Exhibit 10.1
 
 
 
 
 
 
 
 
 

 
ASSET PURCHASE AGREEMENT
 
BY AND BETWEEN
 
CLARIENT, INC.,
 
CLRT ACQUISITION, LLC,
 
TRESTLE HOLDINGS INC.
 
AND
 
TRESTLE ACQUISITION CORP.
 

 
Dated as of June 19, 2006
 
 
 
 
 
 
 
 
 
 

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TABLE OF CONTENTS
 

 
 
Page
 
Article I DEFINITIONS
2
1.1
Certain Definitions
2
 
Article II PURCHASE AND SALE OF ASSETS
12
2.1
Purchase and Sale of Assets
12
2.2
Assumption of Liabilities
15
2.3
Consideration for Purchased Assets
18
2.4
Allocation of Purchase Price
18
2.5
Closing
19
2.6
Nontransferable Assets
20
2.7
Taking of Necessary Action; Further Action
20
 
Article III REPRESENTATIONS AND WARRANTIES OF SELLERS
21
3.1
Organization, Qualification, and Corporate Power
21
3.2
Authorization
21
3.3
Sellers’ SEC Filings
22
3.4
Subsidiaries
22
3.5
No Conflicts
22
3.6
Consents
22
3.7
Sellers’ Financial Statements
23
3.8
Internal Controls
23
3.9
Accounts Receivable
24
3.10
Customers and Suppliers
24
3.11
No Undisclosed Liabilities
25
3.12
No Changes
25
3.13
Events Subsequent to Most Recent Fiscal Period End
25
3.14
Legal Compliance
27
3.15
Tax Matters
29
3.16
Title of Properties; Absence of Liens and Encumbrances; Condition of Assets
30
3.17
Intellectual Property
31
3.18
Contracts
37
3.19
Commercialization of Product
39
3.20
Insurance
39
3.21
Litigation
40
3.22
Product Warranty, Product Liability and Recalls
40
3.23
Employees
40
3.24
Employee Matters and Benefit Plans
40
3.25
Environment, Health, and Safety
42
3.26
Certain Business Relationships With Sellers
43

 

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TABLE OF CONTENTS
(Continued)
 
 

   
Page 
3.27
No Adverse Developments
43
3.28
Foreign Corrupt Practices Act
43
3.29
Fees
43
3.30
Complete Copies of Materials
43
3.31
Board Approval
43
3.32
Stockholder Approval
44
3.33
Information
44
3.34
No Liquidation, Insolvency, Winding-Up
44
3.35
Preferences
45
3.36
Assets
45
3.37
Disclosure
45
3.38
No Limitation on Other Representation
45
 
Article IV REPRESENTATIONS AND WARRANTIES OF BUYER
45
4.1
Organization, Qualification, and Corporate Power
46
4.2
Authorization
46
4.3
No Conflicts
46
4.4
Consents
46
4.5
Brokers’ Fees
47
4.6
Availability of Funds
47
4.7
Litigation
47
 
Article V PRE-CLOSING COVENANTS
47
5.1
Operation of Business
47
5.2
Access to Information
49
5.3
Notice of Developments
50
5.4
No Solicitation
50
5.5
Stockholder Meeting
53
 
Article VI ADDITIONAL AGREEMENTS
54
6.1
Reasonable Efforts
54
6.2
Notices and Consents
54
6.3
Patent Matters.
55
 
Article VII OTHER AGREEMENTS AND COVENANTS
56
7.1
Confidentiality
56
7.2
Additional Documents and Further Assurances
56
7.3
Take-over Statutes
56
7.4
Parent Vote
57
7.5
Reasonable Cooperation of Buyer
57
7.6
Agreement to Perform
57
7.7
Attorney-In-Fact
57

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TABLE OF CONTENTS
(Continued)

   
Page  
7.8
Discharge of Excluded Liabilities
57
7.9
Guarantee
57
7.10
Collection of Accounts Receivable.
58
7.11
Hired Employees.
59
 
Article VIII CONDITIONS TO THE CLOSING
59
8.1
Conditions to Buyer’s Obligations
59
8.2
Conditions to Sellers’ Obligations
60
8.3
Frustration of Closing Conditions
61
 
Article IX TAX MATTERS
61
9.1
Tax Books and Records.
61
9.2
Allocation of Taxes.
62
9.3
Transfer Taxes.
62
9.4
Notices.
63
9.5
Withholding Exemption.
63
 
Article X TERMINATION
63
10.1
Termination of the Agreement
63
10.2
Effect of Termination
65
10.3
Fees and Expenses
65
10.4
Repayment of Bridge Loans
66
 
Article XI MISCELLANEOUS
66
11.1
Press Releases and Public Announcements
66
11.2
No Third-Party Beneficiaries
66
11.3
Entire Agreement
66
11.4
Amendment
66
11.5
Waivers
66
11.6
Successors and Assigns
67
11.7
Counterparts
67
11.8
Notices
67
11.9
Governing Law
68
11.10
Forum Selection; Consent to Jurisdiction
68
11.11
Waiver of Jury Trial
68
11.12
Severability
69
11.13
Construction
69
11.14
Attorneys’ Fees
69
11.15
Nonsurvival of Representations and Warranties
69
11.16
Specific Performance
69
11.17
Time of Essence
69
11.18
Interpretation and Rules of Construction
69

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TABLE OF CONTENTS
(Continued)

     Page 
11.19
Representation by Counsel
70
11.2
Disclosure Letter
70

 
INDEX OF SCHEDULES
 
Schedule
 
Description
 
Schedule 1.1(a)
 
Sellers’ 2006 Operating Forecast
 
Schedule 1.1(b)
 
Hired Employees
 
Schedule 2.1(b)(i) 
 
Assumed Contracts
 
Schedule  2.1(c)(xiii)
Certain Excluded Assets
 
Schedule 2.1(b)(i)
Certain Excluded Liabilities
 
Schedule  2.2(b)(ii)
Deferred Revenue
 
Schedule 2.2(b)(v)
Vendors
 
Schedule 8.1(h)
Material Consents
 

 

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ASSET PURCHASE AGREEMENT
 
This ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
June 19, 2006, by and among Clarient, Inc. a Delaware corporation (“Clarient”),
CLRT Acquisition, LLC, a Delaware limited liability company and wholly-owned
subsidiary of Clarient (“Buyer”), Trestle Holdings Inc., a Delaware corporation
(“Parent”) and Trestle Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of Parent (“Trestle Sub,” and together with Parent, the
“Sellers”). Buyer and Clarient, on the one hand, and Sellers, on the other hand,
are sometimes referred to herein individually as a “Party” and collectively as
the “Parties.”
 
RECITALS
 
A.  Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers,
on the terms and subject to the conditions set forth herein, certain of the
assets of Sellers described herein, and Sellers desire Buyer to assume certain
of Sellers’ liabilities, which Buyer would agree to assume on the terms and
subject to the conditions set forth herein.
 
B.  The respective boards of directors of each of Clarient, Buyer and Sellers
believes it is in the best interests of their respective corporations and
stockholders that the transactions contemplated hereby be consummated and, in
furtherance thereof, have approved this Agreement and the transactions
contemplated hereby.
 
C.  Concurrently with the execution and delivery of this Agreement, Parent and
Clarient have entered into those certain Consulting Agreements dated as of even
date herewith, by and among Clarient, Parent, Trestle Sub and the individuals
named therein (the “Consulting Agreements”) pursuant to which Parent, through
certain of its employees, shall provide consulting services to Buyer and
Clarient.
 
D.  Parent is the borrower pursuant to that certain interest bearing secured
senior promissory note dated February 27, 2006, in the aggregate principal
amount of $250,000, made by Parent in favor of Clarient (as amended to date, the
“First Bridge Note”).
 
E.  In order to facilitate the transactions contemplated in this Agreement,
concurrently with the execution and delivery of this Agreement, Parent, Trestle
Sub and Clarient are (i) entering into that certain Second Loan and Security
Agreement dated as of even date herewith (the “Second Loan and Security
Agreement”) pursuant to which Clarient will, from time to time and upon the
terms and conditions contained therein, loan additional funds to Parent in the
aggregate amount of $500,000, evidenced by a promissory note in the form
attached thereto (the “Subsequent Bridge Note”) and (ii) extending the maturity
of the First Bridge Note.
 
F.  Buyer and Sellers desire to make certain representations, warranties,
covenants and other agreements in connection with the transactions contemplated
hereby.
 
NOW, THEREFORE, in consideration of the covenants and representations set forth
herein, and for other good and valuable consideration, the Parties agree as
follows:
 
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ARTICLE I 
 

DEFINITIONS
 

1.1  
Certain Definitions

 
As used in this Agreement, the following terms have the following meanings
(terms defined in the singular to have a correlative meaning when used in the
plural and vice versa). Certain other terms are defined in the text of this
Agreement.
 
“Acquisition Proposal” shall mean any offer or proposal made by a Person other
than Buyer or its Affiliates for (i) a merger, consolidation, share exchange,
business combination or other similar transaction or series of related
transactions involving either Seller, (ii) any tender offer, exchange offer or
other offer for, or acquisition or series of related acquisitions by any Person
or group (within the meaning of Regulation 13D under the Exchange Act) of
beneficial ownership of, 20% or more of the outstanding common stock or
outstanding voting capital stock of either Seller, (iii) any issuance, sale or
other disposition of securities (or options, rights or warrants to purchase, or
securities convertible into or exchangeable for, such securities) in each case
by a Seller representing 20% or more of the voting power of such Seller,
(iv) any sale, lease, exchange, transfer or other disposition (including by way
of merger, consolidation, license or exchange), in a single transaction or a
series of related transactions, of 20% or more of the Business or of the
Purchased Assets or accounting for 20% or more of the consolidated revenues of
Parent (other than the sale by Sellers to customers of Instruments and
associated licenses and service obligations in the Ordinary Course of Business).
The term Acquisition Proposal shall also include any proposal or offer made by a
Person other than Buyer and its Affiliates with respect to any other transaction
having similar effect as any of the foregoing with respect to either Seller,
other than the transactions contemplated by this Agreement (excluding an
internal combination of one or more Sellers with each other and/or their
Subsidiaries notwithstanding the foregoing provisions).
 
“Adjustment Amount” means the amount of any impairment or reduction of any of a
Seller’s assets that occurs between the Current Balance Sheet Date and the
Closing Date, other than in the Ordinary Course of Business, including any such
impairment or reduction of assets that occurs as a result of (i) theft,
destruction or loss, (ii) any write down or write off of the value of such
assets or (iii) payments outside of the Ordinary Course of Business such as the
payment of any compensation, satisfaction of liabilities or other payments
prohibited by Section 5.1; provided, however, the Adjustment Amount shall not
exceed $300,000.
 
“Adjustment Schedule” has the meaning set forth in Section 2.3(b).
 
“Affiliate” of a Person means any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with such Person.
 
“Agreement” has the meaning set forth in the preamble.
 
“Allocation” has the meaning set forth in Section 2.4.
 

 

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“Ancillary Agreements” means all agreements and instruments delivered pursuant
to this Agreement, including the Consulting Agreement.
 
“Assumed Contracts” has the meaning set forth in Section 2.1(b)(i).
 
“Assumed Liabilities” has the meaning set forth in Section 2.2(b).
 
“Base Price” means (i) cash in an amount equal to $3,000,000, less (ii) the
amount of Assumed Liabilities that are required to be reflected on the Closing
Balance Sheet, less (iii) all amounts paid for services at or prior to the time
of Closing by Clarient or Buyer to Sellers in connection with the Consulting
Agreements, less (iv) the Adjustment Amount, less (v) the Factoring Deductible,
less (vi) $150,000, if the Patent Condition shall not have been satisfied by
Sellers’ at the time of Closing.
 
“Bridge Notes” means the First Bridge Note and the Subsequent Bridge Note.
 
“Business” means Sellers’ and their respective Subsidiaries’ business of
developing, manufacturing and selling digital tissue imaging devices and
products, image management and workflow applications, and telemedicine
applications linking dispersed users and data primarily to the healthcare and
pharmaceutical markets, and supporting such applications, as currently conducted
by Sellers and as currently proposed to be conducted by Sellers.
 
“Business Day” means any day other than a Saturday or Sunday or a day on which
national banking institutions in the City of Los Angeles, California are
authorized or obligated by law or executive order to be closed.
 
“Business Facility” means is any property including the land, the improvements
thereon, the groundwater thereunder and the surface water thereon, that is or at
any time has been owned, operated, occupied, controlled or leased by Sellers or
any of their Subsidiaries in connection with the operation of its business.
 
“Buyer” has the meaning set forth in the preamble.
 
“Buyer Material Adverse Effect” means any circumstance, event, change in, or
effect on, Clarient and Buyer or their business that, either alone or in
combination with any other circumstances, events, changes in, or effects on,
Clarient and Buyer or their business is, or is would reasonably be expected to
have a material adverse effect on the ability of Clarient and Buyer to
consummate the transactions contemplated by this Agreement; provided, however,
that none of the following shall be deemed to constitute or be taken into
account in determining whether there has been or will or could be a “Buyer
Material Adverse Effect”: (1) any change resulting from or arising out of
general market, economic or political conditions (including any change arising
out of acts of war, weather conditions or other force majeure events), (2) any
change in the price or trading value of Clarient’s securities, in and of itself
or (3) any change in the industries in which Clarient and Buyer conduct their
business, provided that in the case of (1) or (3) such changes do not have a
substantially disproportionate impact on Buyer and Clarient as compared to other
similarly situated participants in the industries in which they conduct their
business.
 

 
 

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“Buyer’s Knowledge” means with respect to Buyer, and with respect to any matter
in question, the actual knowledge of any of Buyer’s and Clarient’s officers or
members of its board of directors after reasonable inquiry, and shall include
all similar uses of the concept, including “aware,” “known to” and “knowledge
of.”
 
“Buyer’s Transfer Taxes” has the meaning set forth in Section 9.3.
 
“Change of Recommendation” has the meaning set forth in Section 5.4(e).
 
“Clarient” has the meaning set forth in the preamble.
 
“Consulting Agreement” has the meaning set forth in the recitals.
 
“Closing” has the meaning set forth in Section 2.5.
 
“Closing Accounts Receivable Statement” means a list of all accounts receivable
of the Sellers and their Subsidiaries as of the Closing Balance Sheet Date,
which has been prepared by Sellers in a manner consistent with the preparation
of the Current Accounts Receivable Statement and for which (i) all of the
accounts receivable set forth therein arose in the Ordinary Course of Business,
are carried at values determined in accordance with GAAP consistently applied
and are, to Seller’s Knowledge, collectible except to the extent of reserves
therefor set forth in the Closing Balance Sheet (except that unaudited interim
financial statements do not contain footnotes and other presentation items that
may be required by GAAP and are subject to normal year-end audit adjustments,
which are not material in amount or significance in the aggregate); (ii) except
as set forth in Section 3.7(b) of the Sellers’ Disclosure Letter, no person
other than Buyer or its Affiliates has any Lien on any of the accounts
receivable set forth therein, (iii) no request or agreement for deduction or
discount has been made with respect to any of the accounts receivable set forth
therein, except to the extent of reserves therefor set forth in the Closing
Balance Sheet; and (iv) the accounts receivable set forth therein and the other
debts arising therefrom are not, to Sellers’ Knowledge, subject to any
counterclaim or set-off and there are no claims or disputes with regard to any
such accounts receivable except to the extent of the reserves reflected on the
Closing Balance Sheet.
 
“Closing Balance Sheet” means an unaudited consolidated balance sheet of Parent
dated as of a date that is not more than three days prior to the Closing Date
which (i) is prepared by Sellers in a manner consistent with the preparation of
the Current Balance Sheet and (ii) presents fairly and accurately in all
material respects the Sellers’ financial condition as of the Closing Balance
Sheet Date in accordance with GAAP (except that unaudited interim financial
statements do not contain footnotes and other presentation items that may be
required by GAAP and are subject to normal year-end audit adjustments, which are
not material in amount or significance in the aggregate).
 
“Closing Balance Sheet Date” means the date of the Closing Balance Sheet.
 
“Closing Date” has the meaning set forth in Section 2.5.
 
“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.
 

 
 

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“Code” means the Internal Revenue Code of 1986, as amended.
 
“Confidential IP Information” has the meaning set forth in Section 3.17(i)
 
“Confidentiality Agreement” means the Mutual Non-Disclosure Agreement dated
August 10, 2005 between Parent and Clarient.
 
“Contract” means any agreement, contract, lease, note, loan, evidence of
indebtedness, purchase order, letter of credit, indenture, security or pledge
agreement, franchise agreement, undertaking, covenant not to compete, covenant
not to sue, employment agreement, license, instrument, obligation, commitment or
other arrangement to which either Seller is a party or is bound, whether oral or
written.
 
“Copyrights” means copyrights, copyright registrations, or any application
therefor, in the U.S. or any foreign country, or any other right corresponding
thereto throughout the world, including, without limitation, moral rights.
 
“Current Accounts Receivable Statement” has the meaning set forth in
Section 3.9.
 
“Current Balance Sheet” has the meaning set forth in Section 3.7(b).
 
“Current Balance Sheet Date” means March 31, 2006.
 
“Disposal Site” means a location where Hazardous Materials are treated or
disposed of.
 
“DOL” means the Department of Labor.
 
“Employee” means any current or former or retired employee, consultant or
director of Sellers or any of their respective Subsidiaries.
 
“Employment Statutes” has the meaning set forth in Section 2.2(c)(xii).
 
“Environmental Laws” means all applicable laws, rules, regulations, orders,
treaties, statutes, and codes promulgated by any Governmental Body which
prohibit, regulate or control any Hazardous Material or any Hazardous Material
Activity, including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, the Resource Recovery and
Conservation Act of 1976, the Federal Water Pollution Control Act, the Clean Air
Act, the Hazardous Materials Transportation Act, the Clean Water Act, comparable
laws, rules, regulations, ordinances, orders, treaties, statutes, and codes of
other Governmental Bodies, the regulations promulgated pursuant to any of the
foregoing, and all amendments and modifications of any of the foregoing, all as
amended to date.
 
“Environmental Permit” means any approval, permit, license, clearance or consent
required under applicable Environmental Laws.
 

 

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“ERISA Affiliate” means any other person or entity that is a member of a
“controlled group of corporations” with or under “common control” with Sellers
or any of their Subsidiaries within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder but excluding Buyer,
Clarient or their Affiliates.
 
“Exchange Act” means the Securities and Exchange Act of 1934, as amended.
 
“Excluded Assets” has the meaning set forth in Section 2.1(c).
 
“Excluded Liabilities” has the meaning set forth in Section 2.2(c).
 
“Expense Amount” means the lesser of (A) $125,000 in cash or (B) the direct
expenses (including reasonable attorney’s fees and accounting and financial
advisory costs) of the terminating Party incurred in connection with the
transactions contemplated hereunder.
 
“Factored Accounts” means any of Sellers’ accounts and/or receivables sold to a
factor or otherwise factored by Sellers within 60 days prior to Closing that
remain uncollected by the factor as of the Closing.
 
“Factoring Deductible” means the total face amount of the Factored Accounts.
 
“FDA” has the meaning set forth in Section 3.14(c).
 
“FDCA” has the meaning set forth in Section 3.14(a).
 
“FICA” has the meaning set forth in Section 3.15(b).
 
“First Bridge Note” has the meaning set forth in the recitals.
 
“FMLA” means the Family Medical Leave Act of 1993, as amended.
 
“FUTA” has the meaning set forth in Section 3.15(b).
 
“GAAP” means United States generally accepted accounting principles in effect
from time to time applied on a consistent basis throughout the periods
indicated.
 
“Governmental Body” means any (i) nation, province, state, county, city, town,
village, district, or other jurisdiction of any nature; (ii) federal,
provincial, state, local, municipal, foreign, or other government; (iii)
governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or
other tribunal); (iv) multi-national organization or body; or (v) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature.
 
“Hazardous Material” means any material or substance that is prohibited or
regulated by any Environmental Law or that has been designated by any
Governmental Body to
 

 
 

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be radioactive, toxic or hazardous, including without limitation, asbestos,
urea, formaldehyde, PCBs, radon gas, crude oil or any fraction thereof, all
forms of natural gas, petroleum products or by-products or derivatives.
 
“Hazardous Materials Activity” means the transportation, transfer, recycling,
storage, use, treatment, manufacture, removal, remediation, release, exposure of
others to, sale, or distribution of any Hazardous Material or any product
containing a Hazardous Material.
 
“Hired Employees” means each of the persons listed on Schedule 1.1(a).
 
“Instruments” shall mean the following instruments, devices and applications
sold by Sellers in the Business: MedMicro Non-Robotic Retrofit, MedMicro Robotic
Retrofit, MedMicro Non-Robotic, MedMicro Robotic, MedMicro Robotic Plus,
MedMicro Slideloader, Digital Slide Module Single Slide, Digital Slide Module
Slideloader, Grossing Standalone, Grossing Upgrade, Slide Clip 4, 3 Chip Digital
Camera Replacement, Xcellerator Digital Slide Server (software only) and
Xcellerator Edu Workbench/Desktop (software only).
 
“Intellectual Property Rights” means any or all of the following and all rights
in, arising out of, or associated therewith: all U.S., international or foreign
(i) Patents; (ii) trade secrets and/or nonpublic know-how, including, for
example, inventions, discoveries, improvements, concepts, ideas, methods,
processes, designs, schematics, drawings, formulae, technical data,
specifications, research and development information, technology, databases,
inventions for with patent applications have not yet been filed and other
technical information, and other rights in know-how and confidential or
proprietary information; (iii) Copyrights; (iv) rights in World Wide Web
addresses and domain names and sites and applications and registrations
therefor; (vii) Trademarks; and (viii) similar, corresponding or equivalent
rights to any of the foregoing anywhere in the world, including, without
limitation, moral rights.
 
“Intellectual Property Rights Agreements” has the meaning set forth in
Section 3.17(m).
 
“International Employee Plan” means any Sellers’ Employee Plan for the benefit
of Employees who perform services outside the United States.
 
“Invention” means the Invention described by the Invention Patent.
 
“Invention Patent” means that certain “regions of interest” patent (no.
6,993,169) held by Trestle Sub.
 
“IRS” means the Internal Revenue Service.
 
“Lien” means any mortgage, pledge, lien, charge, claim, security interest,
adverse claims of ownership or use, restrictions on transfer, defect of title or
other encumbrance of any sort, other than (a) mechanic’s, materialmen’s, and
similar liens with respect to any amounts not yet due and payable, (b) liens for
taxes not yet due and payable, and other Permitted Encumbrances.
 

 

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“Multiemployer Plan” means any “Pension Plan” (as defined below) which is a
“multiemployer plan,” as defined in Section 3(37) of ERISA.
 
“Ordinary Course of Business” means, with respect to any Party, the usual,
regular and ordinary course of such Party’s normal operations in substantially
the same manner as heretofore conducted.
 
“Other Claim” means that certain patent no. 6,466,690.
 
“Outside Date” has the meaning set forth in Section 10.1(b).
 
“Parent” has the meaning set forth in the preamble.
 
“Party” or, collectively, “Parties” shall have the meaning set forth in the
preamble.
 
“Patent Condition” has the meaning set forth in Section 6.3(b).
 
“Patents” means (i) patents, utility models, design registrations, certificates
of invention, patents of addition or substitution, or other governmental grants
for the protection of inventions or industrial designs anywhere in the world,
including, without limitation, any reissues, renewals, re-examinations or
extensions thereof; and (ii) any applications for any of the foregoing,
including, without limitation, any international, provisional, divisional,
continuation, continuation-in-part, or continued prosecution applications.
 
“Pension Plan” means any Sellers’ Employee Plan which is an “employee pension
benefit plan,” within the meaning of Section 3(2) of ERISA.
 
“Permits” has the meaning set forth in Section 3.14(a).
 
“Permitted Encumbrances” means (i) statutory liens, charges, assessments,
security interests, claims, obligations, understandings or arrangements for
governmental charges not yet due and payable or the amount or validity of which
is being contested in good faith, (ii) pledges or deposits in connection with,
or to secure, workers’ compensation, unemployment insurance, pension or other
employee benefits, (iii) restrictions on transfer arising out of or related to
securities laws, (iv) any obligations arising under the Assumed Contracts and
Liens arising out of the acts of Buyer, and (v) any other Liens that are not,
individually or in the aggregate, material to the Business.
 
“Person” means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, Governmental
Body or other entity.
 
“Post-Closing Tax Period” means any Tax Period beginning after the Closing Date
and that portion of a Straddle Period beginning after the Closing Date.
 
“Pre-Closing Tax Period” means any Tax Period ending on or before the Closing
Date and the portion of any Straddle Period ending on the Closing Date.
 

 
 

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“Proxy Statement” means the proxy statement to be distributed to the
stockholders of Parent in connection with seeking the Stockholder Approval,
including any preliminary proxy statement, definitive proxy statement or
supplement or amendment thereto, in each case filed with the SEC in accordance
with the terms and provisions of this Agreement.
 
“PTO” has the meaning set forth in Section 3.17(a).
 
“Purchase Price” means the assumption by Buyer of the Assumed Liabilities plus
cash in amount equal to the Base Price.
 
“Purchased Assets” has the meaning set forth in Section 2.1(b).
 
“Records” has the meaning set forth in Section 2.1(b)(iii).
 
“Reexamination” means an examination by the PTO of the validity and
enforceability of the Invention Patent prompted by the ex parte request made to
the PTO on or around May 18, 2006.
 
“Registered Intellectual Property Rights” means any and all Intellectual
Property Rights that is or are the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any Governmental Body or other public or private legal authority at any time.
 
“Representatives” means, with respect to a Person, that Person’s officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors, agents and other representatives.
 
“SEC” means the United States Securities and Exchange Commission.
 
“SEC Filings” has the meaning set forth in Section 3.3.
 
“Second Loan and Security Agreement” has the meaning set forth in the recitals.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Security Agreement” means that certain Loan and Security Agreement, dated as of
February 27, 2006 by and among Clarient and Sellers.
 
“Sellers” has the meaning set forth in the preamble.
 
“Sellers’ Board Recommendation” has the meaning set forth in Section 3.31.
 
“Sellers’ Disclosure Letter” has the meaning set forth in the introduction to
Article III.
 
“Sellers’ Employee Plan” means each employment, consulting, severance,
termination, retirement, profit sharing, bonus, incentive, deferred
compensation, retention, change in control, savings, life, health, disability,
accident, medical, insurance, vacation, other welfare fringe benefit or other
employee compensation stock option, restricted stock or other
 

 

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equity-based plan, program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe benefits
or other employee benefits or remuneration of any kind, funded or unfunded,
including without limitation, each “employee benefit plan,” within the meaning
of Section 3(3) of ERISA which is maintained, contributed to, or required to be
contributed to, by Sellers or any of their Subsidiaries for the benefit of any
Employee or any dependent thereof and with respect to which Sellers or any of
their Subsidiaries has or reasonably could be expected to have any material
liability or obligation.
 
“Sellers’ Financial Statements” has the meaning set forth in Section 3.7(b).
 
“Sellers’ Intellectual Property” means any and all Technology and any and all
Intellectual Property Rights, including Registered Intellectual Property Rights,
that is or are owned (in whole or in part) by or exclusively licensed to Sellers
or any of their Subsidiaries.
 
“Sellers’ Knowledge” means with respect to either Seller or Sellers, and with
respect to any matter in question, the actual knowledge of any of either
Seller’s officers or members of its board of directors, including without
limitation Maurizio Vecchione, Barry Hall, Jack Zeineh, Steve Barbee and Eric
Stoppenhagen, after reasonable inquiry, and shall include all similar uses of
the concept, including “aware,” “known to” and “knowledge of.”
 
“Sellers’ Material Adverse Effect” means any circumstance, event, change in, or
effect on, the Business or Sellers that, either alone or in combination with any
other circumstances, events, changes in, or effects on, the Business or Sellers
is, or would reasonably be expected to have a material adverse effect on (a) the
Business, the Purchased Assets or the Assumed Liabilities or (b) the ability of
Sellers to consummate the transactions contemplated by this Agreement; provided,
however, that none of the following shall be deemed to constitute or be taken
into account in determining whether there has been or will or could be a
“Sellers’ Material Adverse Effect”: (w) any change resulting from or arising out
of general market, economic or political conditions (including any change
arising out of acts of war, weather conditions or other force majeure events),
(x) any change in the price or trading value of Parent’s securities, in and of
itself, (y) any change in the industries in which Sellers conduct their Business
or (z) any change resulting from any matter disclosed in (i) the SEC Filings,
(ii) Sellers’ 2006 operating forecast attached as Schedule 1.1(b) or (iii) the
Sellers’ Disclosure Letter; provided that in the case of clauses (w) or (y),
such changes do not have a substantially disproportionate impact on the Business
as compared to other similarly situated participants in the industries in which
Sellers conduct the Business.
 
“Sellers’ Registered Intellectual Property Rights” has the meaning set forth in
Section 3.17(a).
 
“Sellers’ Transfer Taxes” has the meaning set forth in Section 9.3.
 
“Significant Customers” has the meaning set forth in Section 3.10.
 
“Significant Suppliers” has the meaning set forth in Section 3.10.
 

 
 

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“Stockholder Approval” means the approval of the transactions contemplated by
this Agreement by the affirmative vote of the holders of a majority of the
outstanding stock of each of the Sellers.
 
“Stockholder Meeting” has the meaning set forth in Section 5.5(a).
 
“Straddle Period” means any Tax Period beginning before and ending after the
Closing Date.
 
“Subsequent Bridge Note” has the meaning set forth in the recitals.
 
“Subsidiary” or “Subsidiaries” of any Person means any corporation, partnership,
limited liability company, joint venture or other legal entity of which such
Person (either alone or through or together with any other Subsidiary), owns,
directly or indirectly, more than 50% of the stock or other equity interests the
holder of which is generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity, or
of which such Person is the managing member, general partner, or which such
Person is otherwise contractually entitled to direct and control such entity.
 
“Superior Proposal” means an unsolicited, bona fide written (on its most
recently amended or modified terms, if amended or modified) Acquisition Proposal
(with all of the percentages included in the definition of Acquisition Proposal
increased to 50%) made by a Person (other than Buyer or its Affiliates) after
the date hereof that did not result from a breach of Section 5.4 and that if
consummated would be on terms that Parent’s board of directors in good faith
concludes (after consultation with its financial advisor and outside counsel)
(i) will result in a transaction that is more favorable to Parent’s stockholders
(in their capacities as stockholders), from a financial point of view, than the
transactions contemplated by this Agreement (including any binding revision
hereto proposed by Buyer in response to such proposal or otherwise) and (ii) is
reasonably probable of being completed in a prompt manner.
 
“Superior Proposal Notice” has the meaning set forth in Section 5.4(c).
 
“Takeover Statute” has the meaning set forth in Section 7.3.
 
“Tangible Personal Property” means each item or distinct group of furniture,
fixtures, equipment, machinery, computers, servers, communications and
networking equipment and other tangible personal property currently owned,
leased or subleased by the Sellers and any of their Subsidiaries for the
operation of the Business.
 
“Tax” or, collectively, “Taxes”, means (i) any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities in the nature of a tax, including taxes based upon or measured
by gross receipts, income, profits, sales, use and occupation, and value added,
ad valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts; (ii) any liability for the payment of any
amounts of the type described in clause (i) as a result of being or ceasing to
be a member of an affiliated, consolidated, combined or unitary group for any
period (including, without limitation, any liability under Treas. Reg.
Section 1.1502-6 or any comparable provision of foreign, state or
 

 

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local law); and (iii) any liability for the payment of any amounts of the type
described in clause (i) or (ii) as a result of any express or implied obligation
to indemnify any other person or as a result of any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
 
“Tax Period” means any period prescribed by any Governmental Body for which a
Tax Return is required to be filed or a Tax is required to be paid.
 
“Tax Returns” means any return, declaration, report, claim for refund, transfer
pricing report or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
 
“Technology” means any or all of the following: (i) works of authorship
including, without limitation, computer programs, source code and executable
code, whether embodied in software, firmware or otherwise, documentation,
designs, files, net lists, records, data and mask works; (ii) inventions
(whether or not patentable), improvements, and technology; (iii) proprietary or
confidential information, including technical data and customer and supplier
lists, trade secrets, discoveries, processes, formulas, and know how;
(iv) databases, data compilations and collections and technical data; (v) tools,
methods and processes; and (vi) all instantiations of the foregoing in any form
and embodied in any media.
 
“Termination Fee” means cash in the amount of $90,000 in immediately available
funds.
 
“Third Party” has the meaning set forth in Section 5.4(c).
 
“Trademarks” means trade names, trade dress, brand names, logos, common law
trademarks and service marks, trademark and service mark registrations and
applications therefor and all goodwill associated therewith throughout the
world.
 
“Transfer Taxes” has the meaning set forth in Section 9.3.
 
“Transfer Tax Returns” has the meaning set forth in Section 9.3.
 
“Treasury Regulations” means the Treasury Regulations promulgated under the
Code.
 
“Trestle Sub” has the meaning set forth in the preamble.
 
“Voting Agreements” has the meaning set forth in the recitals.
 
 
ARTICLE II
 
PURCHASE AND SALE OF ASSETS
 
 

2.1  
Purchase and Sale of Assets

. 
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(a)  Purchase and Sale
 
. Upon the terms and subject to the conditions set forth herein, at the Closing
(as defined in Section 2.5 hereof), Buyer shall purchase from Sellers, and
Sellers shall irrevocably sell, convey, transfer, assign and deliver to Buyer,
the Purchased Assets (as defined in Section 2.1(b) hereof), free and clear of
any and all Liens.
 
(b)  Definition of Purchased Assets
 
. For all purposes of and under this Agreement, the term “Purchased Assets”
shall mean, refer to and include all of Sellers’ right, title and interest in
and to all tangible and intangible assets, properties and rights, wherever
located, which are owned, used or held (directly or indirectly) for use by
Sellers to the extent owned, used or held (directly or indirectly) for use by
Sellers or their respective Subsidiaries as of the Closing (but specifically
excluding the Excluded Assets (as defined in Section 2.1(c) hereof)) in
connection with or relating to the Business, including, without limitation, the
following:
 
(i)  all rights and benefits under each of the Contracts of Sellers set forth on
Schedule 2.1(b)(i) and the unfilled customer purchase orders entered into by
Sellers in the Ordinary Course of Business from and after the execution of this
Agreement and outstanding at the Closing (a list of such purchase orders to be
provided by Sellers to Buyer at Closing) (collectively, “Assumed Contracts”);
 
(ii)  all Tangible Personal Property, including but not limited to the Tangible
Personal Property (A) used or held for use by the Sellers’ and their
Subsidiaries at the locations where the Business is conducted, (B) in the
possession or control of any of Sellers’ employees or (C) otherwise owned,
leased or held by Sellers or their Subsidiaries at the Closing Date;
 
(iii)  to the extent relating to the Purchased Assets or the Assumed
Liabilities, all operating data and original records (including computer files
and electronic media), including without limitation, books (other than corporate
minutes, Tax books and records, stock record books and other books relating to
the organization, maintenance, and existence of Sellers as a corporation),
records and accounts, correspondence, research and development files, drug
master files, regulatory support files, regulatory applications, correspondence
and submission files, production records, technical, accounting, manufacturing,
quality control and procedural files and manuals, customer and vendor lists,
customer complaint files, device and product operation manuals, sales and
marketing literature, purchase orders and invoices and copies of all employment
records related to the Hired Employees (collectively, the “Records”); provided
that, in the case of any Records which relate to both the Purchased Assets or
the Assumed Liabilities, on the one hand, and the other businesses or assets or
liabilities of Sellers, on the other hand, Sellers shall have the right to
redact any portion of the Records solely to the extent that they relate to such
other businesses and assets; provided, further, Sellers shall have the right to
retain copies of any portion of the Records to the extent reasonably necessary,
including, in Sellers’ discretion, to effect an orderly dissolution of Sellers;
 
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(iv)  original sets of all lab notebooks, manufacturing procedures, equipment
calibration settings and other technical information;
 
(v)  all of Sellers’ right, title and interest in and to the Sellers’
Intellectual Property, and any and all Intellectual Property Rights that relate
to or are used or held for use in connection with the Business;
 
(vi)  the current telephone and facsimile numbers used in the Business and held
by Sellers;
 
(vii)  all rights to the Internet website addresses used in the Business and
held by Sellers;
 
(viii)  all rights, claims, causes of action, rights of recovery or set-off,
warranty rights or other similar rights of Sellers, whether known, unknown,
matured or unmatured, accrued or contingent, against third parties, including
under express or implied warranties from suppliers and claims existing at the
Closing Date under insurance policies, to the extent and in the proportion
relating to the Purchased Assets or Assumed Liabilities;
 
(ix)  all transferable franchises, Permits, licenses, agreements, waivers and
authorizations issued by or obtained from any Governmental Body, to the extent
held or used by any Seller or any of its Subsidiaries in connection with, or
required for, the operation, use and exploitation of the Purchased Assets or the
assumption, payment, performance and discharge of the Assumed Liabilities;
 
(x)  all customer lists used in the Business; and
 
(xi)  all cash and cash equivalents and the accounts and notes receivable of the
Sellers existing as of the Closing; and
 
(xii)  all other assets, properties, claims, rights and interests of Sellers
which exist on the Closing Date, of every kind and nature and description,
whether tangible or intangible, real, personal or mixed, wherever located, which
relate to or are used or held for use solely in connection with the Business,
other than any Excluded Assets (as defined below) or any items excluded in (i)
through (xi) above.
 
(c)  Definition of Excluded Assets
 
. Notwithstanding anything to the contrary set forth in this Section 2.1 or
elsewhere in this Agreement, the term “Purchased Assets” shall not mean, refer
to or include the following (collectively, the “Excluded Assets”) to the extent
owned, used or held for use by Sellers or any of its Affiliates as of the
Closing:
 
(i)  the assets of any Sellers’ Employee Plan held for the exclusive purpose of
satisfying obligations under such Sellers’ Employee Plan;
 
(ii)  any Contracts to which Sellers are a party or by which Sellers are bound
not expressly assumed in Section 2.1(b) above;
 
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(iii)  the corporate charter and bylaws, qualifications to transact business as
a foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of Sellers as a corporation;
 
(iv)  all securities of any Subsidiaries of Sellers;
 
(v)  all refunds of Taxes with respect to the Business and with respect to the
Purchased Assets, in either case attributable to any Pre-Closing Tax Period and
similar recoveries and benefits of Sellers and their respective Subsidiaries;
 
(vi)  all claims, actions, deposits, prepayments, refunds, causes of action,
rights of recovery, warranty rights, rights of set off, and rights of recoupment
of any kind or nature (including any such item relating to Taxes) to the extent
not otherwise included in the Purchased Assets;
 
(vii)  all rights of Sellers under this Agreement, each Ancillary Agreement or
any agreement, certificate, instrument or other document executed and delivered
by Sellers or Buyer in connection with the transactions contemplated hereby or
thereby, or any side agreement between Sellers and Buyer or its Affiliates
entered into on or after the date hereof, including Sellers’ right to receive
the Purchase Price as contemplated herein;
 
(viii)  all books, records, files, documents, data, information and
correspondence of Sellers, including without limitation Tax books and records,
other than the Records or to the extent not otherwise included in the Purchased
Assets or as otherwise provided in Section 9.1; provided that Buyer shall be
entitled to make copies of Sellers’ Tax books and records to the extent
reasonably necessary for Buyer’s operation of the Business following the
Closing, including Buyer’s compliance with Tax laws and regulations;
 
(ix)  any of Sellers’ rights with respect to claims arising out of Excluded
Liabilities;
 
(x)  All attorney-client privileged communications provided to Sellers by Kaye
Scholer LLP with respect to this Agreement, any Ancillary Agreement, the
transactions contemplated herein and therein, and/or to Parent, or any of
Parent’s directors’ or officers’, with respect to the Securities Act, the
Exchange Act or other applicable securities laws;
 
(xi)  all rights of Sellers under any insurance policies maintained by Sellers
for the benefit of their respective directors and officers in their capacities
as directors and officers including any premiums in connection therewith;
 
(xii)  all rights, title and interest in and to all properties, assets and
rights of Sellers that do not relate to the Business;
 
(xiii)  all assets properties or rights set forth on Schedule 2.1(c)(xiii)
hereto; and
 
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(xiv)  the Factored Accounts and the corresponding asset accounts (including any
residual rights to receive payments from the factor on account of the Factored
Accounts); provided that any cash amounts repaid to Sellers by the factor or any
underlying account debtor in respect of the Factored Accounts at or prior to
Closing shall not constitute Excluded Assets.
 

2.2  
Assumption of Liabilities

 
. 
 
(a)  Assumption
 
. Upon the terms and subject to the conditions set forth herein, at the Closing,
Buyer shall assume from Sellers, and Sellers shall irrevocably convey, transfer
and assign to Buyer, all of the Assumed Liabilities (as defined in
Section 2.2(b) hereof). Buyer shall not assume any liabilities of Sellers
pursuant hereto, other than the Assumed Liabilities.
 
(b)  Definition of Assumed Liabilities
 
. For all purposes of and under this Agreement, the term “Assumed Liabilities”
shall mean, refer to and include only the following liabilities of Sellers (and
shall specifically exclude the Excluded Liabilities (as defined in
Section 2.2(c) hereof)):
 
(i)  all obligations, duties and liabilities of Sellers continuing after the
Closing under the Assumed Contracts, to the extent such liabilities (A) were not
due to have been satisfied or discharged prior to the Closing Date and (B) do
not arise from any breach or default under such Assumed Contract occurring prior
to the Closing Date and (C) are not included on Schedule 2.2(b)(i); provided,
however, that for Instruments that were to have been delivered by Sellers to
customers pursuant to Assumed Contracts no more than seven (7) days prior to
Closing but that have not been delivered at Closing, Buyer shall also assume the
obligation of delivering such Instruments to such customers to the extent that
such Instruments to be delivered are transferred to Buyer as Purchased Assets at
the time of Closing, and Sellers shall retain all other liabilities under the
Assumed Contracts that were due to have been satisfied or discharged prior to
the Closing Date;
 
(ii)  all obligations, duties, liabilities and items relating to (A) deferred
revenue shown on Schedule 2.2(b)(ii) and (B) deferred revenue provided under
customer contracts entered into by Sellers in the Ordinary Course of Business
from and after the execution of this Agreement remaining outstanding at the
Closing (a list of such customer contracts and the associated outstanding
deferred revenue to be provided by Sellers to Buyer at Closing); 
 
(iii)  all obligations, duties and liabilities arising as a result of the
post-Closing employment by Buyer or Clarient of any Hired Employee, other than
any Excluded Liability;
 
(iv)  all obligations, duties and liabilities relating to warranties contained
in written customer agreements for Instruments sold in the Ordinary Course of
Business;
 
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(v)  all obligations, duties and liabilities relating to vendor purchase orders
submitted by Sellers in the Ordinary Course of Business from and after the date
hereof until the Closing to any of the vendors indicated on Schedule 2.2(b)(v)
for the purpose of purchasing inventory;
 
(vi)  all obligations, duties and liabilities arising as a result of the
post-Closing ownership or use by Buyer and Clarient of the Purchased Assets,
other than any Excluded Liabilities; and
 
(vii)  Buyer’s Transfer Taxes.
 
(c)  Definition of Excluded Liabilities
 
. Sellers and their Subsidiaries shall retain, and shall be responsible for
paying, performing and discharging when due, and Buyer shall not assume or have
any responsibility for, any obligations, duties and liabilities of Sellers’ and
their respective Subsidiaries other than Assumed Liabilities, whether arising
prior to, on or after the Closing Date (collectively, “Excluded Liabilities”),
including, without limitation:
 
(i)  all obligations, duties and liabilities of Sellers under this Agreement,
the Ancillary Agreements or any other certificate, instrument or other agreement
entered into in connection with the transactions contemplated hereby;
 
(ii)  obligations, duties and liabilities related to or arising out of the use
or ownership of any Excluded Asset;
 
(iii)  obligations, duties and liabilities to the extent arising from or as a
result of any business of Sellers, including the Business, other than the
Assumed Liabilities, including any action, suit, claim or proceeding thereto,
regardless of when filed and regardless of whether an accrual in respect thereof
is included on the Current Balance Sheet or the Closing Balance Sheet.
 
(iv)  other than Buyer’s Transfer Taxes, any liabilities for Taxes of the
Sellers, or any member of any consolidated, affiliated, combined or unitary
group of corporations of which any Seller is or has been a member, for Taxes and
any liabilities for Taxes attributable to the Purchased Assets for any
Pre-Closing Tax Period arising from the operation of the Business prior to the
Closing;
 
(v)  all accounting, consulting, finders, investment banking, legal and similar
fees and expenses incurred by Sellers in connection with the negotiation of this
Agreement or any Ancillary Agreement, and the consummation of the transactions
contemplated hereby and thereby;
 
(vi)  any liabilities or obligations of Sellers under any Contracts other than
the Assumed Contracts;
 
(vii)  any and all warranty liabilities or obligations of Sellers and their
respective Subsidiaries to the extent not Assumed Liabilities;
 
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(viii)  the liabilities and obligations set forth on Schedule 2.2(b)(i);
 
(ix)  any infringement or alleged infringement of any Intellectual Property
Rights of any other Person, including but not limited to Sellers’ Intellectual
Property, arising out of any action of Sellers on or prior to the Closing or any
misappropriation or misuse of any Technology or any other right of another
Person arising out of any action of Sellers prior to the Closing;
 
(x)  any liability of Sellers arising by reason of any violation or alleged
violation of any judgment, order, decree, statute, law, rule of common law, code
and regulations to the extent such liability results from or arises out of
events, facts or circumstances occurring or existing prior to the Closing;
 
(xi)  any liabilities or obligations of Sellers or their ERISA Affiliates or
respective Subsidiaries arising out of or in connection with (A) any Sellers’
Employee Plan at any time maintained, sponsored, contributed to or required to
be contributed to by or with respect to Sellers or their ERISA Affiliate or
respective Subsidiaries or (B) any employment practices of Sellers or their
ERISA Affiliates or respective Subsidiaries;
 
(xii)  all liabilities and obligations of Sellers and their ERISA Affiliates and
respective Subsidiaries to any current, former or prospective Employees or any
of their spouses, beneficiaries or other dependents (including the Hired
Employees during the period employed by Sellers through their termination by
Sellers) including without limitation, any liabilities or obligations under any
federal, state or municipal employment, labor or employment discrimination law,
including without limitation, the National Labor Relations Act, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination
in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair
Labor Standards Act, ERISA, the Worker Adjustment and Retraining Notification
Act, the Family and Medical Leave Act, the Immigration Reform and Control Act of
1986, the California Fair Employment and Housing Act, the California Family
Rights Act, and the California Labor Code, and all amendments to each such Act
as well as the regulations issued thereunder (together, the “Employment
Statutes”); and
 
(xiii)  all obligations and liabilities, whether absolute or contingent, other
than Assumed Liabilities.
 

2.3  
Consideration for Purchased Assets

 
.
 
(a)  On the terms and subject to the conditions set forth in this Agreement, the
consideration for the Purchased Assets shall be Buyer’s payment to Sellers of
the Purchase Price as provided herein.
 
(b)  On the second Business Day prior to the Closing, Sellers shall deliver to
Buyer (i) the Closing Balance Sheet, (ii) the Closing Accounts Receivable
Statement, together with an aging schedule indicating a range of days elapsed
since invoice, (iii) a schedule reflecting Sellers’ calculation of the
Adjustment Amount, if any (the “Adjustment Schedule”),
 

 
 

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and (iv) all work papers and back-up materials (including a schedule of
inventory) used in the preparation of the Closing Balance Sheet, the Closing
Accounts Receivable Statement and the Adjustment Schedule. Following delivery of
such items, Buyer shall have the right to make reasonable inquiries with respect
thereto and, during regular business hours or by other arrangement with Sellers,
conduct a physical inventory and inspection of Buyer’s financial records,
assets, inventory and facilities for the purpose of verifying and validating the
information set forth in the Closing Balance Sheet, the Closing Accounts
Receivable Statement, and the Adjustment Schedule. Sellers shall provide Buyer
with answers to such queries and such additional information as Buyer may
reasonably request.
 

2.4  
Allocation of Purchase Price

 
. No later than 60 days following the Closing Date, the Buyer will submit to the
Sellers its allocation of the Base Price (plus Assumed Liabilities to the extent
properly taken into account under the Code and the applicable Treasury
Regulations) among the Purchased Assets subject to the approval of the Sellers,
which approval shall not be unreasonably withheld (the “Allocation”). The
Allocation will be made in accordance with Section 1060 of the Code and the
Treasury regulations promulgated thereunder. The Sellers and the Buyer agree to
(i) be bound by the Allocation, (ii) act in accordance with the Allocation in
the preparation of financial statements and filing of all Tax Returns
(including, without limitation, filing Form 8594 with their United States
federal income Tax Return for the taxable year that includes the date of the
Closing) and in the course of any Tax audit, Tax review or Tax litigation
relating thereto and (iii) take no position and cause their Affiliates to take
no position inconsistent with the Allocation for income Tax purposes, including
United States federal and state income Tax and foreign income Tax, unless
otherwise required pursuant to a “determination” within the meaning of Section
1313(a) of the Code. Not later than thirty (30) days prior to the filing of
their respective Forms 8594 (and analogous state law forms) relating to this
transaction, each Party shall deliver to the other party a copy of its Form 8594
(and any analogous state law forms).
 

2.5  
Closing

 
.
 
(a)  Closing Place, Time and Date. Unless this Agreement is earlier terminated
pursuant to Article X hereof, the closing of the transactions contemplated by
this Agreement (the “Closing”) shall be held at the offices of Latham & Watkins
LLP, 650 Town Center Drive, 20th Floor, Costa Mesa, California, at 11:00 a.m. on
the date which is two (2) Business Days following the satisfaction or waiver of
the conditions to Closing set forth in Article VIII hereof, or at such other
place and such other time and/or date as the Parties hereto shall mutually agree
(the actual date on which the Closing shall occur being referred to herein as
the “Closing Date”).
 
(b)  Closing Deliveries
 
.
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(i)  At the Closing, unless otherwise provided, Buyer shall deliver, or cause to
be delivered, to Sellers, as applicable, the following, dated as of the Closing
Date and executed for and on behalf of Buyer by a duly authorized officer
thereof:
 
(1)  the Purchase Price, which shall be delivered in the form of a wire transfer
to Seller’s designated account of immediately available funds in an amount equal
to the Base Price minus the unpaid principal and interest on all of the Bridge
Notes;
 
(2)  the original of each of the Bridge Notes for cancellation in accordance
with the terms thereof, together with a termination of the Security Agreements
in accordance with their terms, and any UCC termination statements and other
filings relating thereto;
 
(3)  one or more instruments of assumption, in customary form and substance
reasonably satisfactory to Buyer and Sellers and their respective counsel;
 
(4)  the certificates and other documents required to be delivered pursuant to
Section 8.2; and
 
(5)  any and all other instruments, certificates and agreements contemplated by
Article VIII or Article IX hereof or as Sellers may reasonably request in order
to effectively make Buyer responsible for all Assumed Liabilities pursuant
hereto to the fullest extent permitted by applicable law.
 
(ii)  At the Closing, Sellers shall deliver, or cause to be delivered, to Buyer
the following, dated as of the Closing Date and executed for and on behalf of
Sellers by duly authorized officers thereof:
 
(1)  a bill of sale, in customary form and substance reasonably satisfactory to
Buyer and Sellers and their respective counsel;
 
(2)  one or more instruments of assumption, in customary form and substance
reasonably satisfactory to Buyer and Sellers and their respective counsel;
 
(3)  an instrument of assignment of Patents, in customary form and substance
reasonably satisfactory to Buyer and Sellers and their respective counsel;
 
(4)  an instrument of assignment of Copyrights, in customary form and substance
reasonably satisfactory to Buyer and Sellers and their respective counsel;
 
(5)  an instrument of assignment of Trademarks, in customary form and substance
reasonably satisfactory to Buyer and Sellers and their respective counsel;
 
(6)  the certificates and other documents required to be delivered pursuant to
Section 8.1; and
 
(7)  any and all other instruments, certificates and agreements contemplated by
Article VIII hereof or as Buyer may reasonably request in order to effectively
 

 
 

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transfer to Buyer all of the Purchased Assets pursuant hereto to the fullest
extent permitted by applicable law.
 

2.6  
Nontransferable Assets

 
.  To the extent that any Purchased Asset or Assumed Liability to be sold,
conveyed, assigned, transferred, delivered or assumed to or by Buyer pursuant
hereto, or any claim, right or benefit arising thereunder or resulting
therefrom, is not capable of being sold, conveyed, assigned, transferred or
delivered without the approval, consent or waiver of the issuer thereof or the
other party thereto, or any third person (including a Governmental Body), or if
such sale, conveyance, assignment, transfer or delivery or attempted sale,
conveyance, assignment, transfer or delivery would constitute a breach or
termination right thereof or a violation of any law, decree, order, regulation
or other governmental edict, except as expressly otherwise provided herein, this
Agreement shall not constitute a sale, conveyance, assignment, transfer or
delivery thereof, or an attempted sale, conveyance, assignment, transfer or
delivery thereof absent such approvals, consents or waivers. If any such
approval, consent or waiver shall not be obtained, or if an attempted assignment
of any such Purchased Asset or the assumption of any Assumed Liability by Buyer
would be ineffective so that Buyer would not in fact receive all such Purchased
Assets or assume all such Assumed Liabilities pursuant hereto, Sellers and Buyer
shall cooperate in a mutually agreeable arrangement under which Buyer would
obtain the benefits and assume the obligations of such Purchased Assets and
Assumed Liabilities in accordance with this Agreement, including subcontracting,
sub-licensing, or sub-leasing to Buyer, or under which Sellers, as Buyer shall
reasonably request, would enforce for the benefit of Buyer, with Buyer assuming
all of Sellers’ obligations thereunder, any and all rights of Sellers against a
third party thereto.
 

2.7  
Taking of Necessary Action; Further Action

 
.  From time to time after the Closing Date, the Parties shall execute and
deliver such other instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as the other Party may reasonably determine is
necessary to transfer, convey and assign to Buyer, and to confirm Buyer’s title
to or interest in, the Purchased Assets, to put Buyer in actual possession and
operating control thereof, to assist Buyer in exercising all rights with respect
thereto and to assist in hiring and transferring the Hired Employees to Buyer’s
employ, to hold Buyer harmless with respect to the Excluded Liabilities, and for
Buyer to assume the Assumed Liabilities and hold Seller’s harmless with respect
thereto. Sellers hereby constitute and appoint Buyer and its successors and
assigns as its true and lawful attorney in fact in connection with the
transactions contemplated by this instrument, with full power of substitution,
in the name and stead of Sellers but on behalf of and for the benefit of the
Buyer and its successors and assigns, to demand and receive any and all of the
assets, properties, rights and business hereby conveyed, assigned, and
transferred or intended so to be, and to give receipt and releases for and in
respect of the same and any part thereof, and from time to time to institute and
prosecute, in the name of Sellers or otherwise, for the benefit of the Buyer or
its successors and assigns, proceedings at law, in equity, or otherwise, which
the Buyer or its successors or assigns reasonably deem proper in order to
collect or reduce to possession or endorse any of the Purchased Assets and to do
all acts and things in relation to the Purchased Assets which the Buyer or its
successors or assigns reasonably deem desirable.
 
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ARTICLE III  
 
REPRESENTATIONS AND WARRANTIES OF SELLERS
 
Subject to such exceptions as are specifically disclosed in the disclosure
letter (referencing the appropriate section numbers) supplied by Sellers to
Buyer (the “Sellers’ Disclosure Letter”), Sellers hereby represent and warrant
to Buyer that the statements contained in this Article III are true and correct
as of the date of this Agreement and will be true and correct as of the Closing
(as though made at the Closing); provided, that representations and warranties
made as of a specified date will be true and correct as of such date.
 

3.1  
Organization, Qualification, and Corporate Power

 
.  Sellers are corporations duly organized, validly existing, and in good
standing under the laws of the State of Delaware, and each of Sellers’
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Sellers and each of their
Subsidiaries are duly authorized to conduct business and in good standing under
the laws of each jurisdiction where such qualification or good standing is
required and in which the failure to be so qualified would not reasonably be
expected to have a Sellers’ Material Adverse Effect. There is no state other
than California in which Sellers or any of their Subsidiaries own any material
property or in which Sellers or any of their Subsidiaries have any employees,
offices or material operations. Sellers and each of their Subsidiaries have full
corporate power and authority to carry on their businesses as they have been and
are currently conducted and to own and use the properties and assets owned and
used by them. Section 3.1 of the Sellers’ Disclosure Letter lists the directors
and officers of each of Sellers. The operations now being conducted by Sellers
and their Subsidiaries in connection with the Business have not been conducted
under any other name since Sellers’ inception. The copies of Sellers’ and each
of their respective Subsidiaries’ Certificates of Incorporation, Bylaws and
other corporate records which have been delivered to Buyer are true, correct and
complete as of the date hereof and shall be as of the Closing.
 

3.2  
Authorization

 
.  Sellers have full corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which they are a party, and, subject
to receipt of the Stockholder Approval to consummate the transactions
contemplated hereunder and thereunder and to perform their obligations hereunder
and thereunder. No other proceedings on the part of Sellers, their stockholders
or any of their Subsidiaries are necessary to authorize the execution, delivery
and performance of this Agreement and the Ancillary Agreements to which Sellers
are a party. This Agreement and the Ancillary Agreements to which Sellers are a
party and the transactions contemplated hereby and thereby have been approved by
the unanimous vote of the board of directors of each Seller. Assuming the due
and valid authorization, execution and delivery thereof by Buyer, this Agreement
and each of the Ancillary Agreements constitute the valid and legally binding
obligations of Sellers, enforceable against Sellers in accordance with their
respective terms and conditions, except as such enforceability may be subject to
the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies. Parent owns, beneficially and of record, all
of the outstanding voting and capital shares of Trestle Sub.
 
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3.3  
Sellers’ SEC Filings

 
. Since January 1, 2005, Parent has timely filed all reports, documents,
schedules, forms, statements and other documents required to be filed by them
with the Securities and Exchange Commission pursuant to the Securities Act and
the Exchange Act, as applicable (“SEC Filings”). As of their respective filing
dates, except as noted therein or to the extent corrected by Parent’s
subsequently filed SEC Filings that were filed prior to the Closing Date,
Parent’s SEC Filings complied in all material respects with the requirements of
the Securities Act and the Exchange Act, as applicable, and the rules and
regulations of the SEC promulgated thereunder applicable to Parent’s SEC
Filings, and except as noted therein or to the extent corrected by Parent’s
subsequently filed SEC Filings that were filed prior to the Closing Date, none
of the Parent’s SEC Filings contained on their filing dates any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
 

3.4  
Subsidiaries

 
.  The Sellers’ Disclosure Letter contains a description of each Subsidiary of
Sellers and their respective jurisdictions of incorporation and qualification.
 

3.5  
No Conflicts

 
.  Neither the execution, delivery or performance of this Agreement or any
Ancillary Agreement by Sellers, nor, subject to the receipt of the Stockholder
Approvals, the consummation of the transactions contemplated hereby and thereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
Governmental Body to which Sellers or any of their Subsidiaries are subject,
(B) violate or conflict with any provision of the Certificate of Incorporation
or Bylaws (or other charter documents) of either Seller or any of their
respective Subsidiaries, or (C) violate, conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, suspend, revoke or cancel, or
require any notice or consent under, any Assumed Contract (or result in the
imposition of any Lien upon any of the Purchased Assets).
 

3.6  
Consents

 
.  Except as set forth on Section 3.6 of the Sellers’ Disclosure Letter, no
consent, notice, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body or any third party, including
a party to any Contract with Sellers or any of their Subsidiaries, is required
by or with respect to Sellers or any of their Subsidiaries in connection with
the execution and delivery of this Agreement and the Ancillary Agreements or the
consummation of the transactions contemplated hereby or thereby or for any
Assumed Contract to remain in full force and effect without limitation or
modification after the Closing, except for (i) the Stockholder Approvals and
(ii) such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws.
 

3.7  
Sellers’ Financial Statements

 

 
 

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. 
 
(a)  As of their respective dates, the consolidated financial statements of
Sellers and their Subsidiaries included in the Sellers’ SEC Filings since
January 1, 2006 complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto. Such financial statements are in accordance
with the books and records of Sellers and have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods indicated and
consistent with each other (except that unaudited interim financial statements
do not contain footnotes and other presentation items that may be required by
GAAP and are subject to normal year-end audit adjustments, which are not
material in amount or significance in the aggregate). Such financial statements
present fairly and accurately in all material respects Sellers’ financial
condition, operating results as of the dates and during the periods indicated
therein all in accordance with GAAP (except that unaudited interim financial
statements do not contain footnotes and other presentation items that may be
required by GAAP and are subject to normal year-end audit adjustments, which are
not material in amount or significance in the aggregate).
 
(b)  Section 3.7(b) of the Sellers’ Disclosure Letter sets forth the unaudited
consolidated balance sheet of Sellers and their Subsidiaries as of March 31,
2006 (the “Current Balance Sheet”), and the related unaudited consolidated
statement of income, cash flow and stockholders’ equity for the three-month
period then ended (together with the Current Balance Sheet, the “Sellers’
Financial Statements”). The Sellers’ Financial Statements are in accordance with
the books and records of Sellers and their Subsidiaries and have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
indicated and consistent with each other and with the consolidated financial
statements of Sellers and their Subsidiaries included in the Sellers’ SEC
Filings (except that unaudited interim financial statements do not contain
footnotes and other presentation items that may be required by GAAP and are
subject to normal year-end audit adjustments, which are not material in amount
or significance in the aggregate). The Sellers’ Financial Statements present
fairly and accurately in all material respects the Sellers’ financial condition
and operating results as of the dates and during the periods indicated therein
all in accordance with GAAP (except that unaudited interim financial statements
do not contain footnotes and other presentation items that may be required by
GAAP and are subject to normal year-end audit adjustments, which are not
material in amount or significance in the aggregate).
 

3.8  
Internal Controls

 
.  Sellers maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
 

3.9  
Accounts Receivable

 

 
 

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The Sellers have made available to Buyer a list of all accounts receivable of
the Sellers and their Subsidiaries as of the Current Balance Sheet Date (the
“Current Accounts Receivable Statement”), together with an aging schedule
indicating a range of days elapsed since invoice. All of such accounts
receivable listed on the Current Accounts Receivable Statement arose in the
Ordinary Course of Business, are carried at values determined in accordance with
GAAP consistently applied (except that unaudited interim financial statements do
not contain footnotes and other presentation items that may be required by GAAP
and are subject to normal year-end audit adjustments, which are not material in
amount or significance in the aggregate), and are to Sellers’ Knowledge,
collectible except to the extent of reserves therefor set forth in the Current
Balance Sheet for receivables arising subsequent to the Current Balance Sheet
Date as reflected on the books and records of the Sellers and their Subsidiaries
(which are prepared in accordance with GAAP, except that unaudited interim
financial statements do not contain footnotes and other presentation items that
may be required by GAAP and are subject to normal year-end audit adjustments,
which are not material in amount or significance in the aggregate), in each
case, except as otherwise set forth in Sellers’ Disclosure Letter. No Person
other than Buyer and its affiliates has any Lien on any of such accounts
receivable and no request or agreement for deduction or discount has been made
with respect to any of the accounts receivable. To the Knowledge of Seller, the
accounts receivable set forth in the Current Accounts Receivable Statement and
other debts arising therefrom are not subject to any counterclaim or set-off and
there are no claims or disputes with regard to any such accounts receivable
except to the extent of the reserves reflected on the Current Balance Sheet.
Since the Current Balance Sheet Date, Sellers have not made any change in their
credit policies, nor have they materially deviated therefrom.
 

3.10  
Customers and Suppliers

 
.  The Sellers’ Disclosure Letter sets forth a complete and accurate list of (i)
the customers of the Sellers on the basis of orders booked in excess of $50,000
during the last twelve (12) calendar months prior to the date of this Agreement
(the “Significant Customers”) and the amount for which each customer was
invoiced during such period, and (ii) the suppliers of the Sellers with respect
to the Business on the basis of cost of goods or services purchased by the
Sellers in excess of $50,000 during the last twelve (12) calendar months prior
to the date of this Agreement (the “Significant Suppliers”) and the amount for
which each such supplier invoiced the Sellers during such period. To Sellers’
Knowledge, no Significant Customer has ceased to use the products, equipment,
goods or services of Sellers, or has substantially reduced the use of such
products, equipment, goods or services at any time. Buyer acknowledges that
Sellers’ Significant Customers are on a purchase order basis. To Sellers’
Knowledge, no Significant Supplier will not sell materials, supplies,
merchandise and other goods after the Closing on terms and conditions
substantially similar to those used in its current sales to the Business,
subject only to general and customary price increases. None of the materials,
supplies, merchandise or other goods supplied to the Business are such that they
are not generally available in the market from more than one source. To the
Sellers’ Knowledge, no such Significant Customer or Significant Supplier is
threatened with bankruptcy or insolvency.
 

3.11  
No Undisclosed Liabilities

 

 
 

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Sellers do not have any material liabilities or obligations of any nature
relating to any Purchased Assets or Assumed Liabilities except for liabilities
or obligations (i) adequately reflected or reserved against in the Current
Balance Sheet in accordance with GAAP (except that unaudited interim financial
statements do not contain footnotes and other presentation items that may be
required by GAAP and are subject to normal year-end audit adjustments, which are
not material in amount or significance in the aggregate), (ii) that are current
liabilities that were incurred in the Ordinary Course of Business that are not
required to be reflected on the Current Balance Sheet in accordance with GAAP
(except that unaudited interim financial statements do not contain footnotes and
other presentation items that may be required by GAAP and are subject to normal
year-end audit adjustments, which are not material in amount or significance in
the aggregate), or (iii) incurred since the Current Balance Sheet Date in the
Ordinary Course of Business.
 

3.12  
No Changes

 
.  Since March 31, 2006, except with respect to the transactions contemplated
hereby, (a) the Business has been conducted in the Ordinary Course of Business
and consistent with past practices, and (b) there has not been any destruction
of, damage to, or loss of any Purchased Assets or Business, or any Significant
Customer or Significant Supplier with respect to the Business (whether or not
covered by insurance) that would reasonably be expected to have a Sellers’
Material Adverse Effect. 
 

3.13  
Events Subsequent to Most Recent Fiscal Period End

 
.  Since March 31, 2006 to the date of this Agreement, neither the Business nor
any of the Purchased Assets has suffered any adverse change that would
reasonably be expected to result in a Sellers’ Material Adverse Effect. Without
limiting the generality of the foregoing, since such date except as provided in
this Agreement, the Ancillary Agreements, the Bridge Notes and the transactions
contemplated hereby and thereby, neither the Sellers nor any Subsidiary of a
Seller have, as it relates to the Business, any of the Purchased Assets or any
of the Assumed Liabilities:
 
(a)  sold, leased, transferred, or assigned any assets or properties, tangible
or intangible, outside the Ordinary Course of Business;
 
(b)  except as otherwise set forth in Section 3.13(b) of the Sellers’ Disclosure
Letter, assumed or become bound under or obligated by any Contract or extended
or modified the terms of any Contract of the type required to be listed in
Section 3.18 of the Sellers’ Disclosure Letter;
 
(c)  had any party accelerate, terminate, make modifications to, or cancel any
Assumed Contract to which Sellers or any of their Subsidiaries is a party or by
which any of them are bound, and neither Sellers nor any of their Subsidiaries
has modified, canceled or waived or settled any debts or claims held by them,
outside the Ordinary Course of Business, or waived or settled any rights or
claims of a substantial value, whether or not in the Ordinary Course of
Business;
 
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(d)  permitted any of the Purchased Assets of Sellers or any of their respective
Subsidiaries, tangible or intangible, to become subject to any Lien and no Lien
held for the benefit of Sellers or their Subsidiaries related to the Business
has been released or discharged;
 
(e)  made any capital expenditures except in the Ordinary Course of Business and
not exceeding $50,000 in the aggregate of all such capital expenditures, other
than in connection with the purchase of inventory held for sale;
 
(f)  made any capital investment in, or any loan to, any Person other than a
Seller in an amount in excess of $50,000;
 
(g)  created, incurred, assumed, prepaid or guaranteed any indebtedness for
borrowed money and capitalized lease obligations, or extended or modified any
existing indebtedness;
 
(h)  experienced a change in relations with their employees or any of their
Subsidiaries as a group that would reasonably be expected to result in a
Sellers’ Material Adverse Effect;
 
(i)  authorized or permitted any change in the Certificate of Incorporation or
Bylaws of Sellers or any of their respective Subsidiaries;
 
(j)  experienced any damage, destruction, or loss (whether or not covered by
insurance) to any Purchased Assets or any of Sellers or any of their respective
Subsidiaries’ other property in excess of $50,000 in the aggregate of all such
damage, destruction and losses whether or not covered by insurance;
 
(k)  cancelled, amended or renewed any insurance policy that provides coverage
with respect to the Purchased Assets, the Business or any Hired Employee;
 
(l)  suffered any repeated, recurring or prolonged shortage, cessation or
interruption of communications, customer access, supplies or utility services
which has had or would reasonably be expected to have a Sellers’ Material
Adverse Effect;
 
(m)  except as otherwise set forth in Section 3.13(m) of the Sellers’ Disclosure
Letter, (i) adopted, entered into or modified any Sellers’ Employee Plan, (ii)
entered into any collective bargaining agreement, or (iii) paid, announced,
promised or granted, whether orally or in writing, any increase in the wages,
salaries, compensation, bonuses, incentives, pensions, severance or termination
payments, fringe benefits or other benefits to any Employees, including without
limitation any increase or change pursuant to any Sellers’ Employee Plan (except
as required by law or, with respect to non-executive Employees only, in the
Ordinary Course of Business);
 
(n)  except in connection with the sale of Sellers’ regular products in the
Ordinary Course of Business, entered into a sale, lease, license, transfer or
other disposition of any products in connection with which, or entry into,
renewal of, or modification or amendment in any material respect of any Contract
under which Sellers or any of their Subsidiaries provided or is obligated to
provide any (i) warranties or indemnities relating to products or the Business,
 

 
 

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(ii) service level guarantees or assurances, or commitments under which Sellers
would be required to deliver any future product or upgrade, or (iii) pricing,
discounting, service or maintenance terms or provisions;
 
(o)  revalued any of their respective assets or properties (whether tangible or
intangible), including writing off notes or accounts receivable;
 
(p)  changed any of the accounting principles followed by them or the method of
applying such principles;
 
(q)  entered into any transaction other than in the Ordinary Course of Business;
 
(r)  made or changed any material election with respect to Taxes, adopted or
changed any material accounting method with respect to Taxes, amended any Tax
Return, entered into any Tax allocation agreement, Tax sharing agreement, Tax
indemnity agreement or closing agreement, settled or compromised on any claim,
notice, audit report or assessment with respect to Taxes, or consented to any
extension or waiver of the limitation period applicable to any claim or
assessment with respect to Taxes, in each case, to the extent related to any
Purchased Asset; and
 
(s)  become obligated to do any of the foregoing.
 

3.14  
Legal Compliance

 
.
 
(a)  Sellers and their Subsidiaries (i) are and have been operated at all times
in material compliance with all federal, state or local statutes, laws, rules,
regulations, ordinances, codes or any other requirements or rules of law
applicable to the Sellers or any of the Sellers’ Subsidiaries or by which any
property, business, product or asset of the Sellers or any of the Sellers’
Subsidiaries is bound or affected, including, but not limited to, the federal
Food, Drug and Cosmetic Act (“FDCA”) (21 U.S.C. § 321 et seq.), the federal
Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the Stark Law (42 U.S.C. §
1395nn), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.), the
administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Anti-Inducement
Law (42 U.S.C. § 1320a-7a(a)(5)), the Health Insurance Portability and
Accountability Act of 1996 (42 U.S.C. § 1320d et seq.), the exclusion laws, SSA
§ 1128 (42 U.S.C. § 1320a-7), Medicare (Title XVIII of the Social Security Act),
Medicaid (Title XIX of the Social Security Act), or the regulations promulgated
pursuant to such laws, and comparable state laws, accreditation standards and
all other state and federal laws, regulations, manual provisions, policies and
administrative guidance relating to the regulation of the business of the
Sellers and their Subsidiaries, and (ii) are not in material default or material
violation of any federal or state governmental licenses, registrations,
approvals, authorizations, clearances, exemptions, filings, permits or
franchises (collectively, “Permits”) to which the Sellers or any of their
Subsidiaries is a party or by which the Sellers or any of their Subsidiaries or
any property, product or asset of the Sellers or any of their Subsidiaries is
bound or affected.
 
(b)  Sellers and their Subsidiaries have in effect all material Permits
necessary for the conduct of their business and the use of their properties,
products and assets, as presently
 

 

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conducted and used; and neither the Sellers nor any of their respective
Subsidiaries have received any notice or communication from any Governmental
Body regarding (i) any actual or possible violation of applicable law or any
Permit or any failure to comply with any applicable law or the requirements of
any Permit, or (ii) any actual or possible revocation, withdrawal, suspension,
cancellation, limitation, termination or modification of any Permit.
 
(c)  Sellers and each of their Subsidiaries, as well as the Sellers’ and their
Subsidiaries’ third party manufacturers, suppliers, distributors or other third
party contractors, develop, test, manufacture, label, store, market, promote and
distribute their products in material compliance with all applicable federal
statutes, and rules and regulations promulgated by the United States Food and
Drug Administration (“FDA”) and with applicable laws, rules, regulations, and
standards of any comparable Governmental Body, including, but not limited to,
the FDCA and its implementing regulations at 21 C.F.R. Parts 801, 803, 806, 807,
812, 814 and 820. All of the products currently marketed by the Sellers and each
of their Subsidiaries have, where required by the FDCA and its implementing
regulations or other applicable statutes, rules and regulations, been approved
or cleared for sale by the FDA and all other applicable Governmental Bodies. For
all of the products currently marketed by the Company and its Subsidiaries
outside the United States, the Company and its Subsidiaries have obtained all
necessary regulatory approvals from all applicable foreign regulatory
authorities. Except as set forth in Section 3.14 of the Sellers’ Disclosure
Letter, neither the Sellers nor any their Subsidiaries have received any notice
from, or otherwise have knowledge of, the FDA or any other Governmental Body,
threatening to limit, suspend, or revoke any product marketing clearance or
approval, change the marketing classification or labeling of, or otherwise
require market removal or withdrawal of any of the Sellers’ or their
Subsidiaries’ products. 
 
(d)  All information, claims, reports and statistics and other data and
conclusions derived therefrom, utilized as the basis for or submitted in
connection with any and all requests for Permits of the FDA relating to the
Sellers and their Subsidiaries and their respective products, when submitted to
the FDA were true, complete and correct in all material respects as of the date
of submission and any necessary or required updates, changes, corrections or
modification to such information, claims, reports, statistics and other data
have been submitted to the FDA.
 
(e)  Except as set forth on Section 3.14(e) of the Sellers’ Disclosure Letter,
the Sellers and their Subsidiaries have not received, nor have knowledge of any
facts that furnish any basis for, any Form FDA-483 inspectional observations or
untitled or warning letters from the FDA, or any other similar communications
from the FDA or any applicable Governmental Body; and there have been no
voluntary or involuntary recalls, corrective actions, removals, field
notifications, import alerts, product detentions, product seizures, governmental
investigations, or civil or criminal enforcement action initiated, or, to
Sellers’ Knowledge, proposed, requested, or threatened relating to the products
or the Sellers or any of their Subsidiaries.
 
(f)  All pre-clinical trials and clinical trials conducted by or on behalf of
the Sellers and their Subsidiaries have been, and are being conducted in
material compliance with experimental protocols, procedures and controls
pursuant to accepted professional scientific standards and all applicable
federal statutes and rules and regulations promulgated by the FDA
 

 

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relating thereto, including without limitation the FDCA and its applicable
implementing regulations at 21 C.F.R. Parts 50, 54, 56 and 812.
 
(g)  Except as set forth on Section 3.14(g) of the Sellers’ Disclosure Letter,
no officer or, to Sellers’ Knowledge, any employee or agent of the Sellers of
any their Subsidiaries has committed any act, made any statement, or failed to
make any statement, that would reasonably be expected to cause the FDA to invoke
its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and
Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991) and
any amendments thereto in a manner affecting the Business.
 
(h)  Except as set forth on Section 3.14(h) of the Sellers’ Disclosure Letter,
none of the Sellers and their Subsidiaries, the officers of Sellers or, to
Sellers’ Knowledge, the employees and agents of the Sellers and their
Subsidiaries, have been convicted of any crime or engaged in any conduct that
would reasonably be expected to result in a material debarment or exclusion (i)
under 21 U.S.C. Section 335a, or (ii) any similar state law, rule or regulation.
As of the date hereof, to Sellers’ Knowledge, no claims, actions or proceedings
that would reasonably be expected to result in such a material debarment or
exclusion are pending or threatened against the Sellers or any of their
Subsidiaries, or the officers, employees or agents of the Sellers or any of
their Subsidiaries. 
 
(i)  Neither the Sellers nor any of their Subsidiaries are enrolled as a
supplier or provider under Medicare, Medicaid, or any other governmental health
care program or third party payment program or is a party to any participation
agreement for payment by any such governmental health care program and third
party payment program.
 

3.15  
Tax Matters

 
. The representations of Sellers under this Section 3.15 are limited to Taxes
(i) for which Buyer would be liable, as a transferee or otherwise, or (ii) that
have or would create a Lien on the Purchased Assets.
 
(a)  Sellers and each of their Subsidiaries have timely filed all Tax Returns
that they were required to file. All such Tax Returns were correct and complete
in all material respects. All Taxes owed by Sellers and each of their
Subsidiaries (whether or not shown on any Tax Return) were paid in full when due
or are being contested in good faith and are supported by adequate reserves on
the Sellers’ Financial Statements. No Seller nor any of their Subsidiaries is
currently the beneficiary of any extension of time within which to file any Tax
Return. To Sellers’ Knowledge, no claim has ever been made by an authority in a
jurisdiction in which a Seller or any of its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
 
(b)  Sellers and each of their Subsidiaries have withheld and paid when due all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party, including without limitation, with respect to its employees, all
federal, state and municipal income and employment Taxes, including without
limitation, Taxes pursuant to the Federal Insurance Contribution Act (“FICA”),
and Taxes pursuant to the Federal Unemployment Tax Act (“FUTA”). Neither Seller
 

 

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is a “foreign person” as defined in Section 1445(f)(3) of the Code. Sellers are
not required to withhold with respect to the transactions contemplated herein
pursuant to the tax withholding provisions of Section 3406 of the Code or of
Subchapter A of Chapter 3 of the Code.
 
(c)  There are no Liens upon any property or assets of Sellers or any Subsidiary
relating to or attributable to Taxes, except for Liens for Taxes not yet due and
payable.
 
(d)  No deficiencies for Taxes have been claimed, proposed in writing or
assessed by any taxing or other Governmental Body against the Sellers or their
Subsidiaries that have not otherwise been paid, settled or contested in good
faith. There are no investigations, disputes or claims or other actions for or
relating to any additional liability for or relating to any liability for Taxes
with respect to the Sellers or their Subsidiaries for which Sellers have
received written notice, or to Sellers’ Knowledge is currently threatened.
Neither Seller nor any of their Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
 
(e)  Sellers have made available to Buyer all federal and state income and all
state sales and use Tax Returns requested by Buyer for all periods since January
1, 2004.
 
(f)  All material elections with respect to Taxes affecting the Purchased Assets
as of the date hereof, to the extent such elections are not shown on or in the
Tax Returns of the Sellers or their Subsidiaries that have been delivered to the
Buyer by the Sellers prior to the date hereof, are set forth in Section 3.15(f)
of the Sellers’ Disclosure Letter.
 
(g)  Neither Seller nor any of their Subsidiaries has been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code
(other than the affiliated group of which Parent is the common parent) or has
any liability for the Taxes of any other Person (i) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii)
as a transferee or successor, (iii) by contract or (iv) otherwise.
 
(h)  There are no, and at the Closing Date there will be no, Tax-sharing
agreements or similar arrangements (including indemnity agreements) with respect
to or involving the Sellers, their Subsidiaries or the Purchased Assets.
 

3.16  
Title of Properties; Absence of Liens and Encumbrances; Condition of Assets

 
. 
 
(a)  Neither Sellers nor any of their Subsidiaries own any real property, nor
have any of them ever owned any real property. All current leases of Sellers and
their respective Subsidiaries relating to the Purchased Assets or Assumed
Liabilities are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any
existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default) on the part of any of them and, to
the Knowledge of the Sellers, on the part of any other party thereto.
 
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(b)  Except as set forth in Section 3.16(b) of Sellers’ Disclosure Letter,
Sellers have the necessary power and right to sell, assign, transfer, convey and
deliver the Purchased Assets to Buyer. Except as set forth in Section 3.16(b) of
Sellers’ Disclosure Letter, following the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements and the execution of
the instruments of transfer contemplated by this Agreement and the Ancillary
Agreements, Buyer will own, with good, valid and marketable title, or lease,
under valid and subsisting leases, or otherwise acquire the interests of Sellers
and their Subsidiaries in the Purchased Assets, free and clear of any Liens
without any increase in rentals, royalties, or license or other fees imposed on
Buyer as a result of, or arising from, the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements.
 
(c)  Section 3.16(c) of Sellers’ Disclosure Letter lists each material item of
equipment with a value of $50,000 or more owned or leased by Sellers or any of
their respective Subsidiaries and used primarily in connection with the
Business. 
 
(d)  At all times since the Balance Sheet Date, Sellers or their Subsidiaries
have caused the Purchased Assets to be maintained in accordance with good
business practice, and all the Purchased Assets are in good operating condition
and repair, subject to normal wear and tear.
 

3.17  
Intellectual Property

 
. 
 
(a)  Section 3.17(a) of Sellers’ Disclosure Letter lists all rights to Sellers’
Intellectual Property, including but not limited to, Registered Intellectual
Property Rights owned by, filed in the name of, or applied for, by Sellers or
any of their Subsidiaries (the “Sellers’ Registered Intellectual Property
Rights”) and lists any proceedings or actions before any court, tribunal
(including the United States Patent and Trademark Office (the “PTO”) or
equivalent authority anywhere in the world) related to Sellers’ Intellectual
Property. Other than the Sellers’ Intellectual Property listed in
Section 3.17(a) of Sellers’ Disclosure Letter, (i) no provisional applications,
nonprovisional applications, substitutions, extensions, reissues,
reexaminations, renewals, divisions, continuations, continuations-in-part,
parents or other related applications have been filed or issued with respect to
Technology used in and/or necessary to the conduct of the business of Sellers as
currently conducted, and, to the Knowledge of Sellers, as currently planned or
contemplated to be conducted by, and (ii) no counterpart applications of the
Sellers’ Intellectual Property listed have been filed or issued in any country.
 
(b)  Except to the extent that would not reasonably be expected to result in a
Sellers’ Material Adverse Effect, each item of Sellers’ Registered Intellectual
Property Rights are valid and subsisting, and all necessary registration,
maintenance and renewal fees in connection with Sellers’ Registered Intellectual
Property Rights have been paid and all necessary documents and certificates in
connection with Sellers’ Registered Intellectual Property Rights have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Registered Intellectual Property Rights. Except as set forth on
Section 3.17(b) of the Sellers’ Disclosure Letter, there are no actions that
must be taken by Sellers or any of their Subsidiaries
 

 
 

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within one hundred twenty (120) days of the Closing Date, including the payment
of any registration, maintenance or renewal fees or the filing of any responses
to PTO office actions, documents, applications or certificates for the purposes
of obtaining, maintaining, perfecting or preserving or renewing any Registered
Intellectual Property Rights. Sellers own all right, title and interest in and
to, or have the valid right or license to, Sellers’ Intellectual Property free
and clear of all encumbrances. In each case in which Sellers or any of their
Subsidiaries have acquired any Technology or Intellectual Property Right from
any person, Sellers or such Subsidiary have obtained a valid and enforceable
assignment or license sufficient to transfer to Buyer such rights in such
Technology and Intellectual Property Rights (including the right to seek past
and future damages with respect thereto) as are necessary or useful for the
conduct of the Business as currently conducted. To the maximum extent provided
for by, and in accordance with, applicable laws and regulations, Sellers and
each of their Subsidiaries have recorded each such assignment of a Registered
Intellectual Property Right assigned to Sellers with the relevant Governmental
Body, including the PTO, the U.S. Copyright Office, or their respective
equivalents in any relevant foreign jurisdiction, as the case may be. Except as
set forth on Section 3.17(b) of the Sellers’ Disclosure Letter, Sellers have not
claimed a particular status, including “Small Business Status,” in the
application for any Intellectual Property Rights, which claim of status was at
the time made, or which has since become, inaccurate or false or that will no
longer be true and accurate as a result of the Closing. 
 
(c)  Sellers have no Knowledge of any facts or circumstances that would render
Sellers’ Intellectual Property invalid or unenforceable. Without limiting the
foregoing, Sellers and each of their Subsidiaries know of no information,
materials, facts, or circumstances, including any information or fact that would
constitute prior art, that would render any of Sellers’ Intellectual Property
invalid or unenforceable, or would adversely effect any pending application for
Sellers’ Registered Intellectual Property Right and neither Sellers nor any of
their Subsidiaries have misrepresented, or failed to disclose, and have no
Knowledge of any misrepresentation or failure to disclose, any fact or
circumstances in any application for Sellers’ Registered Intellectual Property
Right that would constitute fraud or a misrepresentation with respect to such
application or that would otherwise affect the validity or enforceability of
Sellers’ Registered Intellectual Property Right. To Sellers’ Knowledge, there is
no unauthorized use, disclosure, infringement, or misappropriation, or notice of
invalidity or unenforceability, of any Sellers’ Intellectual Property, by any
third party, including for example any employee or former employee of the
Sellers. The Sellers have not sought or received any opinion of counsel, oral or
written, regarding any intellectual property right of a third party. To Sellers’
Knowledge, there is no substantial basis for a claim that Sellers, in the
operation of the business of the Sellers, are infringing or have infringed on or
misappropriated any intellectual property right of any third party.
 
(d)  Each item of Sellers’ Intellectual Property is free and clear of any Liens
(1) except as set forth in Section 3.17(d) of the Sellers’ Disclosure Letter and
(2) except for non-exclusive licenses granted to end-user customers in the
Ordinary Course of Business. Except as set forth in Section 3.17(d) of the
Sellers’ Disclosure Letter, to Sellers’ Knowledge, Sellers are the exclusive
owner or exclusive licensee of all Sellers’ Intellectual Property. Without
limiting the foregoing: (i) Sellers and each of their Subsidiaries are the
exclusive owner of all Trademarks used in connection with the operation or
conduct of the business of Sellers, including the sale, licensing, distribution
or provision of any products or services by Sellers;
 

 
 

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(ii) Sellers and each of their Subsidiaries own exclusively, and has good title
to, all Copyrights that are products of Sellers or which Sellers otherwise
purports to own; and (iii) to the extent that any Patents would otherwise be
infringed by any product or services of Sellers, such Patents constitute
Sellers’ Intellectual Property. 
 
(e)  Except as set forth in Section 3.17(e) of the Sellers’ Disclosure Letter,
all of Sellers’ Intellectual Property will be fully transferable, alienable or
licensable by Buyer without restriction and without payment of any kind to any
third party. The Sellers have not transferred any portion of ownership of any
Sellers’ Intellectual Property to any third party or knowingly permitted any
Sellers’ Intellectual Property to enter the public domain or, with respect to
any Sellers’ Intellectual Property for which any of the Sellers has submitted an
application or obtained a registration, to lapse (other than (i) through the
expiration of a registered Sellers’ Intellectual Property at the end of its
maximum statutory term or (ii) applications abandoned and listed in
Section 3.17(e) of the Sellers’ Disclosure Letter). After the Closing, all
Sellers’ Intellectual Property will be fully transferable, alienable or
licensable by Buyer without restriction and without payment of any kind to any
third party.
 
(f)  Except as set forth in Section 3.17(f) of the Sellers’ Disclosure Letter,
to the extent that Sellers’ Technology has been developed or created by a third
party for Sellers, Sellers have a written agreement with such third party with
respect thereto and Sellers thereby either (i) have obtained ownership of, and
are the exclusive owner of, or (ii) have obtained a license (sufficient for the
conduct of its business as currently conducted and as proposed to be conducted)
to all such third party’s Intellectual Property Rights in such Technology, to
the fullest extent it is legally possible to do so. To Sellers’ Knowledge, to
the extent that any third party intellectual property is incorporated into,
integrated or bundled with, or used by Sellers in the development, manufacture
or compilation of any product under Sellers’ Intellectual Property, or any of
Sellers’ Intellectual Property relates to any development by Sellers that
involves the derivation or use of specifications or technical information
derived from the products of third parties, Sellers have a written agreement
with such third party with respect thereto pursuant to which Sellers either have
obtained complete, unencumbered and unrestricted ownership of, and are the
exclusive owners of, or have obtained perpetual, nonterminable licenses
sufficient for the conduct of its business as currently conducted by Sellers and
as presently proposed to be conducted by Sellers to all such third party
intellectual property.
 
(g)  Except as set forth on Section 3.17(g) of the Sellers’ Disclosure Letter
and with exception of “shrink-wrap” or similar widely available commercial
end-user licenses, all Technology used in or necessary to the conduct of Sellers
and each of their Subsidiaries’ business as presently conducted or currently
contemplated to be conducted by Sellers were written and created solely by
either (i) employees of Sellers acting within the scope of their employment who
have assigned all of their rights in such Technology, including Intellectual
Property Rights therein, to Sellers or (ii) by third parties who have validly
and irrevocably assigned all of their rights, including Intellectual Property
Rights therein, to Sellers, and no third party owns or has any rights to any
Sellers’ Intellectual Property. 
 
(h)  Except as set forth in Section 3.17(h) of the Sellers’ Disclosure Letter,
all employees and consultants of Sellers and their Subsidiaries have entered
into a valid and binding written agreement with Sellers sufficient to vest title
in Sellers of all Technology and Intellectual
 

 
 

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Property Rights created by such employee or consultant in the scope of his or
her services or employment for Sellers. No current or former employee,
consultant or independent contractor of Sellers has any right, license, claim or
interest whatsoever in, to or under any Sellers’ Intellectual Property. To
Sellers’ Knowledge, no current or former employee, consultant or independent
contractor of Sellers: (i) is in violation of any term or covenant of any
Contract relating to employment, invention disclosure, invention assignment,
nondisclosure or noncompetition or any other Contract with any other party by
virtue of such employee, consultant or independent contractor being employed by,
or performing services for, Sellers or using trade secrets or proprietary
information of others without permission; or (ii) has developed any technology,
software or other copyrightable, patentable or otherwise proprietary work for
Sellers that is subject to any agreement under which such employee, consultant
or independent contractor has assigned or otherwise granted, or is obligated to
assign or otherwise grant, to any third party any rights (including Sellers’
Intellectual Property) in or to such technology, software or other
copyrightable, patentable or otherwise proprietary work.
 
(i)  Sellers have taken all steps that are reasonably required to protect
Sellers’ rights in confidential information and trade secrets of Sellers or
provided by any other person to Sellers and to protect and preserve the
confidentiality of all confidential or nonpublic information included in the
Sellers’ Intellectual Property (“Confidential IP Information”). Without limiting
the foregoing, Sellers and each of their Subsidiaries have, and enforce, a
policy requiring each employee, consultant and contractor to execute a
proprietary information, confidentiality and assignment agreement, substantially
in the form(s) attached as Section 3.17(i) of the Sellers’ Disclosure Letter,
and all current and former employees, consultants and contractors of Sellers and
their Subsidiaries have executed such an agreement. To Sellers’ Knowledge, all
use, disclosure or appropriation of Confidential IP Information owned by Sellers
by or to a third party has been pursuant to the terms of a written agreement
between Sellers and such third party. To Sellers’ Knowledge, all use, disclosure
or appropriation of Confidential IP Information not owned by Sellers has been
pursuant to the terms of a written agreement or other legal binding arrangement
between Sellers and the owner of such Confidential IP Information, or is
otherwise lawful. 
 
(j)  Except as set forth on Section 3.17(j) of the Sellers’ Disclosure Letter,
to Sellers’ Knowledge, no Person who has licensed Technology or Intellectual
Property Rights to Sellers has ownership rights or license rights to
improvements made by Sellers in such Technology or Intellectual Property
Rights. 
 
(k)  Except as set forth in Section 3.17(k) of the Sellers’ Disclosure Letter,
neither Sellers nor any of their Subsidiaries have transferred ownership of,
granted any exclusive license of or right to use, or authorized the retention of
any exclusive rights to use or joint ownership of, any Sellers’ Intellectual
Property to any other Person. 
 
(l)  Other than inbound “shrink-wrap” and similar publicly available commercial
binary code end-user licenses and outbound “shrink-wrap” licenses substantially
in the form set forth on Section 3.17(l)(A) of the Sellers’ Disclosure Letter,
the Contracts listed in Section 3.17(l)(B) of the Sellers’ Disclosure Letter
lists all material Contracts to which Sellers are parties with respect to any
Technology or Intellectual Property Rights. Except as set forth in
Section 3.17(l)(C) of the Sellers’ Disclosure Letter, neither Sellers nor any of
their Subsidiaries
 

 
 

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are in breach of nor has any of them failed to perform under, any of the
foregoing Contracts, and, to Sellers’ Knowledge, no other party to any such
Contract is in breach thereof or has failed to perform thereunder. Sellers do
not have an explicit or implied legal obligation, absolute or contingent, to any
Person to sell, transfer or assign any of the Sellers’ Intellectual Property.
Sellers have not made any assignment or granted any license, and are not under
any obligation to grant any such license or rights, including any or all of the
Sellers’ Intellectual Property, to any Person, under any of the Sellers’
Intellectual Property. None of the licenses, sublicenses, assignments or other
Contracts listed in Section 3.17(l)(B) of the Sellers’ Disclosure Letter grants,
or sets forth or creates an obligation to grant, any third party exclusive
rights in, to or under any Sellers’ Intellectual Property, or grants, or sets
forth or creates an obligation to grant, any third party the right to sublicense
any Sellers’ Intellectual Property.
 
(m)  Sellers are not and shall not be as a result of the execution or
effectiveness of this Agreement, or the performance of its obligations under
this Agreement, in material breach of any Contract to which Sellers are a party
relating to any Sellers’ Intellectual Property (the “Intellectual Property
Rights Agreements”). The consummation of the transactions contemplated by this
Agreement will neither result in the modification, cancellation, termination,
suspension of, or acceleration of any payments with respect to the Intellectual
Property Rights Agreements, nor give any non-Sellers party to any Intellectual
Property Rights Agreement the right to do any of the foregoing. Following the
Closing, Buyer will be permitted to exercise all of the rights of the Sellers
under the Intellectual Property Rights Agreements to the same extent Sellers
would have been able had the transactions contemplated by this Agreement not
occurred and without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments that Sellers would otherwise be
required to pay. Neither the execution or effectiveness of this Agreement nor
the performance of the obligations of the Sellers under this Agreement will
cause the forfeiture or termination of, or give rise to a right of forfeiture or
termination of any Sellers’ Intellectual Property, or impair the right of Buyer
to use, possess, sell or license any Sellers’ Intellectual Property or portion
thereof. 
 
(n)  Section 3.17(n) of the Sellers’ Disclosure Letter lists all material
contracts, licenses and agreements between Sellers and any other person wherein
or whereby Sellers or any of their Subsidiaries have agreed to, or assumed, any
obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or
otherwise assume or incur any obligation or liability or provide a right of
rescission with respect to the infringement or misappropriation by Sellers or
any of their Subsidiaries or such other Person of the Intellectual Property
Rights of any Person other than Sellers or any of their Subsidiaries.
 
(o)  Except as set forth in Section 3.17(o) of the Sellers’ Disclosure Letter,
to the Sellers’ Knowledge, there are no contracts, licenses or agreements
between Sellers or any of their Subsidiaries and any other person with respect
to Sellers’ Intellectual Property under which there is any dispute regarding the
scope of such agreement, or performance under such agreement, including with
respect to any payments to be made or received by Sellers or any of their
Subsidiaries thereunder.
 
(p)  Except as otherwise set forth in Section 3.17(p) of the Sellers’ Disclosure
Letter, to Sellers’ Knowledge, the operation of the business of Sellers as
currently conducted or as contemplated to be conducted by Sellers, including but
not limited to the design, development,
 

 
 

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use, import, branding, advertising, promotion, marketing, manufacture and sale
of the products, technology or services (including products, technology or
services currently under development) of Sellers do not and will not when
conducted by Buyer in substantially the same manner following the Closing,
infringe or misappropriate any Intellectual Property Right of any Person,
violate any right of any Person (including any right to privacy or publicity) or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and Sellers have not received notice from any Person claiming that
such operation or any act, product, technology or service (including products,
technology or services currently under development) of Sellers infringe or
misappropriate any Intellectual Property Right of any Person or constitutes
unfair competition or trade practices under the laws of any jurisdiction (nor do
Sellers have any Knowledge of any basis therefor).
 
(q)  To Sellers’ Knowledge, no Person is infringing or misappropriating Sellers’
Intellectual Property. Except as otherwise set forth in Section 3.17(q) of the
Sellers’ Disclosure Letter, Sellers have not obtained a legal opinion analyzing
or assessing the validity or scope of any Sellers’ Intellectual Property. To
Sellers’ Knowledge or reasonably suspected by Sellers, there have been no
instances of infringement and/or misappropriation of Sellers’ Intellectual
Property. Sellers have not brought any action, suit or proceeding for
infringement or misappropriation of, or declaration regarding, any Sellers’
Intellectual Property, breach of any Intellectual Property Rights Agreement, or
violation of any covenant not to compete. 
 
(r)  No Sellers’ Intellectual Property or service of Sellers is subject to any
proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by Sellers or may affect the validity, use or enforceability of Sellers’
Intellectual Property.
 
(s)  With respect to Sellers’ Intellectual Property, except as set forth in
Section 3.17(s) of the Sellers’ Disclosure Letter no claim has been asserted or
suggested, no threat or inquiry has been made, no notification has been received
regarding third party intellectual property rights, including an offer to
license or grant any other rights or immunities under any Intellectual Property
Rights of any third party, and no litigation, arbitration or other adversary
proceeding is pending, or, to Sellers’ Knowledge, is threatened. To Sellers’
Knowledge, none of the Sellers’ Intellectual Property is subject to any pending
or threatened outstanding order, contract, stipulation, proceeding, or
notification, including without limitation any pending interference, opposition,
cancellation, reissue, reexamination, or other challenge or adversarial
proceeding, restricting in any manner the use, transfer, or licensing by Sellers
of any Intellectual Property Rights, or which may affect the validity, use or
enforceability of any Sellers’ Intellectual Property. No freedom to operate,
patent clearance, right to market or right to use studies or analyses have been
performed by or on behalf of Sellers with respect to the Intellectual Property
Rights of third parties.
 
(t)  Except as set forth on Section 3.17(t) of the Sellers’ Disclosure Letter,
Sellers’ Intellectual Property constitutes all the Technology and Intellectual
Property Rights used in and/or necessary to the conduct of the business of
Sellers as currently conducted, and, to the Knowledge of Sellers, as currently
planned or contemplated to be conducted by Sellers, including, without
limitation, the design, development, manufacture, use, import and sale of
 

 

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products, technology and performance of services (including products, technology
or services currently under development).
 
(u)  Neither this Agreement nor the transactions contemplated by this Agreement,
including the assignment to Buyer, by operation of law or otherwise, of any
Contracts to which Sellers are a party, will result in (i) Buyer’s granting to
any third party any right to or with respect to any Technology or Intellectual
Property Right owned by, or licensed to, either of them, (ii) Buyer’s being
bound by, or subject to, any non-compete or other restriction on the operation
or scope of their respective businesses, or (iii) Buyer’s being obligated to pay
any royalties or other amounts to any third party in excess of those payable by
Seller, prior to the Closing.
 
(v)  Except as set forth in Section 3.17(v) of the Sellers’ Disclosure Letter,
there are no royalties, fees, honoraria or other payments payable by Sellers to
person or entity by reason of the ownership, development, use, license, sale or
disposition of Sellers’ Intellectual Property, other than salaries and sales
commissions paid to employees and sales agents in the Ordinary Course of
Business.
 

3.18  
Contracts

 
.  Section 3.18 of the Sellers’ Disclosure Letter lists the following Contracts
under which Sellers or any of their respective Subsidiaries are obligated or by
which Sellers or any of their assets are bound (other than Contracts with Buyer
or Clarient):
 
(a)  any Contract (or group of related Contracts) that (i) involves the future
payment of greater than $50,000 per annum or which extends for more than one (1)
year, (ii) involves any payment or obligation to any Affiliate of Sellers or any
of their Subsidiaries other than in the Ordinary Course of Business,
(iii) involves the sale, lease, license or other disposition of any material
assets (including intangible property) or (iv) involves any license of Sellers’
Intellectual Property (other than in connection with sales of products and
services in the Ordinary Course of Business);
 
(b)  any Contract under which the consequences of a default or termination would
reasonably be expected to have a Sellers’ Material Adverse Effect;
 
(c)  any Contract (or group of related Contracts) for the purchase or sale of
commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will involve
consideration in excess of $50,000;
 
(d)  any Contract concerning a partnership or joint venture;
 
(e)  any Contract (or group of related Contracts) under which Sellers have
created, incurred, assumed, or guaranteed any indebtedness for borrowed money or
any capitalized lease obligation in excess of $50,000 or under which a Lien has
been imposed on any of the Purchased Assets;
 
(f)  any Contract to which Sellers or any of their Subsidiaries are a party or
otherwise bound and which contains covenants of Sellers or any Subsidiary not to
compete or
 

 
 

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engage in the Business, in any geographic area or with any Person or covenants
of any other person not to compete with Sellers or any of their Subsidiaries or
engage in the Business;
 
(g)  any executory Contract under which Sellers or any of their Subsidiaries
have advanced or loaned any amount to any of their respective Employees;
 
(h)  any executory Contract pursuant to which Sellers or any of their
Subsidiaries are obligated to provide maintenance, service, support or training
for its services or products, together with the amounts of deferred revenue
associated with the executory support and service obligations under such
Contracts, all of which has been accrued in the Current Balance Sheet in
accordance with GAAP, consistently applied or has arisen since the date of the
Current Balance Sheet in the Ordinary Course of Business;
 
(i)  any revenue or profit participation Contract;
 
(j)  any license or Contract under which Sellers or any of their respective
Subsidiaries (i) have granted to any Person rights with respect to any Sellers’
Intellectual Property (other than end user licenses in connection with sales of
products and services in the Ordinary Course of Business), (ii) have agreed to
encumber, not assert, transfer or sell rights in or with respect to any Sellers’
Intellectual Property, (iii) are parties or otherwise bound and which provides
for the development of any Technology or Sellers’ Intellectual Property,
independently or jointly or (iv) are parties or otherwise bound and pursuant to
which Sellers or any of their respective Subsidiaries acquired or are authorized
to use any Intellectual Property Rights of any current or former employee or
other Person;
 
(k)  any Contract for the purchase or sale of materials, supplies, equipment,
merchandise or services that contains an escalation clause or that obligates
Sellers or any of their Subsidiaries to purchase all or substantially all of its
requirements of a particular product or service from a supplier or to make
periodic minimum purchases of a particular product or service from a supplier,
which is not terminable on not more than 30 days notice (without penalty or
premium);
 
(l)  any Contract with customers or suppliers for the sharing of fees, the
rebating of charges or other similar arrangements;
 
(m)  any Contract obligating Sellers or any of their Subsidiaries to deliver
maintenance services or future product enhancements (in each case other than
agreements with end users in connection with sales of products and services in
the Ordinary Course of Business) or containing a “most favored nation” pricing
clause;
 
(n)  any Contract obligating Sellers to provide source code to any third party
for Sellers’ Intellectual Property;
 
(o)  any Contract granting exclusive distribution rights with respect to any
part of the Business;
 
(p)  any Contract relating to the acquisition by Sellers of any operating
business or the capital stock of any other person;
 
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(q)  any Contract requiring the payment to any Person of a brokerage or sales
commission or a finder’s or referral fee (other than to Burnham Hill Partners
and arrangements to pay commissions or fees to employees in the Ordinary Course
of Business);
 
(r)  any Contract material to Sellers for which performance has not been
completed that is not listed in clauses (a) through (q) and not made in the
Ordinary Course of Business.
 
Sellers have delivered to Buyer a correct and complete copy of each written
Contract (as amended to date) listed in Section 3.18 of the Sellers’ Disclosure
Letter and a written summary setting forth the terms and conditions of each oral
Contract referred to in Section 3.18 of the Sellers’ Disclosure Letter. With
respect to each such Contract that constitutes an Assumed Contract: (A) the
agreement, with respect to Sellers or any of their Subsidiaries and, to Sellers’
Knowledge, all other parties thereto, is legal, valid, binding, enforceable, and
in full force and effect in all respects; (B) none of Sellers, any of their
respective Subsidiaries nor, to Sellers’ Knowledge, any other party is in
material breach or default, and no event has occurred, which with notice or
lapse of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under the Contract; and (C) neither
Sellers nor any of their Subsidiaries have received notice that any party has
repudiated any provision of the Contract. Except as set forth on Section 3.6 of
the Sellers’ Disclosure Letter, Sellers have obtained or will obtain prior to
the Closing Date, all necessary consents, waivers and approvals of parties to
any such Contract as are required thereunder in connection with the transactions
contemplated by this Agreement or, with respect to any Assumed Contract,
necessary for such Assumed Contract to remain in effect without modification
after the Closing. Except as set forth on Section 3.6 or Section 3.18 of the
Sellers’ Disclosure Letter, following the Closing, Buyer will be permitted to
exercise all of Sellers’ and any of its Subsidiaries’ rights under the Assumed
Contracts to the same extent Sellers would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which Sellers or such Subsidiary would otherwise be required to pay.
 

3.19  
Commercialization of Product

 
. To Sellers’ Knowledge, there are no facts or circumstances that, when taken
together with all other relevant facts and circumstances known to Sellers,
management of the Company has determined would reasonably be expected to
adversely affect the commercialization of any product of the Business in a
manner that would reasonably be expected to result in a Seller Material Adverse
Effect.
 

3.20  
Insurance

 
.  Sellers have delivered to Buyer copies of each insurance policy (including
policies providing property, casualty, liability, and workers’ compensation
coverage and bond and surety arrangements) with respect to which Sellers or any
of their Subsidiaries are a party and which relate to the Purchased Assets, any
employee of Sellers or the Business. With respect to each such insurance policy,
except to the extent such failure to be true would not reasonably be expected to
have a Sellers’ Material Adverse Effect: (A) the policy is legal, valid,
binding,
 

 
 

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enforceable, and in full force and effect (and there has been no notice of
cancellation or nonrenewal of the policy received); (B) neither Sellers nor any
of their Subsidiaries are in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default by
Sellers, or permit termination, modification, or acceleration, under the policy;
(C) neither Sellers nor any of their Subsidiaries have received notice that any
party to the policy has repudiated any provision thereof; and (D) there has been
no failure by Sellers or any of their Subsidiaries to give any notice or present
any claim under the policy in due and timely fashion. There is no claim by
Sellers or any of their Subsidiaries pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed or that Sellers or
any of their Subsidiaries has a reason to believe will be denied or disputed by
the underwriters of such policies or bonds. In addition, there is no pending
claim of which its total value (inclusive of defense expenses) will exceed the
policy limits. All premiums due and payable under all such policies and bonds
have been paid (or if installment payments are due, will be paid if incurred
prior to the Closing Date) and Sellers and any of their Subsidiaries are
otherwise in material compliance with the terms of such policies and bonds.
Section 3.20 of the Sellers’ Disclosure Letter describes any material
self-insurance arrangements presently maintained or contributed to by Sellers or
any of their Subsidiaries.
 

3.21  
Litigation

 
.  Section 3.21 of the Sellers’ Disclosure Letter sets forth each instance as of
the date hereof in which Sellers or any of their Subsidiaries, any of their
respective assets or any of the officers or directors (in a manner related to
the Business) (i) are subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) are or have been, or, to the Sellers’
Knowledge, are threatened to be made a party, to any action, suit, claim,
proceeding, hearing, arbitration, or investigation of, in, or before any
Governmental Body or before any arbitrator, which in any case would reasonably
be expected to have a Sellers’ Material Adverse Effect. None of the matters set
forth in Section 3.21 of Sellers’ Disclosure Letter has had a Sellers’ Material
Adverse Effect or would reasonably be expected to affect the legality, validity
or enforceability of this Agreement, any Ancillary Agreement or the consummation
of the transactions contemplated hereby or thereby.
 

3.22  
Product Warranty, Product Liability and Recalls

 
.  The technologies or products licensed, sold, leased, and delivered and all
services provided by Sellers or any of their Subsidiaries have conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties, and neither Sellers or any of their Subsidiaries have
any liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) for replacement or modification
thereof or other damages (including for product liability) in connection
therewith, other than in the Ordinary Course of Business in an aggregate amount
not exceeding $25,000. Except for (i) the warranties and indemnities contained
in those Contracts set forth in the Sellers’ Disclosure Letter, (ii) warranties
to end users in connection with sales of products and services in the Ordinary
Course of Business which are substantially in the form previously provided to
Buyer, and (iii) warranties implied by law, neither Sellers nor any of their
Subsidiaries have given any
 

 
 

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warranties or indemnities relating to products or Technology sold or services
rendered by the Sellers or any of their Subsidiaries. Except as set forth on
Section 3.22 of Sellers’ Disclosure Letter, neither Sellers nor any of their
Subsidiaries have, during the past five (5) years, (x) recalled any products
produced by Sellers or any of their Subsidiaries, nor (y) received any warranty
claims that individually exceed $25,000, or in the aggregate exceed $250,000, in
any calendar year.
 

3.23  
Employees

 
.
 
(a)  To Sellers’ Knowledge as of the date hereof, no Hired Employee plans to
terminate employment with Sellers or any of their Subsidiaries. None of Sellers
nor any of their Subsidiaries is or ever has been a party to or bound by any
collective bargaining or similar agreement, nor has any of them experienced any
strike, slowdown or work stoppage, and to the Knowledge of Sellers, no such work
disruption is threatened. To Sellers’ Knowledge as of the date hereof, there is
no organizational effort presently being made or threatened by or on behalf of
any labor union or similar organization and no such organization represents or
purports to represent any employees of Sellers or any of their Subsidiaries.
 

3.24  
Employee Matters and Benefit Plans

 
(a) Plans. Section 3.24 of the Sellers’ Disclosure Letter contains an accurate
and complete list of each Sellers’ Employee Plan. None of Sellers nor any of
their Subsidiaries has any commitment to establish, adopt or enter into any new
Sellers’ Employee Plan, or to modify any existing Sellers’ Employee Plan in any
material respect prior to the Closing (except to the extent required by law or
to conform any Sellers’ Employee Plan to the requirements of any applicable
law). With respect to each Sellers’ Employee Plan, the Company has made
available to Buyer complete copies of (i) each Sellers’ Employee Plan (or, if
not written, a written summary of its material terms) and all amendments
thereto, (ii) all summary plan descriptions including any summary of material
modifications, and (iii) all filings made with any governmental entities,
including but not limited any filings under the Employee Plans Compliance
Resolution System or the Department of Labor Delinquent Filer Program concerning
any issue or matter that could reasonably be expected to result in any material
liability.
 
(b) Employee Plan Compliance. Except as set forth in Section 3.24 of the
Sellers’ Disclosure Letter, (i) there are no actions, suits or claims pending,
or, to the Knowledge of Sellers, threatened or reasonably anticipated (other
than routine claims for benefits) against any Sellers’ Employee Plan or against
the assets of Sellers’ Employee Plan, and (ii) there are no audits, inquiries or
proceedings pending or, to the Knowledge of Sellers, threatened by the IRS or
DOL with respect to any Sellers’ Employee Plan, which in either case reasonably
could be expected to result in material liability to any of Sellers or their
Subsidiaries.
 
(c) Pension Plans. Neither Seller nor any ERISA Affiliate sponsors, maintains,
contributes to or has an obligation to contribute to, or has, during the past
six years,
 

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sponsored, maintained, contributed to or had an obligation to contribute to any
Pension Plan subject to Title IV of ERISA or Section 412 of the Code, any
Multiemployer Plan or any multiple employer plan (within the meaning of Section
413 of the Code).
 
(d) Effect of Transactions. Except as set forth on Section 3.24 of the Sellers’
Disclosure Letter, with respect to the Hired Employees, neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, either alone or in combination with another event (whether
contingent or otherwise) will (i) entitle any Hired Employee to any material
payment; (ii) materially increase the amount of compensation or benefits due to
any Hired Employee; (iii) accelerate the vesting, funding or time of payment of
any compensation, equity award or other benefit to any Hired Employee; or (iv)
result in any “parachute payment” under Section 280G of the Code.
 
(e)  No Post-Employment Obligations. Neither Sellers nor any of their
Subsidiaries has any obligation to provide health, accident, disability, life
insurance or death benefits with respect to any current or former Employees, or
the spouses, dependents or beneficiaries of any current or former Employees,
beyond the termination of employment or service of such Employee, except as may
be required by COBRA or other applicable law (the “Continuation Coverage
Requirements”).
 
(f) COBRA Compliance. All group health plans of the Sellers and their
Subsidiaries have been operated in compliance with all applicable Continuation
Coverage Requirements in all material respects.
 
 
(f) COBRA Compliance. All group health plans of the Sellers and their
Subsidiaries have been operated in compliance with all applicable Continuation
Coverage Requirements in all material respects.
 
(f) COBRA Compliance. All group health plans of the Sellers and their
Subsidiaries have been operated in compliance with all applicable Continuation
Coverage Requirements in all material respects.
 
(g) International Employee Plans. None of Sellers nor any of their Subsidiaries
maintains, sponsors, participates in, contributes to or has any obligation to
contribute to any International Employee Plan, or has incurred any material
liability with respect to any such plan that has not been satisfied in full.
 

3.25  
Environment, Health, and Safety

 
.
 
(a)  Condition of Property. As of the Closing, except in compliance with
Environmental Laws in a manner that could not reasonably be expected to subject
Buyer or Clarient to liability, no Hazardous Materials are present on any
Business Facility currently owned, operated, occupied, controlled or leased by
Sellers or any Subsidiary.
 
(b)  Hazardous Materials Activities. Sellers and each of their Subsidiaries have
conducted all Hazardous Material Activities relating to the Business in
compliance in all material respects with all applicable Environmental Laws.
Except as set forth in Section 3.25(b) of the Sellers’ Disclosure Letter, the
Hazardous Materials Activities of Sellers and each of their Subsidiaries prior
to the Closing have not resulted in the exposure of any person to a Hazardous
Material in a manner which has caused or could reasonably be expected to cause a
significant adverse health effect to any such person. 
 
(c)  Permits. Section 3.25(c) of Sellers’ Disclosure Letter accurately describes
all of the Environmental Permits currently held by Sellers and their
Subsidiaries and relating to
 

 
 

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its business and the listed Environmental Permits are all of the Environmental
Permits necessary for the continued conduct of any Hazardous Material Activity
of Sellers and each of their Subsidiaries relating to its business as such
activities are currently being conducted. All such Environmental Permits are
valid and in full force and effect. Sellers and each of their Subsidiaries have
complied in all material respects with all covenants and conditions of any
Environmental Permit which is or has been in force with respect to its Hazardous
Materials Activities. To Sellers’ Knowledge, no circumstances exist which could
cause any Environmental Permit to be revoked, modified, or rendered
non-renewable upon payment of the permit fee. 
 
(d)  Environmental Litigation. Except as set forth in Section 3.25(d) of the
Sellers’ Disclosure Letter, no action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending, or to Sellers’
Knowledge, threatened, concerning any Environmental Permit or any Hazardous
Materials Activity of Sellers or any of their Subsidiaries relating to its
business, or any Business Facility.
 
(e)  Hazardous Material Disposal. No action, proceeding, liability or claim is
pending or, to Sellers’ Knowledge, is threatened against Sellers or any of their
Subsidiaries with respect to any transfer or release of Hazardous Materials
relating to the Business to a Disposal Site which could reasonably be expected
to subject Sellers or any of their Subsidiaries to material liability.
 
(f)  Environmental Liabilities. Sellers are not aware of any fact or
circumstance, which could result in any environmental liability which would
reasonably be expected to result in a Sellers’ Material Adverse Effect.
 
(g)  Reports and Records. Sellers have delivered to Buyer or made available for
inspection by Buyer and their agents, representatives and employees all records
in Sellers’ and its Subsidiaries’ possession concerning the Hazardous Materials
Activities of Sellers or any of their Subsidiaries relating to their respective
businesses and all environmental audits and environmental assessments of any
Business Facility in the possession of Sellers or any of their Subsidiaries.
Sellers have complied with all environmental disclosure obligations imposed by
applicable law with respect to this transaction.
 

3.26  
Certain Business Relationships With Sellers

 
.  To Sellers’ Knowledge, no director, officer or holder of greater than 10% of
the capital stock of Sellers, nor any member of their immediate families, nor
any Affiliate of any of the foregoing, owns, directly or indirectly, or has an
ownership interest (excluding any direct or indirect ownership by a stockholder
of Sellers of up to 5% of the outstanding capital stock of a publicly traded
entity) in (a) any business (corporate or otherwise) which is a party to, or in
any property which is the subject of, any business arrangement or relationship
of any kind with Sellers or any of their Subsidiaries, or (b) any business
(corporate or otherwise) which conducts the same business as, or a business
similar to, that conducted by Sellers or any of their Subsidiaries.
 

3.27  
No Adverse Developments

 

 
 

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.  Since the Current Balance Sheet Date there is no development that (i) has had
or would reasonably be expected to have a Sellers’ Material Adverse Effect, or
(ii) would prevent Buyer from using the Purchased Assets and conducting the
Business of Sellers following the Closing in the manner in which they are
currently used or was conducted by Sellers and their Subsidiaries.
 

3.28  
Foreign Corrupt Practices Act

 
Neither Seller nor any of their Subsidiaries (including any of their officers,
directors, agents, employees or other Person associated with or acting on their
behalf) has, directly or indirectly, taken any action which would cause it to be
in violation of the Foreign Corrupt Practices Act of 1977, as amended, or any
rules or regulations thereunder, used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, made any unlawful payment to foreign or domestic government
officials or employees or made any bribe, rebate, payoff, influence payment,
kickback or other similar unlawful payment.
 

3.29  
Fees

 
.  Sellers have no liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement other than to Burnham Hill Partners.
 

3.30  
Complete Copies of Materials

 
.  To Sellers’ Knowledge, Sellers have delivered or made available true and
complete copies of each document (or summaries of same) that has been requested
by Buyer, or Buyer’s counsel.
 

3.31  
Board Approval

 
.  The board of directors of each Seller has unanimously (i) approved this
Agreement and the transactions contemplated hereby, (ii) determined that the
transactions contemplated hereby are in the best interests of the stockholders
of each of Sellers and are on terms that are fair to such stockholders, and
(iii) subject to Section 5.4, recommended that the stockholders of each Seller
approve this Agreement and the transactions contemplated hereby (the foregoing
(i) - (iii) being collectively referred to as the “Sellers’ Board
Recommendation”).
 

3.32  
Stockholder Approval

 
.  The only vote of holders of any class or series of the capital stock or debt
of Sellers necessary to approve the transactions contemplated by this Agreement
is the Stockholder Approval. Parent has approved the transactions contemplated
by this Agreement in its capacity as sole stockholder of Trestle Sub.
 

3.33  
Information

 
. None of the information included or incorporated by reference in the Proxy
Statement will, at the date it is first mailed to Parent’s stockholders and at
the time of the Stockholder
 

 
 

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Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading which is not corrected by any subsequent amendment or
supplement mailed to the stockholders of Parent not less than 10 days prior to
the Stockholders Meeting or such shorter period as is permitted by law. The
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder. No
representation is made by Sellers in this Section 3.33 with respect to
statements made based on information supplied by Buyer in writing specifically
for inclusion or incorporation by reference in the Proxy Statement.
 

3.34  
No Liquidation, Insolvency, Winding-Up

 
.
 
(a)  As of the date of this Agreement and as of the Closing Date, no judgment,
order or decree has been made, or petition presented, or resolution passed for
the winding- up or liquidation of the Sellers or their Subsidiaries or the
Business, and there is not outstanding:
 
(i)  any petition or judgment, order or decree for the winding up of Sellers or
their Subsidiaries;
 
(ii)  any appointment of a receiver over the whole or part of the undertaking of
assets of Sellers or their Subsidiaries;
 
(iii)  any petition or order for administration of Sellers or their
Subsidiaries;
 
(iv)  any voluntary arrangement between Sellers and any of their creditors;
 
(v)  any assignment for the benefit of the Sellers’ creditors or similar
creditor arrangement or remedy;
 
(vi)  any voluntary petition, involuntary petition or order for relief with
respect to the Sellers under the Bankruptcy Code, 11 U.S.C. Section 101, et
seq.;
 
(vii)  any distress or execution or other process levied in respect of Sellers
which remains undischarged; and
 
(viii)  any unfulfilled or unsatisfied judgment or court order against Sellers
or their Subsidiaries.
 
(b)  Neither Seller has been deemed unable to pay its debts as they come due
within the meaning of applicable law.
 
(c)  The operations of Sellers have not been terminated.
 
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(d)  Buyer acknowledges and consents that following the Closing, Sellers may
wind up, liquidate or dissolve in accordance with applicable law.
 

3.35  
Preferences

 
.  To Sellers’ Knowledge the following statements are, after giving effect to
the transactions contemplated hereby, true and correct:
 
(a)  The aggregate value of all assets and properties of Sellers and their
Subsidiaries, at their respective then present fair saleable values, exceeds the
amount of all the debts and liabilities (including, without limitation,
contingent, subordinated, unmatured and unliquidated liabilities) of Sellers and
their Subsidiaries. Sellers understand that, in this context, “present fair
saleable value” means the amount which may be realized within a reasonable time
through a sale within such period by a capable and diligent businessperson from
an interested buyer who is willing to purchase under ordinary selling
conditions. In determining the present fair saleable value of Sellers’ and their
Subsidiaries’ contingent liabilities (such as litigation, guarantees and pension
plan liabilities), Sellers have considered such liabilities that could possibly
become actual or matured liabilities.
 
(b)  The consideration received by Sellers in connection with the transactions
contemplated hereby constitutes reasonably equivalent consideration for the
Purchased Assets. Immediately after giving effect to the transactions
contemplated by this Agreement, Sellers shall have adequate capital to carry on
and to perform their obligations under the Excluded Liabilities.
 

3.36  
Assets

 
. The Purchased Assets and the Excluded Assets constitute all the properties,
assets and rights forming a part of, used or held, and all such properties,
assets and rights as are adequate for, the conduct of the Business as currently
conducted and, with respect to contract rights, Sellers or their Subsidiaries
are a party to and enjoy the right to the benefits of all Assumed Contracts, all
of which properties, assets and rights constitute Purchased Assets except for
the Excluded Assets.
 

3.37  
Disclosure

 
. Sellers have delivered or made available to Buyer true, correct and complete
copies of all documents, including all amendments, supplements and modifications
thereof or waivers currently in effect thereunder, described in the Sellers’
Disclosure Letter.
 

3.38  
No Limitation on Other Representation

 
. Except as otherwise expressly provided in this Agreement, nothing in any
representation or warranty in this Agreement shall in any way limit or restrict
the scope, applicability or meaning of any other representation or warranty made
by Sellers herein.
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF BUYER
 

 
 

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Buyer and Clarient, jointly and severally, hereby represent and warrant to
Sellers that the statements contained in this Article IV are true and correct as
of the date of this Agreement and will be true and correct as of the Closing (as
though made at the Closing); provided, that the representations and warranties
made as of a specified date will be true and correct as of such date.
 

4.1  
Organization, Qualification, and Corporate Power

 
.  Buyer is a limited liability company duly organized, validly existing, and in
good standing under the laws of the State of Delaware. Buyer is duly qualified
or authorized to conduct business and is in good standing under the laws of the
State of California. Clarient is a corporation duly organized and in good
standing under the laws of the State of Delaware.
 

4.2  
Authorization

 
.  Each of Buyer and Clarient has full power and authority to execute and
deliver this Agreement and the Ancillary Agreements to which it is a party, and
to consummate the transactions contemplated hereunder and to perform its
obligations hereunder, and no other proceedings on the part of Buyer are
necessary to authorize the execution, delivery and performance of this Agreement
and the Ancillary Agreements to which it is a party. This Agreement and the
Ancillary Agreements to which Buyer is a party and the transactions contemplated
hereby and thereby have been approved by Clarient, the Managing Member of Buyer.
The consummation of the transactions contemplated hereby does not require the
approval or consent of the stockholders of Clarient. This Agreement and the
Ancillary Agreements to which Buyer is a party constitute the valid and legally
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms and conditions, except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
 

4.3  
No Conflicts

 
.  Neither the execution and the delivery of this Agreement nor the consummation
of the transactions contemplated hereby, will (A) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any Governmental Body to which Buyer or Clarient is
subject, (B) violate or conflict with any provision of the organizational
documents of Buyer or Clarient, or (C) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under, any agreement, contract, lease, license, instrument, or other arrangement
to which Buyer is a party or by which it is bound or to which its assets are
subject, other than any of the foregoing which would not in the aggregate have a
Buyer Material Adverse Effect.
 

4.4  
Consents

 
.  No consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body or any third party, including
a party to any agreement with Buyer or Clarient, is required by or with respect
to Buyer or Clarient in connection with the
 

 

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execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and (ii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings in
which the failure of which to obtain would not in the aggregate have a Buyer
Material Adverse Effect.
 

4.5  
Brokers’ Fees

 
.  Neither Buyer nor Clarient have any liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
 

4.6  
Availability of Funds

 
.  Buyer shall at the Closing have sufficient, immediately available funds, in
cash, to pay all amounts payable pursuant to this Agreement and to consummate
the transactions contemplated hereby, including, but not limited to, payment of
the Purchase Price and performance of the Assumed Liabilities.
 

4.7  
Litigation

 
.  There is no action, suit, inquiry, proceeding or investigation by or before
any Governmental Body pending, or to Buyer’s Knowledge, overtly threatened
against or involving Buyer or Clarient that could have a Buyer Material Adverse
Effect or that questions or challenges the validity of this Agreement or any
action taken or to be taken by Buyer or Clarient pursuant to this Agreement or
in connection with the transactions contemplated hereby.
 
ARTICLE V  
 
PRE-CLOSING COVENANTS
 
With respect to the period between the execution of this Agreement and the
earlier of the termination of this Agreement and the Closing, unless otherwise
provided or contemplated herein:
 

5.1  
Operation of Business

 
.  During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement and the Closing, Sellers agree
(except to the extent (i) Buyer shall otherwise consent in writing, (ii) this
Agreement, including Section 5.4(c), shall otherwise permit or require, (iii)
contemplated by the Ancillary Agreements or the Bridge Notes or (iv) set forth
in Section 5.1 of the Sellers’ Disclosure Letter), to carry on the Business and
use and maintain the Purchased Assets in the Ordinary Course of Business, to pay
debts and Taxes when due, to pay or perform other obligations when due, and, to
use all reasonable efforts consistent with past practice and policies to
preserve intact the Business, present organization, keep available the services
of the Hired Employees and preserve intact in all material respects their
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with them, all with the goal of preserving
unimpaired the goodwill and
 

 
 

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ongoing Business at the Closing. Sellers shall promptly notify Buyer of any
event or occurrence or emergency not in the Ordinary Course of Business, and any
material event involving it to the extent any of the foregoing had or would
reasonably be expected to have a Sellers’ Material Adverse Affect. Except (i) as
contemplated or permitted by this Agreement, including Section 5.4(c), (ii) as
contemplated by the Ancillary Agreements or the Bridge Notes, or (iii) as set
forth in Section 5.1 of the Sellers’ Disclosure Letter, Sellers and each of
their Subsidiaries shall not, without the prior written consent of Buyer, which
consent shall not be unreasonably withheld, conditioned or delayed, do any of
the following:
 
(a)  Enter into any commitment or transaction involving an amount in excess of
$50,000 other than sales of products and services in the Ordinary Course of
Business or obtaining renewals or extensions of the Sellers’ existing policies
of insurance (including director or officer liability insurance) on
substantially the same terms as currently in effect;
 
(b)  (i) Sell or enter into any license agreement with respect to Sellers’
Intellectual Property with any person or entity other than in connection with
sales of products and services in the Ordinary Course of Business or (ii) buy or
enter into any license agreement with respect to the Intellectual Property of
any person or entity;
 
(c)  Transfer to any person or entity any rights to Sellers’ Intellectual
Property (other than pursuant to non-exclusive licenses to customers in
connection with sales of products and services in the Ordinary Course of
Business);
 
(d)  Enter into or amend any Contracts outside the Ordinary Course of Business
pursuant to which any other party is granted marketing, distribution or similar
rights of any type or scope with respect to any products or technology of
Sellers or any of their respective Subsidiaries;
 
(e)  Amend, cancel or otherwise modify (or agree to do so) or violate the terms
of, any of the Assumed Contracts;
 
(f)  Permit any of the Purchased Assets to become subject to any Lien;
 
(g)  Modify, cancel or waive or settle any debts or claims held by Sellers,
outside the Ordinary Course of Business, or waive or settle any rights or claims
of a substantial value, whether or not in the Ordinary Course of Business;
 
(h)  Commence or settle any litigation relating to the Purchased Assets, Assumed
Liabilities or the Business other than any litigation between the Parties that
is related to the transactions contemplated by this Agreement or any Ancillary
Agreement;
 
(i)  Cause or permit any amendments to its certificate of incorporation or
bylaws or other organizational documents except as contemplated in Section 6.1;
 
(j)  Acquire or agree to acquire by merging or consolidating with, or by
purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or
 

 
 

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otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the Business;
 
(k)  Sell, lease, license or otherwise dispose of any assets or properties that
would otherwise be Purchased Assets (other than sales to customers of products
and services in the Ordinary Course of Business, and non-exclusive licenses
granted to customers in connection therewith);
 
(l)  Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of Sellers or guarantee any
debt securities of others, other than in connection with the sale of accounts
and/or receivables to a factor in the Ordinary Course of Business;
 
(m)  Grant any loans to others or purchase debt securities of others or amend
the terms of any outstanding loan agreement except for advances to employees for
travel and business expenses in the Ordinary Course of Business;
 
(n)  Grant any severance or termination pay to any employee outside the Ordinary
Course of Business;
 
(o)  Revalue any of its assets, including without limitation writing down the
value of inventory or writing off any of the notes or accounts receivable except
in each case, as required by GAAP;
 
(p)  Pay, discharge or satisfy, in an amount in excess of $50,000 individually
(or, in the case of any Person or group of related Persons, $100,000 in the
aggregate for all payments to such Person or Persons), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the Ordinary Course of
Business of liabilities reflected or reserved against in the Financial
Statements or obligations arising in the Ordinary Course of Business after the
date of the Financial Statements.
 
(q)  Make or change any material election in respect of Taxes, adopt or change
any material accounting method in respect of Taxes, enter into any Tax sharing
agreement, Tax indemnity agreement, Tax allocation agreement or closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
 
(r)  Enter into any strategic or joint marketing arrangement or agreement
involving the Business or any of the Purchased Assets, other than the renewal of
agreements with distributors of Sellers’ products on substantially the same
terms as those in existence on the date hereof;
 
(s)  (i) adopt, enter into or modify any Sellers’ Employee Plan, (ii) enter into
any collective bargaining agreement, or (iii) pay, announce, promise or grant,
whether orally or in writing, any increase in the wages, salaries, compensation,
bonuses, incentives, pensions, severance or termination payments, fringe
benefits or other benefits to any Employees, including without limitation any
increase or change pursuant to any Sellers’ Employee Plan (except as
 

 
 

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required by law or, with respect to non-executive Employees only, in the
Ordinary Course of Business);
 
(t)  Declare or pay any dividend or distribution (whether in cash or other
assets) to any stockholder of either Seller other than distributions from
Trestle Sub to Parent;
 
(u)  Take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1(a) through 5.1(t) above, or any other action that
would prevent Sellers from performing or cause Sellers not to perform its
covenants hereunder.
 

5.2  
Access to Information

 
. 
 
(a)  Sellers will permit Buyer, and its Representatives to have access at all
reasonable times, and in a manner so as not to unreasonably interfere with its
normal business operations, to its business and operations. Neither such access,
inspection and furnishing of information to Buyer and its Representatives, nor
any investigation by Buyer and its Representatives, shall in any way diminish or
otherwise affect Buyer’s right to rely on any representation or warranty made by
Sellers hereunder. As of the date hereof, Buyer is not aware of any breach by
Sellers of any representation or warranty herein.
 
(b)  In addition to any other notices or access required by this Agreement,
Sellers shall on a weekly basis provide Buyer with a report that identifies
Sellers’ cash transactions occurring during the previous week and contains (i)
an updated trial balance sheet of Sellers, (ii) an updated trial accounts
receivable statement of Sellers, (iii) an updated trial accounts payable
statement of Sellers, and (iv) a schedule of changes to Sellers’ management
estimates, reserves and accruals since the date of the last Seller trial balance
sheet.
 

5.3  
Notice of Developments

 
.  Each Party shall give prompt notice to each other Party of (i) the occurrence
or non-occurrence of any event, the occurrence or non-occurrence of which is
likely to cause any representation or warranty of such Party contained in this
Agreement to be untrue or inaccurate at or prior to the Closing and (ii) any
failure of such Party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.3 shall not limit or
otherwise affect any remedies available to each other Party. No disclosure by
Sellers pursuant to this Section 5.3, however, shall be deemed to amend or
supplement the Sellers’ Disclosure Letter or prevent or cure any
misrepresentations, breach of warranty or breach of covenant without the written
consent of Buyer.
 

5.4  
No Solicitation

 
.
 
(a)  Each of the Sellers agrees that it shall, and shall cause each of its
Subsidiaries and its and their Representatives to, cease immediately and cause
to be terminated
 

 

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all existing activities, discussions or negotiations, if any, with any Persons
with respect to, or that could reasonably be expected to result in any
Acquisition Proposal. Except as provided in this Section 5.4, from the date of
this Agreement until the earlier of termination of this Agreement or the
Closing, Sellers shall not, and will cause its Subsidiaries and its and their
Representatives to not, directly or indirectly:
 
(i)  initiate, solicit or knowingly encourage or induce any inquiry, or take any
action intended to facilitate the making or announcement of, any offer or
proposal which constitutes or is reasonably likely to lead to any Acquisition
Proposal;
 
(ii)  participate or engage in any discussions or negotiations regarding an
Acquisition Proposal or furnish or disclose any non-public information relating
to either Seller or any of their Subsidiaries, or their businesses, assets,
liabilities or prospects or afford access to the properties, books or records of
either Seller or any of their Subsidiaries to, any Person regarding an
Acquisition Proposal except as provided in Section 5.4(c);
 
(iii)  enter into any letter of intent, agreement in principle, acquisition
agreement, understanding or similar agreement contemplating or relating to an
Acquisition Proposal (other than a confidentiality and standstill agreement as
contemplated in this Section 5.4); or
 
(iv)  approve, endorse or recommend any Acquisition Proposal (except to the
extent specifically permitted by this Section 5.4).
 
(b)  Sellers shall promptly notify Buyer (but in no event later than the end of
the next Business Day) after receipt by a Seller of any Acquisition Proposal or
any request for information or inquiry which could reasonably be expected to
lead to an Acquisition Proposal. Such notice shall identify the Person or group
making such Acquisition Proposal, request or inquiry and include a copy of all
written materials provided in connection with such Acquisition Proposal, request
or inquiry or, if such Acquisition Proposal, request or inquiry is not in
writing, provide a summary of the material terms and conditions of any such
Acquisition Proposal, request or inquiry. After receipt of the Acquisition
Proposal, request or inquiry, Sellers shall promptly keep Buyer informed in all
material respects of the status and details (including material amendments or
proposed material amendments) of any such Acquisition Proposal, request or
inquiry.
 
(c)  If, prior to obtaining the Stockholder Approval either Seller receives an
Acquisition Proposal that was not solicited in violation of Section 5.4(a) that
the board of directors of Sellers determines in good faith, after consultation
with outside counsel and its financial advisor (1) constitutes a Superior
Proposal or (2) could reasonably be expected to result in a Superior Proposal,
Sellers shall promptly provide to Buyer written notice that shall state
expressly (A) that such Seller has received an Acquisition Proposal that
constitutes a Superior Proposal or that could reasonably be expected to result
in a Superior Proposal, and (B) the identity of the Person (the “Third Party”)
making such Acquisition Proposal and the material terms and conditions of the
Acquisition Proposal (the “Superior Proposal Notice”) and may then take the
following actions (either directly or through its Subsidiaries or any of their
Representatives) if the board of directors of Sellers determines, after
consultation with outside
 

 
 

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counsel, that to do so is necessary to comply with its fiduciary obligations to
Sellers’ stockholders under applicable law:
 
(i)  furnish nonpublic information to the Third Party, provided, that (A) prior
to so furnishing, Sellers receive from the Third Party an executed
confidentiality agreement containing customary standstill provisions and other
terms and conditions that are no less restrictive to such Third Party than the
terms and conditions of the Confidentiality Agreement, and (B) on the date of
the provision of any non-public information to such Third Party, Sellers furnish
a copy of such non-public information of Sellers to Buyer (to the extent such
non-public information has not been previously so furnished); and
 
(ii)  participate or engage in any discussions or negotiations with the Third
Party with respect to the Acquisition Proposal.
 
(d)  For a period of not less than three Business Days prior to Sellers
accepting a definitive Superior Proposal, Sellers shall, if requested by Buyer,
negotiate in good faith with Buyer to revise this Agreement so that the
Acquisition Proposal that constituted a Superior Proposal no longer constitutes
a Superior Proposal. The terms and conditions of this Section 5.4(d) shall again
apply to any subsequent Superior Proposal after any changes made to this
Agreement.
 
(e)  Except as expressly permitted by Section 5.4(f), neither Sellers board of
directors nor any committee of Sellers board of directors shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to Buyer,
Sellers’ Board Recommendation or (ii) approve or recommend, or propose publicly
to approve or recommend, any Acquisition Proposal (any action described in the
foregoing (i) or (ii) being referred to as a “Change of Recommendation”). Any
such Change of Recommendation or the entry by a Seller into any letter of
intent, agreement in principle, acquisition agreement, understanding or similar
agreement contemplating or relating to an Acquisition Proposal shall not change
the approval of Sellers board of directors for purposes of causing any state
takeover statute or other state law to be applicable to the transactions
contemplated hereunder.
 
(f)  In the event that prior to obtaining the Stockholder Approval, Sellers
board of directors determines in good faith, after consultation with its
financial advisor and outside counsel, that an Acquisition Proposal not
solicited in violation of Section 5.4(a) has not been withdrawn and continues to
constitute a Superior Proposal following the expiration of the three Business
Day period referenced in Section 5.4(d), Sellers may effect a Change of
Recommendation and/or terminate this Agreement in accordance with
Section 10.1(d)(i); provided that Sellers board of directors has concluded in
good faith, following consultation with outside legal counsel, that, in light of
such Superior Proposal, the failure of Sellers board of directors to effect a
Change of Recommendation or to terminate this Agreement is necessary to comply
with its fiduciary obligations to either of Sellers stockholders under
applicable law; provided further, however that Sellers shall not terminate this
Agreement pursuant to Section 10.1(d)(i), and any purported termination pursuant
to Section 10.1(d)(i) shall be void and of no force or effect, unless Sellers
shall have complied in all material respects with all of the provisions of this
Section 5.4, including the notification provisions in this Section 5.4, and with
 

 
 

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all applicable requirements of Section 10.3 (including the payment of the
Termination Fee prior to or concurrently with such termination).
 
(g)  Sellers shall provide Buyer with three Business Days prior notice (or such
lesser prior notice as is provided to the members of Sellers board of directors)
of any meeting of Sellers board of directors or committee of Sellers board of
directors at which the Sellers board of directors or committee thereof is
reasonably expected to discuss any Acquisition Proposal.
 
Nothing contained in this Section 5.4 or elsewhere in this Agreement shall
prohibit Parent from (x) taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) under the Exchange Act, or (y) making any
disclosure to the stockholders of the Sellers if Parent’s board of directors
determines in good faith (after consultation with its outside legal counsel)
that the failure to make such disclosure would be reasonably expected to be a
breach of its duty of candor under applicable law; provided, however, that any
action taken or disclosure made under this Section 5.4 shall not limit or modify
the effect that any such action or disclosure may have under any other provision
of this Agreement.
 

5.5  
Stockholder Meeting

 
. 
 
(a)  Parent shall, as promptly as reasonably practicable following the execution
of this Agreement and subject to Section 5.4(f), establish a record date for,
duly call, give notice of convene and hold a meeting of its stockholders solely
for the purpose of seeking the Stockholder Approval (“Stockholder Meeting”). In
connection with the Stockholder Meeting, Parent, acting through the Parent board
of directors, will (i) subject to Section 5.4(f) make the Sellers’ Board
Recommendation, (ii) use its commercially reasonable efforts (including
postponing or adjourning the Stockholder Meeting to solicit additional proxies)
to obtain and shall take all other reasonable action necessary or advisable to
secure, the Stockholder Approval and (iii) otherwise comply with Parent’s
Certificate of Incorporation, bylaws and applicable law in connection with such
meeting.
 
(b)  As promptly as reasonably practicable after the date of this Agreement,
Parent shall prepare and file with the SEC, and shall use its commercially
reasonable efforts to have cleared by the SEC, the Proxy Statement (together
with any amendments thereof or supplements thereto) to be distributed in
connection with the Stockholder Meeting. Buyer and Sellers each shall promptly
and timely provide all information relating to its respective businesses or
operations necessary for inclusion in the Proxy Statement to satisfy all
requirements of applicable state and United States federal securities laws and
neither the Proxy Statement nor any amendment or supplement to the Proxy
Statement, will be filed or made by the Sellers, in each case without providing
Buyer a reasonable opportunity to review and comment thereon.
 
(c)  Sellers shall notify Buyer of the receipt of any comments of the SEC with
respect to the Proxy Statement and of any requests by the SEC for any amendment
or supplement thereto or for additional information and shall provide a copy of
such comments or requests to Buyer promptly after receipt, and shall promptly
provide to Buyer copies of all correspondence
 

 
 

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between Sellers or any Representative Sellers and the SEC. Sellers shall give
Buyer and its counsel the reasonable opportunity to review and comment on any
proposed responses to comments, which review shall be concluded as promptly as
possible after the receipt by Buyer of Sellers proposed responses to SEC
comments or other correspondence to the SEC. If at any time after the date the
Proxy Statement is mailed to Parent’s stockholders and prior to the Stockholder
Meeting any information relating to the Sellers or Buyer, or any of their
respective Affiliates, directors, or officers, should be discovered by the
Sellers or Buyer which should be set forth in an amendment or supplement to the
Proxy Statement, so that either such document would not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the Party that discovers such information shall promptly
notify the other Parties hereto and Parent shall promptly file an amendment or
supplement describing such information promptly with the SEC and, to the extent
required by applicable law or the SEC, disseminated to Parent’s stockholders.
 
As promptly as reasonably practicable after the Proxy Statement has been cleared
by the SEC, Parent shall mail the Proxy Statement to the holders of Parent’s
common stock as of the record date established for the Stockholder Meeting.
Unless the board of directors of Parent shall have effected a Change in
Recommendation, the Proxy Statement shall include the Seller Board
recommendation, provided that nothing herein shall prohibit Parent from
supplementing or amending the Proxy Statement if there has been a Change in
Recommendation.
 
ARTICLE VI
 
ADDITIONAL AGREEMENTS
 

6.1  
Reasonable Efforts

 
.  Each of the Parties will use their reasonable efforts to take all action and
to do all things necessary, proper, or advisable, subject to the terms of this
Agreement in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Article VIII below and including defending all
lawsuits or other legal, regulatory or other proceedings to which it is a party
challenging or affecting this Agreement or any Ancillary Agreement or the
transactions contemplated hereby or thereby and having lifted or rescinded any
injunction or restraining order which may adversely affect the Parties’ ability
to consummate the transactions contemplated hereby or thereby). Such action on
the part of Sellers shall include amending the charter documents of Sellers and,
as necessary, each of its Subsidiaries to remove the name “Trestle” and each
variation thereof, assisting Buyer in hiring and transferring the Hired
Employees and completing all necessary financial audits and securities filings
with the utmost urgency.
 

6.2  
Notices and Consents

 
.
 
(a)  Sellers will give any notices to third parties and will use their
respective reasonable best efforts to obtain any third party consents that are
required in connection with the relevant matters identified in the Sellers’
Disclosure Letter or otherwise required in connection
 

 

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with the transactions contemplated by this Agreement so as to preserve all
material rights of or benefits to Buyer relating to the Purchased Assets, the
Assumed Liabilities or the Business. Each of the Parties will give any notices
to, make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of Governmental Bodies in connection
with the relevant matters identified in the Sellers’ Disclosure Letter or as
otherwise required in connection with the transactions contemplated by this
Agreement.
 
(b)  Subject to applicable laws relating to the exchange of information and the
preservation of any applicable attorney-client privilege, work-product doctrine,
self-audit privilege or other similar privilege, Buyer and Sellers shall have
the right to review and reasonably comment on in advance, and to the extent
practicable each will consult the other on, all the information relating to
Buyer or Sellers, as the case may be, and any of their respective Subsidiaries,
that appear in any filing made or oral communication with, or written materials
submitted to, any Person and/or any Governmental Body in connection with the
transactions contemplated hereby or by the Ancillary Agreements; provided,
however, that Buyer and Sellers may, as each deems advisable and necessary,
(x) redact any information concerning Buyer’s valuation of Buyer, and
(y) designate any competitively sensitive material provided to the other under
this Section 6.2 as “outside counsel only,” in which case, such materials and
the information contained therein shall be given only to the outside legal
counsel of the recipient and will not be disclosed by such outside counsel to
employees, officers, or directors of the recipient unless express permission is
obtained in advance from the source of the materials (Buyer or Sellers, as the
case may be) or its legal counsel. In exercising the foregoing right, each of
Buyer and Sellers shall act reasonably and as promptly as practicable.
Notwithstanding anything to the contrary in this Agreement, Buyer shall not be
required to offer or commit to divest any business or assets or agree to any
limitation on the conduct of its or any of its Subsidiaries' businesses, and
Sellers shall not enter into any such agreement, or make any such commitment, or
offer to enter into any such agreement or to make any such commitment, with
respect to its or any of its Subsidiaries' assets or businesses, without the
prior written consent of Buyer.
 
(c)  Subject to applicable law and the preservation of any applicable
attorney-client privilege, Buyer and Sellers each shall, upon request by the
other, furnish the other with all information concerning itself, its
Subsidiaries, directors, officers and stockholders and such other matters as may
be reasonably necessary or advisable in connection with the Proxy Statement or
any other statement, filing, notice or application made by or on behalf of
Buyer, Sellers or any of their respective Subsidiaries to any Person in
connection with the transactions contemplated hereby or by the Ancillary
Agreements.
 
(d)  Subject to any confidentiality obligations and the preservation of any
attorney-client privilege, Buyer and Sellers each shall keep the other
apprised of the status of matters relating to completion of the transactions
contemplated hereby or by the Ancillary Agreements, including promptly
furnishing the other with copies of notices or other communications received by
Buyer or Sellers, as the case may be, or any of its Subsidiaries, from any
Person with respect to the transactions contemplated hereby or by the Ancillary
Agreements. Each of Buyer and Sellers agree not to participate, or to permit its
Subsidiaries to participate, in any substantive meeting or discussion, either in
person or by telephone, with any Governmental Body in connection with the
transactions contemplated hereby or by the Ancillary
 

 
 

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Agreements unless it consults with the other Party in advance and, to the extent
not prohibited by such Governmental Body, gives the other Party the opportunity
to attend and participate.
 
6.3  Patent Matters. 
 
(a)  Sellers shall use their reasonable efforts to satisfy the Patent Condition
prior to Closing, including but not limited to providing Buyer with instruments
and documents that will allow Sellers (or Buyer, as its successor in interest)
to successfully withstand the Reexamination. From and after the date hereof
until the Closing, Sellers shall use their reasonable efforts to take all
actions and to do all things necessary, proper, or advisable in order to defend
all lawsuits or other legal, regulatory or other proceedings to which either
Seller is a party challenging or affecting the validity or enforceability of
Sellers’ Registered Intellectual Property Rights and shall cooperate with Buyer
following the Closing in Buyer’s efforts in doing the same.
 
(b)  For the purposes of this Agreement, the “Patent Condition” shall be deemed
to have been satisfied by Sellers if, prior to the Closing, Sellers have
provided Buyers with (1) a letter from the PTO informing Sellers that it has
elected to not pursue further the Reexamination regarding the Invention Patent
or (2) appropriate affidavits sworn by either the Inventors identified in the
Invention Patent or, to the extent allowed by the PTO, by Sellers, in either
case supported by documentary or other evidence that Buyer has determined in its
sole but reasonable discretion is sufficient to demonstrate with reasonable
certainty that the Invention was conceived by the inventors set forth in the
Invention Patent prior to the effective date of the reference cited in the Other
Claim. To be useful in satisfying the Patent Condition, the technical disclosure
contained in any such evidence must make the showing of facts, in character and
weight, to establish reduction to practice of the Invention as claimed in the
Invention Patent prior to the effective date of the reference cited in the Other
Claim, or conception of the Invention as claimed in the Invention Patent prior
to the effective date of the reference cited in the Other Claim coupled with due
diligence from prior to said date to a subsequent reduction to practice or to
the filing of the application for the Invention Patent. The documentary or other
evidence provided by the Sellers may include, without limitation: (a) inventor
notebooks, notes, and other electronic records maintained by the inventors with
respect to the Invention (b) internal discussions (e-mails, memos, etc.)
regarding the Invention, (c) drafts of patent applications with respect to the
Invention or the Invention Patent, (d) interview of a patent attorney (or a
colleague or team member) regarding the Invention, (e) any contemporaneous
disclosures to a patent attorney or company’s legal department, (f) any drafts
of presentations or articles for conferences, lectures, trade-shows or other
internal peer-review, (g) any disclosure materials given to investors,
third-party collaborators, partners, manufacturers regarding the Invention, (h)
any bill-of-materials for prototype, manufacture, design of the Invention, (i)
any internal funding or project proposals with respect to the Invention, (j) any
milestones or project-progress reports with respect to the Invention and (k)
minutes from team meetings (during relevant time period) discussing the
Invention; provided, however, that the provision of any document or any other
evidence shall not be deemed to have satisfied the Patent Condition unless and
until Buyer has determined in its sole but reasonable discretion that the Patent
Condition has been satisfied.
 
ARTICLE VII
 
OTHER AGREEMENTS AND COVENANTS
 
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7.1  
Confidentiality

 
.  Each of the Parties hereto hereby agrees to keep such information or
knowledge obtained in any due diligence or other investigation pursuant to the
negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, in confidence to the extent required by, and
in accordance with, the provisions of the Confidentiality Agreement, provided
that either Party may disclose such information as may be necessary in
connection with seeking any necessary consent, approval, authorization,
qualification, or order of, or any exemption by, or the making of any material
declaration, filing or registration with, any Governmental Body that is required
to be obtained or made by such Party or any of its Subsidiaries in connection
with the consummation of the transactions contemplated by this Agreement.
 

7.2  
Additional Documents and Further Assurances

 
.  Contemporaneously, with the execution of this Agreement, Parent shall deliver
each Ancillary Agreement to Buyer and Buyer shall extend the maturity date of
the First Bridge Note to September 30, 2006.
 

7.3  
Take-over Statutes

 
. If any Takeover Statute is or may become applicable to the transactions
contemplated by this Agreement or by the Ancillary Agreements, each of Buyer and
Sellers and their respective board of directors shall grant such approvals and
take such actions as are necessary so that such transactions may be consummated
as promptly as practicable hereafter on the terms contemplated hereby or by the
Ancillary Agreements and otherwise act to eliminate or minimize the effects of
such statute or regulation on such transactions. “Takeover Statute” shall mean
any restrictive provision of any applicable “fair price,” “moratorium,” “control
share acquisition,” “interested stockholder” or other similar anti-takeover law,
including Section 203 of the Delaware General Corporation Law. Prior to the
termination of this Agreement, neither the board of directors of either Seller
nor any committee thereof shall exempt any Person from, or otherwise grant a
waiver with respect to, any of the provisions of Section 203 of the Delaware
General Corporation Law.
 

7.4  
Parent Vote

 
. Promptly following receipt of the Stockholder Approval, Trestle Sub shall seek
Parent’s consent to the transactions contemplated by this Agreement in its
capacity as sole stockholder of Trestle Sub and Parent shall vote (or consent
with respect to) or cause to be voted (or a consent to be given with respect to)
any shares of capital stock of Trestle Sub beneficially owned by it or any of
its Affiliates (as such term is defined under the Exchange Act) or with respect
to which it or any of such Affiliates has the power (by agreement, proxy or
otherwise) to cause to be voted (or to provide a consent), in favor of the
transactions contemplated by this Agreement at any meeting of stockholders of
Trestle Sub at which such matters shall be submitted for approval and at all
adjournments or postponements thereof (or, if applicable, by any action of
stockholders by consent in lieu of a meeting).
 

7.5  
Reasonable Cooperation of Buyer

 

 
 

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. Buyer shall cooperate with Sellers to the extent reasonable with Sellers’
efforts to obtain any third party consents, waivers and releases necessary for
the consummation of the transactions contemplated by this Agreement; provided,
however, that this Section 7.5 shall not obligate Buyer (in the aggregate) to
incur any additional expense or liability.
 

7.6  
Agreement to Perform

 
.  From and after the Closing, Sellers shall promptly pay to Buyer when received
all monies received by Sellers under any Purchased Asset or any claim or right
or any benefit arising thereunder, except to the extent the same represents an
Excluded Asset hereunder, and Buyer shall promptly pay to Parent or its designee
all monies received by Buyer with respect to any Excluded Asset (including but
not limited to accounts and notes receivables that have been identified as
Excluded Assets) or any claim or right or benefit arising thereunder and shall
promptly pay, perform and discharge when due all Assumed Liabilities.
 

7.7  
Attorney-In-Fact

 
. Effective on and after the Closing, Sellers hereby constitutes and appoints
Buyer the true and lawful attorney of Sellers, with full power of substitution,
in the name of Sellers or Buyer, but on behalf of and for the benefit of Buyer
to demand and receive from time to time any and all of the Purchased Assets and
to make endorsements and give receipts and releases for and in respect of the
same and any part thereof. Seller hereby acknowledges that the appointment
hereby made and the powers hereby granted are coupled with an interest and are
not and shall not be revocable by it in any manner or for any reason. Sellers
shall deliver to Buyer at the Closing an acknowledged power of attorney to the
foregoing effect executed by each Seller.
 

7.8  
Discharge of Excluded Liabilities

 
. Sellers shall pay and discharge or reserve sufficient assets to pay and
discharge all Excluded Liabilities, including all Sellers' Employee Plans and
all obligations under the Excluded Contracts, as and when the same become due
and payable.
 

7.9  
Guarantee

 
.
 
(a)  Clarient hereby irrevocably and unconditionally guarantees to Sellers, as
primary obligor and not merely as surety, the performance of all obligations
hereunder of Buyer and the due and punctual payment by Buyer in full of any
amounts payable by Buyer pursuant to this Agreement.
 
(b)  To the fullest extent permitted by applicable law, Clarient waives
presentment to, demand of payment from and protest to Sellers, and also waives
notice of acceptance of its guarantee and notice of protest for nonpayment. To
the fullest extent permitted by applicable law, the obligations of Clarient
hereunder shall not be affected by (i) the failure of Sellers to assert any
claim or demand or to exercise or enforce any right or remedy against Buyer
under the provisions of this Agreement or otherwise, or (ii) any rescission,
waiver, amendment or modification of, or any release from any of the terms or
provisions, of this Agreement.
 
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(c)  Clarient agrees that the guarantee pursuant to this Section 7.9 constitutes
an absolute, unconditional, present and continuing guarantee of payment and not
of collection, and waives any right to require that any resort be had by Sellers
to (i) Sellers’ rights against any other person, including Buyer, or (ii) any
other right or remedy available to Sellers by contract, applicable law or
otherwise. It is the intent of the guarantee pursuant to this Section 7.9 that
Sellers shall have resort to Clarient without asserting or resorting to any
remedy against Buyer and without demand to it, as though Clarient were primarily
liable for any payment due hereunder.
 

7.10  
Collection of Accounts Receivable.

 

 
(a) Subject to subsections (b) and (c) below, no later than five business days
following the 90th day following the Closing Date, Buyer shall remit to Parent
an amount equal to 57% of all amounts received by Buyer in payment of accounts
receivable existing at the Closing Date, to the extent such payments (i) are
received by Buyer within 90 days following the invoice of such amount by a
Seller and (ii) reflect payment due by customers in respect of Instruments sold
by a Seller prior to the Closing Date (such amount, the “Remittance Amount”);
provided, however, that the Remittance Amount shall not exceed the amount of
Sellers’ accounts payable assumed by Buyer at Closing pursuant to this
Agreement.
 
(b) All amounts received by Buyer and its Affiliates from a customer during the
time period described in subsection (a) shall be first applied to the oldest
debt owed by such customer (i.e. by due date), unless (i) such oldest debt has
been disputed by the customer, in which case the payment will be allocated to
the next oldest undisputed debt owed by such customer or (ii) the payment refers
to an invoice number, in which case the payment will be allocated to the
invoiced debt notwithstanding clause (i) above.
 
(c) Buyer shall use its commercially reasonable efforts to collect payment of
such accounts receivable consistent with Clarient’s efforts to collect
Clarient’s other accounts receivable of like type and amount; provided however
that neither Buyer nor Clarient shall be under any obligation to (i) institute
any legal proceedings to collect such accounts receivable or (ii) take any
action Clarient determines in its sole discretion to be adverse to either Buyer
or Clarient. Sellers shall not, except upon Buyer’s prior written consent,
institute collection proceedings with respect to such accounts receivable.
Notwithstanding the foregoing, to the extent that Buyer reasonably determines in
good faith that due to oversight or otherwise, amounts that should have been
considered in calculating the Adjustment Amount or amounts by which the Assumed
Liabilities were underaccrued for by Sellers on the Closing Balance Sheet were
excluded from such calculations, Buyer shall be permitted to offset such amounts
against the remittance of the Remittance Amount.
 

7.11  
Hired Employees. 

 
(a)  No later than immediately prior to the Closing, Parent shall terminate, or
shall cause to be terminated, each Hired Employee's employment with Parent and
its Subsidiaries and Parent shall satisfy, or shall cause to be satisfied, all
Parent’s obligations to such Hired
 

 
 

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Employees arising in connection with such Hired Employees' employment with
Parent and its Subsidiaries and the termination thereof.
 
(b)  Immediately after the Closing, Clarient shall offer employment with
Clarient or Buyer to each of the Hired Employees, (i) at a salary level
substantially comparable to that in effect with respect to each such Hired
Employee as of the date hereof, and (ii) with employee benefits which are, with
respect to each such Hired Employee, no less favorable in the aggregate than the
benefits provided to similarly situated employees of Clarient.
 
(c)  No provision of this Section 7.11 shall create any third-party beneficiary
or other rights in any Hired Employee, including without limitation in respect
of continued employment with Buyer or its Affiliates for any period of time. No
provision of this Section shall obligate Buyer or any of its Affiliates to adopt
or maintain any employee benefit plan or arrangement at any time.
 
ARTICLE VIII
 
CONDITIONS TO THE CLOSING
 

8.1  
Conditions to Buyer’s Obligations

 
.  The obligations of Buyer to consummate the transactions contemplated
hereunder are subject to the fulfillment or satisfaction on, and as of the
Closing, of each of the following conditions (any one or more of which may be
waived in writing by Buyer):
 
(a)  Representations and Warranties. The representations and warranties of
Sellers set forth in Article III shall be true and correct, without giving
effect to any qualification as to materiality or Sellers’ Material Adverse
Effect contained in any specific representation or warranty, as of the Closing
with the same force and effect as if made on and as of the Closing except (i) to
the extent expressly made as of a particular date, in which case as of such date
and (ii) where any failures of any such representations and warranties to be
true and correct would not reasonably be expected to have, individually or in
the aggregate, a Sellers’ Material Adverse Effect.
 
(b)  Covenants. Sellers shall have performed or complied in all respects with
all agreements and covenants required by this Agreement to be performed or
complied with by Sellers on or prior to the Closing, except where any failure to
so perform or comply would not reasonably be expected to have, individually or
in the aggregate, a Sellers’ Material Adverse Effect.
 
(c)  No Actions. No unfavorable injunction, judgment, order, decree, ruling, or
charge has been issued by any Governmental Body or before any arbitrator which
would restrain, enjoin or otherwise prohibit or prevent consummation of any of
the material transactions contemplated by this Agreement.
 
(d)  Closing Balance Sheet; Closing Accounts Receivable Statement. Sellers shall
have delivered to Buyer, and Buyer shall be reasonably satisfied with the
preparation of (i) the Closing Balance Sheet, which shall have been prepared in
the manner described in Section
 

 
 

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1.1 hereof, and (ii) the Closing Accounts Receivable Statement, which shall have
been prepared in the manner described in Section 1.1 hereof.
 
(e)  No Material Adverse Effect. From the date of the Current Balance Sheet,
there shall not have been any event or development which has resulted in a
Sellers’ Material Adverse Effect nor shall there have occurred any event or
development which would reasonably be expected to result in the future in a
Sellers’ Material Adverse Effect.
 
(f)  Certificates. The Presidents of Sellers shall have delivered to Buyer a
certificate to the effect that each of the conditions specified above in
Sections 8.1(a) to 8.1(e) is satisfied in all respects.
 
(g)  Delivery of Documents. Sellers shall have executed and delivered to Buyer
the assignment and conveyance instruments described in Section 2.5(b)(ii)
hereof.
 
(h)  Consents and Authorizations. The Parties shall have received all
authorizations, consents, orders and approvals of all Governmental Bodies
necessary for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements, and all third party consents set forth
on Schedule 8.1(h) (the “Material Consents”).
 
(i)  Stockholder Approval. Parent shall have received the Stockholder Approval.
 

8.2  
Conditions to Sellers’ Obligations

 
.  The obligations of Sellers to consummate the transactions contemplated
hereunder are subject to the fulfillment or satisfaction on, and as of the
Closing, of each of the following conditions (any one or more of which may be in
writing waived by Sellers):
 
(a)  Representations and Warranties. The representations and warranties of Buyer
set forth in Article IV shall be true and correct, without giving effect to any
qualification as to materiality or Buyer Material Adverse Effect contained in
any specific representation or warranty, as of the Closing with the same force
and effect as if made on and as of the Closing except (i) to the extent
expressly made as of a particular date, in which case as of such date and
(ii) where any failure of any such representations and warranties to be true and
correct would not reasonably be expected to have, individually or in the
aggregate, a Buyer Material Adverse Effect.
 
(b)  Covenants. Buyer shall have performed or complied in all respects with all
agreements and covenants required by this Agreement to be performed or complied
with by them on or prior to the Closing, except where any failures to so perform
or comply would not reasonably be expected to have, individually or in the
aggregate, a Buyer Material Adverse Effect.
 
(c)  No Actions. No unfavorable injunction, judgment, order, decree, ruling, or
charge has been issued by any Governmental Body or before any arbitrator which
(A) would restrain, enjoin or otherwise prohibit or prevent consummation of any
of the material transactions
 

 
 

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contemplated by this Agreement or (B) would reasonably be expected to result in
a Buyer Material Adverse Effect.
 
(d)  Certificate. The Chief Executive Officer of Clarient shall have delivered
to Sellers a certificate to the effect that each of the conditions specified
above in Sections 8.2(a) to 8.2(c) (inclusive) is satisfied in all respects.
 
(e)  Payment of Purchase Price. Buyer shall have paid the entire Purchase Price
as contemplated hereby.
 
(f)  Stockholder Approval. Parent shall have received the Stockholder Approval.
 
(g)  Consents and Authorizations. The Parties shall have received all
authorizations, consents, orders and approvals of all Governmental Bodies
necessary for the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements.
 

8.3  
Frustration of Closing Conditions

 
.  Neither Sellers nor Buyer may rely on the failure of any condition set forth
in Section 8.1 or 8.2, as the case may be, if such failure was caused by such
party's failure to comply with any provision of this Agreement.
 
ARTICLE IX

 
TAX MATTERS
 

9.1  
Tax Books and Records.

 
The Buyer and the Sellers agree to furnish or cause to be furnished to the
other, upon request, as promptly as practicable, such information and assistance
relating to the Purchased Assets, including, without limitation, access to books
and records, as is reasonably necessary for the filing of all Tax Returns by the
Buyer or the Sellers, the making of any election relating to Taxes, the
preparation for any audit by any taxing authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Tax. The Buyer and each
of the Sellers shall retain all books and records with respect to Taxes
pertaining to the Purchased Assets for a period of at least six (6) years
following the Closing Date. Prior to or at the end of such period, if a party
desires to transfer, destroy or discard any such books and records, such party
shall provide the other with at least ten (10) days prior written notice, during
which period the party receiving such notice can elect to take possession, at
its own expense, of such books and records. The Buyer and the Sellers shall
cooperate fully with each other in the conduct of any audit, litigation or other
proceeding relating to Taxes involving the Purchased Assets. The Buyer and the
Sellers upon written request of the other further agree, upon request, to use
their commercially reasonable efforts to obtain any certificate or other
document from any Governmental Body or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
 
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9.2  
Allocation of Taxes.

 
To the extent not allocated in this Agreement, the Sellers shall be responsible
for and shall promptly pay when due all Taxes levied with respect to the
Purchased Assets attributable to the Pre-Closing Tax Period. All Taxes levied
against Sellers with respect to the Purchased Assets for the Straddle Period
shall be apportioned between the Pre-Closing Tax Period and the Post-Closing Tax
Period, as follows: (i) in the case of any Taxes other than Taxes based upon or
related to income or receipts, the portion allocable to the Pre-Closing Tax
Period shall be deemed to be the amount of such Tax for the entire Straddle
Period multiplied by a fraction the numerator of which is the number of days in
the Tax period ending on the Closing Date and the denominator of which is the
number of days in the entire Straddle Period, and (ii) in the case of any Tax
based upon or related to income or receipts, the portion allocable to the
Pre-Closing Tax Period shall be deemed equal to the amount which would be
payable if the relevant Straddle Period ended on the Closing Date. The Sellers
shall be liable for the proportionate amount of such Taxes attributable to the
Purchased Assets that is attributable to the Pre-Closing Tax Period, and the
Buyer shall be liable for the proportionate amount of such Taxes that is
attributable to the Post-Closing Tax Period. Upon receipt of any bill for such
Taxes relating to the Purchased Assets, the Buyer and the Sellers shall present
a statement to the other setting forth the amount of reimbursement to which each
is entitled under this Section 9.2 together with such supporting evidence as is
reasonably necessary to calculate the proration amount. The proration amount
shall be paid by the party owing it to the other within ten (10) days after
delivery of such statement. In the event that the Buyer or the Sellers shall
make any payment for which it is entitled to reimbursement under this Section
9.2, the applicable party shall make such reimbursement promptly but in no event
later than ten (10) days after the presentation of a statement setting forth the
amount of reimbursement to which the presenting party is entitled along with
such supporting evidence as is reasonably necessary to calculate the amount of
reimbursement.
 

9.3  
Transfer Taxes.

 
All transfer, stamp, documentary, sales, use, registration, value-added and
other similar Taxes (including all applicable real estate transfer Taxes) and
related fees (including any penalties, interest and additions to Taxes)
(collectively, “Transfer Taxes”) incurred in connection with this Agreement and
the transactions contemplated hereby will be borne equally by the Sellers and
Buyer, with Sellers paying 50% of such Taxes (“Sellers’ Transfer Taxes”) and
Buyer paying 50% of such Taxes (“Buyer’s Transfer Taxes”). Notwithstanding the
foregoing, in no event shall Sellers’ collective tax liability for Transfer
Taxes exceed $10,000 in the aggregate. All Tax Returns or other documentation
related to Transfer Taxes (“Transfer Tax Returns”) shall be filed by the Party
required to file each such Transfer Tax Return under applicable law. The Party
required to file a Transfer Tax Return shall submit such Transfer Tax Return
(with copies of any relevant schedules, work papers and other documentation) to
the non-filing Party for such Party’s review, comment, and approval not less
than 30 days before the due date (including extensions) for the filing of such
Transfer Tax Return. The filing Party shall pay all Transfer Taxes shown as due
on such Transfer Tax Return, and the non-filing Party shall promptly pay its
portion of such Transfer Taxes (pursuant to this Section 9.3) to the filing
Party following receipt of a written request from the filing Party for such
payment. If either Party receives notice of an audit or other investigation with
respect to any Transfer Tax Return, such
 

 
 

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Party shall control the conduct of such audit or other proceeding, provided that
the other Party shall be entitled to participate in such audit or other
proceeding at its own expense. The controlling Party shall not resolve or settle
such audit or other investigation without the other Party’s written consent,
which consent shall not be unreasonably withheld or delayed, and Sellers and
Buyer shall bear and pay any additional Transfer Taxes payable as a result
thereof pursuant to this Section 9.3.
 

9.4  
Notices.

 
The Sellers shall promptly notify the Buyer in writing upon receipt by the
Sellers of notice of any pending or threatened federal, state, local or foreign
Tax audits or assessments relating to the income, properties or operations of
the Sellers that reasonably may be expected to relate to the Purchased Assets
and for which Buyer could be liable. Each Party shall promptly notify the other
in writing upon receipt of notice of any pending or threatened Tax audits or
assessments relating to the Transfer Taxes payable in accordance with the terms
of this Agreement.
 

9.5  
Withholding Exemption.

 
The Sellers shall deliver to the Buyer at the Closing all necessary forms and
certificates complying with applicable law and reasonably acceptable to Buyer,
duly executed and acknowledged, certifying that the transactions contemplated
hereby are exempt from withholding under Section 1445 of the Code.
 

ARTICLE X
 
TERMINATION
 

10.1  
Termination of the Agreement

 
.  The Parties may terminate this Agreement as provided below:
 
(a)  by mutual written consent of Buyer and the Sellers at any time prior to the
Closing;
 
(b)  By either Sellers or Buyer upon written notice to the other Parties:
 
(i)  if, prior to the Closing, a court of competent jurisdiction or other
Governmental Body shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, judgment, injunction or
other order, in any case that is in effect and that permanently prevents or
prohibits consummation of the material transactions contemplated in this
Agreement or the Ancillary Agreements, provided that the Party seeking to
terminate this Agreement pursuant to this Section 10.1(b)(i) shall have used its
commercially reasonable efforts to prevent such prohibition and to cause any
such prohibition to be vacated or otherwise rendered of no effect; or
 
(ii)  if the Closing has not occurred by September 30, 2006 (such date, as the
same may be extended as set forth in the following clause the “Outside Date”);
provided,
 

 
 

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however, that the Outside Date may be extended by Buyer or Sellers (by providing
written notice thereof to the other Party within five Business Days prior to and
including September 30, 2006 up to and including October 31, 2006), in the event
all conditions to effect the transactions contemplated by this Agreement, other
than the Stockholder Approval, have been obtained; provided, further, that the
right to terminate this Agreement pursuant to this Section 10.1(b)(ii) shall not
be available to any Party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur by the Outside Date, or
 
(iii)  if the Stockholder Approval shall not have been obtained following a vote
at the Stockholder Meeting (or any adjournment or postponement thereof) at which
the required number of shares to approve the transactions contemplated by this
Agreement were present and entitled to vote and the vote to approve the
transactions contemplated by this Agreement was taken; provided, that no
termination by a Party pursuant to this Section 10.1(b)(iii) shall be effective
unless (A) such failure was not due to a breach by such Party of its obligations
hereunder and (B) concurrently therewith such Party has fulfilled its
obligations, if any, under Section 10.3;
 
(c)  By Buyer, at any time prior to the Closing, upon written notice to Sellers,
if:
 
(i)  (A) the board of directors of Parent or any committee thereof shall have
effected a Change of Recommendation, (B) the board of directors of Parent or any
committee thereof shall have resolved to effect a Change of Recommendation,
(C) the board of directors of Parent or any committee thereof shall have failed
to affirm its recommendation in respect of the transactions contemplated
hereunder within five Business Days of a request to do so by Buyer, or (D) for
any reason Parent fails to call or hold the Stockholder Meeting by the fifth
Business Day prior to the Outside Date;
 
(ii)  if either Seller shall have breached in any material respect any of its
representations, warranties, covenants or agreements contained in this Agreement
or the Ancillary Agreements, such that any of the conditions to Buyer’s
obligation to effect the Closing would fail to be satisfied at the time of
termination and such breach cannot be cured or has not been cured, in all
material respects, within 30 days after notice of such breach from Buyer or, if
sooner, the day prior to the Outside Date; or
 
(iii)  if since the date of this Agreement, there shall have been any event,
development or change of circumstance that constitutes, has had or would
reasonably be expected to have, individually or in the aggregate, a Sellers’
Material Adverse Effect and such Sellers’ Material Adverse Effect is not cured
in all respects, or cannot be cured, within 30 days of notice thereof from Buyer
(or, if sooner, the day prior to the Outside Date)
 
(d)  By Sellers, at any time prior to the Closing, upon written notice to Buyer:
 
(i)  pursuant to and in compliance with Section 5.4(f); or 
 
(ii)  if Buyer shall have breached in any material respect any of the
representations, warranties, covenants or agreements contained in this Agreement
or the Ancillary Agreements, such that any of the conditions to Sellers’
obligations to effect the
 

 

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Closing would fail to be satisfied at the time of termination and such breach
cannot be or has not been cured, in all material respects, within 10 days after
notice of such breach from Sellers or, if sooner, the day prior to the Outside
Date.
 

10.2  
Effect of Termination

 
. In the event of the termination of this Agreement as provided in Section 10.1,
written notice thereof shall forthwith be given to the other Party or Parties
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void (except for the provisions
of this Section 10.2, Section 10.3 and Article XI which shall survive such
termination) and there shall be no liability on the part of Buyer or Sellers,
except (i) as set forth in Section 10.3, and (ii) for damages resulting from any
breach by such Party of this Agreement.
 

10.3  
Fees and Expenses

 
.
 
(a)  Each Party will bear its own costs and expenses (including legal and
accounting fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
 
(b)  If this Agreement is terminated pursuant to Section 10.1(c)(i)(A) - (C) at
any time, then Sellers shall jointly and severally pay the Termination Fee to
Buyer within two Business Days after the termination of this Agreement.
 
(c)  If (i) this Agreement is terminated pursuant to Section 10.1(b)(iii), and
(ii) prior to the Stockholder Meeting, an Acquisition Proposal has been made by
any Third Party, and (iii) such Acquisition Proposal was outstanding at the time
of the Stockholder Meeting then the Sellers shall jointly and severally pay to
Buyer the Termination Fee within two Business Days after the termination of this
Agreement.
 
(d)  If this Agreement is terminated by either Seller pursuant to
Section 10.1(d)(i), then Sellers shall jointly and severally pay to Buyer the
Termination Fee prior to or concurrently with such termination.
 
(e)  If this Agreement is terminated (i) by Buyer pursuant to
Section 10.1(c)(ii), (ii) by Buyer pursuant to Section 10.1(c)(i)(D), or
(iii) by Sellers pursuant to Section 10.1(d)(ii), then the non-terminating Party
shall pay to the terminating Party the Expense Amount within two Business Days
after the termination of this Agreement.
 
(f)  Any payments made under this Section 10.3 shall be made by wire transfer of
immediately available funds to an account designated by the Party entitled to
receive payment. Buyer and Sellers acknowledge and agree that the agreements
contained in this Section 10.3 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, neither
Buyer nor Sellers would enter into this Agreement. Accordingly, if Buyer or
Sellers fail promptly to pay any amount due pursuant to this Section 10.3, and,
in order to obtain such payment, Buyer or Sellers, as the case may be,
 

 
 

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commences a suit that results in a judgment against the other Party for the
Termination Fee or other amounts due pursuant to this Section 10.3, such
defaulting Party shall pay to the prevailing Party its costs and expenses
(including attorneys’ fees and expenses) in connection with such suit, together
with interest on the amount due pursuant to this Section 10.3 from the date such
payment was required to be made until the date of payment at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
 

10.4  
Repayment of Bridge Loans

 
(a)  .If this Agreement is terminated prior to Closing for any reason other than
by Sellers pursuant to Section 10.1(d)(ii), then Parent shall repay to Clarient
the unpaid principal and accrued and unpaid interest under the Bridge Notes
within two Business Days after the termination of this Agreement; provided,
however that if (a) the board of directors of Parent or any committee thereof
shall not have effected or resolved to effect a Change of Recommendation and (b)
Sellers shall not have willfully and materially breached this Agreement prior to
such termination, the time for Parent's repayment pursuant to this Section 10.4
shall be extended and Parent shall repay to Clarient the unpaid principal and
accrued and unpaid interest under the Bridge Notes within 30 days after the
termination of this Agreement (or, if earlier, by the then-applicable maturity
date of the Bridge Notes).
 
ARTICLE XI
 
MISCELLANEOUS
 

11.1  
Press Releases and Public Announcements

 
.  No Party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement prior to the Closing without
the prior written approval of the other Party; provided, however, that (a) Buyer
or Parent may make any public disclosure it believes in good faith is required
by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the Party making such public
announcement will use its reasonable best efforts to advise the other Party
prior to making the disclosure) and (b) Sellers may correspond with third
parties in writings in form and substance reasonably satisfactory to Buyer with
respect to obtaining consents from such parties pursuant to Sections 3.6, 3.18
and 6.2. In furtherance of the foregoing sentence, the Parties agree and
acknowledge that Buyer and Parent will issue a joint press release following the
execution and delivery of this Agreement by the Parties in the form previously
agreed to by the Parties.
 

11.2  
No Third-Party Beneficiaries

 
.  This Agreement shall not confer any rights or remedies upon any Person other
than the Parties, and their respective successors and permitted assigns, other
than as specifically set forth herein.
 

11.3  
Entire Agreement

 
.  This Agreement (including the exhibits hereto) and the Ancillary Agreements
constitute the entire agreement among the Parties with respect to the subject
matter hereof and thereof and
 

 

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supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof and thereof.
 

11.4  
Amendment

 
.  This Agreement may not be amended except by a written agreement executed by
all Parties.
 

11.5  
Waivers

 
.  The rights and remedies of the Parties to this Agreement are cumulative and
not alternative; provided that the rights and remedies granted herein are
exclusive of any rights and remedies which the Parties would otherwise have at
law and in equity. Neither the failure nor any delay by any Party in exercising
any right, power or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power or privilege,
and no single or partial exercise of such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (i) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one Party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other Parties; (ii) no waiver that may be given by a Party
will be applicable except in the specific instance for which it is given; and
(iii) no notice to or demand on one Party will be deemed to be a waiver of any
obligation of such Party or of the right of the Party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
 

11.6  
Successors and Assigns

 
.  This Agreement shall be binding upon and inure to the benefit of the Parties
named herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests, or obligations
hereunder without the prior written approval of the other Parties; provided,
however, that so long as Buyer remains liable for all obligations under this
Agreement, Buyer may assign any or all of its rights and interests hereunder to
a wholly-owned Subsidiary.
 

11.7  
Counterparts

 
.  This Agreement may be executed in counterparts, including by facsimile
transmission, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
 

11.8  
Notices

 
.  All notices and other communications required or permitted hereunder shall be
in writing, shall be effective when given, and shall in any event be deemed to
be given upon receipt or, if earlier, (a) five (5) days after deposit with the
U.S. Postal Service or other applicable postal service, if delivered by
certified or registered first class mail, postage prepaid, return receipt
requested, (b) upon delivery, if delivered by hand, (c) one Business Day after
the Business Day
 

 

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of deposit with Federal Express or similar overnight courier, freight prepaid or
(d) upon facsimile, if delivered by facsimile transmission with copy by
certified or registered first class mail, postage prepaid, return receipt
requested and shall be addressed to the intended recipient as set forth below
unless sent by facsimile on a day which is not a Business Day, in which case on
the next Business Day thereafter:
 
If to Buyer:
 
Clarient, Inc.
31 Columbia
Aliso Viejo, CA 92656
Attn: Chief Financial Officer
Facsimile: (949) 425-5701
 
Copy to:
 
Latham & Watkins, LLP
Attn: Alex Voxman, Esq.
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Facsimile: (213) 891-8763

 
If to Sellers:
 
    c/o Trestle Holdings, Inc.
    199 Technology Drive #105
    Irvine, California 92618
    Attention: Maurizio Vecchione
    Facsimile: (949) 673-1058
 
Copy to:
 
Kaye Scholer LLP
    1999 Avenue of the Stars, Suite 1700
    Los Angeles, California 90067
    Attn: Barry L. Dastin, Esq.
    Facsimile: (310) 788-1200
 
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving seven (7) days’
advance written notice to the other Party pursuant to the provisions above.
 

11.9  
Governing Law

 
.  This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of California without giving effect to any choice or
conflict of law provision or
 

 

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rule (whether of the State of California or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
California.
 

11.10  
Forum Selection; Consent to Jurisdiction

 
. All disputes arising out of or in connection with this Agreement (other than
matters subject to arbitration pursuant to the terms of this Agreement or the
other agreements delivered by the Parties pursuant hereto) shall be solely and
exclusively resolved by a court of competent jurisdiction in the County of
Orange, State of California or the United States District Courts of the Central
District of California. The Parties hereby consent to the jurisdiction of the
courts of the County of Orange, State of California and the United States
District Courts of the Central District of California and waive any objections
or rights as to forum nonconvenience, lack of personal jurisdiction or similar
grounds with respect to any dispute relating to this Agreement.
 

11.11  
Waiver of Jury Trial

 
. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER
OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11.11.
 

11.12  
Severability

 
.  Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are fulfilled to the
greatest extent possible.
 

11.13  
Construction

 

 

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.  The Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
 

11.14  
Attorneys’ Fees

 
.  If any legal proceeding or other action relating to this Agreement is brought
or otherwise initiated, the prevailing Party shall be entitled to recover
reasonable attorney’s fees, costs and disbursements (in addition to any other
relief to which the prevailing Party may be entitled).
 

11.15  
Nonsurvival of Representations and Warranties

 
. None of the representations and warranties in this Agreement or in any
certificate or instrument delivered pursuant to this Agreement shall survive the
Closing.
 

11.16  
Specific Performance

 
. The parties hereto agree that irreparable damage would occur in the event any
of the provisions of this Agreement were not to be performed in accordance with
the terms hereof and that the Parties shall be entitled to specific performance
of the terms hereof in addition to any other remedies at law or in equity. Each
Party agrees to waive any requirement for the posting of, or securing of, a bond
in connection with any such remedy.
 

11.17  
Time of Essence

 
.  With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.
 

11.18  
Interpretation and Rules of Construction

 
. In this Agreement, except to the extent otherwise provided or that the context
otherwise requires:
 
(a)  when a reference is made in this Agreement to an Article, Section, Exhibit
or Schedule, such reference is to an Article or Section of, or a Schedule or
Exhibit to, this Agreement;
 
(b)  the table of contents and headings for this Agreement are for reference
purposes only and do not affect in any way the meaning or interpretation of this
Agreement;
 
(c)  whenever the words “include,” “includes” or “including” are used in this
Agreement, they are deemed to be followed by the words “without limitation”;
 
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(d)  the words “hereof,” “herein” and “hereunder” and words of similar import,
when used in this Agreement, refer to this Agreement as a whole and not to any
particular provision of this Agreement;
 
(e)  all terms defined in this Agreement have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto, unless
otherwise defined therein;
 
(f)  the definitions contained in this Agreement are applicable to the singular
as well as the plural forms of such terms;
 
(g)  any law defined or referred to herein or in any agreement or instrument
that is referred to herein means such law or statute as from time to time
amended, modified or supplemented, including by succession of comparable
successor laws;
 
(h)  references to a Person are also to its successors and permitted assigns;
 
(i)  the use of “or” is not intended to be exclusive unless expressly indicated
otherwise;
 
(j)  the titles, captions or headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
 

11.19  
Representation by Counsel

 
. Each Party hereto represents and agrees with each other that it has been
represented by or had the opportunity to be represented by, independent counsel
of its own choosing, and that it has had the full right and opportunity to
consult with its respective attorney(s), that to the extent, if any, that it
desired, it availed itself of this right and opportunity, that it or its
authorized officers (as the case may be) have carefully read and fully
understand this Agreement in its entirety and have had it fully explained to
them by such Party’s respective counsel, that each is fully aware of the
contents thereof and its meaning, intent and legal effect, and that it or its
authorized officer (as the case may be) is competent to execute this Agreement
and has executed this Agreement free from coercion, duress or undue influence.
 

11.20  
Disclosure Letter

 
. It is expressly understood and acknowledged that any information disclosed in
the Sellers’ Disclosure Letter under any numbered or lettered part shall be
deemed to relate to and qualify representations and warranties set forth in one
or more other parts of the Sellers’ Disclosure Letter, but only where the
relevance of such disclosure to such other part or parts is clear from the text
of such disclosure; provided, however, the mere listing (or inclusion of a copy)
of a document or other item shall not by itself be deemed adequate to disclose
an exception to a representation or warranty made herein.
 
[Remainder of page intentionally left blank.]
 

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date
first above written.
 

 

 
Buyer:      CLRT ACQUISITION, LLC
 
By:  
Name:  
Title:  
 

 
Clarient:  CLARIENT, INC.
 
By:  
Name:  
Title:  

 
Parent:  TRESTLE HOLDINGS, INC.
 
By:  
Name:  
Title:  

 
Trestle Sub:  TRESTLE ACQUISITION CORP.
 
By:  
Name:  
Title: