AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

Agreement and Plan of Merger

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Title: AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
Governing Law: Delaware Date: 5/12/2008
Industry: Medical Equipment and Supplies Law Firm: Wilson Sonsini Sector: Healthcare

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, Parties: occulogix inc. , ocusense acquireco inc , ocusense inc

EXHIBIT 10.1

Execution Copy

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

by and among

OCCULOGIX, INC.

OCUSENSE ACQUIRECO, INC.

and

OCUSENSE, INC.

April 22, 2008

Execution Copy

INDEX OF EXHIBITS

Exhibit

Description

Exhibit A

Form of Investor Representation Statement

Exhibit B

Form of Indemnity

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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this “ Agreement ”) is made and entered into as of April 22, 2008 by and among OccuLogix, Inc., a Delaware corporation (“ Parent ”), OcuSense Acquireco, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), and OcuSense, Inc., a Delaware corporation (the “ Company ”).

W I T N E S S E T H:

WHEREAS, the boards of directors of Parent, Merger Sub and the Company believe it is in the best interests of their respective companies and their respective stockholders that Parent acquire the Company through the statutory merger of Merger Sub with and into the Company (the “ Merger ”) and, in furtherance thereof, have approved this Agreement, the Merger and the other transactions contemplated hereby.

WHEREAS, pursuant to the Merger, Merger Sub will merge with and into the Company whereupon the separate corporate existence of Merger Sub will cease and the Company will continue as a wholly-owned subsidiary of Parent, and all of the outstanding capital stock of the Company will be converted into the right to receive the consideration set forth herein.

WHEREAS, the Company, on the one hand, and Parent and Merger Sub, on the other hand, desire to make certain representations and warranties, covenants and other agreements in connection with the Merger.

NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements and other covenants set forth herein, the mutual benefits to be gained by the performance thereof, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATIONS

1.1 Certain Definitions . For all purposes of and under this Agreement, the capitalized terms set forth below shall have the respective meanings ascribed thereto below:

“ Affiliate ” of a person shall mean any other person or entity under common control with such person within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder.

“ Certificate ” shall have the meaning ascribed to the term in Section 2.8(c) .

“ Certificate of Merger ” shall have the meaning ascribed to the term in Section 2.2 .

“ CGCL ” shall mean the California General Corporations Law.

“ Closing ” shall have the meaning ascribed to the term in Section 2.2 .

“ Closing Date ” shall have the meaning ascribed to the term in Section 2.2 .

“ Closing Price ” shall mean, for any date, the closing price per share of the Parent Common Stock for such date (or the nearest preceding date) on the primary Trading Market.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

“ Company Authorizations ” shall have the meaning ascribed to the term in Section 3.16 .

“ Company Capital Stock ” shall mean the Company Common Stock and any other shares of capital stock of the Company, taken together.

“ Company Common Stock ” shall mean shares of common stock, $0.001 par value per share, of the Company.

“ Company Current Balance Sheet ” shall have the meaning ascribed to the term in Section 3.7 .

“ Company Current Balance Sheet Date ” shall have the meaning ascribed to the term in Section 3.7 .

“ Company Disclosure Schedule ” shall have the meaning ascribed to the term in Article III .

“ Company Financial Statements ” shall have the meaning ascribed to the term in Section 3.7 .

“ Company Insurance Policy ” shall have the meaning ascribed to the term in Section 3.14 .

“ Company Leased Real Property ” shall have the meaning ascribed to the term in Section 3.12 .

“ Company Material Adverse E ffect ” shall mean any change, event or effect that has had, or is reasonably likely to have, a material adverse effect on the business, assets (whether tangible or intangible), Liabilities, financial condition, results of operations, prospects or capitalization of the Company, provided, however, that in no event shall any of the following, alone or in combination, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been, a “Company Material Adverse Effect”: (i) any adverse event, circumstance, change or effect to the extent attributable to changes or conditions generally affecting the industries and segments in which the Company operates, the U.S. economy as a whole or foreign economies in any location where the Company has operations or sales, other than such changes or conditions that have a materially disproportionate adverse effect on the Company relative to other companies in the same or similar industry; (ii) changes in general economic, market or political conditions, other than such changes that have a materially disproportionate adverse effect on the Company relative to other companies in the same or similar industry; (iii) any adverse event, circumstance, change or effect resulting from or relating to compliance with the terms and conditions of, or the taking of any action required by, this Agreement, including the public announcement of the execution of this Agreement; and (iv) changes in GAAP or changes in the laws or regulations (or the interpretation thereof) affecting GAAP as it pertains to the Company.

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“ Company Material Contract ” shall have the meaning ascribed to the term in Section 3.13(a) .

“ Company Options ” shall mean options (including commitments to grant options or other rights) to purchase or otherwise acquire Company Capital Stock (whether or not vested) granted or otherwise issued under the Company Stock Option Plan.

“ Company Stock Option Plan ” shall mean the Company’s Incentive Stock Plan, as amended.

“ Company Warrants ” shall mean warrants to purchase or otherwise acquire Company Capital Stock.

“ Conflict ” shall have the meaning ascribed to the term in Section 3.3 .

“ Contract ” shall mean any written or oral legally binding contract, agreement, instrument, commitment or undertaking (including leases, licenses, mortgages, notes, guarantees, sublicenses, subcontracts and purchase orders).

“ DGCL ” shall mean the General Corporation Law of the State of Delaware.

“ Dissenting Shares ” shall have the meaning ascribed to the term in Section 2.7(a) .

“ Effective Time ” shall have the meaning ascribed to the term in Section 2.2 .

“ Eligible Market ” shall mean any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital Market or the Toronto Stock Exchange.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

“ Exchange Agent ” shall have the meaning ascribed to the term in Section 2.8(a) .

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“ GA AP ” shall mean United States generally accepted accounting principles consistently applied.

“ Governmental Authority ” shall mean any court, administrative agency or commission or other federal, state, county, local or other foreign governmental authority, instrumentality, agency or commission.

“ Intellectual Prop erty ” shall mean any or all of the following: (i) works of authorship, including computer programs, source code and executable code, whether embodied in software, firmware or otherwise, architecture, documentation, designs, files, records, data and mask works; (ii) inventions (whether or not patentable), discoveries, improvements and technology; (iii) proprietary and confidential information, trade secrets and know how; (iv) databases, data compilations and collections and technical data; (v) logos, trade names, trade dress, trademarks and service marks; (vi) domain names, web addresses and sites; (vii) tools, methods and processes; and (viii) any and all instantiations of the foregoing, in any form and embodied in any media.

“ Intellectual Pro perty Rights ” shall mean worldwide common law and statutory rights associated with (i) patents and patent applications, (ii) copyrights, copyright registrations and copyright applications, “moral” rights and mask work rights, (iii) the protection of trade and industrial secrets and confidential information, (iv) other proprietary rights relating to intangible intellectual property, (v) domain name registrations, (vi) trademarks, trade names and service marks, and registrations and registration applications therefor, (vii) analogous rights to those set forth above and (viii) divisions, continuations, renewals, reissuances and extensions of the foregoing (as applicable).

“ Knowle dge ” shall mean the knowledge of the directors, officers and other management level employees of the Company or Parent, as the case may be; provided, however, that such person shall have made reasonable inquiry of those employees and consultants of the Company or Parent, as the case may be, who would reasonably be expected to have knowledge of the matter in question; provided, further, however, that if any such person shall not make such reasonable inquiry, then such person shall be deemed to have knowledge of those facts or matters that such person would reasonably be expected to have, had such person made such inquiry.

“ Liability ” or “ Liabilities ” shall mean any debt, liability or obligation, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable, known or unknown, including those arising under any law, action or governmental order and those arising under any Contract.

“ Lie n ” shall mean any lien, pledge, charge, claim, mortgage, security interest or other encumbrance of any kind whatsoever.

“ Merger Shares ” shall have the meaning ascribed to the term in Section 2.6(b) .

“ Minority Percentage ” shall mean the percentage that the number of shares of Company Common Stock issued and outstanding immediately prior to the Effective Time, after giving effect to the first sentence of Section 2.6(b) , that is held by Stockholders other than Parent, represents of the total number of issued and outstanding shares of Company Capital Stock immediately prior to the Effective Time, without giving effect to Section 2.6(c) , held by all Stockholders, including Parent.

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“ Option Exchange Ratio ” shall have the meaning ascribed to the term in Section 2.6(d)(i) .

“ Parent Affiliate ” shall mean any other person or entity under common control with Parent within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued thereunder.

“ Parent Authorizations ” shall have the meaning ascribed to the term in Section 4.16 .

“ Parent Common S tock ” shall mean shares of the common stock, par value $0.001 per share, of Parent.

“ Parent Current Balance Sheet ” shall have the meaning ascribed to the term in Section 4.7 .

“ Parent Current Balance Sheet Date ” shall have the meaning ascribed to the term in Section 4.7 .

“ Parent Disclosure Schedule ” shall have the meaning ascribed to the term in Article IV .

“ Parent Financial Statements ” shall have the meaning ascribed to the term in Section 4.7 .

“ Parent Insurance Policy ” shall have the meaning ascribed to the term in Section 4.14 .

“ Parent Leased Real Property ” shall have the meaning ascribed to the term in Section 4.12(a) .

“ Parent Material Adverse Effect ” shall mean a material adverse effect on the business, assets (including intangible assets), Liabilities, financial condition or results of operations of Parent and its subsidiaries, taken as a whole, provided, however, that in no event shall any of the following, alone or in combination, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has been, a “Parent Material Adverse Effect”: (i) any adverse event, circumstance, change or effect to the extent attributable to changes or conditions generally affecting the industries and segments in which Parent operates, the U.S. economy as a whole or foreign economies in any location where Parent has operations or sales, other than such changes or conditions that have a materially disproportionate adverse effect on Parent and its subsidiaries, taken as a whole, relative to other companies in the same or similar industry; (ii) changes in general economic, market or political conditions, other than such changes that have a materially disproportionate adverse effect on Parent and its subsidiaries, taken as a whole, relative to other companies in the same or similar industry; (iii) any adverse event, circumstance, change or effect resulting from or relating to compliance with the terms and conditions of, or the taking of any action required by, this Agreement, including the public announcement of the execution of this Agreement; and (iv) changes in GAAP or changes in the laws or regulations (or the interpretation thereof) affecting GAAP as it pertains to Parent.

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“ Parent Material Contract ” shall have the meaning ascribed to the term in Section 4.13(a) .

“ Parent Plan ” shall have the meaning ascribed to the term in Section 4.14(a) .

“ Parent SEC Documents ” shall have the meaning ascribed to the term in Section 4.19 .

“ Parent 10-K ” shall have the meaning ascribed to the term in Section 4.3 .

“ Per Company Common Share Merger Consideration ” shall mean a fraction equal to (i) $18,000,000 multiplied by the Minority Percentage, divided by (ii) the number of issued and outstanding shares of Company Common Stock immediately prior to the Effective Time (for greater certainty, after giving effect to the first sentence of Section 2.6(b) and to Section 2.6(c) ).

“ Returns ” shall have the meaning ascribed to the term in Section 3.10(a) .

“ SE C ” shall mean the United States Securities and Exchange Commission or any successor thereto.

“ Securities Act ” shall mean the Securities Act of 1933, as amended.

“ Spreadsheet ” shall have the meaning ascribed to the term in Section 6.5 .

“ Stockholder ” shall mean any holder of any Company Capital Stock immediately prior to the Effective Time.

“ Subsidiary ” of any person shall mean any corporation, partnership, limited liability company, association, trust, joint venture or other legal entity of which such person (either alone or through or together with any other Subsidiary) owns, directly or indirectly, more than 50% of the capital stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation, partnership, limited liability company, association, trust, joint venture or other legal entity.

“ Surviving Corporation ” shall have the meaning ascribed to the term in Section 2.1 .

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“ Tax ” or, collectively, “ Taxes ” shall mean (i) any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes as well as public imposts, fees and social security charges (including health, unemployment and pension insurance), together with all interest, penalties and additions imposed with respect to such amounts, (ii) any liability for the payment of any amounts of the type described in the foregoing clause (i) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period and (iii) any liability for the payment of any amounts of the type described in the clauses (i) or (ii) as a result of any express or implied obligation to indemnify any other person or as a result of any obligation under any agreement or arrangement with any other person with respect to such amounts and including any liability for taxes of a predecessor entity.

“ Trading Day ” shall mean (i) any day on which the Parent Common Stock is listed or quoted and traded on its primary Trading Market, (ii) if the Parent Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the Nasdaq Global Market (or any successor thereto), or (iii) if trading ceases to occur on the Nasdaq Global Market (or any successor thereto), any day other than Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to be closed.

“ Trading Market ” shall mean the Nasdaq Global Market or any other Eligible Market, or any other national securities exchange, market or trading or quotation facility, in each case, on which the Parent Common Stock is then listed or quoted.

“ Trading Price ” shall mean the average closing sale price of a share of Parent Common Stock on the Nasdaq Global Market (or, if the Parent Common Stock is not then listed on the Nasdaq Global Market, any other national securities exchange, market or trading or quotation facility, in each case, on which the Parent Common Stock is then listed or quoted) for the 15-trading day period ending on the day immediately prior to the date on which such Trading Price is determined.

1.2 Certain Interpretations .

(a) When a reference is made in this Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement, unless otherwise indicated. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement, unless otherwise indicated. When a reference is made in this Agreement to Articles, such reference shall be to an Article of this Agreement, unless otherwise indicated.

(b) The words “include”, “includes” and “including”, when used herein, shall be deemed, in each case, to be followed by the words “without limitation”.

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(c) The headings contained in this Agreement are for reference purposes only and shall not affect, in any way, the meaning or interpretation of this Agreement.

(d) References to the Subsidiaries of an entity shall be deemed to include all direct and indirect Subsidiaries of such entity.

(e) The parties hereto agree that they have been represented by legal counsel during the negotiation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document shall be construed against the party drafting such agreement or document.

ARTICLE II

THE MERGER

2.1 The Merger . At the Effective Time, and subject to and upon the terms and conditions of this Agreement and the applicable provisions of the DGCL, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation and as a wholly-owned subsidiary of Parent. The Company, as the surviving corporation after the Merger, is sometimes referred to herein as the “ Surviving Corporatio n ”.

2.2 Closing and Effective Time . Unless this Agreement is earlier terminated pursuant to Article VIII , as promptly as practicable following the satisfaction or waiver of the conditions set forth in Article VII (other than those conditions which, by their terms, are to be satisfied or waived at the Closing), the parties hereto shall consummate the Merger and the other transactions contemplated hereby at a closing (the “ Closin g ”) to occur at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 12235 El Camino Real, Suite 200, San Diego, California, 92130, unless another time or place is mutually agreed upon in writing by Parent, Merger Sub and the Company. The date upon which the Closing shall actually occur shall be referred to herein as the “ Closing Dat e ”. On the Closing Date, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the “ Certificate of Merger ”) in customary form and substance with the Secretary of State of the State of Delaware in accordance with the applicable provisions of the DGCL (the time of acceptance of such filing by the Secretary of State of the State of Delaware shall be referred to herein as the “ Effect ive Time ”).

2.3 Legal Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided under the applicable provisions of the DGCL. 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.

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2.4 Certificate of Incorporation and Bylaws.

(a) Certificate of Incorporation . Unless otherwise determined by Parent prior to the Effective Time, as of the Effective Time, the Certificate of Incorporation of the Company shall be amended and restated in its entirety to read the same as the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, and such amended and restated Certificate of Incorporation shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended in accordance with the DGCL and such Certificate of Incorporation.

(b) Bylaws . Unless otherwise determined by Parent prior to the Effective Time, as of the Effective Time, the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended in accordance with the DGCL, the Certificate of Incorporation of the Surviving Corporation and such Bylaws.

2.5 Directors and Officers.

(a) Directors . Unless otherwise determined by Parent prior to the Effective Time, the directors of the Company immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time, each to hold the office of a director of the Surviving Corporation in accordance with the provisions of the DGCL and the Certificate of Incorporation and Bylaws of the Surviving Corporation, until their successors are duly elected and qualified.

(b) Officers . Unless otherwise determined by Parent prior to the Effective Time, the officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation as of the Effective Time, each to hold office in accordance with the provisions of the Bylaws of the Surviving Corporation, until their successors are duly appointed and qualified.

2.6 Capital Stock of Constituent Corporations.

(a) Merger Sub Capital Stock . Each share of capital stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and non-assessable share of corresponding capital stock of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares of capital stock of Merger Sub shall continue to evidence ownership of such shares of corresponding capital stock of the Surviving Corporation.

(b) Company Capital Stock . Immediately prior to the Effective Time, (i) each share of each series of Preferred Stock held by Stockholders that is issued and outstanding (other than Dissenting Shares) will be converted into Company Common Stock and (ii) subject to Section 2.6(e), each Company Warrant shall be deemed exercised on a cashless basis and converted into Company Common Stock in accordance with its terms. Then, subject to the terms of this Agreement (including Sections 2.6(e) , (f) and Section 2.8 ), at the Effective Time, each share of Company Common Stock that is issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares) shall, by virtue of the Merger and without the need for any further action on the part of the holder thereof (except as expressly provided herein), be converted into and represent the right to receive (without interest) a pro rata share, based on shares of Company Common Stock issued and outstanding immediately prior to the Effective Time, of an aggregate number of shares of validly issued, fully paid and non-assessable Parent Common Stock equal to the quotient obtained by dividing (i) $18,000,000 multiplied by the Minority Percentage by (ii) $0.10 (the “ Merger Shares ”).

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(c) Parent- or Company-Owned Company Capital Stock . Notwithstanding Section 2.6(b) , each share of Company Capital Stock held by Parent or the Company immediately prior to the Effective Time shall be cancelled and extinguished without any conversion thereof or consideration paid therefor.

(d) Company Options .

(i) Company Options . At the Effective Time, each then outstanding Company Option, whether or not exercisable at the Effective Time and regardless of its exercise price, will be assumed by Parent. Each Company Option assumed by Parent under this Agreement will continue to have, and be subject to, its original terms and conditions, as set forth in the documents evidencing such Company Option (including the Company’s Incentive Stock Option Plan, as amended, and any stock option agreement), in effect immediately prior to the Effective Time (including any repurchase rights or vesting provisions), except that (i) each such Company Option will be exercisable (or will become exercisable in accordance with its terms) for that number of whole shares of Parent Common Stock equal to the product of the number of shares of Common Stock that were issuable upon exercise of such Company Option immediately prior to the Effective Time multiplied by the Option Exchange Ratio (defined below), rounded down to the nearest whole number of shares of Parent Common Stock and (ii) the per share exercise price for the shares of Parent Common Stock issuable upon exercise of such assumed Company Option will be equal to the quotient determined by dividing the exercise price per share of Company Common Stock at which such Company Option was exercisable immediately prior to the Effective Time by the Option Exchange Ratio, rounded up to the nearest whole cent. Each assumed Company Option shall be vested immediately following the Effective Time as to the same percentage of the total number of shares subject thereto as it was vested immediately prior to the Effective Time, except to the extent that such Company Option, by its terms as of the Effective Time, provides for acceleration of vesting upon the Effective Time. For purposes of this Agreement, “ Option Exchange Ratio ” shall mean a fraction equal to (A) the Per Company Common Share Merger Consideration divided by (B) the volume-weighted average Closing Price for the 15-Trading Day period immediately preceding the Closing Date. At least 10 days prior to the Effective Time, the Company shall notify each holder of Company Options that they will be assumed by Parent in accordance with this Section 2.6(d)(i) and shall obtain the written consent of each holder of Company Options to such assumption by Parent.

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(ii) Incentive Stock Options . The conversion of Company Options provided for in Section 2.6(d)(i) , with respect to any Company Option which is intended to be an “incentive stock option” (as defined in Section 422 of the Code), shall be effected in a manner consistent with Section 424(a) of the Code.

(e) Company Warrants . At least 10 days prior to the Effective Time, the Company shall notify each holder of Company Warrants that Company Warrants will not be assumed and converted by Parent or Merger Sub and that, therefore, all Company Warrants will be deemed exercised on a cashless basis immediately prior to the Effective Time and converted into Company Common Stock in accordance with their terms.

(f) Certificate Legends . The certificates evidencing shares of Parent Common Stock to be issued pursuant to this Section 2.6 shall bear the following legend (in addition to any other legend required by law):

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO, (II) IN COMPLIANCE WITH RULE 144 OR (III) PURSUANT TO AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

(g) Fractional Shares . Notwithstanding anything to the contrary set forth herein, no fraction of a share of Parent Common Stock will be issued. In lieu thereof, each Stockholder who would otherwise be entitled to a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock to be received by such Stockholder) shall be entitled to receive from Parent one additional whole share of Parent Common Stock.

(h) Adjustments . The definitions above shall be adjusted to reflect fully the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Parent Common Stock), or other distribution in respect of Parent Common Stock, reorganization, recapitalization or other like change with respect to Parent Common Stock occurring after the date hereof and prior to the Effective Time.

2.7 Dissenting Shares.

(a) Notwithstanding any other provisions of this Agreement to the contrary, any shares of Company Capital Stock (“ Dis senting Shares ”) held by a Stockholder who has not effectively withdrawn or lost such Stockholder’s dissenters’ rights under the DGCL or Chapter 13 of the CGCL, as applicable, shall not be converted into, or represent a right to receive, the consideration for Company Capital Stock set forth in Section 2.6 hereof, but such Stockholder shall only be entitled to such rights as are provided by the DGCL or CGCL, as applicable.

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(b) Notwithstanding the provisions of Section 2.7(a) , if any holder of Dissenting Shares shall effectively withdraw or lose (through failure to perfect or otherwise) such holder’s dissenters’ rights under the DGCL or CGCL, as applicable, then, as of the later of the Effective Time and the occurrence of such event, such holder’s shares shall automatically be converted into and represent only the right to receive the consideration for Company Capital Stock, as applicable, set forth in Section 2.6 , without interest thereon, upon surrender of the Certificate representing such Dissenting Shares.

2.8 Exchange of Certificates.

(a) Exchange Agent . Mellon Investor Services LLC shall serve as the exchange agent (the “ Exchange Ag ent ”) for the Merger.

(b) Parent to Provide Merger Shares . Promptly after the Effective Time, Parent shall make available to the Exchange Agent, for exchange in accordance with this 0 , the Merger Shares issuable pursuant to Section 2.6(b) .

(c) Exchange Procedures . On or promptly after the Effective Time, and in any event within 20 business days after the Effective Time, Parent shall mail, or cause to be mailed, to each holder of record of shares of Company Common Stock (the certificates evidencing such shares being referred to herein as a “ Certificate ” and, collectively, as “ Certificates ”), at the address set forth opposite each such holder’s name on the Spreadsheet, a letter of transmittal in customary form and substance (which shall specify that delivery shall be effected, and risk of loss and title shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form, and have such other provisions as Parent and the Company may reasonably specify, and contain an agreement to be bound by the indemnification provisions hereof) and instructions for use in effecting the surrender of Certificates in exchange for shares of Parent Common Stock pursuant to Section 2.6 . Upon surrender of a Certificate for cancellation to the Exchange Agent, or 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 holder of such Certificate shall be entitled to receive from the Exchange Agent, in exchange therefor, a certificate representing the number of whole shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.6(b) . Until so surrendered, each Certificate outstanding after the Effective Time will be deemed for all corporate purposes to evidence only the right to receive the Merger Shares pursuant to Section 2.6 .

(d) Distributions With Respect to Shares Not Surrendered . No dividends or other distributions declared or made after the Effective Time with respect to shares of Parent Common Stock with a record date after the Effective Time will be paid to the holder of any Certificate that has not been surrendered with respect to the shares of Parent Common Stock represented thereby until the holder of record of such Certificate shall surrender such Certificate to the Exchange Agent in accordance with this Section 2.8 . Subject to applicable law, following surrender of any such Certificate, there shall be paid to the holder of record of the certificates representing whole shares of Parent Common Stock issued in exchange for the surrender of such Certificate, without interest, at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock.

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(e) Transfers of Ownership . If any certificate for shares of Parent Common Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered on the books and records of the Company and as set forth in the Spreadsheet, it will be a condition of the issuance or delivery thereof that the Certificate so surrendered will be properly endorsed and otherwise in proper form for transfer and that the person requesting such exchange will have (i) paid to Parent, or any agent designated by Parent, any transfer or other Taxes required by reason of the issuance of a certificate for shares of Parent Common Stock in any name other than that of the registered holder of the Certificate surrendered or (ii) established to the satisfaction of Parent, or any agent designated by Parent, that such Tax has been paid or is not payable.

(f) No Liability . Notwithstanding anything to the contrary in this Section 2.8 , none of the Exchange Agent, Parent, the Surviving Corporation or any other party hereto shall be liable to a holder of shares of Company Capital Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law.

2.9 No Further Ownership Rights in Company Capital Stock . The shares of Parent Common Stock paid in respect of the surrender for exchange of shares of Company Common Stock in accordance with the terms hereof shall be deemed to be full satisfaction of all rights pertaining to such shares of Company Common Stock, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of Company Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article II .

2.10 Lost, Stolen or Destroyed Certificates . In the event any Certificates evidencing shares of Company Common Stock shall have been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, such amount, if any, as may be required pursuant to Section 2.6 ; provided , however , that Parent may, in its discretion and as a condition precedent to the issuance thereof, require the holder of such lost, stolen or destroyed Certificates to either (i) deliver a bond in such amount as it may reasonably direct or (ii) provide an indemnification agreement, in form and substance acceptable to Parent, against any claim that may be made against Parent or the Exchange Agent with respect to the Certificates alleged to have been so lost, stolen or destroyed.

2.11 Tax Consequences . It is intended by the parties hereto that the Merger shall constitute a reorganization within the meaning of Section 368(a) 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 Treasury Regulations promulgated under the Code. None of the parties hereto has taken or will take any action, or knows of any fact or circumstance, that would be reasonably expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

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2.12 Further Assurances . If, at any time after the Effective Time, any further lawful 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, then the officers and directors of the Company, Parent and Merger Sub shall be fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful action.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub, subject to such exceptions as are specifically disclosed in the disclosure schedule (referencing the appropriate section and paragraph numbers) supplied as of the date hereof by the Company to Parent (the “ Company Disclosure Sch edule ”), as follows, as of the date hereof and as of the Effective Time:

3.1 Organization , Standing and Power . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the corporate power to own its properties and to carry on its business as currently conducted. The Company is duly qualified or licensed to do business and in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified or licensed would have a Company Material Adverse Effect. The Company has delivered a true and correct copy of its Certificate of Incorporation and Bylaws, each as amended to date and in full force and effect on the date hereof, to Parent.

3.2 Authority . The Company has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, and no further action is required on the part of the Company to authorize this Agreement and the transactions contemplated hereby. The board of directors of the Company has unanimously approved this Agreement, the Merger and the other transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the other parties hereto, constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

3.3 No Conflict s . The execution and delivery by the Company of this Agreement, and the consummation of the transactions contemplated hereby, will not (x) conflict with or result in any violation of or default under (with or without notice or lapse of time or both) or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (any such event, a “ Con flict ”) (i) any provision of the Certificate of Incorporation and Bylaws of the Company, (ii) any Contract to which the Company is a party or to which any of its properties or assets is subject or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its properties or assets or (y) result in the imposition or creation of any Lien upon, or with respect to, any of the assets owned or used by the Company.

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3.4 Consents . No consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or any third party, including a party to any Contract with the Company (so as not to trigger any Conflict), is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable securities laws, (ii) the requisite approval of the Stockholders and Parent’s stockholders, as contemplated herein, and (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware.

3.5 Company Capital Structure .

(a) The authorized capital stock of the Company consists of 10,000,000 shares of Common Stock and 3,350,000 shares of Preferred Stock, of which 2,600,000 are designated Series A Preferred Stock and 750,000 are designated Series B Preferred Stock. As of the date hereof, the capitalization of the Company is as set forth in Section 3.5(a) of the Disclosure Schedule. The total number of shares of Company Capital Stock outstanding as of immediately prior to the Effective Time (assuming the conversion, exercise or exchange of all securities convertible into, or exercisable or exchangeable for, shares of Company Capital Stock and the exercise of all Company Options) will be as set forth in Section 3.5(a) of the Company Disclosure Schedule. The Company Capital Stock is held by the persons with the domicile addresses and in the amounts set forth in Section 3.5(a) of the Disclosure Schedule. All outstanding shares of Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable and are not subject to preemptive rights created by statute, the Certificate of Incorporation or Bylaws of the Company or any agreement to which the Company is a party or by which it is bound. All outstanding shares of Company Capital Stock and all outstanding Company Options have been issued or repurchased (in the case of shares that were outstanding and repurchased by the Company or any Stockholder) in compliance with all applicable federal, state, foreign or local statutes, laws, rules and regulations, including federal and state securities laws. The Company has not, and will not have, suffered or incurred any Liability relating to, or arising out of, the issuance or repurchase of any shares of Company Capital Stock or Company Options or out of any agreements or arrangements relating thereto. There are no declared or accrued but unpaid dividends with respect to any shares of Company Capital Stock. The Company has no other capital stock issued or outstanding.

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(b) Except for the Company Stock Option Plan, the Company has never adopted or maintained any stock option plan or other plan providing for equity compensation of any person. Section 3.5(a) of the Company Disclosure Schedule sets forth, (i) for each outstanding Company Option, the name of the holder of such Company Option, the number and type of shares of Company Capital Stock issuable upon the exercise of such Company Option and the exercise price of such Company Option and (ii) for each outstanding Company Warrant, the name of the holder of such Company Warrant, the number and type of shares of Company Capital Stock issuable upon the exercise of such Company Warrant and the exercise price of such Company Warrant. Except for the Company Options and the Company Warrants, there are no options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which the Company is a party or by which it is bound, obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of Company Capital Stock or obligating the Company to grant, extend, accelerate the vesting of, or change the price of or otherwise amend or enter into, any such option, warrant, call, right, commitment or agreement. There are no outstanding or authorized stock appreciation, phantom stock or profit participation rights, or other similar rights, with respect to the Company. Except as contemplated hereby, there are no voting trusts or proxies, or other agreements or understandings, with respect to the voting stock of the Company. As a result of the Merger, Parent will be the sole holder of record and the sole beneficial holder of all issued and outstanding shares of Company Capital Stock and all rights to acquire or receive any shares of Company Capital Stock, whether or not such shares of Company Capital Stock are outstanding.

3.6 Subsidiaries . The Company does not have, and has never had, any subsidiaries or any “affiliated” companies (within the meaning of Rule 145 promulgated under the Securities Act) and does not otherwise own, and has never otherwise owned, any shares of capital stock or any interest in, and does not control, directly or indirectly, any other corporation, partnership, association, joint venture or other business entity.

3.7 Financial Statements . Section 3.7 of the Company Disclosure Schedule sets forth the Company’s unaudited balance sheet as of March 31, 2008, and the related unaudited statements of income, cash flow and stockholders’ equity for the three-month period then ended, and the unaudited balance sheets as of December 31, 2007 and 2006 and the related unaudited statements of income, cash flow and stockholders’ equity for the twelve-month periods then ended (the “ Company Financi al Statements ”). The Company Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated and consistent with each other (except that the Company Financial Statements do not contain footnotes and other presentation items that may be required by GAAP). The Company Financial Statements present fairly, in all material respects, the Company’s financial condition and operating results as of the dates and during the periods indicated therein. The Company’s unaudited balance sheet as of March 31, 2008, is referred to hereinafter in this Article III as the “ Company Curr ent Balance Sheet ”, and the date thereof is referred to herein as the “ Company Current Balance Sheet Date ”. The Company maintains, and shall continue to maintain, an adequate system of internal controls established and administered in accordance with GAAP.

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3.8 No Undisclosed Liabilities . Except as set forth in Section 3.8 of the Company Disclosure Schedule, the Company has no Liability (whether or not required to be reflected in financial statements in accordance with GAAP), except Liabilities (i) incurred reflected in the Company Current Balance Sheet or (ii) incurred in the ordinary course of business consistent with past practices since the Company Current Balance Sheet Date and which do not exceed $25,000 in the aggregate.

3.9 No Changes . Since the Company Current Balance Sheet Date through the date hereof, except with respect to the transactions contemplated hereby, (i) the business of the Company has been conducted in the ordinary course and consistent with past practices, (ii) there has not been any employment dispute, including any claims or matters raised by any individuals or any workers’ representative organization or union regarding labor trouble or claim of wrongful discharge or other unlawful employment or labor practice or action with respect to the Company, and (iii) there has not been any destruction of or damage to, or loss of, any material assets or business of the Company or any significant customer or significant supplier (whether or not covered by insurance).

3.10 Tax es

(a) As of the Closing Date, the Company will have (i) prepared and timely filed all material federal, state, local and foreign returns for the tax year ended December 31, 2007 and all other required federal, state, local and foreign returns, estimates, information statements and reports (“ Retur ns ”) relating to any and all Taxes concerning or attributable to the Company or its operations, and all such Returns are, or will be, true and correct and have been, or will be, completed in accordance with applicable law and (ii) timely paid all material Taxes it is required to pay.

(b) As of the Closing Date, the Company will have timely paid or withheld with respect to its employees all federal, state and foreign income taxes and social security charges and similar fees, including under the Federal Insurance Contribution Act and the Federal Unemployment Tax Act, and all other Taxes required to be withheld, and will have timely paid such Taxes withheld over to the appropriate authorities.

(c) There is no Tax deficiency outstanding, assessed or proposed against the Company, and the Company has not executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax.

(d) No audit or other examination of any Return of the Company is presently in progress, nor has the Company been notified of any request for such an audit or other examination.

(e) The Company has made available to Parent or its legal counsel copies of all Returns for the Company filed for all periods since its inception.

(f) There are (and immediately following the Effective Time, there will be) no Liens on the assets of the Company relating to or attributable to Taxes, other than Liens for Taxes not yet due and payable.

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(g) None of the Company’s assets is treated as “tax-exempt use property” within the meaning of Section 168(h) of the Code.

(h) The Company has (i) never been a member of an affiliated group (within the meaning of Section 1504(a) of the Code) filing a consolidated federal income Tax Return (other than a group, the common parent of which was the Company), (ii) never been a party to any Tax sharing, indemnification or allocation agreement and (iii) no Liability for the Taxes of any person (other than the Company) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or agreement or otherwise.

(i) The Company has not been, at any time, a “United States Real Property Holding Corporation” within the meaning of Section 897(c)(2) of the Code.

(j) No adjustment relating to any Return filed by the Company has been proposed formally or, to the Knowledge of the Company, informally, by any Tax authority to the Company or any representative thereof.

(k) The Company has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code.

(l) &nb

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