AGREEMENT AND PLAN OF MERGER BY AND AMONG AMERICAN MEDICAL SYSTEMS, INC.OAK MERGER CORP. OVION INC. AND THE OTHER PARTIES HERETO DATED AS OF JUNE 3, 2005

1.1  

The Merger . At the Effective Time (as defined below) and upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “ DGCL ”), Merger Subsidiary shall be merged with and into the Company, and, following the merger, the Company shall continue as the surviving corporation (the “ Surviving Corporation ”), the separate corporate existence of Merger Subsidiary shall cease and the Surviving Corporation shall continue to be governed by the laws of the State of Delaware (the “ Merger ”).

1.2  

Effective Time . Subject to the terms and conditions set forth in this Agreement, on the Closing Date (as defined below) the Company and Merger Subsidiary will file, or cause to be filed, with the Secretary of State of the State of Delaware a Certificate of Merger, in the form as required by, and executed and acknowledged in accordance with, the applicable provisions of the DGCL, and substantially in the form attached hereto as Exhibit A (the “ Certificate of Merger ”). The Merger shall become effective at 3 p.m. Central Standard Time on the date the Certificate of Merger is filed or, if agreed to by the

Parent and the Company, such later date or time set forth in the Certificate of Merger (the “ Effective Time ”).

1.3  

Closing of the Merger . Unless this Agreement shall have been terminated and the transactions contemplated herein abandoned pursuant to Article 7 hereof, the closing of the Merger (the “ Closing ”) will take place on a date (the “ Closing Date ”) to be specified by Parent and the Company which shall be no later than the second business day after satisfaction or waiver of the latest to occur of the conditions set forth in Articles 5 and 6 (other than delivery of items to be delivered at the Closing and other than those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the delivery of such items and the satisfaction or waiver of such conditions at the Closing), at 10:00 a.m., local time, at the offices of Oppenheimer, Wolff & Donnelly LLP, 45 South Seventh Street, Suite 3400, Minneapolis, Minnesota 55402, unless another time, date, place or manner (e.g., by facsimile exchange of signature pages with originals to follow by overnight delivery) is agreed to by the parties hereto. The parties will use commercially reasonable efforts to consummate the Closing as soon as the closing conditions in Articles 5 and 6 are satisfied or waived; provided , however , that in no event shall the Closing occur later than the Termination Date. If the Closing has not occurred by the fiftieth (50 ^th ) day after the Company has delivered a right of first refusal notice to Conceptus pursuant to Section 5.1 of the Settlement and License Agreement, Parent shall advance the Company an additional $300,000 on the fifty-first (51 ^st ) day to cover the costs and expenses of the Company’s operations through Closing (the “ Supplemental Advance ”).

1.4  

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

1.5  

Certificate of Incorporation of the Surviving Corporation . The form of Certificate of Incorporation of Merger Subsidiary, as amended, attached hereto as Exhibit B , shall be the Certificate of Incorporation of the Surviving Corporation until thereafter further amended in accordance with Applicable Law, except that the name of the Surviving Corporation shall be Ovion Inc.

1.6  

Bylaws of the Surviving Corporation . The Bylaws of Merger Subsidiary as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until thereafter amended in accordance with Applicable Law, except that the name of the Surviving Corporation shall be Ovion Inc.

1.7  

Directors and Officers of the Surviving Corporation . The directors and officers of Merger Subsidiary immediately prior to the Effective Time shall be the directors and officers respectively, of the Surviving Corporation until their respective successors shall be duly elected and qualified.

1.8  

Initial Merger Consideration . Subject to Section 1.11 (Dissenting Shares) and Section 8.6 (Right of Set-Off), Parent shall pay for all of the Company Common Stock, Company Preferred Stock, Company Stock Options and Company Warrants issued and outstanding immediately prior to the Effective Time the consideration set forth in this Section 1.8 as follows:

(a)  

Parent shall advance Three Hundred Thousand Dollars ($300,000) as a third loan to fund the ongoing operation of the Company (the “ Third Loan ” and, together with the First Loan and the Second Loan, the “ Loans ”) upon execution of this Agreement, unless Parent has previously advanced the Third Loan to the Company.

(b)  

At Closing, Parent shall pay Ten Million Dollars ($10,000,000) (the “ Initial Payment ”), plus or minus, as the case may be, the Purchase Price Adjustment, if any (as defined in section 1.8(c)) (as so adjusted, the “ Initial Merger Consideration ”), which shall be paid by Parent to the Persons and in the amounts as follows: (x) One Million Dollars ($1,000,000) (the “ Escrow Funds ”) to the Escrow Agent to be held in escrow to secure any indemnification obligation of the Stockholders under Section 8.2; (y) Two Hundred Eighty Thousand Five Hundred Dollars ($280,500), in the aggregate, to the persons and in the amounts as set forth in Section 2.5 of the Disclosure Schedule, in partial repayment of the Bridge Loans; and (z) the balance of the Initial Merger Consideration, less any withholding described in 4.11(g), in accordance with the terms of the Payment Agreement (such balance payable to the Stockholders at Closing is sometimes referred to herein as the “ Net Initial Merger Consideration ”). The Escrow Funds shall not be distributed to the Stockholders until twelve (12) months after the Effective Time and shall only be distributed in accordance with the terms and conditions of the Escrow Agreement. In the event that Parent shall have perfected, prior to the expiration of such twelve- (12-) month period, a claim for indemnification pursuant to Section 8.4, the Stockholders’ Representative and the Parent shall endeavor in good faith to determine a reasonable estimate of the maximum amount of such claim and shall instruct the Escrow Agent to deliver any excess amount of Escrow Funds to the Payment Agent for distribution to the Stockholders in accordance with the Escrow Agreement.

(c)  

The Initial Payment shall be adjusted (the “ Purchase Price Adjustment ”) as follows: (A) decreased by (i) the amount of the Loans; (ii) the amount of consideration that would have been payable to Dissenting Stockholders (as defined below) if they had not perfected their rights as Dissenting Stockholders; (iii) the amount, if any, by which Transaction Expenses exceed $150,000; (iv) any amounts paid prior to Closing in settlement of the Musket Litigation; (v) the Supplemental Advance, if any; and (vi) the aggregate amount of the employee bonuses payable at Closing, as set forth in Section 2.8(j) of the Disclosure Schedule; and (B) increased by (i) the Closing Capital and (ii) that portion of the Supplemental Advance, if any, that the Company spends on operations in the ordinary course of business, consistent in nature and amount with past practice, after having spent all other cash resources available to the Company following

advancement by Parent of the Third Loan. “ Closing Capital ” shall mean the amount of cash on hand as of the Closing, excluding amounts received from the exercise of options and warrants, if any; provided , however , that the Company continues to pay its liabilities and make cash disbursements through the Closing in the ordinary course of business, consistent in timing, nature and amount with past practice.

(d)  

Not less than three (3) business days prior to the Closing, the Company shall prepare and deliver to Parent a good faith written estimate of the Initial Merger Consideration, setting forth, in reasonable detail, a calculation of the estimated: (i) Purchase Price Adjustment, including estimated Transaction Expenses; and (ii) Closing Capital.

1.9  

Contingent Merger Consideration . As additional consideration for the Merger and subject to the conditions set forth in this Section 1.9, Section 1.11 (Dissenting Shares), Section 4.11(g) (Tax Withholding) and Section 8.6 (Right of Set-Off), Parent shall make the following additional payments (collectively, the “ Contingent Merger Consideration ” and, together with the Initial Merger Consideration, the “ Merger Consideration ”) to the Payment Agent for distribution to those Stockholders who are not otherwise Dissenting Stockholders:

(a)  

If the Company or Parent (i) receives IDE approval from the U.S. Food and Drug Administration (the “ FDA ”) to conduct a clinical trial of the Product, and (ii) commences an FDA-approved pivotal clinical trial with respect to the Product as demonstrated by the first successful placement of the Product in both ostia using flexible hysteroscopy (the “ Clinical Trial ”) (the “ First Milestone ”), Parent shall pay an additional Five Million Dollars ($5,000,000), less (i) the Legal Advance Funds, if any, advanced to the Company pursuant to Section 4.12, (ii) the amounts owed under the Bridge Loans on the First Milestone within fifteen (15) days of completing the First Milestone and (iii) the aggregate amount of the employee bonuses payable at the First Milestone, as set forth in Section 2.8(j) of the Disclosure Schedule;

(b)  

If the Company or Parent completes enrollment of and placement of the Product in the minimum number of patients in the Clinical Trial required for a PMA submission (the “ Second Milestone ”), Parent shall pay an additional Five Million Dollars ($5,000,000), less (i) the amounts owed under the Bridge Loans on the Second Milestone within fifteen (15) days of completing the Second Milestone and (ii) the aggregate amount of the employee bonuses payable at the Second Milestone, as set forth in Section 2.8(j) of the Disclosure Schedule;

(c)  

If the Company or Parent receives PMA approval, including but not limited to final labeling, from the FDA to market the Product for female sterilization (the “ Third Milestone ” and the date such approval is received, the “ PMA-Approval Date ”), Parent shall pay an additional Ten Million Dollars ($10,000,000) within fifteen (15) days of completing the Third Milestone; and

(d)  

After the Third Milestone is successfully completed, Parent will pay an amount equal to one times Net Sales of the Product for the twelve- (12-) month period (the “ Final Contingent Payment ” and, together with the First Milestone, the Second Milestone and the Third Milestone, the “ Milestones ”) beginning on the later of: (A) the first fiscal quarter of Parent commencing more than six (6) months after the PMA-Approval Date or (B) January 1, 2008 (in either case, the “ Contingent Period ”).

(i)  

If one or more of the Interference Requests have resulted in the U.S. Patent and Trademark Office declaring an interference that is pending at the end of the Contingent Period, Parent may pay all or a portion of the Final Contingent Payment, if any, to the Escrow Agent in an amount not to exceed the Maximum Interference Liability, minus any amounts previously set-off with respect to one or more of the Interference Requests (the “ Additional Escrow Funds ”) until final resolution of such interference.

(ii)  

In the event of a catastrophic event, such as a war, terrorist attack, tornado, earthquake, or similar extraordinary event, or an FDA inspection, shutdown, or recall that causes the manufacturing of the Product to be suspended for five days or more and such suspension results in Parent being unable to fill orders for the Product, the Contingent Period shall be extended for the period of time that Parent is unable to fill orders for the Product.

(e)  

Parent shall deliver to the Stockholders’ Representative, no later than sixty (60) days following the last day of the Contingent Period, a statement with reasonable detail reflecting Parent’s calculation of Net Sales for the Contingent Period (the “ Contingent Calculation ”). The Stockholders’ Representative shall not distribute these statements to any Person other than such advisors and consultants as may be necessary to assist the Stockholders’ Representative in reviewing the Contingent Calculation and any accompanying information. The Contingent Calculation will be deemed to be accepted by the Stockholders’ Representative and shall be conclusive for purposes of determining the Contingent Calculation, unless the Stockholders’ Representative shall have delivered to Parent within fifteen (15) days following delivery of the Contingent Calculation a written statement objecting to any of the information contained in the Contingent Calculation, specifying in reasonable detail the amount in dispute and accompanied by detailed schedules and work papers providing reasonable support for such determination. With respect to any undisputed portion of the Contingent Calculation (the “ Undisputed Contingent Amount ”), Parent shall pay fifty percent (50%) of such Undisputed Contingent Amount (the “ Initial Contingent Payment Amount ”) to the Payment Agent for distribution to the Stockholders pursuant to Section 1.9(g).

(f)  

The Stockholders’ Representative may cause an audit to be made of those books and records of Parent and the Surviving Corporation that are reasonably necessary

to review and audit the information delivered pursuant to Section 1.9(e) and created in connection with the Contingent Calculation. Any such audit shall be conducted only by an independent certified accountant selected by the Stockholders’ Representative and reasonably acceptable to Parent, after prior written notice to Parent, and shall be conducted during regular business hours at Parent’s offices and in such a manner so as not to interfere with Parent’s normal business activities. Parent agrees to permit such accountants, during normal business hours, to have reasonable access to, and to examine and make copies of, those books and records of Parent and the Surviving Corporation that are reasonably necessary to review and audit the Contingent Calculation. Neither the Stockholders’ Representative nor such auditors will have the right to review or audit any other books and records of Parent. In no event shall more than one audit be conducted, nor shall the records supporting any statements be audited more than once for the same purpose. In the event any such audit reveals any discrepancy less than five percent (5%) of the Net Sales for the period audited, the Stockholders shall pay for the reasonable third party costs and expenses of such audit. In the event any such audit reveals any discrepancy greater than or equal to five percent (5%) of the Net Sales for the period audited, Parent shall pay for the reasonable third party costs and expenses of such audit. The determination of the auditors with respect to the Contingent Calculation (the “ Final Contingent Calculation ”) shall be final and binding upon the parties hereto.

(g)  

Subject to Section 8.6, within fifteen (15) days following final determination of the Contingent Calculation pursuant to Section 1.9(e) or 1.9(f), Parent shall pay to the Payment Agent for distribution to the Stockholders an amount equal to either (i) the Contingent Calculation, in the case in which no dispute has arisen in connection with the Contingent Calculation or (ii) the amount obtained by subtracting (A) the Initial Contingent Payment Amount from (B) the Final Contingent Calculation.

1.10  

Cancellation and Conversion of Company Securities at the Effective Time . On or prior to Closing, all outstanding shares of Company Preferred Stock shall be converted into Company Common Stock in accordance with the Company’s Certificate of Incorporation and Applicable Law. As of the Effective Time, by virtue of the Merger and without any action on the part of any holder of any share of capital stock of the Company or Merger Subsidiary:

(a)  

Subject to the terms and conditions hereof, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than (i) Company Common Stock held in the Company’s treasury, (ii) Company Common Stock held at the Effective Time by Parent, Merger Subsidiary or any Affiliate of Parent, and (iii) Dissenting Shares) shall automatically be converted into the right to receive Merger Consideration in cash, payable to the holders thereof upon surrender of the Certificates (as defined in Section 1.12(a) below) in accordance with their Percentage Interest, as set forth in Schedule 1.10 .

(b)  

Each Company Stock Option and each Company Warrant that is outstanding immediately prior to the Effective Time, whether or not vested or exercisable, shall, effective immediately prior to the Effective Time, be cancelled and the holder of such Company Stock Option or Company Warrant, as applicable, shall have the right to receive the Merger Consideration minus the exercise price for such Company Stock Option or Company Warrant, that is due such holder based on the number of shares vested or exercisable as of the Effective Time, in accordance with their Percentage Interest, as set forth in Schedule 1.10 . Except as otherwise agreed to in writing by the parties hereto, the Company Stock Option Plans and any other plan, program or arrangement providing for the issuance or grant of any interest in respect of the capital stock of the Company shall terminate as of the Effective Time, and the Company shall ensure that following the Effective Time no holder of a Company Stock Option or Company Warrant shall have any right thereunder to acquire any equity securities of the Company, Parent or Merger Subsidiary.

(c)  

Each share of the common stock, par value $.01 per share, of Merger Subsidiary (“ Merger Subsidiary Common Stock ”), issued and outstanding at the Effective Time of the Merger shall be converted into one (1) share of common stock, par value $0.01 per share, of the Surviving Corporation (“ Surviving Corporation Common Stock ”).

(d)  

Each share of Company Common Stock held in the treasury of the Company and each share of Company Common Stock held by Parent, Merger Subsidiary or any Affiliate of Parent, Merger Subsidiary or the Company immediately prior to the Effective Time will, by virtue of the Merger and without any action on the part of Merger Subsidiary, the Company or the holder thereof, be canceled, retired and cease to exist without payment of any consideration therefore and without any conversion thereof.

(e)  

At least three days prior to Closing, the Company shall prepare and deliver to Parent Schedule 1.10 .

1.11  

Dissenting Shares .

(a)  

Notwithstanding any provision of this Agreement to the contrary, any shares of Company Capital Stock issued and outstanding immediately prior to the Effective Time that are held by any holder of shares of Company Capital Stock that has not voted in favor of the Merger (if entitled to vote) and has properly exercised and perfected appraisal rights in accordance with either Section 262 et. seq. of the DGCL or Section 1300 et seq. of the California Corporations Code (the “ CCC ”) (such holders are referred to as “ Dissenting Stockholders ” and such shares are referred to as “ Dissenting Shares ”) will not be converted into the right to receive the Merger Consideration, but will become entitled to the right to receive such consideration as may be determined to be due to the holders of such Dissenting Shares pursuant to the DGCL or the CCC); provided , however , that any holder of Dissenting Shares who will have failed to perfect or who effectively will have

withdrawn or lost such rights of appraisal under the DGCL or the CCC will forfeit the right to appraisal of such shares of Company Capital Stock, and such shares of Company Capital Stock will no longer be Dissenting Shares and, as of the Effective Time, will be deemed to have been converted into the right to receive the Merger Consideration.

(b)  

The Company will give Parent and Merger Subsidiary prompt notice of any written demands for appraisal, withdrawals of demands for appraisal and any other related instruments received by the Company and, Parent will have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company will not, except with the prior written consent of Parent, which consent shall not be unreasonably withheld, delayed or conditioned, make any payment with respect to, or settle or offer to settle, any such demands. Notwithstanding anything to the contrary in this Section 1.11 if (i) the Merger is terminated, rescinded or abandoned or (ii) if the Stockholders revoke the authority to effect the Merger, then the right of any Stockholder to be paid the fair value of such Stockholder’s shares of Company Capital Stock will cease. The Surviving Corporation will comply with all obligations of the DGCL and CCC with respect to Dissenting Stockholders.

1.12  

Escrow Procedure; Exchange of Certificates .

(a)  

U.S. Bank National Association or such other bank as the parties may agree shall act as the payment agent (in such capacity, the “ Payment Agent ”), pursuant to a payment agreement to be entered into between the Company and the Payment Agent (the “ Payment Agreement ”), and escrow agent (in such capacity, the “ Escrow Agent ”), pursuant to the Escrow Agreement, for the benefit of the holders of Company Common Stock and Company Preferred Stock for the purpose of paying the Merger Consideration upon surrender of certificates which immediately prior to the Effective Time represented Company Common Stock or Company Preferred Stock (in either case, the “ Certificates ”).

(b)  

At the Closing, Parent shall deposit, or shall cause to be deposited, with the Payment Agent pursuant to the Payment Agreement, for the benefit of the Stockholders, cash in U.S. dollars in an amount equal to the Net Initial Merger Consideration.

(c)  

To the extent that sums are released by the Payment Agent or the Escrow Agent to the Stockholders or the Parent in accordance with this Agreement or the Escrow Agreement, any accumulated interest shall be distributed in accordance with the Payment Agreement or the Escrow Agreement, as the case may be.

(d)  

As soon as reasonably practicable after the Effective Time, the Payment Agent shall mail to each holder of record of Certificates: (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Payment Agent and shall be in such form and have such other provisions as Parent and the

Company may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for a cash payment of the proper Merger Consideration when and if it becomes payable under this Agreement. Upon surrender of a Certificate for cancellation to the Payment Agent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor by check or wire transfer, as the case may be, an amount equal to the proper Merger Consideration when and if it becomes payable under this Agreement, and the Certificate so surrendered shall forthwith be canceled. No interest shall be paid or accrued on any Merger Consideration upon the surrender of any Certificates. In the event of a transfer of ownership of Company Common Stock or Company Preferred Stock which is not registered in the transfer records of the Company, payment of the proper Merger Consideration when and if it becomes payable under this Agreement may be paid to a transferee if the Certificate representing such Company Common Stock or Company Preferred Stock, as applicable, is presented to the Payment Agent, accompanied by all documents that the Payment Agent may require to evidence and effect such transfer and by evidence that any applicable stock transfer or other taxes required as a result of such payment to a Person other than the registered holder of such shares have been paid. Until surrendered and exchanged as contemplated by this Section 1.12, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender an amount equal to the proper Merger Consideration when and if it becomes payable under this Agreement.

(e)  

In the event that any Certificate shall have been lost, stolen or destroyed, the Payment Agent will, upon the making of an affidavit of that fact by the holder claiming such Certificate to have been lost, stolen or destroyed, pay the proper Merger Consideration as would be required pursuant to this Agreement but for the failure to deliver such Certificate to the Payment Agent; provided , however , that the Surviving Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificate to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against the Surviving Corporation with respect to the Certificate alleged to have been lost, stolen or destroyed.

(f)  

The Merger Consideration paid upon the surrender of Certificates for exchange of Company Common Stock and Company Preferred Stock in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to such Company Common Stock and Company Preferred Stock. After the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Company Common Stock or Company Preferred Stock that 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 1, except as otherwise provided by Applicable Law.

(g)  

Notwithstanding Section 1.12(d), neither the Surviving Corporation nor Parent shall be liable to any holder of Company Common Stock or Company Preferred Stock for any Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

(h)  

To the extent permitted by Applicable Law, any amounts of Merger Consideration, including any Escrow Funds, Additional Escrow Funds and any Set-Off Amounts pursuant to Section 8.6, remaining unclaimed by any holder of Company Common Stock or Company Preferred Stock at the time the Escrow Agreement and Payment Agreement are terminated in accordance with their respective terms (or such earlier date immediately prior to such time as such amounts would otherwise escheat to or become property of any governmental entity) shall be delivered to Parent and shall become the property of the Parent, subject to the rights of any such Stockholder to claim such amounts from Parent.

2.1  

Corporate Organization and Power . The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all requisite corporate power and authority, and all governmental licenses, governmental authorizations, governmental consents and governmental approvals, required to carry on its business as now conducted and to own, lease and operate the assets and properties of the Company as now owned, leased and operated, except for any such governmental licenses, governmental authorizations, governmental consents and governmental approvals the failure to have would not have a Material Adverse Effect on the Company. The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in every jurisdiction in which the character or location of its properties and assets owned, leased or operated by the Company or the nature of the business conducted by the Company requires such qualification or licensing, except where the failure to be so qualified, licensed or in good standing in such other jurisdiction would not, individually or in the aggregate, have a Material Adverse Effect on the Company. The Company has heretofore delivered to Parent complete and accurate copies of its Certificate of Incorporation and Bylaws, as currently in effect. The

Disclosure Schedule contains a list of all jurisdictions in which the Company is qualified or licensed to do business.

2.2  

Subsidiaries . The Company does not have and has never had any subsidiaries. The Company does not own or control or have any capital, equity, partnership, participation or other ownership interest in any corporation, partnership, joint venture or other business association or entity.

2.3  

Authorization . The Company has the full corporate power and authority to enter into this Agreement and, subject to obtaining the necessary approval of its stockholders with respect to the Merger, to carry out the transactions contemplated herein. The Board of Directors of the Company have taken, and prior to the Closing the Stockholders will have taken, all action required by law, the Company’s Certificate of Incorporation and Bylaws and otherwise to duly and validly authorize and approve the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated herein and no other corporate proceedings on the part of the Company are, or will be, necessary to authorize this Agreement or to consummate the transactions contemplated hereby. The affirmative vote of holders of at least: (a) a majority of the outstanding             shares of Company Capital Stock, voting together as a class; (b) a majority of the outstanding             shares of Company Preferred Stock, voting separately as a class, and (c) a majority of the outstanding shares of Company Common Stock, voting separately as a class, are the only votes of the holders of any class or series of the Company’s capital stock necessary to approve and adopt this Agreement and to consummate the Merger. This Agreement has been, and the agreements, if any, required by Article 5 will be, duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligations of the Company, enforceable against it in accordance with their terms, subject to laws of general application relating to bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and rules of law governing specific performance, injunctive relief or other equitable remedies.

2.4  

Capitalization of the Company . The authorized capital stock of the Company consists of (a) 15,000,000 shares of Company Common Stock, 3,140,955 shares of which are issued and outstanding; and (b) 5,000,000 shares of Company Preferred Stock, 321,795 shares of which are issued and outstanding and convertible into 321,795 shares of Company Common Stock. All of the issued and outstanding shares of Company Capital Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. All issued and outstanding             shares of Company Capital Stock are owned (of record) solely by the Stockholders in the exact amounts as set forth in the Disclosure Schedule. There are 500,000 shares of Company Common Stock reserved for future issuance pursuant to Company Stock Plans, including 347,500 shares subject to outstanding Company Stock Options, and 106,983 shares of Company Preferred Stock subject to outstanding Company Warrants. There are no other outstanding (w) shares of capital stock or other voting securities of the Company, (x) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company, (y) options, warrants, conversion privileges, contracts, understandings, agreements or other rights to purchase or acquire from the Company, and, no obligations of the Company to issue, any

capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company, and (z) equity equivalent interests in the ownership or earnings of the Company or other similar rights (collectively, “ Company Securities ”). There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any Company Securities. Except as contemplated under Section 2.35, there are no stockholder agreements, voting trusts or other agreements or understandings to which the Company is a party or by which it is bound relating to the voting or registration of any shares of capital stock of the Company.

2.5  

Non-Contravention . Neither the execution, delivery and performance by the Company of this Agreement nor the consummation of the transactions contemplated herein will (a) contravene or conflict with the Certificate of Incorporation or Bylaws of the Company, (b) contravene or conflict with or constitute a violation of any provision of any Applicable Law binding upon or applicable to the Company, or any of the Company’s assets; (c) result in the creation or imposition of any Lien on any of the Company’s assets, other than Permitted Liens or (d) be in conflict with, constitute (with or without due notice or lapse of time or both) a default under, result in the loss of any material benefit under, or give rise to any right of termination, cancellation, increased payments or acceleration under any terms, conditions or provisions of any note, bond, lease, mortgage, indenture, license, contract, franchise, permit, instrument or other agreement or obligation to which the Company is a party, or by which any of their respective properties or assets may be bound, except in the case of clause (b) where such conflicts or other occurrences could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

2.6  

Consents and Approvals . No consent, approval, order or authorization of or from, or registration, notification, declaration or filing with (hereinafter sometimes separately referred to as a “ Consent ” and sometimes collectively as “ Consents ”) any individual or entity, including without limitation any Governmental Authority or Person, is required in connection with the execution, delivery or performance of this Agreement by the Company or the consummation by the Company of the transactions contemplated herein, other than the requirements of the DGCL for filing of appropriate documents to effect the Merger. The Company is the “acquired person” within the meaning of Rule 801.2(b) promulgated pursuant to the HSR Act and does not within the meaning of Rule 801.1 of the HSR Act directly or indirectly control (as defined in Rule 801.1(b)) any entities, trusts, partnerships or other business organizations. The Company had total assets as of the date of its last regularly prepared balance sheet (as determined in accordance with Rule 801.11 of the HSR Act) of less than Ten Million Seven Hundred Thousand Dollars ($10,700,000) and annual net sales for its most recent fiscal year (as determined in accordance with Rule 801.11 of the HSR Act) of less than Ten Million Seven Hundred Thousand Dollars ($10,700,000). There are no facts relating to the identity or circumstances of the Company that would prevent or materially delay obtaining any of the Consents.

2.7  

Financial Statements; Undisclosed Liabilities.

(a)  

The Company has delivered to Parent true, correct and complete copies of the unaudited balance sheet, as of April 30, 2005 of the Company (the “ Latest Balance Sheet ”) and the unaudited statements of income, stockholders’ equity and cash flows of the Company for the three-month period ended April 30, 2005 (such statements of income, stockholders’ equity and cash flows and the Latest Balance Sheet being herein referred to as the “ Latest Financial Statements ”). The Latest Financial Statements are based upon the information contained in the books and records of the Company and fairly and accurately present the financial condition of the Company as of the dates thereof and results of operations for the periods referred to therein. The Latest Financial Statements have been prepared in accordance with the income tax basis of accounting consistently applied.

(b)  

All accounts, books and ledgers related to the business of the Company are properly and accurately kept, are complete in all material respects, and there are no material inaccuracies or discrepancies of any kind contained or reflected therein. The Company does not have any of its records, systems, controls, data, or information recorded, stored, maintained, operated or otherwise wholly or partly dependent upon or held by any means (including any electronic, mechanical or photographic process, whether computerized or not) which (including all means of access thereto and therefrom) are not under the exclusive ownership (excluding licensed software programs) and direct control of the Company.

(c)  

Except as and to the extent reflected in the Latest Balance Sheet, the Company has no liabilities or obligations (whether accrued, absolute, contingent, unliquidated or otherwise, whether due or to become due, whether known or unknown, and regardless of when asserted) arising out of transactions or events heretofore entered into, or any action or inaction, or any state of facts existing, with respect to or based upon transactions or events heretofore occurring, except liabilities of not more than $150,000 in the aggregate that have arisen after the date of the Latest Balance Sheet in the ordinary course of business, consistent with past custom and practice (none of which is a liability for breach of contract, breach of warranty, violation of Applicable Law, tort, infringement, claim or lawsuit).

2.8  

Absence of Certain Changes . Except as otherwise authorized by this Agreement, since December 31, 2004, the Company has owned and operated its assets, properties and businesses in the ordinary course of business and consistent with past practice and there has not been:

(a)  

any change, effect, event, occurrence, state of facts or development that individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect;

(b)  

any declaration, setting aside or payment of any dividend or other distribution with respect to any shares of capital stock of the Company, or any repurchase, redemption or other acquisition by the Company (other than any wholly-owned subsidiary) of any outstanding shares of capital stock or other equity or debt securities of, or other ownership interests in, the Company;

(c)  

any split, combination or reclassification of any of its capital stock;

(d)  

any amendment of any provision of the Certificate of Incorporation, Bylaws or other governing documents of, or of any material term of any outstanding security issued by, the Company;

(e)  

any incurrence, assumption or guarantee by the Company of any indebtedness for borrowed money;

(f)  

any change in any method of accounting or accounting practice by the Company;

(g)  

issuance of any equity or debt securities of the Company other than pursuant to the Company Stock Option Plans, Company Stock Options or Company Warrants in the ordinary course of business and consistent with past practice;

(h)  

acquisition or disposition of assets material to the Company, taken as a whole, except for sales of inventory in the ordinary course of business consistent with past practice, any acquisition or disposition of capital stock of any third party, or any merger or consolidation with any third party, by the Company;

(i)  

any creation or assumption by the Company of any Lien except for Permitted Liens;

(j)  

any individual capital expenditure (or series of related capital expenditures) either involving more than Ten Thousand Dollars ($10,000) or outside the ordinary course of business;

(k)  

any material damage, destruction or loss (whether or not covered by insurance) from fire or other casualty to its tangible property;

(l)  

any material increase in the base salary of any officer or employee of the Company;

(m)  

any adoption, amendment, modification, or termination of any bonus, profit-sharing, incentive, severance or other similar plan for the benefit of any of its directors, officers or employees except as required by Applicable Law;

(n)  

entry by the Company into any joint venture, partnership or similar agreement with any person;

(o)  

any filing of any amended Tax Return, settlement of any Tax claim or assessment relating to the Company, payment of any estimated Taxes in excess of $10,000,

change in method of Tax accounting, or consent to the extension or waiver of the limitations period applicable to any claim or assessment with respect to Taxes; or

(p)  

any authorization of, or commitment or agreement to take any of, the foregoing actions except as otherwise permitted by this Agreement.

2.9  

Assets and Properties .

(a)  

The Company has good and valid right, title and interest in and to or, in the case of leased properties or properties held under license, good and valid leasehold or license interests in, all of its assets and properties, including, but not limited to, all of the machinery, equipment, terminals, computers, vehicles, and all other assets and properties (real, personal or mixed, tangible or intangible) reflected in the Latest Balance Sheet and all of the assets purchased or otherwise acquired since the date of the Latest Balance Sheet, except those assets and properties disposed of in the ordinary course of business after the date of the Latest Balance Sheet. The Company holds title to each such property and asset free and clear of all Liens, except Permitted Liens.

(b)  

The (i) current use and operation of all real property is in compliance with all Applicable Laws (including without limitation laws relating to parking, zoning and land use) and public and private covenants and restrictions except where non-compliance would not be reasonably likely to have a Material Adverse Effect on the Company, (ii) Company has not received written notice of noncompliance with any Applicable Laws and (iii) utilities, access and parking, if any, for each such real property are adequate for the current use and operation of each such real property. There are no zoning, building code, occupancy restriction or other land-use regulation proceedings or any proposed change in any Applicable Laws, which could materially detrimentally affect the use or operation by the Company of any real property, nor has the Company received any written notice of any special assessment proceedings affecting the real property, or applied for any change to the zoning or land use status of the real property. The Company has obtained all licenses, permits, approvals, easements and rights of way (and all such items are currently in full force and effect) required from any Governmental Authority having jurisdiction over each real property or from private parties for the current use and operation of each real property except where the failure to obtain such licenses, permits, approvals, easements and rights of way would not be reasonably likely to have a Material Adverse Effect on the Company. Neither the Company, nor any Subsidiary is a foreign person, as the term foreign person is defined in Section 1445(f)(3) of the Code.

2.10  

Manufacturing and Marketing Rights . The Company has not granted rights to manufacture, produce, assemble, license, market, or sell the Product to any other person and is not bound by any agreement that affects the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell the Product.

2.11  

FDA and Regulatory Matters .

(a)  

The Company has obtained all necessary and applicable approvals, clearances, authorizations, licenses and registrations required by United States or foreign governments or government agencies, to permit the design, development, pre-clinical and clinical testing, manufacture, labeling, and distribution of its products in jurisdictions where it currently conducts such activities with respect to each product, but excluding Environmental Permits which are addressed in Section 2.22 below (collectively, the “ Company Licenses ”). The Company is in compliance in all material respects with the terms and conditions of each Company License. The Company is in compliance in all material respects with all Applicable Laws regarding registration, license, certification for each site at which a product is manufactured, labeled, or distributed. To the extent any product has been exported from the United States, the Company has exported such product in compliance in all material respects with Applicable Laws. All manufacturing operations performed by or on behalf of the Company have been and are being conducted in all material respects in compliance with the Quality Systems regulations of the FDA and, to the extent applicable to the Company, counterpart regulations in the European Union and all other countries where compliance is required. All non-clinical laboratory studies of products sponsored by the Company and intended to be submitted to regulatory authorities in support of regulatory clearance or approval, have been and are being conducted in compliance in all material respects with the FDA’s good Laboratory Practice for Non-Clinical Studies regulations (21 CFR Part 58) in the United States and, to the extent applicable to the Company, counterpart regulations in the European Union and all other countries. The Company is in compliance in all material respects with all applicable reporting requirements for all Company Licenses or plant registrations including, but not limited to, applicable adverse event reporting requirements in the United States and outside of the United States under Applicable Law. The Disclosure Schedule sets forth a list of all Company Licenses.

(b)  

The Company is in compliance in all material respects with all FDA and non-United States equivalent agencies and other Applicable Laws relating to the maintenance, compilation and filing of reports, including medical device reports, with regard to the Company’s products. The Disclosure Schedule sets forth a list of all applicable adverse event reports related to the Products, including any report filed under 21 CFR § 812.150(b).

(c)  

Neither the Company nor any Subsidiary has received any written notice or other written communication from the FDA or any other Governmental Authority alleging any violation of Applicable Law by the Company.

(d)  

There have been no recalls, field notifications or seizures ordered or adverse regulatory actions taken or, to the Company’s Knowledge, threatened by the FDA or any other Governmental Authority with respect to any of the Company’s products, including any facilities where any such products are produced,

processed, packaged or stored, and neither the Company nor any Subsidiary has within the last three years, either voluntarily or at the request of any Governmental Authority, initiated or participated in a recall of any product.

(e)  

The Company and each Subsidiary have conducted all of their clinical trials with reasonable care and in all material respects in accordance with all Applicable Laws and the stated protocols for such clinical trials.

(f)  

All filings with and submissions to the FDA and any corollary entity in any other jurisdiction made by the Company with regard to the Company’s products, were true, accurate and complete in all material respects as of the date made, and, to the extent required to be updated, as so updated remain true, accurate and complete in all material respects as of the date hereof, and do not materially misstate any of the statements or information included therein, or omit to state a material fact necessary to make the statements therein not misleading.

2.12  

Reimbursement/Billing .

(a)  

The Company is neither a provider nor a supplier under Medicare, Medicaid or any other government-sponsored health care program (collectively, “ Government Programs ”), and does not bill any Government Program or third party payor for its products.

(b)  

There is no pending, nor to the knowledge of Company, threatened, proceeding or investigation under any Government Program involving the Company.

(c)  

To Company’s actual knowledge, the Company has not arranged with or contracted with (by employment or otherwise) any person who is excluded from participation in any Government Program for the provision of items or services for which payment may be made under any such Government Program. None of the officers, directors, or managing employees (as such term is defined in 42 U.S.C. § 1320a-5(b)) of the Company, has been excluded from any Government Program or been subject to sanction pursuant to 42 U.S.C. § 1320a-7a or 1320a-8 or been convicted of a crime described at 42 U.S.C. § 1320a-7b.

(d)  

Neither the Company, any director, officer or employee of the Company, nor any agent acting on behalf of or for the benefit of any of the foregoing, has directly or indirectly in connection with the Company: (i) offered or paid any remuneration, in cash or in kind, to or made any financial arrangements with, any past, present or potential customers, past or present suppliers, patients, contractors or employees of third party payors or Government Programs in order to obtain business or payments from such persons other than in the ordinary course of business; (ii) given or agreed to give, any gift or gratuitous payment of any kind, nature or description (whether in money, property or services) to any customer or potential customer, supplier or potential supplier, contractor, third party payor or any other person other than in connection with promotional or entertainment activities in the ordinary course of business and in compliance with the

Company’s compliance program; or (iii) made any false entries on any of the Company’s books or records for any purpose prohibited by Applicable Law.

(e)  

Neither the Company, nor any director, officer or employee of the Company is a party to any contract to provide services, lease space or lease equipment to the Company with any physician, health care facility, hospital or other person who is in a position to make or influence referrals to the Company where such contract or provision of services or space is prohibited by Applicable Law.

2.13  

Compliance with Applicable Laws . The Company, and each of its officers, directors, agents and employees have complied in all material respects with all Applicable Laws, including, but not limited to, Applicable Laws relating to Government Programs and to billing and health care fraud (including the federal Anti-Kickback Law, 42 U.S.C. §1320a-7b, the Stark I and II Laws, 42 U.S.C. §1395nn, as amended, and the False Claims Act, 31 U.S.C. §3729 et seq . and any regulations related thereto, as well as with any similar state statutes). To the Company’s Knowledge, no claims have been filed against the Company alleging a violation of any Applicable Law. The Company is not a “covered entity” or a “business associate” within the meaning of the HIPAA Privacy Regulations.

2.14  

Government Inspections . The Company (i) is not a party to a Corporate Integrity Agreement with the Office of the Inspector General of the Department of Health and Human Services, (ii) has no reporting obligations pursuant to any settlement agreement entered into with any governmental body, (iii) to the Company’s Knowledge, has not been the subject of any Government Program investigation conducted by any governmental body, (iv) has not been a defendant in any qui tam /False Claims Act litigation (other than by reason of an unsealed complaint of which the Company has no knowledge), and (v) has not been served with or received any search warrant, subpoena, civil investigation demand, contact letter, or to the Company’s Knowledge, telephone or personal contact by or from any governmental body.

2.15  

Permits . The Disclosure Schedule sets forth all approvals, authorizations, certificates, consents, licenses, orders and permits and other similar authorizations of all Governmental Authorities (and all other Persons) that are necessary for the Company to conduct its business and own and operate its properties, but excluding Environmental Permits which are addressed in Section 2.22 below (the “ Permits ”). Each Permit is valid and in full force and effect and none of the Permits will be terminated, revoked, modified or become terminable or impaired in any respect for any reason, except as would not have a Material Adverse Effect on the Company. The Company has conducted its business in compliance with all material terms and conditions of the Permits. The term Permits shall not include any Company License as defined in Section 2.11.

2.16  

Inventories . All inventories of the Company reflected in the Latest Balance Sheet (a) to the Company’s Knowledge, conform to the material specifications established therefor, and (b) to the Company’s Knowledge, have been manufactured in material compliance with all Applicable Laws. The quantities of all inventories, materials and supplies of the Company are not obsolete, damaged, slow-moving, defective or excessive and the present

quantities of all inventory, materials and supplies of the Company are reasonable in the present circumstances of the business of the Company, as a whole, as currently conducted, except for items that are obsolete or below standard quality, all of which are immaterial to the overall financial condition of the Company, taken as a whole, and have been adequately allowed for in the Latest Balance Sheet.

2.17  

Litigation . There are no (a) actions, suits, claims, hearings, arbitrations, proceedings (public or private) or governmental investigations that have been brought by any Governmental Authority or any other Person against the Company or any officer, employee or director of the Company in their capacity as such (collectively, “ Proceedings ”), nor any investigations or reviews by any Governmental Authority against or affecting the Company, pending or, to the Company’s Knowledge, threatened, against or by the Company or any of their assets or which seek to enjoin or rescind the transactions contemplated by this Agreement; and (b) existing orders, judgments or decrees of any Governmental Authority naming the Company as an affected party or otherwise affecting any of the assets or the business of the Company.

2.18  

Contracts .

(a)  

The Disclosure Schedule lists the following Contracts of the Company (collectively, the “ Scheduled Contracts ”):

(i)  

Each Contract providing for the lease of real property by the Company or which is used by Company in connection with the operation of its business.

(ii)  

Each Contract relating to all machinery, tools, equipment, motor vehicles, rolling stock and other tangible personal property (other than inventory and supplies) owned, leased or used by the Company, except for items having remaining payments of less than $10,000 which do not, in the aggregate, have remaining payments of more than $25,000 or having a remaining term of longer than six (6) months or that are not cancelable by the Company in its discretion and without penalty upon notice of sixty (60) days or less.

(iii)  

Each Contract to which the Company is a party that would reasonably be expected to involve payments by or to the Company in excess of $25,000, or would have a Material Adverse Effect.

(iv)  

All Contracts relating to, or evidences of, or guarantees of, or providing security for, indebtedness or the deferred purchase price of property (whether incurred, assumed, guaranteed or secured by any asset).

(v)  

Each independent sales representative or distribution agreement, supply agreement or similar Contract relating to or providing for the marketing or manufacturing of the Company’s products.

(vi)  

Each consulting, development, joint development, research and development, regulatory or similar Contract relating to development of the Company’s products or Intellectual Property and each Contract under which the Company has granted or obtained a license to Intellectual Property, other than commercial software licenses.

(vii)  

All acquisition, partnership, joint venture, teaming arrangements or other similar Contracts.

(viii)  

Any Contract under which the Company has agreed not to compete or has granted to a third party an exclusive right that restricts or otherwise adversely affects the ability of the Company to conduct its business.

(ix)  

All Benefit Plans.

(x)  

All Contracts with any “disqualified individual” (as defined in Section 280G(c) of the Code) which contains any severance or termination pay liabilities which would result in a disallowance of the deduction for any “excess parachute payment” (as defined in Section 280G(b)(l) of the Code) under Section 280G of the Code.

(xi)  

Every Contract between the Company and any of the Company’s officers, directors or more than 5% stockholders, or any entity in which any of the Company’s officers, directors or more than 5% stockholders has a greater than 2% equity interest.

(xii)  

All Contracts for clinical or marketing trials relating to the Company’s products and all Contracts with physicians, hospitals or other healthcare providers, or other scientific or medical advisors.

(xiii)  

All Contracts not identified in clause (xii) which relate to the Company’s compliance with or obligation to comply with the requirements of the HIPAA Privacy Regulations, including without limitation all business associate agreements, subcontractor agreements, confidentiality agreements and similar contracts.

(b)  

The Company has delivered to Parent true and correct copies (or summaries, in the case of any oral Contracts) of all such Scheduled Contracts. None of the Scheduled Contracts contain a provision requiring the consent of any party with respect to the consummation of the transaction contemplated herein. No notice of default arising under any Scheduled Contract has been delivered to or by the Company. Each Scheduled Contract is a legal, valid and binding obligation of the Company and each other party thereto, enforceable against each such party thereto in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity, and neither the Company, nor, to the Company’s Knowledge, the other party thereto, is in breach, violation or default thereunder. The Company is not a party to and is not

bound by any contract, agreement or instrument that currently has or would have a Material Adverse Effect.

2.19  

Benefit Plans .

(a)  

None of the Company, or any other ERISA Affiliate sponsors, maintains, contributes to, is required to contribute to or has or could have any liability of any nature, whether known or unknown, direct or indirect, fixed or contingent, with respect to, any Pension Plan, including, without limitation, any such plan that is excluded from coverage by Section 4 of ERISA or is a “Multiemployer Plan” within the meaning of Section 3(37) or 4001(a)(3) of ERISA. To the Company’s Knowledge, each such Pension Plan that is a Multiemployer Plan has been operated in all material respects in accordance with its terms and in compliance in all material respects with the applicable provisions of ERISA, the Code and other Applicable Law. Each such other Pension Plan has been operated in all material respects in accordance with its terms and in compliance in all material respects with the applicable provisions of ERISA, the Code and all other Applicable Law. All Pension Plans which the Company operates as plans that are qualified under the provisions of Section 401(a) of the Code satisfy in form and operation all applicable qualification requirements and has not received in the preceding seven (7) years or committed to receive a transfer of assets and/or liabilities or spin-off from another plan, except transfers, which qualify as transfers from eligible rollover distributions within the meaning of Code Section 402(c)(4). None of the Company, any Subsidiary or any other ERISA Affiliate has sponsored, maintained or contributed to any Pension Plan which, during the preceding seven (7) years, has been terminated, including by way of merger with or into another Pension Plan.

(b)  

No Pension Plan is now nor has ever been “top-heavy” pursuant to Section 416 of the Code.

(c)  

The Disclosure Schedule sets forth the name of each ERISA Affiliate.

(d)  

None of the Company, any Subsidiary or any other ERISA Affiliate has or could have any liability of any nature, whether known or unknown, direct or indirect, fixed or contingent, to any Pension Plan, the Pension Benefit Guaranty Corporation or any other person, arising directly or indirectly under Title IV of ERISA other than liability pursuant to Section 4007 for premiums which are not yet due (without regard to any waiver). No “reportable event,” within the meaning of Section 4043 of ERISA, has occurred with respect to any Pension Plan subject to Title IV of ERISA. None of the Company, any Subsidiary or any other ERISA Affiliate has ceased operations at any facility or withdrawn from any Company Pension Plan in a manner which could subject the Company, any Subsidiary or any other ERISA Affiliate to liability under Section 4062(e), 4063 or 4064 of ERISA. None of the Company, any

Subsidiary or any other ERISA Affiliate maintains, contributes to or has participated in or agreed to participate in any Pension Plan that is a Multiemployer Plan. None of the Company, any Subsidiary or any other ERISA Affiliate has been a party to a sale of assets to which Section 4204 of ERISA applied with respect to which it could incur any withdrawal liability (including any contingent or secondary withdrawal liability) to any Multiemployer Plan. None of the Company, any Subsidiary or any other ERISA Affiliate has incurred, or has experienced an event that will, within the ensuing twelve (12) months, result in, a “complete withdrawal” or “partial withdrawal,” as such terms are defined respectively in Sections 4203 and 4205 of ERISA, with respect to a Pension Plan which is a Multiemployer Plan, and nothing has occurred that could result in such a complete or partial withdrawal. None of the Company, any Subsidiary or any other ERISA Affiliate has incurred a decline in contributions to any Multiemployer Plan such that, if the current rate of contributions continues, a seventy percent (70%) decline in contributions (as defined in Section 4205 of ERISA) will occur within the next three (3) plan years.

(e)  

None of the Company, any Subsidiary or any other ERISA Affiliate sponsors, maintains, contributes to, is required to contribute to, or has or could have any liability of any nature, whether known or unknown, direct or indirect, fixed or contingent, with respect to any Welfare Plan, whether insured or otherwise, including, without limitation, any such plan that is a Multiemployer Plan within the meaning of Section 3(37) of ERISA. To the Company’s Knowledge, each such Welfare Plan that is a Multiemployer Plan has been operated in all material respects in accordance with its terms and in compliance in all material respects with applicable provisions of ERISA, the Code and other Applicable Law. Each such other Welfare Plan has been operated in all material respects in accordance with its terms and in compliance in all material respects with the applicable provisions of ERISA, the Code and all other Applicable Law. Benefits under each Welfare Plan are fully insured by an insurance company unrelated to the Company, any Subsidiary or any other ERISA Affiliate. No insurance policy or contract requires or permits retroactive increase in premiums or payments due thereunder. None of the Company, any Subsidiary or any other ERISA Affiliate has established or contributed to, is required to contribute to or has or could have any liability of any nature, whether known or unknown, direct or indirect, fixed or contingent, with respect to any “voluntary employees’ beneficiary association” within the meaning of Section 501(c)(9) of the Code, “welfare benefit fund” within the meaning of Section 419 of the Code, “qualified asset account” within the meaning of Section 419A of the Code or “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA. No Welfare Plan that is a Multiemployer Plan imposes any post-withdrawal liability or contribution obligations upon the Company or any ERISA Affiliate. None of the Company, any Subsidiary or any other ERISA Affiliate maintains, contributes to or has or could have any liability of any nature, whether known or unknown, direct or indirect, fixed or contingent, with respect to medical, health, life or other welfare benefits for present or future terminated employees or their spouses or dependents other than as required by Part 6 of Subtitle B of Title I of ERISA or any comparable state law.

(f)  

None of the Company, any Subsidiary or any other ERISA Affiliate is a party to, maintains, contributes to, is required to contribute to or has or could have any liability of any nature, whether known or unknown, direct or indirect, fixed or contingent, with respect to any Compensation Plan. Each Compensation Plan has been operated in all material respects in accordance with its terms and in compliance in all material respects with the applicable provisions of all Applicable Law.

(g)  

There are no facts or circumstances which could, directly or indirectly, subject the Company, any Subsidiary or any other ERISA Affiliate to any (i) excise tax or other liability under Chapters 43, 46 or 47 of Subtitle D of the Code, (ii) penalty tax or other liability under Chapter 68 of Subtitle F of the Code or (iii) civil penalty, damages or other liabilities arising under Section 502 of ERISA.

(h)  

Full payment has been made of all amounts which the Company, any Subsidiary or any other ERISA Affiliate is required, under Applicable Law, the terms of any Benefit Plan, or any agreement relating to any Benefit Plan, to have paid as a contribution, premium or other remittance thereto or benefit thereunder. Each Pension Plan that is subject to the minimum funding standards of Section 412 of the Code and/or Section 302 of ERISA meets those standards and has not incurred any accumulated funding deficiency within the meaning of Section 412 or 418B of the Code or Section 302 of ERISA and no waiver of any minimum funding requirements has been applied for or obtained with respect to any Pension Plan. The Company, the Subsidiaries and each other ERISA Affiliate has made adequate provisions for reserves or accruals in accordance with GAAP to meet contribution, benefit or funding obligations arising under Applicable Law or the terms of any Benefit Plan or related agreement. There will be no change on or before Closing Date in the operation of any Benefit Plan or any documents with respect thereto which will result in an increase in the benefit liabilities under such Benefit Plans, except as may be required by law.

(i)  

The Company and each other ERISA Affiliate has timely complied in all material respects with all reporting and disclosure obligations with respect to the Benefit Plans imposed by the Code, ERISA or other Applicable Law.

(j)  

There are no pending or, to the Company’s Knowledge, threatened audits, investigations, claims, suits, grievances or other proceedings, and there are no facts that could give rise thereto, involving, directly or indirectly, any Benefit Plan, or any rights or benefits thereunder, other than the ordinary and usual claims for benefits by participants, dependents or beneficiaries.

(k)  

The transactions contemplated herein do not result in any payment (whether of severance pay or otherwise), forgiveness of debt, distribution, increase in benefits, obligation to fund, or the acceleration of accrual, vesting, funding or payment of any contribution or benefit under any Benefit Plan.

(l)  

No employer other than the Company and/or an ERISA Affiliate is permitted to participate or participates in the Benefit Plans. No leased employees (as defined in Section 414(n) of the Code) or independent contractors are eligible for, or participate in, any Benefit Plans.

(m)  

No action or omission of the Company, any Subsidiary or any other ERISA Affiliate or any director, officer, employee, or agent thereof in any way restricts, impairs or prohibits the Parent, the Company, any Subsidiary, any other ERISA Affiliate or any successor from amending, merging, or terminating any Benefit Plan in accordance with the express terms of any such plan and Applicable Law.

(n)  

The Disclosure Schedule lists each Benefit Plan and the Company has delivered to the Parent true and complete copies of all Benefit Plan documents and related trust agreements or other agreements or contracts evidencing any funding vehicle with respect thereto, including all amendments. The Company has delivered to the Parent true and complete copies of: (i) the three most recent annual reports on Treasury Form 5500, including all schedules and attachments thereto, with respect to any Benefit Plan for which such a report is required; (ii) the three (3) most recent actuarial reports with respect to any Pension Plan that is a “defined benefit plan” within the meaning of Section 414(j) of the Code; (iii) the form of summary plan description, including any summary of material modifications thereto or other modifications communicated to participants, currently in effect with respect to each Benefit Plan; (iv) the most recent determination letter with respect to each Pension Plan intended to qualify under Section 401(a) of the Code and the full and complete application therefor submitted to the Internal Revenue Service; and (v) all professional opinions, material internal memoranda, material correspondence with regulatory authorities and administrative policies, manuals, interpretations and the like with respect to each Benefit Plan.

(o)  

The Disclosure Schedule lists each Benefit Plan that is or may be, in whole or in part, subject to Section 409A of the Code (each such plan or part thereof, a “ Section 409A Benefit Plan ”). Except as set forth in the Disclosure Schedule, to the Company’s Knowledge: (a) each Section 409A Benefit Plan complies in form with Section 409A of the Code, and (b) no service provider under any Section 409A Benefit Plan is subject to the additional income tax under Section 409A of the Code.

(p)  

The Disclosure Schedule lists and the Company has delivered to the Parent true and correct copies of the Welfare Plan documents establishing compliance with the HIPAA Privacy Regulations, including appointment of a privacy official, its Notice of HIPAA Privacy Practices, privacy policies and procedures, and the plan administrator’s group health plan document amendment certification.

(q)  

The Company has properly determined and timely collected and reported all Federal Insurance Contribution Act (“ FICA ”) taxes imposed under Sections 3101 and 3111 of the Code on remuneration for employment that constitutes “wages”

within the meaning of Section 3121(a) of the Code, including amounts deferred under nonqualified deferred compensation plans, agreements or arrangements.

2.20  

Labor and Employment Matters .

(a)  

The Disclosure Schedule sets forth a list of the current employees, officers and directors of the Company. The Company has previously delivered to Parent a complete and accurate list of all current employees, officers and directors of the Company that includes their base salaries and bonus. All employees of the Company are employed on an “at-will” basis. The Disclosure Schedule identifies all employees who are currently on leave for any reason or receiving disability or workers’ compensation or any other similar type of benefit from the Company.

(b)  

The Company is and has been in compliance in all material respects with all Applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such Applicable Laws respecting employment discrimination and occupational safety and health requirements, and has not and is not engaged in any unfair labor practice. There is no unfair labor practice complaint against the Company pending or, to the Company’s Knowledge, threatened before the National Labor Relations Board or any other comparable Governmental Authority. There is no labor strike, dispute, slowdown or stoppage actually pending or, to the Company’s Knowledge, threatened against or directly affecting the Company. No labor representation question exists respecting the employees of the Company and there is not pending or, to the Company’s Knowledge, threatened any activity intended or likely to result in a labor representation vote respecting the employees of the Company. No grievance or any arbitration proceeding arising out of or under collective bargaining agreements is pending and no claims therefor exist or, to the Company’s Knowledge, have been threatened. No collective bargaining agreement is binding and in force against the Company or currently being negotiated by the Company. The Company has not experienced any significant work stoppage or other significant labor difficulty. The Company is not delinquent in payments to any persons for any wages, salaries, commissions, bonuses or other direct or indirect compensation for any services performed by them or amounts required to be reimbursed to such persons, including without limitation any amounts due under any Benefit Plan. Upon termination of the employment of any person, neither the Company, Parent nor any subsidiary of Parent will, by reason of any agreement or understanding to which the Company is a party, be liable to any of such persons for so-called “severance pay” or any other payments. Within the twelve-month period prior to the date hereof there has not been any expression of intention to the Company by any officer or key employee to terminate such employment.

(c)  

All individuals who are performing or have performed services for the Company or any of its Affiliates and who are or were classified by the Company or any of its Affiliates as “independent contractors” qualify for such classification under Section 530 of the Revenue Act of 1978 or Section 1706 of the Tax Reform Act

    of 1986, as applicable, and such individuals are not entitled to any benefits under the Benefit Plans maintained by the Company.

2.21  

Intellectual Property .

(a)  

Except for Intellectual Property relating to commercial off-the-shelf software, the Disclosure Schedule lists all Intellectual Property that is registered with, has been applied for, or has been issued by the U.S. Patent and Trademark Office or a corresponding foreign governmental or public authority and all Intellectual Property that: (i) is owned by, licensed to or otherwise controlled by the Company; (ii) is used in, developed for use in, or, to the Company’s Knowledge, necessary to the conduct of its business as now conducted; or (iii) has been licensed to or from third parties. The Company has delivered or made available to Parent complete and accurate copies of correspondence, litigation documents, agreements, file histories and office actions relating to the patents and patent applications listed in the Disclosure Schedule. Each item of Intellectual Property owned or used by the Company immediately prior to the Effective Time hereunder will be owned or available for use by the Parent on identical terms and conditions immediately after the Effective Time.

(b)  

The Company owns, free and clear of any Lien (other than Permitted Liens), and possesses all right, title and interest, or holds a valid license, in and to all Intellectual Property, and has taken all reasonable action to protect the Intellectual Property. To the Company’s Knowledge, all patents included in the Intellectual Property are valid and enforceable. To the Company’s Knowledge, the Intellectual Property owned or licensed by the Company constitutes all the intellectual property necessary to the conduct of the business of the Company as it is currently conducted. There are no royalties, fees, honoraria or other payments payable by the Company to any Person by reason of the ownership, development, modification, use, license, sublicense, sale, distribution or other disposition of the Intellectual Property other than salaries and sales commissions paid to employees and sales agents in the ordinary course of business. The Company has taken all reasonable security measures to protect the secrecy, confidentiality and value of the Intellectual Property.

(c)  

The Disclosure Schedule lists the Internet domain names included in the Intellectual Property. The Company is the registrant and sole legal and beneficial owner of the Internet domain names included in the Intellectual Property, free and clear of all Liens. The Company is the registered owner of the trademarks underlying each of the domain names included in the Intellectual Property. The Company is not aware of any pending or threatened actions, suits, claims, litigation or proceedings relating to the domain names included in the Intellectual Property. The Company has operated the websites identified in the Disclosure Schedule.

(d)  

All personnel, including employees, agents, consultants and contractors, who have contributed to or participated in the conception or development, or both, of

the Intellectual Property on behalf of the Company and all officers and technical employees of the Company either (i) have been a party to “work-for-hire” arrangements or agreements with the Company in accordance with applicable federal and state law that has accorded the Company full, effective, sole, exclusive and original ownership of all tangible and intangible property thereby arising, or (ii) have executed appropriate instruments of assignment in favor of the Company as assignee that have conveyed to the Company effective, sole and exclusive ownership of all tangible and intangible property arising thereby.

(e)  

To the Company’s Knowledge, the conduct of the Company’s businesses has not infringed, misappropria