ASSET PURCHASE AGREEMENT

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1.   Certain Definitions . For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (1) the terms defined in this Section have the meanings assigned to them in this Section, wherever they appear in this Agreement (2) all accounting terms not otherwise defined herein have the meanings assigned under generally accepted accounting principles consistently applied and as in effect on the date hereof (“GAAP”) and (3) all words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision.

“ Affiliate ” means, with respect to a specified Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the specified Person.

“ Agreement ” has the meaning set forth in the introduction.

“ Approval ” has the meaning set forth in Section 8.7.

“ Assumed Contract ” has the meaning set forth in Section 2.1(5).

“ Business ” has the meaning set forth in the recitals.

“ Buyer ” has the meaning set forth in the introduction.

“ Buyer Indemnified Parties ” has the meaning set forth in Section 11.1

“ Buyer Material Adverse Effect ” means a material adverse effect on the business, properties, assets or financial condition of Buyer and its Subsidiaries, taken as a whole, other than (i) effects resulting from the execution or announcement of this Agreement or any other Transaction Document or resulting from or relating to compliance with the terms of, or the taking of any action required by, this Agreement or any other Transaction Document, (ii) effects of any change arising in connection with acts of war, sabotage, terrorism, military actions or the escalation thereof, (iii) effects of any change in applicable Laws, regulations or accounting rules, (iv) changes in general economic, financial, regulatory, political or market conditions in the world and (v) changes in conditions or developments generally applicable to the industries in which Buyer is involved and that do not affect Buyer in any manner materially disproportionate to other Persons in such industry.

“ Buyer’s Stock ” means shares of common stock, par value $0.01 per share, of iCAD, Inc.

“ CAD Products ” has the meaning set forth in Section 2.1(1).

“ Closing ” means the closing of the transactions contemplated by this Agreement.

“ Closing Date ” means the date on which the Closing occurs.

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

“ Confidentiality Agreement ” has the meaning set forth in Section 15.

“ Consent ” means any consent, approval, order or authorization of, or any declaration, filing or registration with, or any application or report to, or any waiver by, or any other action (whether similar or dissimilar to any of the foregoing) of, by or with, any Person, which is necessary in order to take a specified action or actions in a specified manner and/or to achieve a specified result or to avoid the occurrence of a default.

“ Contract ” means any written contract, agreement, instrument, order, commitment or binding arrange-ment, express or implied, of any nature whatsoever.

“ Contract Right ” means any right, power or remedy under any Contract, including but not limited to rights to receive property or services or otherwise to derive benefits from the payment, satisfaction or performance of another party’s obligations.

“ Documents ” means and includes any document, agreement, instru-ment, certificate, notice, Consent, affidavit, correspondence (by letter, electronic mail, telex or otherwise), written statement, schedule or exhibit whatsoever.

“ Domain Names ” has the meaning set forth in Section 4.15(11).

“ Employee Benefit Plan ” means any employee benefit plan as defined in Section 3(3) of ERISA, 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, or “qualified asset account” within the meaning of Section 419A of the Code, and any other plan, program, policy or arrangement for or regarding bonuses, commissions, incentive compensation, severance, vacation, deferred compensation, pensions, profit sharing, retirement, payroll savings, stock options, stock purchases, stock awards, stock ownership, phantom stock, stock appreciation rights, equity compensation, medical/dental expense payment or reimbursement, disability income or protection, sick pay, group insurance, self insurance, death benefits, employee welfare or fringe benefits of any nature, including those benefiting retirees or former employees.

“ Encumbrance ” means any lien, security interest, pledge, mortgage, easement, leasehold, assessment, covenant, restriction, hypothecation or any other encumbrance, claim, burden or charge of any kind or nature whatsoever.

“ ERISA Affiliate ” means any entity, trade or business (whether or not incorporated) that is part of the same controlled group with, common control with, part of an affiliated service group with, or part of another arrangement that includes, Seller or any ERISA Affiliate within the meaning of Code Section 414(b), (c), (m) or (o).

“ Escrow Agent ” has the meaning set forth in Section 3.3.

“ Escrow Agreement ” has the meaning set forth in Section 3.3.

“ Escrow Shares ” has the meaning set forth in Section 3.3.

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

“ Excluded Assets ” has the meaning set forth in Section 2.2.

“ FDA ” means the United States Food and Drug Administration.

“ FDCA ” means the Federal Food, Drug, and Cosmetic Act of 1938, as amended.

“ Financial Statements ” has the meaning set forth in Section 4.3.

“ Fundamental Representations ” has the meaning set forth in Section 10.1.

“ GAAP ” has the meaning set forth in Section 1.

“ Indebtedness ” means all items which, in accordance with GAAP, would be included in determining total liabilities as shown on the liability side of a balance sheet as of the date Indebtedness is to be determined.

“ Insurance Policies ” means any policy or binder for fire, public liability, product liability, general liability, life, hospital, medical, disability, comprehensive, automobile, property damage, workmen’s compensation, key man, fidelity bond, theft, forgery, vehicular, or errors and omissions insurance, or for any other insurance of any nature whatsoever.

“ Intangible ” means, throughout the world, any name, corporate name, domain name, fictitious name, Domain Name, trademark, trademark application, trademark registration, service mark, service mark application, service mark registration, trade name, brand name, product name, corporate name, symbol, logo, slogan, trade dress, trade secret, know-how, research and development data, written works, visual works, audio works, multimedia works, Web site, database, information or data created or maintained in any database, technical information or data, design, formula, invention, product right, technology, idea, concept, method, process, discovery, Software, license, Permit, or other intangible asset of any nature, whether in use, operational, active, under development or design, non-operative, or inactive, owned, marketed, maintained, supported, used, licensed or otherwise held for use by, or licensed to or with respect to which rights are granted to, a Person, whether arising under statutory or common law in any jurisdiction or otherwise, and includes, without limitation, the goodwill of the business symbolized by and associated with such name, corporate name, domain name, fictitious name, Domain Name, trademark, service mark, trade name, brand name, product name, symbol, logo, slogan, or trade dress, including without limitation all CAD Products which comprise intangible property, and any and all Intellectual Property Rights in and to the foregoing.

“ Intellectual Property Right(s) ” means any and all intellectual property rights and industrial property rights arising under statutory or common law, contract, or otherwise, and whether or not perfected, including all: (a) Patents; (b) rights associated with works of authorship including copyrights, moral rights, copyright applications, copyright registrations, and rights to prepare derivative works; (c) rights relating to trade secrets and confidential information; (d) rights in trademarks, trademark applications, service marks, service mark applications, trade names, logos, symbols, and the like, including all goodwill therein; (e) divisions, continuations, renewals, reissues and extensions of the foregoing (as and to the extent applicable) now existing, hereafter filed, issued, or acquired; and (f) rights analogous to those set forth in this “Intellectual Property Rights” definition and any and all other proprietary rights relating to the foregoing in any jurisdiction throughout the world, including all rights to sue for past, present and future infringement.

“ Interim Balance Sheet ” has the meaning set forth in Section 4.3.

“ Inventory ” means any raw materials, supplies, work-in-progress, finished goods, parts or any other inventory of any nature whatsoever used in connection with the Business.

“ IRS ” means the Internal Revenue Service.

“ Judgment ” means any order, writ, injunction, fine, citation, award, decree or any other judgment of any kind whatsoever of any foreign, federal, state or local court, governmental body, administrative agency, regulatory authority or arbitration tribunal.

“ Knowledge of Seller ” or phrases of similar import means, with respect to Seller, the actual knowledge of the officers and members of the board of managers of Seller after due inquiry of those individuals responsible for the matter being represented and warranted.

“ Laws ” means any applicable laws relating to the operation of the Business, including but not limited to, medical device product distribution, and the possession, control, warehousing, marketing, sale and distribution of medical devices, the FDCA, Current Good Manufacturing Practices (CGMP), requirements of the Quality System regulation for medical devices, as specified in Title 21, code of Federal Regulations, Part 820 (21 C.F.R. 820), the Occupational Health and Safety Act (29 U.S.C. Section 651 et seq.) or other applicable state or federal laws and any similar laws and regulations issued by foreign regulatory bodies and any implementing regulations to any of the foregoing.

“ Liabilities ” means any direct or indirect Indebtedness, liability, claim, loss, damage, Judgment, deficiency or obligation, known or unknown, fixed or inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise whether or not of a kind required by GAAP to be set forth on financial statements.

“ Losses ” means any and all Liabilities, Proceedings, causes of action, costs and expenses including, without limitation, costs of investigation, actual interest costs, penalties and attorneys’ fees associated with the enforcement of any terms and conditions of this Agreement.

“ Material Permits ” has the meaning set forth in Section 4.7.

“ OSS ” has the meaning set forth in Section 4.15(5).

“ Patents ” means all patents and patent applications and all patent applications hereafter filed, including any continuation, continuation-in-part, division, provisional or any substitute applications, any patent issued with respect to any such patent applications, any reissue, reexamination, renewal or extension (including any supplemental patent certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all foreign counterparts of any of the foregoing.

“ Permit ” means all governmental licenses, authorizations, supplier numbers, registrations, permits, device authorizations and approvals, certificates, franchises, qualifications, accreditations, consents, approvals, listings, product clearances or approvals, marketing authorizations in connection with the conduct of Seller’s Business or to comply with applicable Laws, including, establishment registrations, device listings, Investigational Device Exemptions (IDEs), 510(k) exemptions, 510(k) clearances, and PMA approvals, as those terms are defined in the FDCA and implementing regulations, and those issued by state governments, foreign regulatory bodies, environmental protection agency permits.

“ Permitted Encumbrances ” means, collectively, (i) Encumbrances for Taxes, fees, levies, duties or other governmental charges not yet past due and (ii) Encumbrances for mechanics, material, laborers, employees, suppliers or similar liens arising by operation of Law for sums which are not yet past due.

“ Person ” means any individual, sole proprietorship, joint venture, partnership, corporation, limited liability company, association, joint-stock company, unincorporated organization, cooperative, trust, estate, government entity or authority (including any branch, subdivision or agency thereof), administrative or regulatory authority, or any other entity of any kind or nature whatsoever.

“ Proceeding ” means any claim, suit, action, equitable action, litigation, investigation, arbitration, trademark opposition, cancellation action, administrative hearing or any other judicial or administrative proceeding of any kind or nature whatsoever, or any formal demand which might lead to any of the foregoing.

“ Property ” means real, personal or mixed property.

“ Public License ” has the meaning set forth in Section 4.15(5).

“ Purchase Price ” has the meaning set forth in Section 3.2.

“ Purchased Assets ” has the meaning set forth in Section 2.1.

“ Real Property ” means any real estate, land, building, structure, improvement or other real property of any kind or nature whatsoever owned, leased or occupied by either Seller, all shares of stock or other ownership interests through which interests in real estate may be held, and all appurtenant and ancillary rights thereto, including, without limitation, easements, covenants, water rights, sewer rights and utility rights.

“ Retained Liabilities ” has the meaning set forth in Section 2.4.

“ SEC ” has the meaning set forth in Section 5.9.

“ SEC Reports ” has the meaning set forth in Section 5.9.

“ Securities Act ” has the meaning set forth in Section 5.7.

“ Seller ” has the meaning set forth in the introduction.

“ Seller Employee Benefit Plans ” means each of the Employee Benefit Plans which Seller, or any ERISA Affiliate, sponsors, maintains or contributes to, is required to contribute to, or has or could reasonably be expected to have any Liability of any nature with respect to, whether known or unknown, direct or indirect, fixed or contingent, for the benefit of present or former employees of Seller and/or its ERISA Affiliates.

“Seller Indemnified Parties ” has the meaning set forth in Section 11.2.

“ Seller Intangibles ” means any Software or other Intangible that is used, held for use, marketed, maintained, supported, operated, under development or design, licensed, or with respect to which rights are granted in connection with, related to, pursuant to, in the conduct of, or as part of the Business, or any Software or other Intangible that is owned, in whole or in part, solely or jointly with one or more other Persons, by Seller in connection with the Business.

“ Seller Material Adverse Effect ” means a material adverse effect on the Purchased Assets taken as a whole, other than (i) effects resulting from the execution or announcement of this Agreement or any other Transaction Document or resulting from or relating to compliance with the terms of, or the taking of any action required by, this Agreement or any other Transaction Document, (ii) effects of any change arising in connection with acts of war, sabotage, terrorism, military actions or the escalation thereof, (iii) effects of any change in applicable Laws, regulations or accounting rules, (iv) changes in general economic, financial, regulatory, political or market conditions in the world and (v) changes in conditions or developments generally applicable to the industries in which Seller is involved and that do not affect Seller in any manner materially disproportionate to other Persons in such industry.

“ Seller Web Sites ” has the meaning set forth in Section 4.15(15).

“ Shares ” has the meaning set forth in Section 3.2.

“ Software ” means any computer program, operating system, application, system, firmware or software of any nature, whether operational, active, under development or design, non-operational or inactive, including all object code, source code, comment code, algorithms, processes, formulae, interfaces, navigational devices, menu structures or arrangements, icons, operational instructions, scripts, commands, syntax, screen designs, reports, designs, concepts, visual expressions, technical manuals, test scripts, user manuals and other documentation therefore, whether in machine-readable form, programming language or any other language or symbols, and whether stored, encoded, recorded or written on disk, tape, film, memory device, paper or other media of any nature and all data bases necessary to operate any such computer program, operating system, application, system, firmware or software.

“ Specified Liabilities ” has the meaning set forth in Section 2.3

“ Subsidiaries ” with respect to any Person, means any other Person or business entity, with respect to whom 50% or more of the equity interest (or debt or other interest convertible into an equity interest) is owned directly or indirectly by such Person.

“ Tangible Property ” means any machinery, buildings, fixtures, equipment, parts, furniture, leasehold improvements, office equipment, vehicles, tools, forms, molds, supplies or other tangible property of any kind or nature whatsoever, including without limitation all CAD Products which comprise tangible property,.

“ Tax ” or “ Taxes ” means all taxes and governmental impositions of any kind in the nature of (or similar to) taxes, payable to any federal, state, local or foreign taxing authority or other governmental authority, including, but not limited to, those on or measured by or referred to as income, franchise, profits, gross receipts, capital, ad valorem, custom duties, alternative or add-on minimum taxes, estimated, environmental, disability, registration, value added, sales, use, service, real or personal property, capital stock, license, payroll, withholding, employment, social security, workers’ compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes, and interest, penalties and additions to tax imposed with respect thereto.

“ Tax Return ” shall mean any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information (including any amendments thereto) that is, has been or may in the future be filed with or submitted to, or required to be filed with or submitted to, any governmental authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Law relating to any Tax.

“ Transaction Documents ” means this Agreement together with all schedules and exhibits hereto, and all other Documents executed and delivered pursuant to this Agreement.

“ Transferred Contract ” has the meaning set forth in Section 8.10.

“ Transferred Employees ” has the meaning set forth in Section 8.4(1).

“ WARN Act ” means the Worker Adjustment and Retraining Notification Act and all similar federal and state Laws relating to termination of employment.

“ Web ” has the meaning set forth in Section 4.15(15).

2.   Sale and Purchase of Purchased Assets .

2.1   Purchased Assets . On the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, transfer, convey, assign and deliver to Buyer and Buyer shall purchase and acquire from Seller, all right, title and interest in and to all of Seller’s assets which are owned or used in its operation of the Business, and rights of every nature, kind and description wheresoever located and whether or not reflected on the books and records of Seller (excluding only those assets set forth in Section 2.2) including, without limitation, the following (all of which being hereinafter collectively referred to as the “Purchased Assets”) free and clear of all Encumbrances other than Permitted Encumbrances:

(1) all right, title and interest of Seller in and to the following products: FTP for Breast MR, ProStream, Theramap (collectively, the “CAD Products”);

(2) all Intangibles owned by Seller or used in connection with the Business and all Intellectual Property Rights associated therewith, all goodwill, licenses and sublicenses granted or obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the Laws of all jurisdictions;

(3) all of Seller’s machinery, equipment, supplies and all other items of Tangible Property used in the Business;

(4) all of Seller’s Inventory;

(5) all rights, powers and privileges in and to those Contracts set forth on Schedule 2.1(5),each of which has been entered into in connection with the operation or conduct of the Business (collectively, the “Assumed Contracts”);

(6) all of Seller’s records relating to the Business, including, correspondence, employment records for the Transferred Employees, production records, property records, research and development files, customer, vendor, supplier, contractor and service provider lists and records, technical files for the CE Mark and FDA approved products and copies of official notifications that the CE Mark and FDA clearances have been achieved and other records and files of or relating to the Business or the Purchased Assets (but excluding employment (other than those of Transferred Employees) and accounting records);

(7) all prototypes, archive files, physical designs, advertising and promotional materials and other similar items used in or related to the Business that are not Intangibles or Excluded Assets (as hereinafter defined);

(8) all of Seller’s prepayments, prepaid expenses, deferred charges, advances, escrows and deposits under any Assumed Contract;

(9) the name “CAD Sciences”;

(10) all rights, benefits and interests relating to or arising out of any warranty, express or implied, issued in connection with the conduct of the Business;

(11) all insurance benefits, including rights and proceeds, arising from or relating to the Purchased Assets or the Specified Liabilities (as hereinafter defined) prior to the Closing Date;

(12) all of Seller’s Proceedings, demands and other legal rights and remedies, whether or not known as of the Closing, relating to Seller’s ownership of the Purchased Assets and/or the Business, but excluding claims against Buyer with respect to the transactions contemplated herein; and

(13) all other rights, interests, assets and items of personal property, tangible or intangible (including goodwill), owned, used by or accruing to the benefit of Seller in connection with the operation or conduct of the Business or necessary to enable Buyer to continue the operation or conduct of the Business substantially as operated or conducted by Seller immediately before the Closing Date.

2.2   Excluded Assets . Notwithstanding anything to the contrary contained herein, there is excluded from the sale and purchase contemplated by this Agreement the following assets (the “Excluded Assets”):

(1) the consideration delivered by Buyer to Seller pursuant to this Agreement for the Purchased Assets;

(2) all personnel records and other records that Seller is required by Law to retain in its possession provided that copies thereof have been furnished to Buyer (except for records regarding employment and labor matters (other than those relating to Transferred Employees), membership and other equity interests in the Company, any Retained Liability and any Excluded Asset, copies of which the Seller is not required to provide to the Buyer hereunder);

(3) all claims for refund of Taxes and other governmental charges of whatever nature covering periods ending on or before the Closing Date;

(4) all rights of Seller under this Agreement;

(5) all of Seller’s accounts receivable;

(6) the stock ledger and minute books of Seller, all financial books and records of Seller (copies of which have been delivered to Buyer) and all books and records relating to any Excluded Asset or Retained Liability;

(7) all of Seller’s cash in the bank or invested on the Closing Date, except for cash deposits from customers and the pro rata portion of advances, advertising payments and other amounts payable to Seller under the Assumed Contracts;

(8) all assets of Seller which are not used or related to the operation of the Business, all claims for refunds under insurance policies maintained by Seller and those other assets, properties and rights specifically listed in Schedule 2.2(8) hereof;

2.3   Assumption of Certain Liabilities . On the terms and subject to the conditions set forth herein, on the Closing Date, Buyer shall assume, agree to perform and agree to pay only the following Liabilities (“Specified Liabilities”) but only to the extent the same are not incurred or resulting from (directly or indirectly) any breach or default by Seller under any Assumed Contract with any Person or any representation, warranty or covenant of Seller noted herein:

(1) all Liabilities of Seller arising and relating to periods after the Closing in the nature of services to be performed, payments to be made or goods to be delivered under the Assumed Contracts transferred pursuant to this Agreement, but not including any Liabilities of Seller under any Contract with any Affiliate or Principal or other member of Seller;

(2) all existing warranty and service obligations under the Assumed Contracts set forth in Schedule 2.3(2); and

(3) all such other Liabilities specifically assumed by Buyer on Schedule 2.3(3) hereof.

2.4   Non-Assumption of Liabilities . Notwithstanding anything herein capable of interpretation to the contrary, except for the Specified Liabilities, Buyer shall not assume and, as between Seller and Buyer, Seller shall remain liable for all of Seller’s Liabilities existing as of the Closing Date or thereafter whether or not disclosed to Buyer on any Schedule hereto, and Buyer does not assume and shall in no event be liable therefore (collectively, the “Retained Liabilities”). Such Retained Liabilities shall include without limitation:

(1) all Liabilities to the extent arising out of or relating to (i) the operation or conduct by Seller of the Business prior to the Closing Date other than as specifically set forth in Section 2.3, (ii) any business conducted by Seller not relating to the Purchased Assets and (iii) all Liabilities to the extent arising out of or relating to any Excluded Asset;

(2) any Liability resulting from product liability or general liability claims for damage or injury (actual or alleged) to Persons or Property to the extent arising from the ownership, possession or use of any product sold by Seller prior to the Closing in excess of any reserve therefor on the Financial Statements except that Seller shall not be liable to the extent the damage or injury arises out of modifications made to any such product by the Buyer or the failure of Buyer to properly maintain or update any such product;

(3) all Liabilities and commitments relating to current or former employees of Seller, including without limitation (i) any compensation or benefits payable to present or past employees of Seller, including, any Liabilities arising under any Seller Employee Benefit Plan or other employee benefit plan and any of Seller’s Liabilities for vacation, holiday or sick pay, and (ii) any Liabilities under any employment, consulting or non-competition agreement, change of control agreement, indemnity agreement, any retention or performance-based bonus or other compensation agreement, and any similar agreements, whether written or oral, and any Liabilities arising out of the termination by Seller of any of its employees in anticipation or as a consequence of, or following, consummation of the transactions contemplated by the Transaction Documents, including under the WARN Act;

(4) all Liabilities and commitments of Seller in respect of Taxes;

(5) any Liabilities arising from or relating to any environmental matters or conditions arising on or before the Closing Date, including without limitation any release of hazardous substances after the Closing Date arising from events or circumstances occurring on or before the Closing Date, except to the extent actually caused by Buyer after the Closing Date;

(6) any Liability of Seller to any employee or arising out of or relating to any employee grievance, in each case to the extent arising out of or relating to any occurrence or event happening on or prior to the Closing Date and to any employees of the Business for periods prior to the Closing Date;

(7) any Liability of Seller to any Affiliate of Seller;

(8) all Indebtedness obligations of Seller;

(9) all of Seller’s accounts payable;

(10) any Liability of Seller arising out of any Proceeding pending or Judgment entered on or prior to the Closing Date;

(11) any Liability of Seller arising from this Agreement or any Transaction Document executed by Seller; and

(12) any other Liabilities of Seller, its Subsidiaries or current or former Affiliates thereof, if any, other than the Specified Liabilities.

3.   Closing; Purchase Price

3.1   Closing . The Closing of the transactions contemplated by this Agreement shall take place within two (2) business days after the satisfaction of the terms and conditions of Section 9 at the offices of Blank Rome LLP, 405 Lexington Avenue, New York, New York 10174. All transactions occurring at the Closing shall be deemed to occur concurrently.

3.2   Purchase Price . In consideration of the sale, transfer, conveyance and delivery of the Purchased Assets, and in reliance upon the representations and warranties made herein by Seller, Buyer shall on the Closing Date, in full payment thereof, pay to Seller, or its designees, Five Million Dollars ($5,000,000) (the “Purchase Price”) payable as follows: (i) Two Million Dollars ($2,000,000) in immediately available funds and (ii) the issuance of such number of restricted shares of Buyer Stock as are equal to Three Million Dollars ($3,000,000) divided by the average per share closing sales price reported on the Nasdaq Capital Market for the ten (10) consecutive trading days ending on the trading day immediately preceding the Closing Date (the “Shares”). The parties acknowledge and agree that the terms of this Agreement are commercially reasonable and have been negotiated in an arms-length transaction and that the Purchase Price constitutes fair market value for the Purchased Assets.

3.3   Escrow . In order to secure Seller’s indemnification obligations under Section 11 of this Agreement, Buyer shall, at the Closing, deliver to and deposit with U.S. Bank National Association (the “Escrow Agent”) such number of Shares equal to Seven Hundred Fifty Thousand Dollars ($750,000) as calculated in Section 3.2(ii) above (the “Escrow Shares”). The Escrow Shares shall be held for a period of one (1) year with (i) Escrow Shares equal to Five Hundred Thousand Dollars ($500,000) as calculated in Section 3.2 (ii) above to be distributed by the Escrow Agent on the six (6) month anniversary of the Closing (subject to any claims for indemnification) and (ii) the remaining Escrow Shares to be distributed by the Escrow Agent on the first anniversary of the Closing (subject to any claims for indemnification), all pursuant to the terms of an escrow agreement to be entered into on the Closing Date by and among Buyer, Seller and the Escrow Agent, in substantially the form attached hereto as Exhibit A (the “Escrow Agreement”).

3.4   Purchase Price Allocation . The Purchase Price for the Purchased Assets shall be allocated in a manner set forth on Schedule 3.4 hereto. In connection with the determination of such schedule, the parties shall cooperate with each other and provide such information as any of them shall reasonably request. The parties shall (a) prepare and, where applicable, file each report relating to the federal, state, local, foreign and other Tax consequences of the purchase and sale contemplated hereby (including the filing of IRS Form 8594) in a manner consistent with such allocation schedule and (ii) take no position in any Tax Return or other Tax filing, Proceeding, audit or otherwise which is inconsistent with such allocation.

4.   Representations, Warranties and Covenants of Seller . Knowing that Buyer intends to rely thereon, Seller represents, warrants and covenants to Buyer as of the date hereof and as of the Closing as set forth in this Section 4 as follows:

(1) Seller, and any consolidated, combined, unitary or aggregate group for Tax purposes of which Seller is or has been a member, has timely filed with the appropriate governmental agencies all Tax Returns required to be filed by it, all of which have been prepared and completed in compliance with all Laws in all material respects.

(2) Except as set forth on Schedule 4.5, all Taxes due, owing and payable have been fully paid or duly provided for in the Financial Statements. No claim for Taxes due is being contested by Seller.

(3) No written claim has ever been made by any governmental authority in a jurisdiction where Seller does not file a Tax Return that it is or may be subject to taxation by that jurisdiction.

(4) None of the Purchased Assets is subject to any liens for Taxes, other than liens for Taxes not yet due and payable.

(5) Seller has complied in all material respects with the provisions of the Code relating to the withholding and payment of Taxes, including, without limitation, the withholding and reporting requirements under Code sections 1441 through 1464, 3401 through 3406, and 6041 through 6049, as well as similar provisions under any other Laws, and has, within the time and in the manner prescribed by Law, withheld from employee wages and paid over to the proper governmental authorities all amounts required.

(6) Seller has been properly treated as a partnership for United States federal income tax purposes from the time of its formation through the Closing Date.

(1) Seller does not own all or any portion of any Real Property.

(2) Schedule 4.12 sets forth a true and correct list of (a) all Contracts under which Seller is lessor, lessee, sublessor or sublessee of any Real Property; (b) all options held or given by Seller and all contractual obligations on the part of Seller to sell, purchase or acquire any interest in Real Property; and (c) all other Contracts affecting or relating to Seller’s leased Real Property.

(3) To the Knowledge of Seller, there has not been filed by or against any landlord any bankruptcy or insolvency petition or any assignment for the benefit of creditors, nor is any landlord in default under any mortgage or underlying lease covering any Real Property, nor are there any current foreclosure Proceedings against any landlord or leased Real Property.

(4) Except as set forth in Schedule 4.12, to Seller’s Knowledge, none of the Real Property leased by Seller or the use, occupancy, operation or maintenance thereof, is in material violation of any restrictive covenants, Laws, or any building, zoning, environmental, health, fire, safety or other ordinances, codes or regulations. To Seller’s Knowledge, there have been no hazardous materials treated, stored or disposed of, or otherwise deposited, in or on the Real Property leased by Seller (including, but not limited to, any surface waters or subsurface waters on or flowing through the Real Property leased by Seller.

4.13   Books of Account and Reports . Seller’s books of account and other financial books and records are true, correct and complete and accurately reflect all of its items of income and expense, and all of its assets, Liabilities and accruals are and have been prepared and maintained in accordance with applicable Laws (including any record-keeping, inventory and other requirements and regulations of the FDA, the Federal Drug Enforcement Agency, any federal or state pharmacy board and other governmental authority). Seller has filed all reports required by all Laws to be filed, and it has duly paid or accrued on its books of account all applicable duties and charges due or assessed against it pursuant to such reports.

4.14   Tangible Property . Schedule 4.14 sets forth a list and summary description of all interests owned, leased or subleased (as lessor or lessee) or claimed by Seller (including, without limitation, options) in or to Tangible Property having an individual value equal to or greater than $5,000. Except as set forth on Schedule 4.14, all Contracts pursuant to which Seller may hold or use any interest owned or claimed by Seller (including, without limitation, options) in or to Tangible Property are in full force and effect, Seller is not in default thereunder and no condition exists which, with notice, lapse of time or both, would constitute a default. The Purchased Assets which comprise Tangible Property are in good operating condition and repair, except for Seller’s server referred to in Section 9.1(9), which currently is not used in Seller’s business and which Seller does not intend to repair. Seller has not received notice that any such Tangible Property is in violation of any material Laws.

4.15   Intangibles .

(1) Schedule 4.15 contains an accurate and complete list and description of all Seller Intangibles, and, in the case of Software, a product description including a reasonably detailed feature set of the products as it is currently being supported for any customer or other Person, a listing of all modules that are a part of such Software, including a reasonable description of the modules’ function and a listing of each file that forms a part of the relevant module, the language in which it is written, and the type of hardware and software platform(s) on which it runs including a detailed description of each third-party software needed to cause the Software to perform all of its intended functions. Except as set forth on Schedule 4