AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

by and among

BRICKELL BAY ACQUISITION CORP.,
BRICKELL BAY MERGER CORP.
and
ALLION HEALTHCARE, INC.
Dated as of October 18, 2009

TABLE OF CONTENTS

AGREEMENT AND PLAN OF MERGER

          THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), is made and entered into as of October 18, 2009, by and among Brickell Bay Acquisition Corp., a Delaware corporation (“ Parent ”), Brickell Bay Merger Corp., a Delaware corporation (“ Merger Sub ”), and Allion Healthcare, Inc., a Delaware corporation (the “ Company ”).

RECITALS

          WHEREAS, the boards of directors of Parent, Merger Sub and the Company have unanimously approved the merger of Merger Sub with and into the Company (the “ Merger ”), upon the terms and subject to the conditions set forth in this Agreement, and have determined that the Merger and the other transactions contemplated by this Agreement are fair to, and in the best interests of, their respective stockholders;

          WHEREAS, the Board of Directors of the Company (the “ Company Board ”) has unanimously resolved to recommend that the stockholders of the Company approve the Merger;

          WHEREAS, the transactions described in this Agreement are subject to the approval of the stockholders of the Company and the satisfaction of certain other conditions set forth in this Agreement;

          WHEREAS, concurrently with the execution of this Agreement, and as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, Parent and certain beneficial owners (the “ Rollover Holders ”) of Common Stock are entering into Exchange Agreements (the “ Exchange Agreements ”), pursuant to which the Rollover Holders are agreeing, among other things, to contribute the portion of their Common Stock set forth therein (such shares, collectively, the “ Rollover Shares ”) to Parent immediately prior to the Effective Time of the Merger; and

          WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, certain stockholders of the Company are entering into a Voting Agreement substantially in the form attached as Exhibit A (the “ Voting Agreement ”).

          NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, Parent, Merger Sub and the Company agree as follows:

ARTICLE 1

THE MERGER

     1.01 The Merger . At the Effective Time (as defined in Section 1.03 ), subject to the terms and conditions of this Agreement and in accordance with the provisions of the Delaware General Corporation Law (the “ DGCL ”), (i) Merger Sub shall be merged with and into the Company, (ii) the separate corporate existence of Merger Sub shall cease, and (iii) the Company shall continue as the surviving corporation and a wholly owned subsidiary of Parent. The

Company, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the “ Surviving Corporation ”.

     1.02 Closing . Subject to the conditions contained in this Agreement, the closing of the Merger (the “ Closing ”) shall take place (i) at the offices of Alston & Bird LLP, 90 Park Avenue, New York, New York 10016, at 10:00 a.m., local time, on the date most promptly practicable following the satisfaction or waiver of the conditions set forth in Article 6 (which can be satisfied prior to Closing), but in no event later than the third (3 ^rd ) business day following such date or (ii) at such other place and time and/or on such other date as the Company and Merger Sub may mutually agree in writing. The date on which the Closing occurs is hereinafter referred to as the “ Closing Date ”.

     1.03 Effective Time . At the Closing, the parties shall cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware a certificate of merger (the “ Certificate of Merger ”), executed in accordance with the relevant provisions of the DGCL. The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as is agreed to by the parties hereto and specified in the Certificate of Merger (the time at which the Merger becomes effective is hereinafter referred to as the “ Effective Time ”).

     1.04 Effects of the Merger . The Merger shall have the effects set forth in this Agreement, the Certificate of Merger and the DGCL. Without limiting the generality of the foregoing, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and the Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and the Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

     1.05 Certificate of Incorporation and Bylaws of the Surviving Corporation .

          (a) At the Effective Time, the certificate of incorporation of the Company shall be amended to read in its entirety as the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, and as so amended shall be the Certificate of Incorporation of the Surviving Corporation, until duly amended in accordance with applicable Law and the Surviving Corporation’s certificate of incorporation and bylaws; provided that the name of the Surviving Corporation shall be “Allion Healthcare, Inc.”

          (b) The bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation, until duly amended in accordance with applicable Law and the Surviving Corporation’s certificate of incorporation and bylaws.

     1.06 Directors and Officers . The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal in accordance with applicable Law and the Surviving Corporation’s certificate of incorporation and bylaws. The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office until their

respective successors are duly elected and qualified, or their earlier death, resignation or removal.

ARTICLE 2

EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE COMPANY AND MERGER SUB

     2.01 Effect on Shares of Company Capital Stock .

          (a) Common Stock of the Company . As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Common Stock, the Company or Merger Sub, each share of common stock of the Company, par value $0.001 per share (the “ Common Stock ”) issued and outstanding immediately prior to the Effective Time (other than (i) Dissenting Shares (as defined in Section 2.04 ), and (ii) those shares of Common Stock to be canceled pursuant to Section 2.01(c) ) shall be converted into the right to receive Six Dollars and Sixty Cents ($6.60) in cash (the “ Merger Consideration ”), payable to the holder of such shares of Common Stock, without interest or dividends, less applicable withholding Taxes, in the manner provided in Section  2.05 . All such shares of Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled, and each holder of a certificate or certificates representing shares of Common Stock shall cease to have any rights with respect to such shares of Common Stock, except the right to receive the Merger Consideration.

          (b) Rollover Shares . Immediately prior to the Effective Time, the Rollover Holders shall contribute the Rollover Shares to Parent pursuant to the Exchange Agreements. Subsequent to the receipt of the Rollover Shares from the Rollover Holders, such Rollover Shares shall automatically be canceled, by virtue of the Merger, in accordance with Section 2.01(c) below.

          (c) Cancellation of Certain Shares of Common Stock . As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Common Stock, the Company or Merger Sub, each share of Common Stock owned by the Company or any of its wholly owned Subsidiaries as treasury stock or otherwise or owned by Merger Sub or Parent (including, without limitation, the Rollover Shares) or any of their direct or indirect subsidiaries immediately prior to the Effective Time shall automatically be canceled, and no cash or other consideration shall be delivered or deliverable in exchange for such shares of Common Stock.

     2.02 Effect on Shares of Merger Sub Capital Stock . As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of Merger Sub Common Stock, the Company or Merger Sub, each share of common stock, par value $0.01 per share, of Merger Sub (“ Merger Sub Common Stock ”) issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of the Surviving Corporation (“ Surviving Corporation Common Stock ”). Each certificate that, immediately prior to the Effective Time, represented

issued and outstanding shares of Merger Sub Common Stock shall be deemed to represent the same number of shares of Surviving Corporation Common Stock.

     2.03 Effect on Restricted Stock, Options and Warrants .

          (a) Restricted Stock . Between the date of this Agreement and the Effective Time, the Company shall take all necessary action to provide that each outstanding Restricted Stock Award, the restrictions of which have not lapsed immediately prior to the Effective Time, shall become fully vested immediately prior to the Effective Time and the holder of the resultant shares of Common Stock thereof shall be entitled to receive the Merger Consideration pursuant to Section 2.01(a) for such shares.

          (b) Options . Between the date of this Agreement and the Effective Time, the Company shall take all necessary action to provide that each Option shall become fully vested and exercisable immediately prior to the Effective Time. Holders of the Options shall be given the opportunity to exercise their Options, effective immediately prior to the Effective Time and conditioned upon the consummation of the Merger, and thereby to receive the Merger Consideration for each share of Common Stock subject to such exercised Options pursuant to Section 2.01 . As of the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub or the holder of any Option, each Option outstanding immediately prior to the Effective Time that is not exercised pursuant to the preceding sentence and that has a per-share exercise price less than the Merger Consideration (each, a “ Cash-Pay Option ”), shall be converted into the right to receive an amount in cash equal to the product of (i) the total number of shares of Common Stock subject to such Cash-Pay Option multiplied by (ii) the excess of the Merger Consideration over the per-share exercise price of such Cash-Pay Option, with the aggregate amount of such payment rounded to the nearest cent (the “ Option Consideration ”), payable to the holder of such Cash-Pay Option, without dividends or interest, less applicable withholding Taxes, in the manner provided in this Section 2.03(b) . All such Cash-Pay Options, when so converted, shall cease to be outstanding and shall automatically be canceled, and each holder of a Certificate representing a Cash-Pay Option shall cease to have any rights with respect to such Cash-Pay Options, except the right to receive the Option Consideration. Parent shall, or shall cause the Company to, pay to holders of Cash-Pay Options the Option Consideration as soon as reasonably practicable following the Effective Time. Each Option outstanding immediately prior to the Effective Time that has a per-share exercise price equal to or greater than the Merger Consideration shall be canceled, and each holder of a Certificate representing such canceled Option shall cease to have any rights with respect to such Option and shall not be entitled to receive any payment with respect thereto. For purposes of this Agreement, the term “ Option ” means each outstanding unexercised option to purchase shares of Common Stock, whether or not then vested or fully exercisable, granted to any current or former employee, director, consultant or advisor of the Company or any Subsidiary or any other person, whether under any stock option plan or otherwise (including, without limitation, under the Company’s 1998 Stock Option Plan and Amended and Restated 2002 Stock Incentive Plan (collectively, the “ Stock Plans ”)).

          (c) Warrants . As of the Effective Time, by virtue of the Merger and without any action on the part of the Company, Merger Sub or the holder of any warrants to purchase shares of Common Stock (“ Warrants ”), each Warrant outstanding immediately prior to the Effective

Time, whether or not then vested or exercisable in accordance with its terms, shall be converted into the right to receive an amount in cash equal to the product of (i) the total number of shares of Common Stock subject to such Warrant multiplied by (ii) the excess, if any, of the Merger Consideration over the exercise price of such Warrant, with the aggregate amount of such payment rounded to the nearest cent (the “ Warrant Consideration ”), payable to the holder of such Warrant, without dividends or interest, less applicable withholding Taxes, in the manner provided in this Section 2.03(c) . All such Warrants, when so converted, shall no longer be outstanding and shall automatically be canceled, and each holder of a certificate or certificates representing Warrants shall cease to have any rights with respect to such Warrants, except the right to receive the Warrant Consideration. Parent shall, or shall cause the Company to, pay to holders of Warrants the Warrant Consideration as soon as reasonably practicable following the Effective Time.

          (d) Effectuation . The Board of Directors of the Company (or the appropriate committee thereof) shall take or cause to be taken all actions necessary to effectuate this Section 2.03 to the extent that such treatment is not expressly provided for by the terms of the applicable Stock Plans and related award agreements. The Company shall take such actions as are necessary or appropriate so that, as of the Effective Time, the Stock Plans shall be terminated.

     2.04 Dissenting Shares . Notwithstanding anything in this Agreement to the contrary, any shares of Common Stock issued and outstanding immediately prior to the Effective Time and held by a stockholder (a “ Dissenting Stockholder ”) who has not voted in favor of the Merger or consented thereto in writing and who has properly demanded appraisal for such shares of Common Stock (“ Dissenting Shares ”) in accordance with the DGCL, shall not be converted into the right to receive the Merger Consideration at the Effective Time in accordance with Section 2.01(a) hereof, but shall represent and become the right to receive such consideration as may be determined to be due to such Dissenting Stockholder pursuant to the Laws of the State of Delaware, unless and until such holder fails to perfect or withdraws or otherwise loses such holder’s right to appraisal and payment under the DGCL. If, after the Effective Time, such holder fails to perfect or withdraws or otherwise loses such holder’s right to appraisal, the Dissenting Shares held by such holder shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Consideration, without any interest or dividends thereon, in accordance with Section 2.01(a) . The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Common Stock, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by the Company. The Company shall have the right to participate in all negotiations and proceedings with respect to such demands, and the Company shall not, without the prior written consent of Parent, make any payment with respect to any demands for appraisal or offer to settle or settle any such demands.

     2.05 Exchange of Common Stock .

          (a) Agent . Prior to the Effective Time, Merger Sub shall appoint a commercial bank or trust company reasonably acceptable to the Company to act as exchange and paying agent, registrar and transfer agent (the “ Agent ”) for the purpose of exchanging (other than the Rollover Shares) (i) certificates representing, immediately prior to the Effective Time, Common Stock for the aggregate Merger Consideration, or (ii) shares of uncertificated Common Stock

outstanding immediately prior to the Effective Time (“ Uncertificated Shares ”) for the aggregate Merger Consideration.

          (b) Deposit of Consideration . At or prior to the Effective Time, Merger Sub shall supply or cause to be supplied for the account of the Agent, in trust for the benefit of the holders of the Common Stock and for exchange pursuant to this Section 2.05 , the aggregate consideration payable to holders of the Common Stock pursuant to Section 2.01 .

          (c) Notice of Merger . Promptly, but in no event later than five (5) business days, after the Effective Time, the Surviving Corporation shall cause the Agent to mail to each holder of record of certificates or other instruments that immediately prior to the Effective Time represented shares of Common Stock (the “ Certificates ”) or Uncertificated Shares (i) a notice of the effectiveness of the Merger, (ii) a form letter of transmittal, in a form reasonably acceptable to Parent and the Company, which shall specify that delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates or transfer of Uncertificated Shares to the Agent, and (iii) instructions for use in surrendering the Certificates or transferring Uncertificated Shares and receiving the Merger Consideration in respect thereof.

          (d) Exchange Procedures . Upon surrender to the Agent of a Certificate or transfer of Uncertificated Shares, together with such letter of transmittal duly executed and completed in accordance with the instructions thereto and such other documents as may be required pursuant to such instructions, the holder of such Certificate or Uncertificated Shares (other than Dissenting Shares and Common Stock to be canceled pursuant to Section 2.01(c) ) shall be entitled to receive, in exchange therefor, within ten (10) business days after such surrender or transfer, cash in an amount equal to the product of (i) the number of shares of Common Stock formerly represented by such Certificate or Uncertificated Shares and (ii) the Merger Consideration, which shall be paid by Agent by check or wire transfer in accordance with the instructions provided by such holder. No interest or dividends will be paid or accrued on the consideration payable upon the surrender of any Certificate or transfer of any Uncertificated Shares. If the consideration provided for herein is to be made to a person other than the person in whose name the surrendered Certificate or transferred Uncertificated Shares is registered, the surrendered Certificate or transferred Uncertificated Shares shall be properly endorsed, accompanied by appropriate stock powers or otherwise in proper form for transfer, and the person requesting such payment shall pay any transfer or other taxes required by reason of such payment to a person other than the registered holder of the Certificate or the Uncertificated Shares, or that such person shall establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable.

          (e) Lost Certificates . In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit (in form and substance acceptable to the Surviving Corporation) of that fact by the person (who shall be the record owner of such Certificate) claiming such Certificate to be lost, stolen or destroyed, the Agent will issue, in exchange for such affidavit, the Merger Consideration deliverable in respect of such Certificate pursuant to this Agreement.

          (f) Termination of Fund . At any time following the one (1) year anniversary of the Effective Time, the Surviving Corporation shall be entitled to require the Agent to deliver to

it any funds that had been made available to the Agent and not disbursed to holders of Common Stock (including, without limitation, all interest and other income received by the Agent in respect of all funds made available to it), and, thereafter, such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar Laws) only as general creditors thereof with respect to any consideration payable upon due surrender of the Certificates or transfer of the Uncertificated Shares held by them. Notwithstanding the foregoing, none of Parent, the Surviving Corporation or the Agent shall be liable to any holder of Common Stock, Options or Warrants, for any consideration delivered in respect of such Common Stock, Options or Warrants to a public official pursuant to any abandoned property, escheat or other similar Law.

          (g) Withholding Rights . Each of the Agent, the Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of Common Stock, Options or Warrants pursuant to this Agreement such amounts as may be required to be deducted or withheld with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “ Code ”), or any applicable provision of state, local or foreign tax Law. To the extent that amounts are so deducted or withheld and paid over to the appropriate taxing authority by Agent, the Surviving Corporation or Parent, such amounts shall be treated for all purposes of this Agreement as having been paid to the person to whom such amounts would otherwise have been paid.

          (h) Transfer Books . At the close of business on the day on which the Effective Time occurs, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of shares of Common Stock on the records of the Company.

          (i) Adjustments . Notwithstanding anything in this Agreement to the contrary, the Merger Consideration, Option Consideration and Warrant Consideration shall each be adjusted to reflect fully the effect of any stock split, reverse stock split, stock dividend, reclassification, redenomination, recapitalization, split-up, combination, exchange of shares or other similar transaction with respect to the Common Stock occurring or having a record date or effective date between the date of this Agreement and the Effective Time.

     2.06 Phantom Stock Units .

          (a) At the Closing, Merger Sub shall pay or cause to be paid to each holder of a cash-settled phantom stock unit granted by the Company and outstanding immediately prior to the Closing (each, a “ Phantom Stock Unit ”), whether or not then vested in accordance with its terms, an amount in cash equal to the product of (i) the number of Phantom Stock Units held by such holder and (ii) the Merger Consideration (the “ Phantom Stock Unit Consideration ”), by wire transfer of immediately available funds to the account specified in writing by such holder at least three (3) business days prior to Closing. No interest will be paid or accrued on the Phantom Stock Unit Consideration.

          (b) Merger Sub shall be entitled to deduct and withhold, or cause to be deducted and withheld, from the consideration otherwise payable to any holder of Phantom Stock Units pursuant to this Agreement such amounts as may be required to be deducted or withheld with

respect to the making of such payment under the Code, or any applicable provision of state, local or foreign tax Law. To the extent that amounts are so deducted or withheld and paid over, or caused to be paid over, to the appropriate taxing authority by Merger Sub, such amounts shall be treated for all purposes of this Agreement as having been paid to such holder of Phantom Stock Units.

          (c) At the Closing, Merger Sub shall also pay or cause to be paid to each holder of a Phantom Stock Unit, an amount in cash equal to the Gross Up Payment, by wire transfer of immediately available funds to the account specified in writing by such holder at least three (3) business days prior to Closing. No interest will be paid or accrued on the Gross Up Payment payable on such Phantom Stock Units.

          (d) When the Phantom Stock Unit Consideration and the Gross Up Payment have been paid, each holder of a certificate or certificates representing Phantom Stock Units shall cease to have any rights with respect to such Phantom Stock Units, except for the provisions of such certificates as shall, by their terms, survive payment of the Phantom Stock Units, including provisions with respect to any additional payment subject to the excise tax imposed by Section 4999 of the Code.

          (e) Notwithstanding anything in this Agreement to the contrary, the Phantom Stock Unit Consideration shall be adjusted to reflect fully the effect of any stock split, reverse stock split, stock dividend, reclassification, redenomination, recapitalization, split-up, combination, exchange of shares or other similar transaction with respect to the Common Stock occurring or having a record date or effective date between the date of this Agreement and the Closing.

     2.07 Notes . At the Closing, Merger Sub shall pay or cause to be paid to each holder of a promissory note outstanding immediately prior to the Closing that is listed on Section 2.07 of the Company Disclosure Schedule (each, a “ Note ”), whether or not then due and payable in accordance with its terms, an amount in cash equal to the principal plus accrued interest on such Note (the “ Note Consideration ”), by wire transfer of immediately available funds to the account specified in writing by such Note holder at least three (3) business days prior to Closing. All such Notes, when so paid, shall no longer be outstanding and shall automatically be canceled, and each holder of a Note shall cease to have any rights with respect to such Note.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as disclosed in the Form 10-K filed with the SEC for the fiscal year ended December 31, 2008 (the “ Latest 10-K ”) and SEC Reports (as defined in Section 3.07(a) ) filed with the SEC after the filing of the Latest 10-K but prior to the date hereof (in each case, excluding any risk factors or cautionary, predictive or forward looking statements contained therein) or as set forth in the Company Disclosure Schedule (it being understood that any matter disclosed in such Latest 10-K, such SEC Reports filed after the filing of the Latest 10-K or in any section of the Company Disclosure Schedule shall be deemed disclosed in each representation and warranty where the relevance of such disclosure is reasonably apparent on its

face, without regard to whether a representation or warranty specifically references either the Company Disclosure Schedules, the Latest 10-K or the SEC Reports filed after the filing of the Latest 10-K), the Company represents and warrants to Parent and Merger Sub as follows:

     3.01 Organization and Qualification; Subsidiaries.

          (a) The Company and each subsidiary of the Company (each, a “ Subsidiary ” and collectively, the “ Subsidiaries ”) is a corporation or limited liability company duly formed, validly existing and in good standing (to the extent applicable) under the Laws of the jurisdiction of its formation. The Company and each Subsidiary has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted, except as would not reasonably be expected to have a Material Adverse Effect. The Company and each Subsidiary is duly qualified as a foreign corporation or limited liability company to do business, and is in good standing (to the extent applicable), in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so qualified and in good standing would not reasonably be expected to have a Material Adverse Effect.

          (b) Section 3.01(b) of the Company Disclosure Schedule sets forth a true and complete list of each Subsidiary, together with the jurisdiction of formation of each Subsidiary and the percentage of the outstanding equity interests of each Subsidiary owned by the Company and each other Person.

          (c) Except for the Subsidiaries, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, limited liability company, partnership, joint venture or other business association or entity.

     3.02 Certificate of Incorporation and Bylaws . The Company has furnished to Parent and Merger Sub a complete and correct copy of the certificate of incorporation and the bylaws (or equivalent organizational documents) of the Company and each Subsidiary in full force and effect as of the date of this Agreement. Neither the Company nor any Subsidiary is in material violation of any provision of its certificate of incorporation or bylaws (or equivalent organizational documents).

     3.03 Capitalization .

          (a) The authorized capital stock of the Company consists of (i) 80,000,000 shares of Common Stock and (ii) 20,000,000 shares of preferred stock, par value $0.001 per share (the “ Preferred Stock ”). As of October 14, 2009, (i) 28,699,094 shares of Common Stock were issued and outstanding, all of which have been duly authorized and are validly issued, fully paid and nonassessable, (ii) no shares of Preferred Stock are issued and outstanding, (iii) no shares of Common Stock or Preferred Stock were held in the treasury of the Company, and (iv) 822,568 shares of Common Stock were reserved for issuance pursuant to the Stock Plans. All shares of Common Stock issuable upon exercise of Options have been duly reserved for issuance by the Company, and upon any issuance of such shares in accordance with the terms of the Stock Plans, will be duly authorized, validly issued and fully paid and nonassessable.

          (b) Section 3.03(b) of the Company Disclosure Schedule sets forth the name of each holder of an outstanding Option or Warrant, together with the number of shares of Common Stock issuable thereunder, the grant date, exercise price, expiration date and the vesting schedule. Section 3.03(b) of the Company Disclosure Schedule sets forth each right issued by the Company, the value of which is based on capital stock or another similar interest in the Company (e.g., phantom units), together with the number of shares of Common Stock on which such value is based, the grant date, and vesting schedule. Except as set forth on Section 3.03(b) of the Company Disclosure Schedule, there are no options, warrants, convertible securities, calls, preemptive rights, rights of first refusal or other rights, or agreements or commitments of any nature obligating the Company to issue, transfer or sell any shares of capital stock of, or other equity interests in, the Company.

          (c) There are no outstanding contractual obligations of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any capital stock of, or other equity interests in, the Company or any Subsidiary. Except as set forth on Section 3.03(c) of the Company Disclosure Schedule, to the Company’s Knowledge, there are no stockholders agreements, voting trusts or other agreements or understandings relating to voting of any shares of Common Stock or granting to any Person the right to elect, or to designate or nominate for election, a director to the Company Board.

          (d) Each outstanding share of capital stock of, or other equity interests in, each Subsidiary is duly authorized, validly issued, fully paid and nonassessable, and, except as set forth in Section 3.03(d) of the Company Disclosure Schedule, each such share or other equity interest that is owned directly or indirectly by the Company is owned by the Company or another Subsidiary free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, rights of first offer, charges and other encumbrances of any nature whatsoever (collectively, “ Liens ”). There are no stockholders agreements, voting trusts or other agreements or understandings relating to voting of any equity securities of any Subsidiary or granting to any Person (other than the Company or a wholly-owned Subsidiary) the right to elect, or to designate or nominate for election, a director to the board of directors (or equivalent body) of any Subsidiary.

     3.04 Authority Relative to the Transactions .

          (a) The Company has the corporate power and authority necessary to execute and deliver this Agreement, to perform its obligations hereunder and, subject to the adoption of this Agreement and the approval of the Merger by the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon, to consummate the transactions contemplated hereby (the “ Transactions ”). The execution and delivery by the Company of this Agreement and the consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize the Company’s execution and delivery of this Agreement or to consummate the Transactions (other than the approval and adoption of this Agreement and the Merger by the holders of a majority of the outstanding shares of Common Stock entitled to vote thereon and the filing of appropriate merger documents as required by the DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes the legal, valid

and binding obligation of the Company, enforceable against the Company in accordance with its terms (except to the extent its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles).

          (b) On or prior to the date of this Agreement, the Company Board has, at a meeting duly called and held in which all directors were present, unanimously determined that this Agreement and the Transactions are fair to and in the best interest of the Company and its stockholders, and adopted resolutions by a unanimous vote (i) approving this Agreement, (ii) declaring this Agreement and the Merger advisable, (iii) directing that this Agreement be submitted to the Company’s stockholders for their adoption, and (iv) recommending to the stockholders that they approve and adopt this Agreement and the Merger (the “ Board Recommendation ”), which resolutions, subject to Sections 5.02(c) and 5.09(b) , have not been subsequently withdrawn or modified in a manner adverse to Parent.

          (c) The Special Committee has (i) unanimously determined that this Agreement and the Transactions are fair to and in the best interest of the Company and its stockholders, and (ii) unanimously recommended that the Company Board approve this Agreement and the Transactions, which determination and recommendation, subject to Sections 5.02(c) and 5.09(b), have not been subsequently withdrawn or modified in a manner adverse to Parent.

     3.05 No Conflict; Required Filings and Consents .

          (a) The execution and delivery by the Company of this Agreement do not, and the performance by the Company of this Agreement and the consummation of the Transactions will not, (i) conflict with or violate the certificate of incorporation or bylaws (or equivalent organizational documents) of the Company, (ii) assuming that all consents, approvals, authorizations and other actions described in Section 3.05(b) have been obtained or taken and all filings and obligations described in Section 3.05(b) have been made or fulfilled, conflict with or violate any Law applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected, (iii) except as set forth in Section 3.05(a) of the Company Disclosure Schedule, conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under, or give rise to any right of termination, acceleration or cancellation of, or result in the creation or imposition of a Lien on any property or asset of the Company pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation, except, with respect to clauses (ii) and (iii) of this Section 3.05(a) , to the extent any such conflicts, violations, breaches, defaults or other occurrences would not, individually or in the aggregate, have a Material Adverse Effect.

          (b) Except as set forth in Section 3.05(b) of the Company Disclosure Schedule, the execution and delivery by the Company of this Agreement do not, and the performance by the Company of this Agreement and the consummation by the Company of the Transactions will not, (i) result in any termination, revocation, material modification, rescission or other material adverse impact on any material written consent, approval, license, permit, exemption, or registration of any domestic (federal, state or local) or foreign government or governmental, regulatory or administrative authority, agency, instrumentality or commission, or any court, tribunal, or judicial or arbitral body (each, a “ Governmental Authority ”); or (ii) require any

material consent, approval, authorization or permit of, or material filing with or notification to, any Governmental Authority, except for (i) applicable requirements, if any, of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), the Securities Act of 1933, as amended (the “ Securities Act ”), and the rules and regulations thereunder, (ii) requirements under the rules of the Nasdaq Stock Market, and (iii) the filing and recordation of appropriate merger documents as required by the DGCL and the business organization Laws of the jurisdictions where the Company is qualified to do business as a foreign corporation.

     3.06 Compliance with Laws; Permits .

          (a) The Company and each Subsidiary is, and since October 15, 2006 has been, in compliance in all material respects with all Laws applicable to the Company or such Subsidiary or by which any property or asset of the Company or such Subsidiary is bound or affected. The Company and the Subsidiaries have timely filed all reports, data and other information required to be filed with the Governmental Authorities with respect to the Company and each Subsidiary, except where the failure to make such timely filing would not, individually or in the aggregate, have a Material Adverse Effect.

          (b) Except as set forth in Section 3.06(b) of the Company Disclosure Schedule, there is no material suit, claim, action, proceeding, arbitration, or, to the Company’s Knowledge, investigation (each, an “ Action ”) pending before any court, tribunal, or judicial or arbitral body, or to the Company’s Knowledge, any other Governmental Authority or, to the Company’s Knowledge, threatened by any Governmental Authority, with respect to the Company or any Subsidiary or any properties or assets of the Company or of any Subsidiary, or, to the Company’s Knowledge, any current or former supervisory employee of the Company or any Subsidiary with respect to any acts or omissions as an employee of the Company or any Subsidiary.

          (c) Except as set forth on Section 3.06(c) of the Company Disclosure Schedule, the Company and each Subsidiary has all material permits, licenses, certifications, approvals and franchises (each, a “ Permit ”) necessary for the Company or such Subsidiary to own, lease and operate its properties or to carry on its business as it is now being conducted. No suspension, cancellation or materially adverse modification of any material Permit is pending or, to the Company’s Knowledge, threatened. The Company and each Subsidiary is in material compliance with the terms of the Permits.

          (d) The Company and each Subsidiary is, and since October 15, 2006 has been, in material compliance with (i) all applicable statutes, rules and regulations of the Medicare and Medicaid programs; (ii) all applicable state Laws relating to health care fraud and abuse; (iii) all applicable federal or state Laws relating to billing or claims for reimbursement submitted to any third party payor; and (iv) all applicable federal and state Laws relating to privacy or confidentiality of health records or personal health information.

          (e) The Company has delivered or made available to Parent accurate and complete copies of the Company’s and any applicable Subsidiary’s material compliance program documents. Neither the Company nor any Subsidiary (i) has been assessed a civil money penalty under Section 1128A of the Social Security Act, 42 U.S.C. §1320a-7a, or any regulations

promulgated thereunder, (ii) has been convicted of any criminal offense relating to the delivery of any item or service under a Federal Health Care Program, as that term is defined in Section 1128B(f) of the Social Security Act, 42 U.S.C. §1320a-7b(f), relating to the unlawful manufacture, distribution, prescription, or dispensing of a prescription drug or a controlled substance, (iii) is a party to an outstanding Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services, or (iv) has reporting obligations pursuant to any settlement agreement entered into with any Governmental Authority.

          (f) The Company and the Subsidiaries, as applicable, (i) (A) are appropriately certified for participation in, have current and valid provider contracts with, and are in material compliance with the applicable conditions of participation for such the Medicare and Medicaid programs, the CHAMPUS/TRICARE Program (if applicable), and such other similar Federal, state or local governmental health care programs (collectively, the “ Governmental Programs ”) as necessary to carry on their respective businesses as they are now being conducted and (ii) currently participate in private, non-governmental health care programs (including private insurance health care programs) (the “ Private Programs ”) under which the Company and the Subsidiaries directly or indirectly receives payments for health care items and services. To the Company’s Knowledge, all billing practices of the Company and the Subsidiaries have been in material compliance with applicable Law, regulation and written policies of Governmental Programs and Private Programs. To the Company’s Knowledge, (A) neither the Company nor any Subsidiary has received any material payment or reimbursement in excess of amounts allowed by Law, and (B) neither the Company nor any Subsidiary is liable for recoupment of material amounts previously paid by a Governmental Program or a Private Program in which the Company or any Subsidiary participates or has participated in the past three (3) years that are not reflected in the Financial Statements, except for routine claims processing and adjudication in the ordinary course of business or where such overpayment is a result of an administrative error by a Governmental Program or a Private Program. Except as set forth in Section 3.06(e) of the Company Disclosure Schedule, no surveys of any of the Company, the Subsidiaries or their respective predecessors in interest that related to the respective businesses of such entities and that were conducted in connection with any Governmental Program, Private Program or license (excluding individual employee licenses), accreditation, permit or certificate during the past three (3) years, required material corrective action to be taken by the Company, Subsidiary, or their respective predecessors.

          (g) To the Company’s Knowledge, neither the Company nor any Subsidiary, nor any of their directors, members, employees, officers, managers or independent contractors who currently furnish services or supplies that may be reimbursed in whole or in part under any Governmental Program: (i) has been convicted of or charged with any violation of any Law related to any Governmental Program; or (ii) is excluded, suspended or debarred from participation in any Federal Health Care Program. The Company reviews (A) the “list of Excluded Individuals/Entities” on the website of the United States Health and Human Services Office of Inspector General (http://oig.hhs.gov/fraud/exclusions.html), and (B) the “List of Parties Excluded From Federal Procurement and Nonprocurement Programs” on the website of the United States General Services Administration (http://www.arnet.gov/epls/) with regard to the exclusion status of its directors, members, employees, officers, managers or independent contractors.

          (h) Notwithstanding anything in this Agreement to the contrary, this Section 3.06 contains the sole and exclusive representations and warranties of the Company and the Subsidiaries with respect to (i) compliance with health care Laws and health care Permits, (ii) the Company’s and the Subsidiaries’ participation in, billing of and reimbursement from Governmental Programs, to the extent related to its compliance with Laws with respect to such activities, and (iii) the Company’s and the Subsidiaries’ participation in, billing of and reimbursement from Private Programs, to the extent related to its compliance with such Private Programs’ regulations and policies.

     3.07 SEC Filings; Financial Statements; Undisclosed Liabilities, Internal Controls .

          (a) Since June 22, 2005, the Company has timely filed with or furnished to, as applicable, the Securities and Exchange Commission (the “ SEC ”) all forms, reports, statements, schedules and other documents required to be filed or furnished by it pursuant to the U.S. securities Laws and the rules and regulations thereunder (collectively, the “ SEC Reports ”). Except as set forth in Section 3.07(a) of the Company Disclosure Schedule, the SEC Reports (i) were prepared in all material respects in accordance with either the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations promulgated thereunder and (ii) did not, at the time they were filed, or, if amended or supplemented, as of the date of such amendment or supplement, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. There are no unresolved comments issued by the staff of the SEC with respect to any of the SEC Reports. To the Knowledge of the Company, as of the date hereof, none of the SEC Reports is the subject of ongoing SEC review, outstanding SEC comment or outstanding SEC investigation. No Subsidiary is required to file any form, report or other document with the SEC.

          (b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the SEC Reports, as amended or supplemented, including any amendments or restatements thereto, was prepared in all material respects in accordance with published rules and regulations of the SEC (including Regulation S-X) and United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited interim statements, the omission of footnotes and otherwise as permitted by Form 10-Q of the SEC) and each fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and the Subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except that the unaudited interim statements are subject to normal and recurring year-end adjustments, none of which were, or are expected to be, material in amount. The per share exercise price of each Option is equal to the fair market value of a share of common stock on the date such Option was granted, and each such grant was properly accounted for in accordance with GAAP in the consolidated financial statements of the Company contained in the SEC Reports.

          (c) Except as set forth in Section 3.07(c) of the Company Disclosure Schedule, neither the Company nor any Subsidiary has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), except (i) liabilities reflected, reserved for or disclosed in the most recent consolidated balance sheet of the Company and the Subsidiaries,

including the notes thereto, contained in the most recent SEC Report filed prior to the date of this Agreement, (ii) liabilities incurred or accrued in the ordinary course of business consistent with past practice, (iii) liabilities incurred in connection with the Transactions, and (iv) liabilities that would not reasonably be expected to have a Material Adverse Effect.

          (d) The Company has established and maintains a system of internal control over financial reporting (as defined in and required by Rule 13a-15 under the Exchange Act). Except as disclosed in the Latest 10-K, such internal controls are sufficient to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of Company financial statements for external purposes in accordance with GAAP. The Company’s principal executive officer and its principal financial officer have disclosed, based on their most recent evaluation, to the Company’s auditors and the audit committee of the Company Board (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting known to such persons that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud, whether or not material, known to such persons that involves management or other employees who have a significant role in the Company’s internal control over financial reporting, and the Company has provided to Parent copies of any material written materials relating to the foregoing.

          (e) The Company maintains “disclosure controls and procedures” (as such term is defined in Rules 13a-15 and 15d-15(e) under the Exchange Act) as required by Rule 13a-15 under the Exchange Act and such disclosure controls and procedures are designed to ensure that (i) material information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and (ii) all such information is accumulated and communicated with the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the principal executive officer and principal financial officer of the Company required under the Exchange Act with respect to such reports.

          (f) The records, systems, controls, data and information of the Company and the Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or the Subsidiaries or their accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a material adverse effect on the Company’s system of internal accounting controls.

          (g) Neither the Company nor any Subsidiary has made any loans prohibited by the Sarbanes-Oxley Act to any executive officer of the Company (as defined in Rule 3b-7 under the Exchange Act) or director of the Company or any Subsidiary. There are no outstanding loans or other extensions of credit, other than cash advances for reimbursable travel and other business expenses, made by the Company or any Subsidiary to any executive officer of the Company or any Subsidiary (as defined in Rule 3b-7 under the Exchange Act) or director of the Company or any Subsidiary.

     3.08 Absence of Certain Changes or Events . Except as set forth in Section 3.08 of the Company Disclosure Schedule or as expressly contemplated by this Agreement, since September 30, 2009, (a) the Company and each Subsidiary has conducted its business in the ordinary course of business consistent with past practice, and (b) there has not been any Material Adverse Effect. Except as set forth in Section 3.08 of the Company Disclosure Schedule or as expressly contemplated by this Agreement, since June 30, 2009, the Company has not taken any action that would be prohibited by Sections 5.01(b)(i) , (d) , (e) , (g) , (h) , (k) , or (l) if proposed to be taken after the date hereof.

     3.09 Litigation . Except as set forth in Section 3.09 of the Company Disclosure Schedule, there is no Action pending before any court, tribunal, or judicial or arbitral body, or to the Company’s Knowledge, any other Governmental Authority or, to the Company’s Knowledge, threatened, against the Company or any Subsidiary or any properties or assets of the Company or any Subsidiary, or, to the Company’s Knowledge, any current or former supervisory employee of the Company or any Subsidiary with respect to any acts or omissions as an employee of the Company or any Subsidiary, except for Actions that, if determined adversely to the Company or any Subsidiary, would not individually or in the aggregate have a Material Adverse Effect. Except as set forth in Section 3.09 of the Company Disclosure Schedule, neither the Company nor any Subsidiary is subject to or bound by any outstanding Order.

     3.10 Labor and Employment Matters . (a) Neither the Company nor any Subsidiary is a party to any collective bargaining agreement or other labor union contract applicable to employees of the Company or any Subsidiary, (b) to the Company’s Knowledge, there are no activities or proceedings of any labor union to organize any employees of the Company or any Subsidiary or any current union representation questions involving such employees, (c) there is no labor strike, controversy, slowdown, work stoppage or lockout occurring, or, to the Company’s Knowledge, threatened by or with respect to any employees of the Company or any Subsidiary, (d) there are no unfair labor practice complaints pending or, to the Company’s Knowledge, threatened against the Company or any Subsidiary before the National Labor Relations Board or any other Governmental Authority, (e) no charges with respect to or relating to the Company or any Subsidiary are pending or, to the Company’s Knowledge, threatened before the Equal Employment Opportunity Commission or any other Governmental Authority, and (f) there is no claim with respect to payment of wages, salary or overtime pay that has been asserted or is pending or, to the Company’s Knowledge, threatened before any Governmental Authority with respect to any current or former employees of the Company or any Subsidiary, except, with respect to clauses (c) through (f) of this Section 3.10 , to the extent any such matter would not, individually or in the aggregate, have a Material Adverse Effect.

     3.11 Employee Benefit Plans .

          (a) Section 3.11(a) of the Company Disclosure Schedule sets forth a true and complete list of all (i) “employee pension benefit plans” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)), (ii) “employee welfare benefit plans” (as defined in Section 3(1) of ERISA), (iii) other bonus, deferred compensation, pension, profit-sharing, retirement, insurance, stock purchase, stock option, vacation pay, sick pay or other fringe benefit plan, employment, consulting, severance, retention, termination or change-of-control agreements, arrangements or understandings, or practice and

any other benefit or compensation plan, program, agreement or arrangement, in each case maintained, sponsored, or contributed or required to be contributed to, by the Company or any Subsidiary for the benefit of any of the current or former employees, independent contractors, directors or officers of the Company or any Subsidiary or any of their dependents (collectively, the “ Employees ”), or with respect to which the Company or any Subsidiary has any current or potential liability or obligation (collectively, the “ Benefit Plans ”). The Company has furnished or made available to Parent and Merger Sub correct and complete copies of (i) each Benefit Plan, (ii) the most recent annual report on Form 5500 filed with the Internal Revenue Service with respect to each Benefit Plan (if applicable) (and all attachments thereto), (iii) the most recent summary plan description for each Benefit Plan for which such summary plan description is required, (iv) each trust agreement and group annuity contract or other funding arrangement relating to any Benefit Plan, and (v) in the case of any plan that is intended to be qualified under Section 401(a) of the Code, the most recent determination letter (and if a prototype plan, an opinion letter), if any, received from the Internal Revenue Service.

          (b) None of the Benefit Plans is, and none of the Company, any Subsidiary or any ERISA Affiliate has ever maintained or had an obligation to contribute to or has any current or potential liability or obligation under or with respect to, (i) a “single employer plan” (as such term is defined in Section 4001(a)(15) of ERISA) subject to Section 412 of the Code or Section 302 of Title I of ERISA or Title IV of ERISA, (ii) a “multiple employer plan” (as such term is defined in ERISA), (iii) a “multiemployer plan” (as such term is defined in Section 3(37) of ERISA), (iv) a funded welfare benefit plan (as such term is defined in Section 419 of the Code) or (v) any plan, program, agreement or arrangement that provides for post-retirement or post-termination health or life insurance or other welfare-type benefits (other than health continuation coverage required by Section 4980B of the Code or similar state Law, any Benefit Plan that provides disability benefits, or any benefit for which the covered individual pays the entire cost of coverage). For purposes of this Agreement, the term “ ERISA Affiliate ” means any Person that, together with the Company or any Subsidiary would at any relevant time be deemed a “single employer” within the meaning of Section 414(b), (c), (m) or (o) of the Code. The Company and the Subsidiaries have complied and are in compliance in all material respects with the requirements of Section 4980B of the Code.

          (c) Except as set forth in Section 3.11(c) of the Company Disclosure Schedule, each Benefit Plan and all related trusts, insurance contracts and funds have been maintained, funded and administered in all material respects in accordance with the terms of such Benefit Plan and in material compliance with the applicable provisions of ERISA, the Code and other applicable Laws. Each Benefit Plan that is intended to meet the requirements of a “qualified plan” under Section 401(a) of the Code (i) has received a favorable determination letter from the Internal Revenue Service, (ii) is entitled to rely on a favorable opinion letter issued by the Internal Revenue Service, or (iii) has a remedial amendment period that has not yet expired during which the Company may file for a favorable determination letter with respect to all provisions of such Benefit Plan. Nothing has occurred that could reasonably be expected to adversely affect the qualification of such Benefit Plan. With respect to each Benefit Plan, all contributions or payments (including all employer contributions, employee salary reduction contributions and premium payments) that are due have been made within the time periods prescribed by the terms of each Benefit Plan, ERISA, the Code and other applicable Law.

          (d) None of the Company, any Subsidiary or, to the Company’s Knowledge, any other Person has engaged in a “prohibited transaction” (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any breach of fiduciary responsibility with respect to any Benefit Plan that could reasonably be expected to subject the Company or any Subsidiary or the Employees to any material tax, penalty or other liability imposed by the Code or ERISA. With respect to any Benefit Plan: (i) no filing, application or other matter is pending with the Internal Revenue Service, the Pension Benefit Guaranty Corporation, the United States Department of Labor or any other Governmental Authority and (ii) there is no action, suit, investigation, audit, proceeding, inquiry or claim pending or, to the Company’s Knowledge, threatened, other than routine claims for benefits, with respect to any Benefit Plan.

          (e) Except as set forth in Section 3.11(e) of the Company Disclosure Schedule, neither the execution or delivery of this Agreement nor the consummation of the Transactions will result in any payment or funding, accelerate the time of payment or vesting, or increase the amount, of compensation or benefits to any Person under the Benefit Plans.

     3.12 Real Property; Assets .

          (a) Except as set forth in Section 3.12(a) of the Company Disclosure Schedule, the Company or a Subsidiary has good and marketable title to all material assets owned by the Company and the Subsidiaries (the “ Owned Assets ”), free and clear of all Liens, other than (i) Liens for current Taxes not yet past due and payable and liens for Taxes that are being contested in good faith by appropriate proceedings for which appropriate reserves have been established in accordance with GAAP, (ii) mechanics’ and materialmen’s Liens for construction in progress for amounts not yet past due and payable, (iii) workmen’s, repairmen’s, warehousemen’s and carriers’ Liens arising in the ordinary course of business of the Company or the Subsidiary consistent with past practice, for amounts not yet past due and payable, and (iv) easements, covenants, conditions, restrictions and similar matters of record not violated by the current use or occupancy of the Owned Assets or the operation of the business of the Company or the Subsidiaries (collectively, “ Permitted Liens ”). The buildings, structures, improvements, fixtures, machinery, equipment, personal properties, vehicles and other tangible assets owned by the Company and the Subsidiaries (other than assets that are not necessary for the operation of the business of the Company and the Subsidiaries) have been installed, maintained and operated in conformity with all applicable Laws, regulations and insurance policies (except as would not, individually or in the aggregate, have a Material Adverse Effect), are in good condition and repair (reasonable wear and tear excepted), are usable in the ordinary course of business, and to the Company’s Knowledge, there are no latent defects with respect thereto. The properties and assets owned, leased or used by the Company or any Subsidiary, both tangible and intangible, are sufficient and adequate to carry on their respective businesses in all material respects as presently conducted.

          (b) Neither the Company nor any Subsidiary owns any real property.

          (c) Section 3.12(c) of the Company Disclosure Schedule sets forth a true and complete list of all leases, subleases, licenses, concessions and other agreements (written or oral) (the “ Leases ”) pursuant to which the Company or any Subsidiary holds any leasehold or subleasehold estate or other right to use or occupy any land, buildings, structures, improvements,

fixtures or other interest in real property (the “ Leased Real Property ”). The Company has furnished or made available to Parent and Merger Sub a true and complete copy of each written Lease (including all material amendments, extensions, renewals, guaranties and other agreements with respect thereto) for Leased Real Property, and in the case of any oral Lease for Leased Real Property, a written summary of the material terms of such Lease. Except as set forth in Section 3.12(c) of the Company Disclosure Schedule or as would not have a Material Adverse Effect, the Company or a Subsidiary has a good and valid leasehold interest in each Leased Real Property. Except as set forth in Section 3.12(c) of the Company Disclosure Schedule, (i) to the Company’s Knowledge, the Company or a Subsidiary has the right to use and occupancy of the Leased Real Property for the full term of the lease or sublease relating thereto, (ii) each Lease is a legal, valid and binding obligation, enforceable in accordance with its terms, of the Company or a Subsidiary and, to the Company’s Knowledge, the other parties thereto, and none of the Company, any Subsidiary or, to the Company’s Knowledge, any other party thereto, is in default (with or without notice or lapse of time, or both) with respect to any Lease for Leased Real Property, (iii) neither the Company nor any Subsidiary has assigned its interest under any Lease or sublet any part of the premises covered thereby, and (iv) the other party to any Lease is not an affiliate of, and otherwise does not have any economic interest in, the Company or any Subsidiary.

          (d) There are no pending or, to the Company’s Knowledge, threatened condemnation proceedings with respect to the Owned Assets or Leased Real Property.

     3.13 Intellectual Property .

          (a) Section 3.13(a) of the Company Disclosure Schedule sets forth a true and complete list of U.S. and foreign (i) issued patents and patent applications, (ii) trademark registrations and applications, (iii) Internet domain name registrations, (iv) and copyright registrations and applications, in each case that are owned by the Company or any Subsidiary.

          (b) Except as set forth in Section 3.13(b) of the Company Disclosure Schedule and except as would not have a Material Adverse Effect, the Company or a Subsidiary owns and possesses all right, title and interest in and to, or has a valid and enforceable license to use pursuant to a written license agreement, all other intellectual property (including all trade names) necessary to conduct their respective businesses (such intellectual property and the rights thereto are collectively referred to herein as the “ IP Rights ”).

          (c) To the Company’s Knowledge, (i) the businesses of the Company and the Subsidiaries do not infringe, misappropriate or otherwise violate any third party’s intellectual property rights, and there is no such claim pending or threatened against the Company or any Subsidiary, and (ii) no third party is infringing, misappropriating or otherwise violating the IP Rights, and there is no such claim pending or threatened against any Person by the Company or any Subsidiary.

          (d) The Company and the Subsidiaries take commercially reasonable measures to maintain and protect (i) all of their respective IP Rights, and (ii) the confidentiality of their respective trade secrets, patient and other personal data and to prevent unauthorized access to trade secrets, patient and other personal data.

          (e) To the Company’s Knowledge, the Company has not experienced any incident in which personal information of consumers was or may have been stolen or improperly accessed, and the Company is not aware of any facts suggesting the likelihood of the foregoing, including without limitation any breach of security or any notices or complaints from any Person regarding personal information.

     3.14 Taxes .

          (a) For purposes of this Agreement, “ Tax ” or “ Taxes ” refers to any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and levies, including, without limitation, taxes based upon or measured by gross receipts, income (gross or net), profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, real property, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts. For purposes of this Agreement, “ Tax Return ” or “ Tax Returns ” refers to all federal, state, local and foreign returns, schedules, attachments, estimates, information statements and reports relating to Taxes, and any amendments thereto, including any return of an affiliated, combined or unitary group that includes the Company or any Subsidiary.

          (b) The Company and the Subsidiaries have filed all Tax Returns required to be filed by them prior to the date hereof. All such Tax Returns are correct and complete in all material respects. All Taxes shown as due on such Tax Returns have been timely paid. Neither the Company nor any Subsidiary currently is the beneficiary of any extension of time within which to file any Tax Return. There are no liens for Taxes upon any property or assets of the Company or the Subsidiaries, except (i) liens for Taxes not yet due and payable and (ii) liens for Taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves are being maintained in accordance with GAAP.

          (c) Proper accruals pursuant to GAAP have been established (and until the Closing Date will be maintained) on the Company’s consolidated financial statements adequate to pay all material Taxes of the Company and the Subsidiaries not yet due and payable.

          (d) Except as set forth in Section 3.14(d) of the Company Disclosure Schedule, (i) no deficiencies for Taxes with respect to the Company or any Subsidiary has been claimed, proposed or assessed by a Tax authority or other Governmental Authority in writing, (ii) no audit or other proceeding for or relating to any liability in respect of Taxes of the Company or any Subsidiary is being conducted by any Tax authority or Governmental Authority and neither the Company nor any Subsidiary has received notification in writing that any such audit or other proceeding is pending, and (iii) neither the Company nor any Subsidiary has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

          (e) Except as set forth in Section 3.14(e) of the Company Disclosure Schedule, neither the Company nor any Subsidiary is a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in any payment that would not be deductible pursuant to Sections 162(m) or 280G of the Code (or any corresponding provision of state, local or foreign Tax Law).

          (f) The Company has not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

          (g) Neither the Company nor any Subsidiary has any liability for the Taxes of any Person (other than members of the consolidated group of which the Company is the common parent) (i) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign Law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.

          (h) During the three (3) year period ending on the Closing Date, neither the Company nor any Subsidiary was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code.

          (i) Neither the Company nor any Subsidiary has entered into any transaction identified as a “listed transaction” for purposes of Treasury Regulations Section 1.6011-4(b)(2).

          (j) Neither the Company nor any Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (A) change in method of accounting for a taxable period ending on or prior to the Closing Date; (B) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of income Tax Law) executed on or prior to the Closing Date; (C) intercompany transactions or any excess loss account described in Treasury Regulations under Section 1502 of the Code (or any similar provision of state, local, or foreign Law); (D) installment sale or open transaction disposition made on or prior to the Closing Date; or (E) election to defer cancellation of debt income under Section 108(i) of the Code.

     3.15 Environmental Matters .

          (a) As used in this Agreement, “ Environmental Laws ” shall mean all federal, state and local statutes, regulations, ordinances and other requirements having the force or effect of law, all judicial and administrative orders and determinations, and all common law concerning public health and safety, worker health and safety, pollution, or protection of the environment, as the foregoing are enacted or in effect, on or prior to the Closing Date.

          (b) The Company and the Subsidiaries have complied in all material respects with, and are in compliance in all material respects with, all Environmental Laws applicable to their businesses as presently or previously conducted, including without limitation obtaining, maintaining, and complying with all environmental permits required for the occupation of the Company’s or the Subsidiaries’ properties or facilities. Neither the Company nor any Subsidiary has received any notice, report or other information regarding any violation of, or liability under, Environmental Laws, including without limitation with respect to its past or current operations, properties or facilities. Neither the Company nor any Subsidiary, nor, to the Company’s Knowledge, any predecessor or affiliate of the Company or the Subsidiaries, has treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, exposed any Person to or released any substance, or owned or operated its business or any property or facility (and no such property or facility is contaminated by any such substance), in each case, so as to have

given rise to or as would give rise to any liabilities or investigative, corrective or remedial obligations pursuant to CERCLA or any other Environmental Laws.

          (c) Neither the Company nor any Subsidiary has assumed, undertaken, provided an indemnity with respect to, or otherwise become subject to, any liability of any other Person relating to Environmental Laws.

          (d) Neither the Company nor any Subsidiary has designed, manufactured, distributed or sold products or items containing asbestos, silica, lead, mercury, or other similar hazardous materials, and neither the Company nor any Subsidiary has any liability (contingent or otherwise), with respect to the presence or alleged presence of asbestos, silica, lead, mercury, or other similar hazardous materials in any product or item or at or upon any property or facility.

          (e) The Company has furnished or made available to Parent and Merger Sub all environmental audits, reports and other material environmental documents, if any, relating to the Company and the Subsidiaries, or their past or current operations, properties or facilities that are in their possession or under their reasonable control.

     3.16 Material Contracts .

          (a) For all purposes of and under this Agreement, a “ Material Contract ” means any oral or written:

               (i) “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K under the Exchange Act, other than those agreements and arrangements described in Item 601(b)(10)(iii)) with respect to the Company and the Subsidiaries, taken as whole;

               (ii) employment or consulting contract (in each case, under which the Company or any Subsidiary has continuing obligations as of the date hereof) with any current or former executive officer or other employee of the Company or the Subsidiaries or member of the Company Board providing for an annual base salary in excess of $150,000;

               (iii) Benefit Plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the consummation of the Transactions or the value of any of the benefits of which will be calculated on the basis of any of the Transactions;

               (iv) contract that contains severance or termination pay liabilities of the Company or any Subsidiary related to termination of employment;

               (v) contract that provides for indemnification by the Company or the Subsidiaries of any officer, director or employee of the Company or the Subsidiaries;

               (vi) contract containing any covenant (A) limiting the right of the Company or any Subsidiary to engage in any line of business or to compete with any Person in any line of business or in any geographic location, or (B) prohibiting the Company or any Subsidiary from engaging in business with any Person or levying a fine, charge or other payment for doing so;

               (vii) contract entered into after January 1, 2007 or that has not yet been consummated (A) relating to the disposition or acquisition by the Company or any Subsidiary after the date of this Agreement of a material amount of assets other than in the ordinary course of business, or (B) pursuant to which the Company or any Subsidiary will acquire any material ownership interest in any other Person or other business enterprise other than the Subsidiaries;

               (viii) mortgages, indentures, guarantees for borrowed money, loans or credit agreements, security agreements or other contracts relating to the borrowing of money or extension of credit (whether incurred, assumed, guaranteed or secured by any asset), other than (A) accounts receivables and payables, and (B) loans to direct or indirect wholly owned Subsidiaries, in each case in the ordinary course of business consistent with past practice;

               (ix) contract pursuant to which the Company or any Subsidiary has continuing “earn-out” or other contingent payment obligations;

               (x) contract to which the Company or any Subsidiary is a party that (A) contains most favored customer pricing provisions or (B) grants any exclusive rights, rights of first refusal, rights of first negotiation or similar rights to any Person;

               (xi) contract to which the Company or any Subsidiary is a party that relates to product supply, manufacturing, distribution or development (except for any contracts in which either the annual aggregate noncontingent payments to or by the Company are not in excess of $250,000 or the annual potential payments to or by the Company are not expected to exceed $250,000);

               (xii) contract pursuant to which the Company or any Subsidiary has any obligations or liabilities (whether absolute, accrued, contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker, or otherwise in respect of any obligation of any other Person, or any capital maintenance, keep-well or similar agreements or arrangements, in each case individually in excess of $250,000;

               (xiii) contract that involves any joint venture, partnership or similar arrangement of the Company or any Subsidiary;

               (xiv) material agreement with respect to intellectual property; or

               (xv) contract that contains “standstill” or similar provisions to which the Company or any Subsidiary is subject and restricted.

          (b) Section 3.16(b) of the Company Disclosure Schedule contains a complete and accurate list of all Material Contracts (including any amendments thereto) to or by which the Company or any Subsidiary is a party or is bound. Complete and correct copies of each Material Contract (including any amendments thereto) in existence as of the date hereof have been delivered or made available by the Company to Parent and Merger Sub prior to the date hereof.

          (c) Except as set forth in Section 3.16(c) of the Company Disclosure Schedule and except as would not have a Material Adverse Effect, all of the Material Contracts are valid and binding on the Company (and/or each Subsidiary party thereto) and are in full force and