AGREEMENT AND PLAN OF MERGER

Exhibit 10.1

CONFORMED COPY

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

ITHAKA ACQUISITION CORP.,

ITHAKA SUB ACQUISITION CORP.,

ALSIUS CORPORATION

and

CERTAIN OF THE SHAREHOLDERS OF
ALSIUS CORPORATION

DATED AS OF OCTOBER 3, 2006

AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of October 3, 2006, by and among Ithaka Acquisition Corp., a Delaware corporation (“ Parent ”), Ithaka Sub Acquisition Corp., a California corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), Alsius Corporation, a California corporation (“ Company ”), and each of the persons listed under the caption “Signing Shareholders” on the signature page hereof, such persons being certain of the shareholders of the Company (each a “ Signing Shareholder ” and, collectively, the “ Signing Shareholders ”). Notwithstanding anything in this Agreement to the contrary, the parties acknowledge that, although the Signing Shareholders have approved and adopted this entire Agreement in accordance with Section 1.13(a), the only covenants that bind them in their capacities as Signing Shareholders are Sections 1.5(a), 1.13, 1.14, 1.18, 5.10, 5.11, 5.12, 5.13 and 5.14.

RECITALS

     A. Upon the terms and subject to the conditions of this Agreement (as defined in Section 1.2) and in accordance with the California Business Corporation Act (the “ CGCL ”), Parent and the Company intend to enter into a business combination transaction by means of a merger between Merger Sub and the Company in which the Company will merge with Merger Sub and be the surviving entity and a wholly owned subsidiary of Parent.

     B. The Boards of Directors of each of the Company, Parent and Merger Sub have determined that the Merger (as defined in Section 1.1) is fair to, and in the best interests of, their respective companies and their respective stockholders.

     C. The parties intend, by executing this Agreement, to adopt a plan of reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “ Code ”).

     NOW, THEREFORE, in consideration of the covenants, promises and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows (defined terms used in this Agreement are listed alphabetically in Article IX, together with the Section and, if applicable, paragraph number in which the definition of each such term is located):

ARTICLE I

THE MERGER

     1.1 The Merger . At the Effective Time (as defined in Section 1.2) and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the CGCL , Merger Sub shall be merged with and into the Company (the “ Merger ”), the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation. The Company as the surviving corporation after the Merger is hereinafter sometimes referred to as the “ Surviving Corporation .”

     1.2 Effective Time; Closing . Subject to the conditions of this Agreement, the parties hereto shall cause the Merger to be consummated by filing with the Secretary of State of the State of California in accordance with the relevant provisions of the CGCL a certified copy of this Agreement (the “ Certificate of Merger ”) (the time of such filing with the Secretary of State of the State of California, or such later time as may be agreed in writing by the Company and Parent and specified in the Certificate of Merger, being the “ Effective Time ”) as soon as practicable on or after the Closing Date (as herein defined). The term “ Agreement ” as used herein refers to this Agreement and Plan of Merger, as the same may be amended from time to time, and all schedules hereto (including the Company Schedule and the Parent Schedule, as defined in the preambles to Articles II and III hereof, respectively). Unless this Agreement shall have been terminated pursuant to Section 8.1, the closing of the Merger (the “ Closing ”) shall take place at the offices of Graubard Miller, counsel to Parent, The Chrysler Building, 405 Lexington Avenue, New York, New York 10174-1901, at a time and date to be specified by the parties, which shall be no later than the second business day after the satisfaction or waiver of the conditions set forth in Article VI, or at such other time, date and location as the parties hereto agree in writing (the “ Closing Date ”). Closing signatures may be transmitted by facsimile.

     1.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of the CGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

     1.4 Articles of Incorporation; Bylaws .

     (a) At the Effective Time, the Articles of Incorporation of the Company shall be amended and restated by the filing under the CGCL of an Amended and Restated Articles of Incorporation of the Company in the form annexed hereto as Exhibit A , which, as so filed, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Articles of Incorporation of the Surviving Corporation.

     (b) Also, at the Effective Time, the Bylaws of Merger Sub, a copy of which is annexed hereto as Exhibit B , shall be the Bylaws of the Surviving Corporation.

     1.5 Effect on Capital Stock . Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and this Agreement and without any action on the part of Merger Sub, the Company or the holders of any of the securities of the Company, the following shall occur:

     (a) Conversion of Company Capital Stock . Other than any shares to be canceled pursuant to Section 1.5(c), all shares of capital stock, no par value, of the Company (“ Company Capital Stock ”) and convertible promissory notes (“ Notes ”) issued and outstanding immediately prior to the Effective Time, including shares of Company Capital Stock subject to dissenters’ rights in accordance with Section 1.17, will be automatically converted (subject to Section 1.5(f)), on the Closing Date, into the right to receive (i) 8,000,000 shares of Parent Common Stock (as defined in Section 3.3(a)) (“ Merger Shares ”) and (ii) the Milestone Shares (as defined in Section 1.5(b)(iii)), all of which shall be distributed to the holders of the Company Capital Stock and Notes in accordance with the priorities set forth in Schedule 1.5(a) , pro rata in accordance with the number of shares of Company Capital Stock or principal amount of Notes, as the case may be, held by each such holder. The Company and the Signing Shareholders acknowledge that, as a result of the priorities set forth in Schedule 1.5(a) , the holders of common stock and preferred stock of the Company, other than holders of Series F Preferred Stock, may not be entitled to receive any Merger Shares or Milestone Shares. For purposes of Schedule 1.5(a) , the Merger Shares shall be valued at the last sale price on the third trading day immediately preceding the Closing Date.

     (b) Milestone Shares .

     (i) For each of the fiscal years 2007, 2008 and 2009 for which the Revenues (as defined in Section 1.5(b)(iii)) of the Surviving Corporation equal or exceed 80% of the “ Revenue Target ” set forth below for such year, Parent shall issue that percentage of the shares of Parent Common Stock set forth in Section 1.5(b)(ii) as “ Target Shares ” for such year determined as follows:

     (ii) The Revenue Targets, Target Shares and 120% Target Shares for each of the fiscal years 2007, 2008 and 2009 shall be as follows:

     (iii) As used in this Agreement, (A) the term “ Revenues ” shall mean the revenues of the Surviving Corporation, calculated in a manner consistent with the Audited Financial Statements (as defined in Section 2.7), for the fiscal year in question, as derived from the audited financial statements of Parent and its subsidiaries for such year as publicly reported, excluding revenues from acquisitions of businesses made after the date of this Agreement and (B) the term “ Milestone Shares ” shall mean shares of Parent Common Stock issuable pursuant to the provisions of this Section 1.5(b).

     (iv) Milestone Shares, to the extent earned, shall be issued, in accordance with the priorities set forth in Schedule 1.5(a) after giving effect to the shares of Parent Common Stock issued pursuant to Section 1.5(a), no later than April 30 ^th of the year following the year with respect to which they are earned or as soon as practicable thereafter. For purposes of Schedule 1.5(a), the Milestone Shares shall be valued at the last sale price on the third trading day preceding the date of issuance. Notwithstanding anything in this Section 1.5 to the contrary, Milestone Shares otherwise distributable with respect to Dissenting Shares shall be distributed to the holders of Company Capital Stock and Notes other than the holders of Dissenting Shares.

     (v) The provisions of this Section 1.5(b) shall remain in effect notwithstanding any acquisition, merger, consolidation, stock exchange, asset sale or similar event affecting the Surviving Corporation or Parent. Following such event, the acquiring or surviving party will continue to be obligated to issue Milestone Shares in accordance with Schedule 1.5(a) to the extent Parent would have been obligated to do so had such event not occurred. Following such event, if applicable, any unissued portion of Milestone Shares previously payable in Parent Common Stock will be payable in the form of the security or other consideration into which Parent Common Stock is converted. Neither the Surviving Corporation nor Parent will consummate any acquisition, merger, consolidation, stock exchange, asset sale or similar event without providing for the potential economic benefits of this Section 1.5(b).

     (c) Cancellation of Treasury and Parent-Owned Stock . Each share of Company Capital Stock held by the Company or owned by Merger Sub, Parent or any direct or indirect wholly-owned subsidiary of the Company or of Parent immediately prior to the Effective Time shall be canceled and extinguished without any conversion or payment in respect thereof.

     (d) Capital Stock of Merger Sub . Each share of Common Stock, par value, of Merger Sub (the “ Merger Sub Common Stock ”) issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of common stock, no par value, of the Surviving Corporation. Each certificate evidencing ownership of shares of Merger Sub Common Stock shall evidence ownership of such shares of common stock of the Surviving Corporation.

     (e) Adjustments to Exchange Ratios . The numbers of shares of Parent Common Stock that the holders of the Company Capital Stock are entitled to receive as a result of the Merger shall be equitably adjusted to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Parent Common Stock), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to Parent Common Stock occurring on or after the date hereof and prior to the completion of the issuance, if any, of the Milestone Shares.

     (f) Fractional Shares . No fraction of a share of Parent Common Stock will be issued by virtue of the Merger, and each holder of shares of Company Capital Stock or Notes who would otherwise be entitled to a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock that otherwise would be received by such holder) shall, upon compliance with Section 1.6, receive from Parent, in lieu of such fractional share, one (1) share of Parent Common Stock.

     1.6 Surrender of Certificates; Uncertificated Shares .

     (a) Exchange Agent . Continental Stock Transfer & Trust Company (“ Continental ”) shall be designated by the parties hereto to act as the exchange agent (the “ Exchange Agent ”) in the Merger.

     (b) Parent to Provide Common Stock . Promptly after the Effective Time, and in no event more than three (3) business days thereafter, Parent shall make available to the Exchange Agent, for exchange in accordance with this Article I, the shares of Parent Common Stock issuable pursuant to Section 1.5 (other than Milestone Shares) in exchange for outstanding shares of Company Capital Stock and Notes and any dividends or distributions to which holders of shares of Company Capital Stock may be entitled pursuant to Section 1.6(e).

     (c) Exchange Procedures . The certificates representing the shares of Parent Common Stock issuable with respect to certificates for shares of Company Capital Stock and Notes (collectively, “ Company Instruments ”) shall be issued to the holders of Company Instruments upon surrender of the Company Instruments in the manner provided in this Section 1.6 (or in the case of a lost, stolen or destroyed instrument, upon delivery of an affidavit (and indemnity, if required) in the manner provided in Section 1.8). Each holder shall be issued two separate certificates (in equal amounts) for such holder’s Escrow Shares (as defined in Section 1.11) and two separate certificates (in equal amounts) for the remaining number of shares of Parent Common Stock to which such holder is entitled. Promptly after the Effective Time, and in no event more than

three (3) business days thereafter, Parent shall cause the Exchange Agent to mail to each holder of record (as of the Effective Time) of Company Instruments, which immediately prior to the Effective Time represented outstanding shares of Company Capital Stock and Notes that were converted into the right to receive shares of Parent Common Stock pursuant to Section 1.5: (i) a letter of transmittal in customary form and including a provision to the effect set forth in Section 1.18, and (ii) instructions for use in effecting the surrender of the Company Instruments in exchange for the certificates representing shares of Parent Common Stock to which the holder of such Company Instruments is entitled as a result of the Merger and any dividends or other distributions pursuant to Section 1.6(e). Upon surrender of Company Instruments for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holders of such Company Instruments shall be entitled to receive in exchange therefor such amounts of certificates representing the number of shares of Parent Common Stock into which their             shares of Company Capital Stock and Notes were converted at the Effective Time, including the Escrow Shares (which shall be delivered to the Escrow Agent pursuant to Section 1.11), and any dividends or distributions payable pursuant to Section 1.6(e), and the Company Instruments so surrendered shall forthwith be canceled. Until so surrendered, outstanding Company Instruments will be deemed, from and after the Effective Time, to evidence only the right to receive the applicable number of shares of Parent Common Stock issuable pursuant to Section 1.5(a).

     (d) Uncertificated Shares and Notes . Not later than one (1) business day after the Effective Time, the Company shall provide to Parent, with a copy to the Exchange Agent, a list, certified as being true and complete by the Company’s Chief Financial Officer, of all holders of Company Capital Stock and Notes that are not represented by Company Instruments who are entitled to receive Parent Common Stock in exchange therefor as a result of the Merger, which list shall state the name, address and tax identification number of each such holder, the number of shares of Company Capital Stock and Notes held by such holder that are not so represented and the number of shares of Parent Common Stock such holder is entitled to receive with respect thereto. Parent shall thereupon issue to the Exchange Agent, in its capacity as stock transfer agent of the Company, an authorization to issue and deliver to the holders of such uncertificated shares of Company Capital Stock and Notes the numbers of shares of Parent Common Stock that they are entitled to receive in exchange therefor as a result of the Merger and the Exchange Agent shall so issue and deliver certificates representing such shares of Parent Common Stock to such holders as if such holders had delivered Company Instruments representing such shares of Company Capital Stock and Notes to the Exchange Agent pursuant to Section 1.5(c).

     (e) Distributions With Respect to Unexchanged Shares . No dividends or other distributions declared or made after the date of this Agreement with respect to Parent Common Stock with a record date after the Effective Time will be paid to the holders of any unsurrendered Company Instruments with respect to the shares of Parent Common Stock to be issued upon surrender thereof until the holders of record of such Company Instruments shall surrender such Company Instruments. Subject to applicable law, following surrender of any such Company Instruments with a properly completed

letter of transmittal, the Exchange Agent shall promptly deliver to the record holders thereof, without interest (other than accrued interest on the Notes through the Effective Time in accordance with the terms of the Notes), the certificates representing shares of Parent Common Stock issued in exchange therefor and the amount of any such dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such shares of Parent Common Stock.

     (f) Transfers of Ownership . If certificates representing shares of Parent Common Stock are to be issued in a name other than that in which the Company Instruments surrendered in exchange therefor are registered, it will be a condition of the issuance thereof that the Company Instruments so surrendered will be properly endorsed and otherwise in proper form for transfer and that the persons requesting such exchange will have paid to Parent or any agent designated by it any transfer or other taxes required by reason of the issuance of certificates representing shares of Parent Common Stock in any name other than that of the registered holder of the Company Instruments surrendered, or established to the satisfaction of Parent or any agent designated by it that such tax has been paid or is not payable.

     (g) Required Withholding . Each of the Exchange Agent, Parent and the Surviving Corporation shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to any holder or former holder of Company Capital Stock or Notes such amounts as are required to be deducted or withheld therefrom under the Code or under any provision of state, local or foreign tax law or under any other applicable legal requirement. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the person to whom such amounts would otherwise have been paid.

     (h) Termination of Exchange Agent Obligations . Certificates for shares of Parent Common Stock held by the Exchange Agent that have not been delivered to holders of Company Instruments within six (6) months after the Effective Time shall promptly be paid or delivered, as appropriate, to Parent, and thereafter holders of Company Instruments who have not theretofore complied with the exchange procedures outlined in and contemplated by this Section 1.6 shall thereafter look only to Parent (subject to abandoned property, escheat and similar laws) for their claim for shares of Parent Common Stock and any dividends or distributions pursuant to Section 1.6(e) with respect to shares of Parent Common Stock to which they are entitled.

     (i) No Liability . Notwithstanding anything to the contrary in this Section 1.6, neither the Exchange Agent, Parent, the Surviving Corporation, the Company nor any party hereto shall be liable to a holder of shares of Parent Common Stock or Company Capital Stock or Notes for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law.

     1.7 No Further Ownership Rights in Company Stock . All shares of Parent Common Stock issued in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of Company Capital Stock and Notes and there

shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Capital Stock or Notes that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Company Instruments are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article I.

     1.8 Lost, Stolen or Destroyed Certificates . In the event that any Company Instruments shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Company Instruments, upon the making of an affidavit of that fact by the holder thereof, the certificates representing the shares of Parent Common Stock that the shares of Company Capital Stock or Notes formerly represented by such Company Instruments were converted into and any dividends or distributions payable pursuant to Section 1.6(e); provided, however, that, as a condition precedent to the issuance of such certificates representing shares of Parent Common Stock and other distributions, the owner of such lost, stolen or destroyed Company Instruments shall indemnify Parent against any claim that may be made against Parent, the Surviving Corporation or the Exchange Agent with respect to the Company Instruments alleged to have been lost, stolen or destroyed.

     1.9 Tax Consequences . It is intended by the parties hereto that the Merger shall constitute a reorganization within the meaning of Section 368 of the Code. The parties hereto adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.

     1.10 Taking of Necessary Action; Further Action . If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the officers and directors of the Company and Merger Sub will take all such lawful and necessary action.

     1.11 Escrow .

     (a) As the sole remedy for the indemnity obligations set forth in Article VII, at the Closing, each Person receiving Merger Shares shall deposit in escrow, to be held for the period ending on the thirtieth day after the date that Parent is required to file its Annual Report on Form 10-K for the year ended December 31, 2007 (the “ Indemnity Escrow Period ”) and for such further period as may be required pursuant to the Escrow Agreement referred to below, ten percent (10%) of the Merger Shares received by such Person (the “ Indemnity Escrow Shares ”), which shares shall be allocated among the Persons entitled to receive them in the same proportions as the shares of Parent Common Stock are allocated among them, all in accordance with the terms and conditions of the Escrow Agreement to be entered into at the Closing between Parent, the Representatives referred to in Section 1.14(b) and Continental, as Escrow Agent, substantially in the form annexed hereto as Exhibit C (the “ Escrow Agreement ”).

     (b) If, at the Effective Time, holders of Company Capital Stock have properly exercised rights under the CGCL with respect to Dissenting Shares (as defined in Section 1.17(b)), to provide a fund for reimbursement to Parent for payments made by Parent or the Company with respect to Dissenting Shares pursuant to Section 1.17(c), each Person

receiving Merger Shares shall deposit in escrow, to be held until all claims by Dissenters with respect to Dissenting Shares are finally resolved, such number of Merger Shares as Parent shall reasonably determine is sufficient to provide for such reimbursement, not to exceed ten percent (10%) of the Merger Shares received by such Person (“ Reimbursement Escrow Shares ” and, together with the Indemnity Escrow Shares, the “ Escrow Shares ”), which shares shall be allocated among the Persons entitled to receive them in the same proportions as the shares of Parent Common Stock are allocated among them, all in accordance with the terms and conditions of the Escrow Agreement.

     1.12 Rule 145 . All shares of Parent Common Stock issued pursuant to this Agreement to “affiliates” of the Company listed in Schedule 1.12 will be subject to certain resale restrictions under Rule 145 promulgated under the Securities Act and all certificates representing such shares shall bear an appropriate restrictive legend.

     1.13 Signing Shareholder Matters .

     (a) By his, her or its execution of this Agreement, each Signing Shareholder, in his, her or its capacity as a shareholder of the Company, hereby approves and adopts this Agreement and authorizes the Company, its directors and officers to take all actions necessary for the consummation of the Merger and the other transactions contemplated hereby pursuant to the terms of this Agreement and its exhibits. Such execution shall be deemed to be action taken by the irrevocable written consent of each Signing Shareholder for purposes of Section 603 of the CGCL. Each Signing Shareholder also confirms that he, she or it is not entitled to any dissenters rights pursuant to the CGCL.

     (b) Each Signing Shareholder, for itself only, represents and warrants as follows: (i) all Parent Common Stock to be acquired by such Signing Shareholder pursuant to this Agreement will be acquired for his, her or its account and not with a view towards distribution thereof other than, with respect to Signing Shareholders that are entities, transfers to its shareholders, partners or members; (ii) it understands that he, she or it must bear the economic risk of the investment in the Parent Common Stock, which cannot be sold by him, her or it unless it is registered under the Securities Act (as defined in Section 1.13(c)), or an exemption therefrom is available thereunder; (iii) he, she or it has had both the opportunity to ask questions and receive answers from the officers and directors of Parent and all persons acting on Parent’s behalf concerning the business and operations of Parent and to obtain any additional information to the extent Parent possesses or may possess such information or can acquire it without unreasonable effort or expense necessary to verify the accuracy of such information; and (iv) he, she or it has had access to the Parent SEC Reports filed prior to the date of this Agreement. Each Signing Shareholder acknowledges, as to himself, herself or itself only, that (v) he, she or it is either (A) an “accredited investor” as such term is defined in Rule 501(a) promulgated under the Securities Act or (B) a person possessing sufficient knowledge and experience in financial and business matters to enable it to evaluate the merits and risks of an investment in Parent; and (vi) he, she or it understands that the certificates representing the Parent Common Stock to be received by him, her or it may bear legends to the effect that the Parent Common Stock may not be transferred except upon compliance with (C) the registration requirements of the Securities Act (or an exemption

therefrom) and (D) the provisions of Section 1.18 of this Agreement and the Lock-Up Agreement referred to therein.

     (c) Each Signing Shareholder, for himself, herself or itself, represents and warrants that the execution and delivery of this Agreement by such Signing Shareholder does not, and the performance of his, her or its obligations hereunder will not, on the part of such Signing Shareholder, require any consent, approval, authorization or permit of, or filing with or notification to, any court, administrative agency, commission, governmental or regulatory authority, domestic or foreign (a “ Governmental Entity ”), except (i) for applicable requirements, if any, of the Securities Act of 1933, as amended (“ Securities Act ”), the Securities Exchange Act of 1934, as amended (“ Exchange Act ”), state securities laws (“ Blue Sky Laws ”), and the rules and regulations thereunder, and (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (as defined in Section 10.2(a)) on such Signing Shareholder or the Company or, after the Closing, the Parent, or prevent consummation of the Merger or otherwise prevent the parties hereto from performing their obligations under this Agreement.

     1.14 Committee and Representatives for Purposes of Escrow Agreement .

     (a) Parent Committee . Prior to the Closing, the Board of Directors of Parent shall appoint a committee consisting of Eric M. Hecht and Paul Brooke to act on behalf of Parent to take all necessary actions and make all decisions pursuant to the Escrow Agreement regarding Parent’s right to indemnification pursuant to Article VII hereof. In the event of a vacancy in such committee, the Board of Directors of Parent shall appoint as a successor a Person who was a director of Parent prior to the Closing Date or some other Person who would qualify as an “independent” director of Parent and who has not had any compensatory business relationship with the Company prior to the Closing. Such committee is intended to be the “ Committee ” referred to in Article VII hereof and the Escrow Agreement.

     (b) Representatives . The Company and the Signing Shareholders hereby designate Kurt Wheeler and Wende Hutton, acting together, to represent the interests of the Persons entitled to receive Parent Common Stock as a result of the Merger for purposes of the Escrow Agreement. If either such Person ceases to serve in such capacity, for any reason, such Person shall designate his or her successor. Failing such designation within ten (10) business days after a Representative has ceased to serve, those members of the Board of Directors of Parent who were directors of the Company prior to the Closing shall appoint as successor a Person who was a former shareholder of the Company or such other Person as such members shall designate. Such Persons or their successors are intended to be the “ Representatives ” referred to in Section 1.11 and Article VII hereof and the Escrow Agreement.

     1.15 Derivative Securities . The Company shall arrange that all outstanding options, warrants, convertible debt and other derivative securities of the Company that are not exercised for or converted into shares of Company Capital Stock prior to the Effective Time shall be

cancelled as of the Effective Time without the payment of any consideration by the Company. Other than as contemplated or permitted by this Agreement, or in connection with the exercise of outstanding warrants and options, without the consent of Parent, which consent may be withheld in Parent’s absolute discretion, the Company will not issue any of its securities after the date hereof and prior to the earlier of the date this Agreement is terminated and the Effective Time.

     1.16 Notice to Other Shareholders of the Company . As promptly as practicable after the execution of this Agreement, the Company, after consultation with Parent, shall give the shareholders of the Company, other than the Signing Shareholders, notice of the written consent of the Signing Shareholders pursuant to Section 1.13(a), in accordance with the provisions of Section 603 of the CGCL.

     1.17 Shares Subject to Dissenters’ Rights .

     (a) Notwithstanding Section 1.5 hereof, Dissenting Shares (as hereinafter defined) shall not be converted into a right to receive Parent Common Stock (including Milestone Shares). The holders thereof shall be entitled only to such rights as are granted by the CGCL. Each holder of Dissenting Shares who becomes entitled to payment for such shares pursuant to the CGCL shall receive payment therefor from the Surviving Corporation in accordance with the CGCL, provided, however, that (i) if any shareholder of the Company who asserts dissenters’ rights in connection with the Merger (a “ Dissenter ”) shall have failed to establish his entitlement to such rights as provided in the CGCL, or (ii) if any such Dissenter shall have effectively withdrawn his demand for payment for such shares or waived or lost his right to payment for his shares under the dissenters’ rights process under the CGCL, the shares of Company Capital Stock held by such Dissenter shall be treated as if they had been converted, as of the Effective Time, into a right to receive Parent Common Stock as provided in Section 1.5. The Company shall give Parent prompt notice of any demands for payment received by the Company from a person asserting dissenters’ rights, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands.

     (b) As used herein, “ Dissenting Shares ” means any shares of Company Capital Stock held by shareholders of the Company who are entitled to dissenters’ rights under the CGCL, and who have properly exercised, perfected and not subsequently withdrawn or lost or waived their rights to demand payment with respect to those shares in accordance with the CGCL.

     (c) Parent shall, upon demand, be reimbursed for payments made by it and the Company with respect to Dissenting Shares solely by means of transfer to Parent of Reimbursement Escrow Shares having a value equal to the amounts of such payments, determined in accordance with the Escrow Agreement; provided that the Parent shall not be entitled to reimbursement for such payments with respect to Dissenting Shares made by it and the Company in excess of the value of the Reimbursement Escrow Shares, determined in accordance with the Escrow Agreement. Parent Indemnitees (as defined in

Section 7.1(a)) shall not have recourse or rights to the Indemnity Escrow Shares with respect to payments made with respect to Dissenting Shares.

     1.18 Sale Restriction; Lock-Up Agreement; Registration Rights Agreements .

     (a) No public market sales of Merger Shares shall be made for a period of twelve (12) months following the Closing Date, at which time one-half of the Merger Shares issued to each holder of Company Capital Stock and Notes may be sold in the public market. The remaining Merger Shares may be sold in the public market after eighteen (18) months following the Closing Date. No private sales of Merger Shares shall be made unless the purchaser acknowledges and agrees to the restriction stated in the preceding sentence by delivery to Parent of a written document to such effect. Certificates representing Merger Shares issued pursuant to Section 1.6(c) to the holders of Company Capital Stock and Notes entitled to receive them shall bear a prominent legend to such effect, with one certificate for half of the Merger Shares exclusive of the Escrow Shares and one certificate for half of the Escrow Shares issued to each holder bearing a legend reflecting the twelve (12) month restriction and the other certificates issued to each holder bearing a legend reflecting the eighteen (18) month restriction. The foregoing restrictions shall not apply to the Milestone Shares.

     (b) Each Signing Shareholder shall, concurrently with the execution of this Agreement, execute an agreement (“ Lock-Up Agreement ”) in the form annexed hereto as Exhibit D reflecting the provisions of this Section 1.18. Notwithstanding the foregoing, if any Person who is party to a Lock-Up Agreement is released from any of the restrictions set forth therein, all other Persons party to Lock-Up Agreements shall be automatically released from such restrictions to the same extent.

     (c) The Company shall arrange that all agreements pursuant to which it is obligated to register its securities under the Securities Act shall be terminated effective no later than the Effective Time without the payment of any consideration by the Company.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Subject to the exceptions set forth in Schedule 2 attached hereto (the “ Company Schedule ”), the Company hereby represents and warrants to, and covenants with, Parent and Merger Sub, as follows:

     2.1 Organization and Qualification .

     (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of California and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being or currently planned by the Company to be conducted. The Company is in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders (“ Approvals ”) necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its

business as it is now being or currently planned by the Company to be conducted, except where the failure to have such Approvals could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Complete and correct copies of the articles of incorporation and by-laws (or other comparable governing instruments with different names) (collectively referred to herein as “ Charter Documents ”) of the Company, as amended and currently in effect, have been heretofore delivered to Parent or Parent’s counsel. The Company is not in violation of any of the provisions of the Company’s Charter Documents.

     (b) The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Each jurisdiction in which the Company is so qualified or licensed is listed in Schedule 2.1 .

     (c) The minute books of the Company contain true, complete and accurate records of all meetings and consents in lieu of meetings of its Board of Directors (and any committees thereof), similar governing bodies and shareholders (“ Corporate Records ”) since the time of the Company’s organization. Copies of such Corporate Records of the Company have been heretofore delivered to Parent or Parent’s counsel.

     (d) The stock transfer, warrant and option transfer and ownership records of the Company contain true, complete and accurate records of the securities ownership as of the date of such records and the transfers involving the Company Capital Stock and other securities of the Company since the time of the Company’s organization. Copies of such records of the Company have been heretofore delivered to Parent or Parent’s counsel.

     2.2 Subsidiaries . The Company has no subsidiaries.

     2.3 Capitalization .

     (a) The authorized Company Capital Stock and the amounts of each class and series thereof outstanding on the date hereof, all of which are validly issued, fully paid and nonassessable, are set forth in Schedule 2.3(a) hereto.

     (b) Except as set forth in Schedule 2.3(b) hereto, as of the date of this Agreement, (i) no shares of Company Capital Stock are reserved for issuance upon the exercise of outstanding options to purchase Company Capital Stock granted to employees of the Company or other parties (“ Company Stock Options ”), and (ii) no shares of Company Capital Stock are reserved for issuance upon the exercise of outstanding warrants or other rights (other than Company Stock Options) to purchase Company Capital Stock (“ Company Warrants ”). All shares of Company Capital Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instrument pursuant to which they are issuable, will be duly authorized, validly issued,

fully paid and nonassessable. There are no commitments or agreements of any character to which the Company is bound obligating the Company to accelerate the vesting of any Company Stock Option or Company Warrant as a result of the Merger. All outstanding shares of Company Capital Stock and all outstanding Company Stock Options and Company Warrants have been issued and granted in compliance with (x) in all material respects, all applicable securities laws and other applicable laws and regulations, and (y) all requirements set forth in any applicable Company Contracts (as defined in Section 2.19). The Company has heretofore delivered to Parent or Parent’s counsel true and accurate copies of the forms of documents used for the issuance of Company Stock Options and Company Warrants and a true and complete list of the holders thereof, including their names and the numbers of shares of Company Capital Stock underlying such holders’ Company Stock Options and Company Warrants.

     (c) Except as set forth in Schedule 2.3(c) hereto or as set forth elsewhere in this Section 2.3, there are no subscriptions, options, warrants, equity securities, partnership interests or similar ownership interests, calls, rights (including preemptive rights), commitments or agreements of any character to which the Company is a party or by which it is bound obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or acquisition of, any shares of Company Capital Stock or similar ownership interests of the Company or obligating the Company to grant, extend, accelerate the vesting of or enter into any such subscription, option, warrant, equity security, call, right, commitment or agreement.

     (d) Except as contemplated by this Agreement and except as set forth in Schedule 2.3(d) hereto, there are no registration rights, and there is no voting trust, proxy, rights plan, antitakeover plan or other agreement or understanding to which the Company is a party or by which the Company is bound with respect to any equity security of any class of the Company.

     (e) All consents or further agreements of any holder of Company Capital Stock or Notes required in order to effectuate the provisions of Section 1.5 have been received, are in full force and effect and will remain in full force and effect through the Closing Date. Copies of all such consents and agreements have been delivered to Parent.

     2.4 Authority Relative to this Agreement . The Company has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and, to consummate the transactions contemplated hereby (including the Merger). The execution and delivery of this Agreement and the consummation by the Company of the transactions contemplated hereby (including the Merger) have been duly and validly authorized by all necessary corporate action on the part of the Company (including the approval by its Board of Directors and shareholders, subject in all cases to the satisfaction of the terms and conditions of this Agreement, including the conditions set forth in Article VI), and no other corporate proceedings on the part of the Company or its shareholders are necessary to authorize this Agreement or to consummate the transactions contemplated hereby pursuant to the CGCL and the terms and conditions of this Agreement other than the giving of the notice provided for in Section 1.16. This Agreement has been duly and validly executed and delivered by the

Company and, assuming the due authorization, execution and delivery thereof by the other parties hereto, constitutes the legal and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

     2.5 No Conflict; Required Filings and Consents .

     (a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company shall not, (i) conflict with or violate the Company’s Charter Documents, (ii) subject to the giving of the notice provided for in Section 1.16, conflict with or violate any Legal Requirements (as defined in Section 10.2(c)), (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or materially impair the Company’s rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company pursuant to, any Company Contracts or (iv) result in the triggering, acceleration or increase of any payment to any Person pursuant to any Company Contract, including any “change in control” or similar provision of any Company Contract, except, with respect to clauses (ii), (iii) or (iv), for any such conflicts, violations, breaches, defaults, triggerings, accelerations, increases or other occurrences that would not, individually and in the aggregate, have a Material Adverse Effect on the Company.

     (b) The execution and delivery of this Agreement by the Company does not, and the performance of its obligations hereunder will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or other third party (including, without limitation, lenders and lessors, except (i) for applicable requirements, if any, of the Securities Act, the Exchange Act or Blue Sky Laws, and the rules and regulations thereunder, and appropriate documents received from or filed with the relevant authorities of other jurisdictions in which the Company is licensed or qualified to do business, (ii) the consents, approvals, authorizations and permits described in Schedule 2.5(b) hereto, and (iii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or, after the Closing, Parent, or prevent consummation of the Merger or otherwise prevent the parties hereto from performing their obligations under this Agreement.

     2.6 Compliance . Except as set forth in Schedule 2.6 , the Company has complied with and is not in violation of any Legal Requirements (as defined in Section 10.2(b)) with respect to the conduct of its business, or the ownership or operation of its business, except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on the Company. Except as set forth in Schedule 2.6 , no written notice of non-compliance with any Legal Requirements has been received by the Company (and the Company has no knowledge of any such notice delivered to any other Person). The Company is not in violation of any term of any Company Contract (as defined in

Section 2.19(a)(i)), except for failures to comply or violations which, individually or in the aggregate, have not had and are not reasonably likely to have a Material Adverse Effect on the Company.

     2.7 Financial Statements .

     (a) The Company has provided to Parent a correct and complete copy of the audited financial statements (including any related notes thereto) of the Company for the fiscal years ended December 31, 2005, December 31, 2004 and December 31, 2003 (the “ Audited Financial Statements ”). The Audited Financial Statements were prepared in accordance with the published rules and regulations of any applicable Governmental Entity and with generally accepted accounting principles of the United States (“ U.S. GAAP ”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto), and each fairly presents in all material respects the financial position of the Company at the respective dates thereof and the results of its operations and cash flows for the periods indicated.

     (b) The Company has provided to Parent a correct and complete copy of the unaudited financial statements (including any related notes thereto) of the Company for the six month period ended June 30, 2006 (the “ Unaudited Financial Statements ”). Except as set forth in Schedule 2.7(b) , the Unaudited Financial Statements comply as to form in all material respects, and were prepared in accordance, with the published rules and regulations of any applicable Governmental Entity and with U.S. GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto), and fairly present in all material respects the financial position of the Company at the date thereof and the results of its operations and cash flows for the period indicated, except that such statements do not contain notes and are subject to normal adjustments that are not expected to have a Material Adverse Effect on the Company.

     (c) The books of account, minute books, stock certificate books and stock transfer ledgers and other similar books and records of the Company have been maintained in accordance with good business practice, are complete and correct in all material respects and there have been no material transactions that are required to be set forth therein and which have not been so set forth.

     (d) The accounts and notes receivable of the Company reflected on the balance sheets included in the Audited Financial Statements and the Unaudited Financial Statements (i) arose from bona fide sales transactions in the ordinary course of business and are payable on ordinary trade terms, (ii) are legal, valid and binding obligations of the respective debtors enforceable in accordance with their terms, except as such may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting creditors’ rights generally, and by general equitable principles, (iii) are not subject to any valid set-off or counterclaim except to the extent set forth in such balance sheet contained therein, (iv) are collectible in the ordinary course of business consistent with past practice in the aggregate recorded amounts thereof, net of any applicable reserve reflected in such balance sheet referenced above, and (v) are not the subject of any actions or proceedings brought by or on behalf of the Company.

     2.8 No Undisclosed Liabilities . Except as set forth in Schedule 2.8 hereto, the Company has no liabilities (absolute, accrued, contingent or otherwise) that are, individually or in the aggregate, material to the business, results of operations or financial condition of the Company that would be required to be reflected on a balance sheet or in the notes thereto prepared in accordance with U.S. GAAP, except: (i) liabilities provided for in or otherwise disclosed in the interim balance sheet included in the Unaudited Financial Statements or in the notes to the Audited Financial Statements, and (ii) such liabilities arising in the ordinary course of the Company’s business since June 30, 2006, that would not have, individually or in the aggregate, a Material Adverse Effect on the Company.

     2.9 Absence of Certain Changes or Events . Except as set forth in Schedule 2.9 hereto, since June 30, 2006, there has not been: (i) any Material Adverse Effect on the Company, (ii) any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Company’s stock, or any purchase, redemption or other acquisition by the Company of any of the Company’s capital stock or any other securities of the Company or any options, warrants, calls or rights to acquire any such shares or other securities, (iii) any split, combination or reclassification of any of the Company’s capital stock, (iv) any granting by the Company of any increase in compensation or fringe benefits, except for normal increases of cash compensation in the ordinary course of business consistent with past practice, or any payment by the Company of any bonus, except for bonuses made in the ordinary course of business consistent with past practice, or any granting by the Company of any increase in severance or termination pay or any entry by the Company into any currently effective employment, severance, termination or indemnification agreement or any agreement the benefits of which are contingent or the terms of which are materially altered upon the occurrence of a transaction involving the Company of the nature contemplated hereby, (v) entry by the Company into any licensing or other agreement with regard to the acquisition or disposition of any Intellectual Property (as defined in Section 2.18 hereof) other than licenses in the ordinary course of business consistent with past practice or any amendment or consent with respect to any licensing agreement filed or required to be filed by the Company with respect to any Governmental Entity, (vi) any material change by the Company in its accounting methods, principles or practices, (vii) any change in the auditors of the Company, (viii) any issuance of capital stock of the Company, (ix) any revaluation by the Company of any of its assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or accounts receivable or any sale of assets of the Company other than in the ordinary course of business, or (x) any agreement, whether written or oral, to do any of the foregoing.

     2.10 Litigation . There are no claims, suits, actions or proceedings pending or, to the knowledge of the Company, threatened against the Company before any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator that seeks to restrain or enjoin the consummation of the transactions contemplated by this Agreement or which could reasonably be expected, either singularly or in the aggregate with all such claims, actions or proceedings, to have a Material Adverse Effect on the Company or have a Material Adverse Effect on the ability of the parties hereto to consummate the Merger.

     2.11 Employee Benefit Plans .

     (a) All employee compensation, incentive, fringe or benefit plans, programs, policies, commitments or other arrangements (whether or not set forth in a written document) covering any active or former employee, director or consultant of the Company, or any trade or business (whether or not incorporated) which is under common control with the Company, with respect to which the Company has liability (individually, a “ Plan ” and, collectively, the “ Plans ”) have been maintained and administered in all material respects in compliance with their respective terms and with the requirements prescribed by any and all statutes, orders, rules and regulations which are applicable to such Plans, and all liabilities with respect to the Plans have been properly reflected in the financial statements and records of the Company. No suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of Plan activities) has been brought, or, to the knowledge of the Company, is threatened, against or with respect to any Plan. There are no audits, inquiries or proceedings pending or, to the knowledge of the Company, threatened by any governmental agency with respect to any Plan. All contributions, reserves or premium payments required to be made or accrued as of the date hereof to the Plans have been timely made or accrued. The Company does not have any plan or commitment to establish any new Plan, to modify any Plan (except to the extent required by law or to conform any such Plan to the requirements of any applicable law, in each case as previously disclosed to Parent in writing, or as required by this Agreement), or to enter into any new Plan except as contemplated by this Agreement. Each Plan can be amended, terminated or otherwise discontinued after the Closing in accordance with its terms, without liability to Parent or the Company (other than ordinary administration expenses and expenses for benefits accrued but not yet paid).

     (b) Except as disclosed in Schedule 2.11 hereto, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any shareholder, director or employee of the Company under any Plan or otherwise, (ii) materially increase any benefits otherwise payable under any Plan, or (iii) result in the acceleration of the time of payment or vesting of any such benefits.

     2.12 Labor Matters . The Company is not a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company and the Company does not know of any activities or proceedings of any labor union to organize any such employees.

     2.13 Restrictions on Business Activities . Except as disclosed in Schedule 2.13 hereto, to the Company’s knowledge, there is no agreement, commitment, judgment, injunction, order or decree binding upon the Company or its assets or to which the Company is a party which has or could reasonably be expected to have the effect of prohibiting or materially impairing any business practice of the Company, any acquisition of property by the Company or the conduct of business by the Company as currently conducted other than such effects, individually or in the aggregate, which have not had and could not reasonably be expected to have a Material Adverse Effect on the Company.

     2.14 Title to Property .

     (a) All real property owned by the Company (including improvements and fixtures thereon, easements and rights of way) is shown or reflected on the balance sheet of the Company included in the Unaudited Financial Statements. The Company has good, valid and marketable fee simple title to the real property owned by it, and except as set forth in the Unaudited Financial Statements, all of such real property is held free and clear of (i) all leases, licenses and other rights to occupy or use such real property and (ii) all Liens, rights of way, easements, restrictions, exceptions, variances, reservations, covenants or other title defects or limitations of any kind, other than liens for taxes not yet due and payable and such liens or other imperfections of title, if any, as do not materially detract from the value of or materially interfere with the present use of the property affected thereby.

     (b) All leases of real property held by the Company, and all personal property and other property and assets of the Company owned, used or held for use in connection with the business of the Company (the “ Personal Property ”) are shown or reflected on the balance sheet included in the Audited Financial Statements, other than those entered into or acquired after December 31, 2005 in the ordinary course of business. The Company has good and marketable title to the Personal Property owned by it, and all such Personal Property is in each case held free and clear of all Liens, except for Liens disclosed in the Audited Financial Statements or in Schedule 2.14 hereto, none of which liens or encumbrances has or will have, individually or in the aggregate, a Material Adverse Effect on such property or on the present or contemplated use of such property in the businesses of the Company.

     (c) All leases pursuant to which the Company leases from others material real or Personal Property are valid and effective in accordance with their respective terms, and there is not, under any of such leases, any existing material default or event of default of the Company or, to the Company’s knowledge, any other party (or any event which with notice or lapse of time, or both, would constitute a material default), except where the lack of such validity and effectiveness or the existence of such default or event of default could not reasonably be expected to have a Material Adverse Effect on the Company.

     (d) The Company is in possession of, or has valid and effective rights to, all properties, assets and rights (including Intellectual Property) required for the conduct of its business in the ordinary course.

     2.15 Taxes .

     (a) Definition of Taxes . For the purposes of this Agreement, “ Tax ” or “ Taxes ” refers to any and all federal, state, local and foreign taxes, including, without limitation, gross receipts, income, profits, sales, use, occupation, value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, assessments, governmental charges and duties together with all interest, penalties and additions imposed with respect to any such amounts and any obligations

under any agreements or arrangements with any other Person with respect to any such amounts and including any liability of a predecessor entity for any such amounts.

     (b) Tax Returns and Audits .

     (i) Except as set forth in Schedule 2.15 hereto:

     (ii) The Company has timely filed all federal, state, local and foreign returns, estimates, information statements and reports relating to Taxes (“ Returns ”) required to be filed by the Company with any Tax authority prior to the date hereof, except such Returns which are not material to the Company. All such Returns are true, correct and complete in all material respects. The Company has paid all Taxes shown to be due and payable on such Returns.

     (iii) All Taxes that the Company is required by law to withhold or collect have been duly withheld or collected, and have been timely paid over to the proper governmental authorities to the extent due and payable.

     (iv) The Company has not been delinquent in the payment of any material Tax nor is there any material Tax deficiency outstanding, proposed or assessed against the Company, nor has the Company executed any unexpired waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax.

     (v) To the knowledge of the Company, no audit or other examination of any Return of the Company by any Tax authority is presently in progress, nor has the Company been notified of any request for such an audit or other examination.

     (vi) No adjustment relating to any Returns filed by the Company has been proposed in writing, formally or informally, by any Tax authority to the Company or any representative thereof.

     (vii) The Company has no liability for any material unpaid Taxes which have not been accrued for or reserved on the Company’s balance sheets included in the Audited Financial Statements or the Unaudited Financial Statements, whether asserted or unasserted, contingent or otherwise, which is material to the Company, other than any liability for unpaid Taxes that may have accrued since the end of the most recent fiscal year in connection with the operation of the business of the Company in the ordinary course of business, none of which is material to the business, results of operations or financial condition of the Company.

     (viii) The Company has not taken any action and does not know of any fact, agreement, plan or other circumstance that is reasonably likely to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

     2.16 Environmental Matters .

     (a) Except for such matters that, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect: (i) the Company has complied with all applicable Environmental Laws (as defined below); (ii) to the Company’s knowledge, the properties currently operated by the Company (including soils, groundwater, surface water, air, buildings or other structures) are not contaminated with any Hazardous Substances (as defined below); (iii) to the Company’s knowledge, the properties formerly owned or operated by the Company were not contaminated with Hazardous Substances during the period of ownership or operation by the Company or during any prior period; (iv) the Company is not subject to liability for any Hazardous Substance disposal or contamination on any third party or public property (whether above, on or below ground or in the atmosphere or water); (v) the Company has not been associated with any release or threat of release of any Hazardous Substance; (vi) the Company has not received any notice, demand, letter, claim or request for information alleging that the Company may be in violation of or liable under any Environmental Law; and (vii) the Company is not subject to any orders, decrees, injunctions or other arrangements with any Governmental Entity or subject to any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances.

     (b) As used in this Agreement, the term “ Environmental Law ” means any federal, state, local or foreign law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, health and safety, or natural resources; (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, wetlands, pollution, contamination or any injury or threat of injury to persons or property.

     (c) As used in this Agreement, the term “ Hazardous Substance ” means any substance that is: (i) listed, classified or regulated pursuant to any Environmental Law; (ii) any petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or (iii) any other substance which is the subject of regulatory action by any Governmental Entity pursuant to any Environmental Law.

     2.17 Brokers; Third Party Expenses . Except as set forth in Schedule 2.17 hereto, the Company has not incurred, nor will it incur, directly or indirectly, any liability for brokerage, finders’ fees, agent’s commissions or any similar charges in connection with this Agreement or any transactions contemplated hereby. Except pursuant to Section 1.5, and as disclosed in Schedule 2.17 hereto, no shares of common stock, options, warrants or other securities of either the Company or Parent are payable to any third party by the Company as a result of this Merger.

     2.18 Intellectual Property . Schedule 2.18 hereto contains a description of all material Intellectual Property of the Company. For the purposes of this Agreement, the following terms have the following definitions:

“ Intellectual Property ” shall mean any or all of the following and all worldwide rights in, arising out of, or associated therewith: (i) patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof (“ Patents ”); (ii) inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (iii) copyrights, copyrights registrations and applications therefor, and all other rights corresponding thereto throughout the world; (iv) software and software programs; (v) domain names, uniform resource locators and other names and locators associated with the Internet (vi) industrial designs and any registrations and applications therefor; (vii) trade names, logos, common law trademarks and service marks, trademark and service mark registrations and applications therefor (collectively, “ Trademarks ”); (viii) all databases and data collections and all rights therein; (ix) all moral and economic rights of authors and inventors, however denominated, and (x) any similar or equivalent rights to any of the foregoing (as applicable).

“ Company Intellectual Property ” shall mean any Intellectual Property that is owned by, or exclusively licensed to, the Company, including software and software programs developed by or exclusively licensed to the Company (specifically excluding any off the shelf or shrink-wrap software).

“ Registered Intellectual Property ” means all Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with, or recorded by any government or other legal authority.

“ Company Registered Intellectual Property ” means all of the Registered Intellectual Property owned by, or filed in the name of, the Company.

“ Company Products ” means all current versions of products or service offerings of the Company.

     (a) Except as disclosed in Schedule 2.18 hereto, no Company Intellectual Property or Company Product is subject to any material proceeding or outstanding decree, order, judgment, contract, license or stipulation restricting in any manner the use, transfer or licensing thereof by the Company, or which may affect the validity, use or enforceability of such Company Intellectual Property or Company Product, which in any such case could reasonably be expected to have a Material Adverse Effect on the Company.

     (b) The Company owns or has enforceable rights to use all Intellectual Property required for the conduct of its business as presently conducted or as contemplated to be conducted by the Company’s business plan heretofore delivered to Parent (the “ Business Plan ”). The Company owns and has good and exclusive title to each material item of Company Intellectual Property owned by it free and clear of any Liens (excluding non-exclusive licenses and related restrictions granted by it in the ordinary course of business); and the Company is the exclusive owner of all material registered Trademarks used in connection with the operation or conduct of the business

of the Company including the sale of any products or the provision of any services by the Company.

     (c) To the Company’s knowledge, the operation of the business of the Company as such business currently is conducted, including the Company’s use of any product, device or process, has not and does not infringe or misappropriate the Intellectual Property of any third party or constitute unfair competition or trade practices under the laws of any jurisdiction and the Company has not received any claims or threats from third parties alleging any such infringement, misappropriation or unfair competition or trade practices.

     2.19 Agreements, Contracts and Commitments .

     (a) Schedule 2.19(a) hereto sets forth a complete and accurate list of all Material Company Contracts (as hereinafter defined), specifying the parties thereto. For purposes of this Agreement, (i) the term “ Company Contracts ” shall mean all contracts, agreements, leases, mortgages, indentures, notes, bonds, licenses, permits, franchises, purchase orders, sales orders, and other understandings, commitments and obligations (including without limitation outstanding offers and proposals) of any kind, whether written or oral, to which the Company is a party or by or to which any of the properties or assets of the Company may be bound, subject or affected (including without limitation notes or other instruments payable to the Company) and (ii) the term “ Material Company Contracts ” shall mean (x) each Company Contract (I) providing for payments (present or future) to the Company in excess of $100,000 in the aggregate or (II) under which or in respect of which the Company presently has any liability or obligation of any nature whatsoever (absolute, contingent or otherwise) in excess of $100,000, (y) each Company Contract that otherwise is or may be material to the businesses, operations, assets, condition (financial or otherwise) or prospects of the Company and (z) without limitation of subclause (x) or subclause (y), each of the following Company Contracts:

     (i) any mortgage, indenture, note, installment obligation or other instrument, agreement or arrangement for or relating to any borrowing of money by or from the Company by or to any officer, director, shareholder or holder of derivative securities (“ Insider ”) of the Company;

     (ii) any guaranty, direct or indirect, by the Company, a Subsidiary or any Insider of the Company of any obligation for borrowings, or otherwise, excluding endorsements made for collection in the ordinary course of business;

     (iii) any Company Contract of employment or management;

     (iv) any Company Contract made other than in the ordinary course of business or (x) providing for the grant of any preferential rights to purchase or lease any asset of the Company or (y) providing for any right (exclusive or non-exclusive) to sell or distribute, or otherwise relating to the sale or distribution of, any product or service of the Company;

     (v) any obligation to register any shares of the capital stock or other securities of the Company with any Governmental Entity;

     (vi) any obligation to make payments, contingent or otherwise, arising out of the prior acquisition of the business, assets or stock of other Persons;

     (vii) any collective bargaining agreement with any labor union;

     (viii) any lease or similar arrangement for the use by the Company of real property or personal property (other than any lease of vehicles, office equipment or operating equipment made in the ordinary course of business where the annual lease payments are less than $25,000);

     (ix) any Company Contract granting or purporting to grant, or otherwise in any way relating to, any interest (including, without limitation, a leasehold interest) in real property;

     (x) any Company Contract to which any Insider of the Company is a party; and

     (xi) any offer or proposal which, if accepted, would constitute any of the foregoing.

     (b) Each Material Company Contract was entered into at arms’ length and in the ordinary course, is in full force and effect and, to the Company’s knowledge, is valid and binding upon and enforceable against each of the parties thereto (except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by principles governing the availability of equitable remedies). To the knowledge of the Company, no other party to a Material Company Contract is the subject of a bankruptcy or insolvency proceeding. True, correct and complete copies of all Material Company Contracts and all outstanding offers and proposals which, if accepted, would constitute Material Company Contracts (or written summaries in the case of oral Material Company Contracts) have been heretofore delivered to Parent or Parent’s counsel.

     (c) Except as set forth in Schedule 2.19(c) , neither the Company nor, to the best of the Company’s knowledge, any other party thereto is in material breach of or in default under, and no event has occurred which with notice or lapse of time or both would become a material breach of or default under, any Company Contract, and no party to any Company Contract has given any written notice of any claim of any such breach, default or event, which, individually or in the aggregate, are reasonably likely to have a Material Adverse Effect on the Company. Each Material Company Contract to which the Company is a party or by which it is bound that has not expired by its terms is in full force and effect.

     2.20 Insurance . Schedule 2.20 sets forth the Company’s insurance policies and fidelity bonds covering the assets, business, equipment, properties, operations, employees, officers and directors (collectively, the “ Insurance Policies ”). The insurances provided by such Insurance

Policies are adequate in amount and scope for the Company’s business and operations, including any insurance required to be maintained by Company Contracts.

     2.21 Governmental Actions/Filings .

     (a) Except as set forth in Schedule 2.21(a) , the Company has been granted and holds, and has made, all Governmental Actions/Filings (as defined below) (including, without limitation, the Governmental Actions/Filings required for (i) emission or discharge of effluents and pollutants into the air and the water and (ii) the manufacture and sale of all products manufactured and sold by it) necessary to the conduct by the Company of its business (as presently conducted and as presently proposed to be conducted) or used or held for use by the Company, except where failure to obtain such Governmental Actions/Filings is not reasonably likely to have a Material Adverse Effect upon the Company, and true, complete and correct copies of which have heretofore been delivered to Parent. Each such Governmental Action/Filing is in full force and effect and, except as disclosed in Schedule 2.21(a) hereto, will not expire prior to December 31, 2007, and the Company is in material compliance with all of its obligations with respect thereto. No event has occurred and is continuing which requires or permits, or after notice or lapse of time or both would require or permit, and consummation of the transactions contemplated by this Agreement or any ancillary documents will not require or permit (with or without notice or lapse of time, or both), any modification or termination of any such Governmental Actions/Filings except such events which, either individually or in the aggregate, would not have a Material Adverse Effect upon the Company.

     (b) No Governmental Action/Filing is necessary to be obtained, secured or made by the Company to enable it to continue to conduct its businesses and operations and use its properties after the Closing in a manner which is consistent with current practice.

     (c) For purposes of this Agreement, the term “ Governmental Action/Filing ” shall mean any franchise, license, certificate of compliance, authorization, consent, order, permit, approval, consent or other action of, or any filing, registration or qualification with, any federal, state, municipal, foreign or other governmental, administrative or judicial body, agency or authority.

     2.22 Interested Party Transactions . No employee, officer, director or shareholder of the Company or a member of his or her immediate family is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any such Person (as defined in Section 10.2(c)), other than (a) for payment of salary for services rendered, (ii) reimbursement for reasonable expenses incurred on behalf of the Company, and (b) for other employee benefits made generally available to all employees. To the Company’s knowledge, none of such individuals has any direct or indirect ownership interest in any Person with whom the Company is affiliated or with whom the Company has a contractual relationship, or in any Person that competes with the Company, except that each employee, shareholder, officer or director of the Company and members of their respective immediate families may own less than 5% of the outstanding stock in publicly traded companies that may compete with the Company.

To the knowledge of the Company, no officer, director or Signing Shareholder or any member of their immediate families is, directly or indirectly, interested in any Material Company Contract with the Company (other than such contracts as relate to any such Person’s ownership of capital stock or other securities of the Company or such Person’s employment with the Company).

     2.23 Board Approval . The board of directors of the Company (including any required committee or subgroup thereof) has, as of the date of this Agreement, duly approved this Agreement and the transactions contemplated hereby, subject to the giving of the notice provided for in Section 1.16, and has resolved to cause such notice to be given.

     2.24 Signing Shareholder Approval . The shares of Company Capital Stock owned by the Signing Shareholders constitute, in the aggregate, the requisite amount of shares necessary for the adoption of this Agreement and the approval of the Merger by the shareholders of the Company in accordance with the CGCL.

     2.25 Company Business Plan . The Business Plan has been prepared by the Company based upon reasonable projections and expectations and is, in the judgment of the Company’s executive officers, achievable without undue effort or expense not contemplated thereby.

     2.26 Registration Statement Withdrawal . The Company has filed a request with the SEC to withdraw from registration its registration statement on Form S-1 filed under the Securities Act (No. 333-133554).

     2.27 Bridge Financing . The Company has received irrevocable binding commitments from its investors to fund the Company through the Closing.

     2.28 Representations and Warranties Complete . The representations and warranties of the Company included in this Agreement and any list, statement, document or information set forth in, or attached to, any Schedule provided pursuant to this Agreement or delivered hereunder, are true and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading, under the circumstance under which they were made.

     2.29 Survival of Representations and Warranties . The representations and warranties of the Company set forth in this Agreement shall survive the Closing until the end of the Indemnity Escrow Period.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PARENT

     Subject to the exceptions set forth in Schedule 3 attached hereto (the “ Parent Schedule ”), Parent represents and warrants to, and covenants with, the Company and the Persons holding Company Instruments at the Effective Time, as follows:

     3.1 Organization and Qualification .

     (a) Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being or currently planned by Parent to be conducted. Parent is in possession of all Approvals necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being or currently planned by Parent to be conducted, except where the failure to have such Approvals could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effec