consent from the lessor of the Lease in Schedule 1.1(i) to assign
the Lease to the Buyer (or its subsidiary).




5.3.
Conditions to
Obligations of Seller. The obligation of Seller to consummate the
transactions contemplated hereby shall be subject to the fulfillment (or waiver
by Seller), on or prior to the Closing Date, of the following additional
conditions, which the Buyer agrees to use reasonable good faith efforts to cause
to be fulfilled.




5.3.1.
Representations,
Performance. The representations and warranties of the Buyer contained in
this Agreement and the Collateral Agreements (i) shall be true and correct in
all respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) at and as of
the Effective Date and (ii) shall be repeated and shall be true and correct in
all respects (in the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the case of any
representation or warranty without any materiality qualification) on and as of
the Closing Date with the same effect as though made at and as of such time.
Buyer shall have duly performed and complied in all material respects with all
agreements and conditions required by this Agreement and the Collateral
Agreements to be performed or complied with by it prior to or on the Closing
Date. Buyer shall have delivered to Seller a certificate, dated the Closing Date
and signed by its duly authorized officer, to the foregoing effect.




5.3.2.
Corporate
Proceedings. All corporate proceedings of Buyer in connection with this
Agreement and the Collateral Agreements and the transactions contemplated
thereby, and all documents and instruments incident thereto, shall be reasonably
satisfactory in substance and form to Seller, and its counsel, and Seller and
its counsel shall have received all such documents and instruments, or copies
thereof, certified if requested, as may be reasonably requested.




5.3.3.
Consents and
Approvals. Seller shall have obtained and delivered to Buyer copies of
all Governmental Approvals and Consents necessary to be obtained by it to
consummate the transactions contemplated under this Agreement and the Collateral
Agreements, unless failure to obtain such Governmental Approvals or Consents
would not individually or in the aggregate, have a Material Adverse
Effect.




5.3.4.
Collateral
Agreements. Buyer shall have entered into each of the Collateral
Agreements to which it is a party.




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5.3.5.
Closing
Deliveries. Buyer shall have delivered to and/or entered into with, as
the case may be, the Seller at the Closing (or as soon as practicable
thereafter) the following items:




(a) an assignment of lease agreement to
Buyer, dated as of the Closing Date (or a date subsequent as practicable after
the formation of Buyer’s formation, as mutually agreed), with respect to the
Lease in form attached as Schedule 5.2.5(d);




(b) funds in the amount of One Hundred
and Fifty Thousand Dollars ($150,000) by wire transfer; and




(c) Buyer shall have assumed the
Assumed Liabilities as soon as practicable after the formation of Buyer’s
subsidiary.




5.3.6.
Consents.
Seller shall have received the Consent from the lessor of the Lease to assign
the lease to the Buyer, as set forth in Schedule 5.3.6.




ARTICLE
VI




EMPLOYEES
AND EMPLOYEE BENEFIT PLANS




6.1.
Employment of Seller's
Employees. (a) Seller will use its best efforts to cause the employees
employed by Seller in the Business as of the Closing Date to make available
their employment services to the Buyer and its subsidiary. For a period of
five (5) years from the Closing Date, Seller will not, and will not permit
any of its Affiliates to, solicit, offer to employ or retain the services of or
otherwise interfere with the relationship of Buyer with any Person employed by
or otherwise engaged to perform services for Buyer in connection with the
operation of the Business or the use of the Assets.  Seller shall not
be entitled to receive any additional compensation, beyond that set forth in
Section 2.2, above, for Seller’s obligations under this Article VI.




(b)
Effective as of the Closing Date, Buyer shall offer employment to all of
the Employees who are employed by Seller principally in the Business, at
wage or salary levels, as applicable, and with employee benefits that are in
compliance with applicable law.  Those Employees who accept such
offers of employment shall be referred to herein as the "Transferred
Employees."  As soon as practicable after formation of Buyer’s
subsidiary, Buyer shall employ the Transferred Employees set forth in Schedule
6.1(b).




(c) As
soon as practicable after formation of the Buyer’s subsidiary, conditional on
Closing, Buyer shall assume and be responsible for all Plans and other benefits
of the Transferred Employees, accruing on or after the Closing
Date.  The Seller shall quantify to Buyer the amount of accrued
vacation pay due and owning to the Transferred Employees as of the Effective
Date.




6.2.
Workers
Compensation. From and after the Closing Date, Seller shall remain solely
responsible for any and all liabilities to or in respect of any Transferred
Employee relating to or arising in connection with any and all claims for
workers' compensation benefits arising in connection with any occupational
injury or disease occurring or existing on or prior to the Closing
Date.




ARTICLE
VII




DEFINITIONS,
MISCELLANEOUS




7.1.
Definition of Certain
Terms. The terms defined in this Section 7.1, whenever used in this
Agreement (including in the Schedules), shall have the respective meanings
indicated below for all purposes of this Agreement. All references herein to a
Section, Article or Schedule are to a Section, Article or Schedule of or to this
Agreement, unless otherwise indicated.




Affiliate:
of a Person means a Person that directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first Person. "Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a person, whether
through the ownership of voting securities, by contract or credit arrangement,
as trustee or executor, or otherwise.




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Agreement:
this Asset Purchase Agreement,
including the Schedules hereto.




Applicable
Law: all applicable provisions of all (i) constitutions, treaties, statutes,
laws (including the common law), rules, regulations, ordinances, codes or orders
of any Governmental Authority, (ii) Governmental Approvals and (iii) orders,
decisions, injunctions, judgments, awards and decrees of or agreements with any
Governmental Authority.




Assets:
as defined in Section 1.1.




Assumed
Liabilities: as defined in Section 2.5.




Business:
the business of the Seller pertaining to the Assets, and the Assumed
Liabilities, and relating generally to the creation, engineering and development
of intellectual property related to medical devices, and the provision of
technical and professional services in connection therewith.




Buyer: as
defined in the first paragraph of this Agreement.




Buyer
Indemnities: as defined in Section 7.2(a).




Closing:
as defined in Section 2.1.




Closing
Date: as defined in Section 2.1.




Code: the
Internal Revenue Code, as amended.




Collateral
Agreements: the agreements and other documents and instruments described in
Sections 5.2.5 and 5.2.7.




Consent:
any consent, approval, authorization, waiver, permit, grant, franchise,
concession, agreement, license, exemption or order of, registration,
certificate, declaration or filing with, or report or notice to, any Person,
including but not limited to any Governmental Authority.




Contract:
as defined in Section 3.1.12(a).




Covered
Returns: as defined in Section 3.1.6.




Covered
Taxes: any and all Taxes required to be paid by Seller in connection with the
ownership, operation or transfer of the Business, Assets or
otherwise.




$ or
Dollars: lawful money of the United States of America.




Employees:
all of employees of Seller employed or formerly employed in the operation of the
Business, including their respective beneficiaries and dependents.




Excluded
Liabilities: as defined in Section 2.6.




Financial
Statements: each of the financial statements required to be provided by Section
3.1.4.




Fixed
Assets: as defined in Section 1.1 and more specifically described in Schedule
1.1.




GAAP:
generally accepted accounting principles as in effect in the United
States.




Governmental
Approval: any Consent of, with or to any Governmental Authority.




Governmental
Authority: any nation or government, any state or other political subdivision
thereof, any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including, without
limitation, any government authority, agency, department, board, commission or
instrumentality of the United States, any State of the United States or any
political subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.




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Henvil
Corp..: the Ontario, Canada corporation, which is a Fifty Percent (50%)
shareholder in Seller, owned and controlled by Steve Livneh, and located at 3180
Grand Marais E., Windsor, Ontario Canada N8W 4W5.




Indemnified
Party: as defined in Section 7.2(d).




Indemnifying
Party: as defined in Section 7.2(d).




Intangible
Assets: as defined in Section 1.1 and more specifically described in Schedule
1.1.




Intellectual
Property: any and all United States and foreign: (a) patents (including design
patents, industrial designs and utility models) and patent applications
(including docketed patent disclosures awaiting filing, reissues, divisions,
continuations-in-part and extensions), patent disclosures awaiting filing
determination, inventions and improvements thereto; (b) trademarks, service
marks, trade names, trade dress, logos, business and product names, slogans, and
registrations and applications for registration thereof; (c) copyrights
(including software) and registrations thereof but excluding the name "Lican
Developments, Ltd."; (d) inventions, processes, designs, formulae, trade
secrets, know-how, industrial models, confidential and technical information,
manufacturing, engineering and technical drawings, product specifications and
confidential business information; (e) mask work and other semiconductor chip
rights and registrations thereof; (f) intellectual property rights similar to
any of the foregoing; (g) copies and tangible embodiments thereof (in whatever
form or medium, including electronic media).




Intellectual
Property Assets: as defined in Section 1.1(c).




Inventories:
as defined in Section 1.1(b).




IRS: the
Internal Revenue Service.




Knowledge:
an individual will be deemed to have "Knowledge" of a particular fact or other
matter if: (a) such individual is actually aware of such fact or other matter;
or (b) a prudent individual could reasonably be expected to discover or
otherwise become aware of such fact or other matter with the exercise of
reasonable and prudent diligence and oversight. A Person (other than an
individual) will be deemed to have "Knowledge" of a particular fact or other
matter if any individual who is serving, or who has at any time served, as a
director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has, or at any time had, Knowledge of such fact or other
matter. For purposes of this Agreement, “Knowledge” when used with respect
to Seller shall mean the Knowledge of Mr. Steve Livneh, and when used with
respect to Buyer shall mean the Knowledge of Mr. Moshe Citronowicz.




Lease:
means the real property lease pursuant to which Seller is the lessee, for the
use of the commercial space within which the Business is currently being
conducted.




Lien: any
mortgage, pledge, hypothecation, right of others, claim, security interest,
encumbrance, lease, sublease, license, occupancy agreement, adverse claim or
interest, easement, covenant, encroachment, burden, title defect, title
retention agreement, voting trust agreement, interest, equity, option, lien,
right of first refusal, charge or other restrictions or limitations of any
nature whatsoever, including but not limited to such as may arise under any
Contracts.




Losses:
as defined in Section 7.2(a).




Material
Adverse Effect: any event, occurrence, fact, condition, change or effect that is
materially adverse to the business, operations, prospects, results of
operations, prospects, condition (financial or otherwise), properties (including
intangible properties), assets (including intangible assets) or liabilities of
the Business or related to the Assets.




MODULLIONTM
Products: medical devices and related services based on or derived from the
Intellectual Property Assets pertaining to the “Modullion” designs and trade
name.




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Net
Sales: the arithmetic result determined by subtracting the following items from
gross sales: merchandise returned for credit, allowances for damaged or missing
goods, freight out, and any cash discounts allowed.




Non-Competition
Agreement: as defined in Section 5.2.5.




Owned
Intellectual Property: as defined in Section 3.1.18(a).




Permitted
Liens: (i) Liens reserved against in the Unaudited Financial Statements, to the
extent so reserved, (ii) Liens for Taxes not yet due and payable or which are
being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of Seller in
accordance with GAAP, or (iii) Liens that, individually and in the aggregate, do
not and would not materially detract from the value of any of the property or
assets of the Business or materially interfere with the use thereof as currently
used or contemplated to be used or otherwise.




Person:
any natural person, firm, partnership, association, corporation, company, trust,
business trust, Governmental Authority or other entity.




Plans:
any "employee benefit plan," and each bonus, incentive or deferred compensation,
severance, termination, retention, change of control, stock option, stock
appreciation, stock purchase, phantom stock or other equity-based, performance
or other employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, that provides
or may provide benefits or compensation in respect of any Employees or under
which any Employee is or may become eligible to participate or derive a benefit
and that is or has been maintained or established by Seller, or to which Seller
or any Related Person contributes or is or has been obligated or required to
contribute or with respect to which Seller may have any liability or
obligation.




Purchase
Price: as defined in Section 2.2.




Restricted
Stock: Shares of Common Stock of Bovie Medical Corporation which have not been
registered under the United States Securities Act of 1933, as amended (the
“Act”), and each restricted stock certificate shall bear a restrictive legend to
the effect that the shares have not been registered under the Act and may not be
transferred or sold in the absence of an effective registration statement duly
filed with the U.S. Securities and Exchange Commission with respect to the
shares, or the Issuer is otherwise furnished with an opinion of counsel,
satisfactory to it, that registration is not required under the
Act.




RF Skin
Resurfacing: the invention of the Seller described in Exhibit “B”
hereto.




RF Skin
Resurfacing Products: medical devices and related services based on or derived
from the Intellectual Property Assets pertaining to the “RF Skin Resurfacing”
designs and trade name.




SEAL-N-CUT:
the invention of the Seller described in the Exhibit “C” hereto.




SEAL-N-CUT
Products: medical devices and related services based on or derived from the
Intellectual Property Assets pertaining to the “SEAL-N-CUT” designs and trade
name.




Sellers
Accountants: means Canadian Chartered Accountant Mario Parete.




Seller:
as defined in the first paragraph of this Agreement.




Subsidiaries:
each corporation or other Person in which a Person owns or controls, directly or
indirectly, capital stock or other equity interests representing at least 50% of
the outstanding voting stock or other equity interests.




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Tax: any
United States or Canadian federal, state, provincial, local, foreign or other
income, alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall profits, gross
receipts, value added, sales, use, goods and services, excise, customs duties,
transfer, conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental (including taxes under Section 59A of the
Code), real property, personal property, ad valorem, intangibles, rent,
occupancy, license, occupational, employment, unemployment insurance, social
security, disability, workers' compensation, payroll, health care, withholding,
estimated or other similar tax, duty or other governmental charge or assessment
or deficiencies thereof (including all interest and penalties thereon and
additions thereto whether disputed or not).




Tax
Return: any return, report, declaration, form, claim for refund or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.




Tip-on-Tube:
the invention of the Seller described in Exhibit “D” hereto.




Tip-on-Tube
Products: medical devices and related services based on or derived from the
Intellectual Property Assets pertaining to the “Tip on Tube” designs and trade
name.




Transaction
Expenses: as defined in Section 7.4.




Transfer
Amounts: as defined in Section 6.2(c).




Transferred
Employees: as defined in Section 6.1(b).




Transfer
Taxes: as defined in Section 4.1.8.




Treasury
Regulations: the regulations prescribed pursuant to the Code.




Unaudited
Balance Sheet Date: as defined in Section 3.1.4.




Withholding
Taxes: as defined in Section 3.6(a).




7.2.
Indemnification. (a)
By Seller.
Seller covenants and agrees to defend, indemnify and hold harmless the Buyer,
its officers, directors, employees, agents, advisers, representatives and
Affiliates (collectively, the "Buyer Indemnitees") from and against, and pay or
reimburse the Buyer Indemnitees for, any and all claims, liabilities,
obligations, losses, fines, costs, royalties, proceedings, deficiencies or
damages (whether absolute, accrued, conditional or otherwise and whether or not
resulting from third party claims), including out-of-pocket expenses and
reasonable attorneys' and accountants' fees incurred in the investigation or
defense of any of the same or in asserting any of their respective rights
hereunder (collectively, "Losses"), resulting from or arising out
of:




(i) any
material inaccuracy of any representation or warranty by Seller herein or in any
Collateral Agreement or in connection herewith or therewith;




(ii) any
material failure of Seller to perform any covenant or agreement hereunder or
Collateral Agreement or to fulfill any other obligation in respect hereof or of
Collateral Agreement;




(iii) any
Excluded Liabilities or Excluded Assets;




(iv) any
and all Taxes of Seller and its Affiliates not relating to or arising out of the
Business;




(v) any
and all Benefit Liabilities in respect of Employees except, with respect to
Transferred Employees, to the extent expressly assumed by the Buyer pursuant to
Article VI;




(vi) any
product liability claim with respect to products manufactured or sold or events
occurring prior to the Closing; and




(vii) any
failure of the Seller to comply with applicable bulk sales laws (in
consideration of which indemnification obligation the Buyer hereby waives
compliance by Seller with any applicable bulk sales laws).




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            BUYER:
      ___    SELLER:
      ___







Except
for inaccuracies in the representations and warranties contained in Sections
3.1.1, 3.1.2, 3.1.3 and 3.1.6, Seller shall not be required to indemnify the
Buyer Indemnities with respect to any claim for indemnification pursuant to
clause (i) of the first sentence of this Section 7.2(a) unless and until the
aggregate amount of all claims against Seller under such clause exceeds One
Thousand Dollars ($1,000) and then only to the extent such aggregate amount
exceeds One Thousand Dollars ($1,000).




(b) By the Buyer. Buyer
covenants and agrees to defend, indemnify and hold harmless Seller and its
officers, directors, employees, agents, advisers, representatives and Affiliates
(collectively, the "Seller Indemnities") from and against any and all Losses
resulting from or arising out of:




(i) any
material inaccuracy in any representation or warranty by Buyer herein or in any
Collateral Agreement or in connection therewith; or




(ii) any
material failure of Buyer to perform any covenant or agreement made or contained
in this Agreement or any Collateral Agreement or to fulfill any other obligation
in respect thereof;




(iii) the
Assumed Liabilities; and




(iv) the
Buyer's ownership, operation or use of the Assets following the Closing
Date,




except, in the case
of clause (iv), to the extent such Losses result from or arise out of the
Excluded Liabilities or constitute Losses for which Seller is required to
indemnify the Buyer Indemnities under Section 7.2(a). Except for inaccuracies in
the representations and warranties contained in Sections 3.2.1 and 3.2.2, Buyer
shall not be required to indemnify Seller Indemnitees with respect to any claim
for indemnification pursuant to clause (i) of the first sentence of this Section
7.2(b) unless and until the aggregate amount of all claims against Buyer under
such clause exceeds One Thousand Dollars ($1,000) and then only to the extent
such aggregate amount exceeds One Thousand Dollars ($1,000).




(c) Indemnification
Procedures. In the case of any claim asserted by a third party against a
party entitled to indemnification under this Agreement (the "Indemnified
Party"), notice shall be given by the Indemnified Party to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual Knowledge of any claim as to which indemnity may be
sought, and the Indemnified Party shall permit the Indemnifying Party (at the
expense of such Indemnifying Party) to assume the defense of any claim or any
litigation resulting therefrom, provided that (i) the counsel for the
Indemnifying Party who shall conduct the defense of such claim or litigation
shall be reasonably satisfactory to the Indemnified Party, (ii) the Indemnified
Party may participate in such defense at such Indemnified Party's expense, and
(iii) the omission by any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnification obligation under
this Agreement except to the extent that such omission results in a failure of
actual notice to the Indemnifying Party and such Indemnifying Party is
materially damaged as a result of such failure to give notice. Except with the
prior written consent of the Indemnified Party, no Indemnifying Party, in the
defense of any such claim or litigation, shall consent to entry of any judgment
or enter into any settlement that provides for injunctive or other non-monetary
relief affecting the Indemnified Party or that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation. In the event that the Indemnified Party shall in good faith
determine that the conduct of the defense of any claim subject to
indemnification hereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the Indemnified Party's
Tax liability or the ability of the Buyer to conduct its business (including,
but not limited to, use, license or transfer of the Assets, or any part
thereof), or that the Indemnified Party may have available to it one or more
defenses or counterclaims that are inconsistent with one or more of those that
may be available to the Indemnifying Party in respect of such claim or any
litigation relating thereto, the Indemnified Party shall have the right at all
times to take over and assume control over the defense, settlement, negotiations
or litigation relating to any such claim at the sole cost of the Indemnifying
Party, provided that if the Indemnified Party does so take over and assume
control, the Indemnified Party shall not settle such claim or litigation without
the written consent of the Indemnifying Party, such consent not to be
unreasonably withheld. In the event that the Indemnifying Party does not accept
the defense of any matter as above provided, the Indemnified Party shall have
the full right to defend against any such claim or demand and shall be entitled
to settle or agree to pay in full such claim or demand. In any event, the
Indemnifying Party and the Indemnified Party shall cooperate in the defense of
any claim or litigation subject to this Section 7.2 and the records of each
shall be available to the other with respect to such defense.




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            BUYER:
      ___    SELLER:
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(d) Time Limitation. All
claims for indemnification under clause (i) of the first sentence of Section
7.2(a) or clause (i) of the first sentence of Section 7.2(b) must be asserted
within thirty (30) days of the termination of the respective survival periods
set forth in Section 7.3.




7.3.
Survival of
Representations and Warranties. The representations and warranties
contained in this Agreement shall survive the execution and delivery of this
Agreement, any examination by or on behalf of the Parties hereto and the
completion of the transactions contemplated herein, but only to the extent
specified below:




(a)
except as set forth in clauses (b) and (c) below, the representations and
warranties contained in Section 3.1 and Section 3.2 shall survive for a period
of five (5) years following the Closing Date.




(b) the
representations and warranties contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.2.1
and 3.2.2 shall survive without limitation; and




(c) the
representations and warranties of Seller contained in Section 3.1.6 shall
survive as to any Tax covered by such representations and warranties for so long
as any statute of limitations for such Tax remains open, in whole or in part,
including without limitation by reason of waiver of such statute of
limitations.




7.4.
Expenses.
Except as provided in Section 4.1.8, Seller, on the one hand, and Buyer, on the
other hand, shall bear their respective expenses, costs and fees (including
attorneys', auditors' and financing commitment fees) in connection with the
transactions contemplated hereby, including the preparation, execution and
delivery of this Agreement and compliance herewith (the "Transaction Expenses"),
whether or not the transactions contemplated hereby shall be
consummated.




7.5.
Severability.
If any provision of this Agreement, including any phrase, sentence, clause,
Section or subsection is inoperative or unenforceable for any reason, such
circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering
any other provision or provisions herein contained invalid, inoperative, or
unenforceable to any extent whatsoever.




7.6.
Notices. All
notices, requests, demands, waivers and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if (a) delivered personally, (b) mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or (c) sent by next-day or overnight mail or delivery or (d) sent by
facsimile or telegram.





(i) if to
the Buyer to,


Bovie Medical Corporation


7100 30th Avenue,
North


St. Petersburg, FL 33710


Attn: Moshe Citronowicz,
COO




with a
copy to:


Bovie Medical Corporation


7100 30th Avenue,
North


St. Petersburg, FL 33710


Attn: General Counsel


(ii) if
to Seller,


Lican Developments, Ltd.


3180 Grand Marais Blvd.
E.


Windsor, Ontario


Canada N8W 4W5


Attn: Steve Livneh,
President




CONFIDENTIAL
      (11.10.06)
            Page 25
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            BUYER:
      ___    SELLER:
      ___







with a
copy to:


Miller
Canfield Paddock and Stone, LLP


443 Ouellette Avenue


Windsor, Ontario, Canada


Attn: Jeffrey Slopen





or, in
each case, at such other address as may be specified in writing between the
Parties.




All such
notices, requests, demands, waivers and other communications shall be deemed to
have been received (w) if by personal delivery on the day after such delivery,
(x) if by certified or registered mail, on the seventh business day after the
mailing thereof (provided sender produces countersigned return receipt), (y) if
by next-day or overnight mail or delivery, on the day delivered, (z) if by
facsimile or telegram, on the next day following the day on which such facsimile
or telegram was sent, provided that a copy is also sent by certified or
registered mail.




7.7.
Change in
Control.  (a) Buyer Acquired. If
Buyer is acquired by a third party during the period of five (5) years after the
Closing Date, and Buyer thereafter elects not to commercialize the products for
which Seller is entitled to receive the royalty payments set forth in Section
2.2, Seller shall notify in writing Buyer of its election to invoke this Section
of the Agreement.




(b) Appraiser. No later
than thirty (30) days after Buyer’s receipt of Seller’s notice under 7.7(a),
Buyer and Seller shall mutually select an appraiser (the “Appraiser”) whose
determination of Seller’s Added Value shall be binding upon the Parties only for
the purposes set forth in this Section 7.7.  If Buyer and Seller
cannot agree on an Appraiser, Buyer and Seller shall each select an appraiser
that satisfies the qualifications and experience requirements of the Appraiser,
who in turn will select the Appraiser.  Appraiser shall possess
professional qualifications and industry experience suitable to the
determination of Seller’s Added Value.   Buyer and Seller shall
each pay one-half of the professional fees and expenses of the Appraiser (and of
Buyer’s and Seller’s appraisers, if necessary, as set forth
above).  “Seller’s Added Value” means the incremental value above
Buyer’s market capitalization (as of the Closing Date) attributed to the Assets
acquired under this Agreement.




(c) Fee Payable. No later
than ninety (90) days after the Parties’ receipt of the Appraiser’s report
containing the determination of Seller’s Added Value, Buyer shall pay to Seller
an amount (the “Change in Control Fee”) equal to Five Percent (5%) of Seller’s
Added Value.




(d) Accelerated
Vesting.  Upon Buyer’s payment to Seller of the Change in
Control Fee set forth in Section 7.7(c), Buyer shall immediately accelerate the
vesting of all remaining unvested, restricted shares granted pursuant to Section
2.2(c), if any.




(e) Release. Upon Buyer’s
payment to Seller of the Change in Control Fee in Section 7.7(c) and Buyer’s
accelerated vesting of restricted shares in Section 7.7(d), Seller shall
contemporaneously deliver to Buyer a duly executed release in favor of Buyer and
its Affiliates, officers, directors, employees, agents, advisors, attorneys,
accountants, and consultants (collectively, the “Released Parties”), in a form
acceptable to Buyer’s counsel, relieving the Released Parties from any further
obligations under Section 2.2.




7.8.
Miscellaneous.




7.8.1.
Headings. The
headings contained in this Agreement are for purposes of convenience only and
shall not affect the meaning or interpretation of this Agreement.




7.8.2.
Entire
Agreement. This Agreement (including the Schedules and Exhibits hereto)
and the Collateral Agreements (when executed and delivered) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, between the Parties with respect to the subject matter
hereof.




7.8.3.
Counterparts.
This Agreement may be executed in several counterparts, each of which shall be
deemed an original and all of which shall together constitute one and the same
instrument.




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            BUYER:
      ___    SELLER:
      ___







7.8.4.
Governing Law.
This Agreement shall be governed in all respects, including as to validity,
interpretation and effect, by the internal laws of the State of Florida, without
giving effect to the conflict of laws rules thereof to the extent that the
application of the law of another jurisdiction would be required thereby. Buyer
and Seller hereby irrevocably submit to the jurisdiction of the courts of the
State of Florida and the Federal courts of the United States of America located
in the State, City and County of St. Petersburg, Florida, USA, solely in respect
of the interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and hereby waive, and agree not to
assert, as a defense in any action, suit or proceeding for the interpretation or
enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any of such document may not be enforced in or by said courts, and
the Parties irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a St. Petersburg, Florida,
State or Federal court. Buyer and Seller hereby consent to and grant any such
court jurisdiction over the person of such Parties and over the subject matter
of any such dispute and agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in Section
7.6, or in such other manner as may be permitted by law, shall be valid and
sufficient service thereof.




7.8.5.
Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective heirs, successors and permitted
assigns.




7.8.6.
Assignment.
This Agreement shall not be assignable or otherwise transferable by any Party
hereto without the prior written consent of the other party hereto, provided
that the Buyer may assign this Agreement to any Subsidiary of the Buyer or to
any lender to the Buyer or any Subsidiary or Affiliate thereof as security for
obligations to such lender in respect of the financing arrangements entered into
in connection with the transactions contemplated hereby and any re-financings,
extensions, re-funding or renewals thereof, provided, further, that no
assignment to any such lender shall in any way affect the Buyer's obligations or
liabilities under this Agreement.




7.8.7.
No Third Party
Beneficiaries. Except as provided in Section 7.2 with respect to
indemnification of Indemnified Parties hereunder, nothing in this Agreement
shall confer any rights upon any person or entity other than the Parties hereto
and their respective heirs, successors and permitted assigns.




7.8.8.
Amendment;
Waivers. No amendment, modification or discharge of this Agreement, and
no waiver hereunder, shall be valid or binding unless set forth in writing and
duly executed by the Party against whom enforcement of the amendment,
modification, discharge or waiver is sought. Any such waiver shall constitute a
waiver only with respect to the specific matter described in such writing and
shall in no way impair the rights of the Party granting such waiver in any other
respect or at any other time. Neither the waiver by any of the Parties hereto of
a breach of or a default under any of the provisions of this Agreement, nor the
failure by any of the Parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege hereunder,
shall be construed as a waiver of any other breach or default of a similar
nature, or as a waiver of any of such provisions, rights or privileges
hereunder. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any Party may otherwise have at law or
in equity. The rights and remedies of any Party based upon, arising out of or
otherwise in respect of any inaccuracy or breach of any representation,
warranty, covenant or agreement or failure to fulfill any condition shall in no
way be limited by the fact that the act, omission, occurrence or other state of
facts upon which any claim of any such inaccuracy or breach is based may also be
the subject matter of any other representation, warranty, covenant or agreement
as to which there is no inaccuracy or breach. The representations and warranties
of Seller shall not be affected or deemed waived by reason of any investigation
made by or on behalf of the Buyer (including but not limited to by any of its
advisors, attorneys, consultants or representatives) or by reason of the fact
that the Buyer or any of such advisors, attorneys, consultants or
representatives knew or should have known that any such representation or
warranty is or might be inaccurate.




CONFIDENTIAL
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            Page 27
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            BUYER:
      ___    SELLER:
      ___







7.8.9.
Foreign
Currencies. Unless otherwise stated, all dollars specified in this
Agreement and the Collateral Agreements shall be in U.S. dollars. All foreign
currency shall be converted to U.S. dollar equivalents determined on the basis
of the exchange rates published in The Wall Street Journal on the date three (3)
days prior to the relevant Closing (or, if The Wall Street Journal is not
published on such date, the next preceding date on which it is
published).




IN WITNESS WHEREOF, the
Parties have duly executed this Agreement as of the Effective Date.





BOVIE
      MEDICAL CORPORATIONBy:
              /S/ Moshe CitronowiczName:
              Moshe CitronowiczTitle:
              VP/COOLICAN
      DEVELOPMENTS, LTD.By:
              /S/ Steve LivnehName:
              Steve LivnehTitle:
              President




CONFIDENTIAL
      (11.10.06)
            Page 28
      of 34
            BUYER:
      ___    SELLER:
      ___





SCHEDULES
– Exceptions and Declarations





Schedule
1.1 (Assets)


Fixed Assets (Seller)
 
 Item
                                              
                                              Asset
                                              
                                              Model
                                              
                                              S/N
                                              
                                              Owner1
                                              
                                              Emcomat Tabletop Lathe
                                              
                                              8.4
                                              
                                              8.4
                                              
                                              Lican2
                                              
                                              Hardinge Lathe
                                              
                                              HC
                                              
                                              CT-A
                                              
                                              Lican3
                                              
                                              16 Speed Heavy Duty Drill
    Press
                                              
                                              1412
                                              
                                              4299
                                              
                                              Lican4
                                              
                                              Castek EDM Hole Driller
                                              
                                              SD20
                                              
                                              80207144
                                              
                                              Lican5
                                              
                                              8" Bench Grinder
                                              
                                              55-3516-6
                                              
                                              4075
                                              
                                              Lican6
                                              
                                              Degreasing Machine
                                              
                                              E110
                                              
                                              1056332
                                              
                                              Lican7
                                              
                                              Foredom Hand grinder
                                              
                                              
                                              
                                              F060343
                                              
                                              Lican8
                                              
                                              Baldor Polisher
                                              
                                              
                                              
                                              P4-96
                                              
                                              Lican9
                                              
                                              Baltec Riveter
                                              
                                              RN081
                                              
                                              810029
                                              
                                              Lican10
                                              
                                              See Attached List of Office Equipment, Telephone
      System, TV, Work Bench, Software Licenses, Printers (4), Routers (2),
      Facsimile Machine (1), Computers (7), and Monitors
    (7).
                                              
                                              See
                                                Attached
                                                List
                                              
                                              See Attached List
                                              
                                              Lican
 
 Intangible Assets (Seller)
 
 Item
                                                      
                                                      Asset
                                                      
                                                      
                                                      
                                                      Owner1
                                                      
                                                      Provisional Patent Applications for
      MODULLION
                                                      
                                                      See Exhibit A
                                                      
                                                      Lican2
                                                      
                                                      Provisional Patent Applications for RF Skin
      Resurfacing
                                                      
                                                      See Exhibit B
                                                      
                                                      Lican3
                                                      
                                                      Provisional Patent Applications
      for
                                                        SEAL-N-CUT
                                                      
                                                      See Exhibit C
                                                      
                                                      Lican4
                                                      
                                                      Provisional Patent Applications
      for
                                                        TIP-ON-TUBE
                                                      
                                                      See Exhibit D
                                                      
                                                      Lican5
                                                      
                                                      MODULLION trademark
      (unregistered)
                                                      
                                                      
                                                      
                                                      Lican6
                                                      
                                                      SEAL-N-CUT trademark
      (unregistered)
                                                      
                                                      
                                                      
                                                      Lican7
                                                      
                                                      TIP-ON-TUBE trademark
      (unregistered)
                                                      
                                                      
                                                      
                                                      Lican8
                                                      
                                                      Organized ISO-Certified
      Workforce
                                                      
                                                      
                                                      
                                                      Lican9
                                                      
                                                      ISO Certified Manufacturing Process & ISO
      Certification




Schedule
1.2 (Excluded Assets)





None.





Schedule
2.2(a) (Seller’s Wire Transfer Information)





Routing
Number: 38842004


Account
Number: 0298-7303273


Bank
Name: TD Canada Trust Bank


3281
Dougall Street, Windsor, ON




CONFIDENTIAL
      (11.10.06)
            Page 29
      of 34
            BUYER:
      ___    SELLER:
      ___








Lican
Developments Ltd.


3180
Grand Marais Blvd., Windsor, ON





Schedule
2.2(e) (Tip-on-Tube Product Royalties)





The
royalties payable under these subsections shall be determined for Net Sales on a
calendar year basis and shall be disbursed no later than sixty (60) days
after the end of each calendar year during the Term.





Schedule
2.2(f) (RF Skin Resurfacing Product Royalties)





The
royalties payable under these subsections shall be determined for Net Sales on a
calendar year basis and shall be disbursed no later than sixty (60) days
after the end of each calendar year during the Term.





Schedule
2.2(g) (Seal-n-Cut Product Royalties)





The
royalties payable under these subsections shall be determined for Net Sales on a
calendar year basis and shall be disbursed no later than sixty (60) days
after the end of each calendar year during the Term.





Schedule
2.2(h) (Modullion Product Royalties)





The
royalties payable under these subsections shall be determined for Net Sales on a
calendar year basis and shall be disbursed no later than sixty (60) days
after the end of each calendar year during the Term.





Schedule
2.2(i) (Morsellator Product Royalties and Focused Ultrasonic Energy Skin
Products Royalties)





The
royalties payable under these subsections shall be determined for Net Sales on a
calendar year basis and shall be disbursed no later than sixty (60) days
after the end of each calendar year during the Term.





Schedule
2.4(b) (Assumed Liabilities)





There are
no additional Assumed Liabilities.





Schedule
3.1.3 (No Conflicts)





None.





Schedule
3.1.5 (Absence of Undisclosed Liabilities)





None.





Schedule
3.1.6(a) (Covered Taxes)





None.





Schedule
3.1.6(b) (Taxes)





None.




CONFIDENTIAL
      (11.10.06)
            Page 30
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            BUYER:
      ___    SELLER:
      ___








Schedule
3.1.6(c) (Taxes)





None.





Schedule
3.1.6(d) (No Litigation or Appeal for Taxes)





None.





Schedule
3.1.7 (Absence of Changes Since Unaudited Balance Sheet Date)





Seller
has operated the Business since the Unaudited Balance Sheet Date in the ordinary
course and in a manner consistent with prior practices.





Schedule
3.1.8 (No Litigation)





None.





Schedule
3.1.9(a) (Governmental Approvals)





None.





Schedule
3.1.9(b) (Governmental Approvals)





·
            Consent
      of relevant Governmental Authority to the transfer of Seller’s ISO
      registration.


·
            Consent
      of relevant Governmental Authority to the transfer of all provisional
      patent applications related to the Intellectual Property
      Assets.





Schedule
3.1.9(c) (Governmental Authority Contracts)





Federal
(IRAP) grant of CDN $90,000 to support the development of the MODULLION
project.





Schedule
3.1.10 (Operation of the Business)





Lease and
other matters related to the Business were conducted through Henvil
Corp.





Schedule
3.1.11 (Title to Assets)





Personal
Property Security Act (Ontario) registration bearing reference file number
900855936.





Schedule
3.1.12(a) (Contracts)





·
            Lease
      between Henvil Corp. and L&M COCO Construction Ltd. for the lease of
      approximately 4,375 square feet of the premises municipally located at
      3180 Grand Marais Blvd. E., Windsor, Ontario, N8W
  4W5;




·
            Federal
      (IRAP) grant of CDN $90,000 to support the development of the MODULLION;
      and




·
            Verbal
      employment agreements for eight (8) current employees of the
      Seller.




CONFIDENTIAL
      (11.10.06)
            Page 31
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            BUYER:
      ___    SELLER:
      ___








Schedule
3.1.12(c) (Contracts)





None.





Schedule
3.1.14 (Inventories)





None.





Schedule
3.1.15 (Suppliers)





See
Attached.





Schedule
3.1.16(a) (Product Warranties)





None.





Schedule
3.1.16(b) (Product Liabilities)





None.





Schedule
3.1.16(c) (Product Rebates)





None.





Schedule
3.1.18(a) (Owned Intellectual Property)





1.  Multi-Mode
Surgical Instrument (68,197-003) filed 1/25/2005 and published on 7/28/2005
[Non-provisional application].





2.  Apparatus
and Method for Skin Tightening and Corrective Forming (68,197-008) filed
3/17/2006 [Provisional application].





3.  Apparatus
and Method for Skin Tightening and Corrective Forming (68,197-009) filed
7/5/2006 [Provisional application].





4.  Surgical
and General Instrument Having Detachable and Movable Jaws with Stationary Tip
Mechanism (68,197-010) filed 6/30/2006 [Provisional application].





5.  Seal-N-Cut
Forceps (68,197-011) filed 7/13/2006 [Provisional application].





6.  The
unregistered trademarks TIP-ON-TUBE, SEAL-N-CUT, MODULLION, and
MORSELLATOR.





Schedule
3.1.18(d) (Licensing Arrangements)





None.





Schedule
3.1.18(g) (Use of Name and Mark)





None.




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            BUYER:
      ___    SELLER:
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Schedule
3.1.19 (Insurance Policies)





Seller
has no insurance policies in force.





Schedule
3.1.20(a) (Employee & Labor Matters)





·
            Verbal
      employment agreements for eight (8) current employees of the
      Seller.





Schedule
3.1.21 (Confidentiality)





None.





Schedule
3.2.2 (No Governmental Approvals or Consents)





There are
no Governmental Approvals required of the Buyer.  The Buyer requires
its Board of Directors’ approval for the Asset Purchase Agreement and each
Collateral Agreement, including the employment agreements for Steve Livneh
and Howard Stallard.





Schedule
5.2.5(a) (Livneh Employment Agreement)





See
Attached.





Schedule
5.2.5(b) (Stallard Employment Agreement)





See
Attached.





Schedule
5.2.5(c) (Release and Consent from Henvil)





See
Attached.





Schedule
5.2.5(d) (Lease Assignment Agreement)





See
Attached.





Schedule
5.2.5(e) (Lican Non-Competition Agreement)





See
Attached.





Schedule
5.2.7(a) (Bill of Sale & General Conveyance for Assets)





See
Attached.





Schedule
5.2.7(b) (Assignments and Consents)





See
Attached.





Schedule
5.3.6 (Consent from Seller’s Lessor)





See
Attached.




CONFIDENTIAL
      (11.10.06)
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            BUYER:
      ___    SELLER:
      ___








Schedule
6.1(b) (List of Transferred Employees)





Girald,
      Conrad J.
              
              465-768-679
              
              257
      King Street, Amherstberg, ON N9V 2C4Qian,
      Dong
              
              520-343-286
              
              3655
      Sandwich Street, Windsor, ON N9C 1B8Stallard,
      Howard
              
              472-400-043
              
              2357
      Docherty Drive, Tecumseh, ON N8N 4R1Lifei,
      Jiang
              
              548-707-306
              
              3655
      Sandwich Street, Windsor, ON N9C 1B8Stallard,
      Sean
              
              523-778-744
              
              3655
      Sandwich Street, #209, Windsor, ON N9C 1B8Livneh,
      Steve
              
              484-298-047
              
              440
      Dalhousie, Amherstburg, ON N9V 1X3Yu,
      Yingue
              
              533-841-979
              
              3655
      Sandwich Street, #210, Windsor, ON N9C 1B8Turnbull,
      Zachary
              
              524-508-843
              
              3655
      Sandwich Street, Windsor, ON N9C
1B8





Exhibit
A – Provisional Patent Applications for Modullion





See
Attached.





Exhibit
B – Provisional Patent Applications for RF Skin Resurfacing





See
Attached.





Exhibit
C – Provisional Patent Applications for Seal-n-Cut





See
Attached.





Exhibit
D - Provisional Patent Applications for Tip-on-Tube





See
Attached.




CONFIDENTIAL
      (11.10.06)
            Page 34
      of 34
            BUYER:
      ___    SELLER:
      ___