EXHIBIT
10.1





Execution
Copy











AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION








by
and among





OCCULOGIX,
INC.





OCUSENSE
ACQUIRECO, INC.





and





OCUSENSE,
INC.











April
22, 2008





Execution
Copy





INDEX
OF EXHIBITS





Exhibit
            Description


Exhibit
      A
            Form
      of Investor Representation
Statement


Exhibit
      B
            Form
      of Indemnity


-ii-


AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION





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





W I T N E
S S E T H:





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





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





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





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





ARTICLE
I





DEFINITIONS AND
INTERPRETATIONS





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





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





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





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





“CGCL” shall mean the
California General Corporations Law.





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





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





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





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





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





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





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





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





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





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





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





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





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





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


-2-


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





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





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





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





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





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





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





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





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





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





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





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


-3-


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





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





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





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





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





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





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





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





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


-4-


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





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





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





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





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





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





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





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





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





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





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


-5-


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





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





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





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





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





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





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





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





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





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





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





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


-6-


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





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





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





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





1.2           Certain Interpretations.





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





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


-7-


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





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





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





ARTICLE
II





THE
MERGER





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





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





2.3           Legal Effect of the
Merger.  At the Effective Time, the effect of the Merger shall
be as provided under the applicable provisions of the DGCL.  Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.


-8-


2.4           Certificate
of Incorporation and Bylaws.





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





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





2.5           Directors
and Officers.





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





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





2.6           Capital
Stock of Constituent Corporations.





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





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


-9-


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





(d)           Company
Options.





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


-10-


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





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





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





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





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





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





2.7           Dissenting
Shares.





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


-11-


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





2.8           Exchange
of Certificates.





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





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





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





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


-12-


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





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





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





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





2.11           Tax
Consequences.  It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code.  The parties hereto adopt this Agreement as a “plan of
reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
Treasury Regulations promulgated under the Code.  None of the parties
hereto has taken or will take any action, or knows of any fact or circumstance,
that would be reasonably expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the
Code.


-13-


2.12           Further
Assurances.  If, at any time after the Effective Time, any
further lawful action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company and Merger Sub, then the officers and directors of the Company,
Parent and Merger Sub shall be fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful
action.





ARTICLE
III





REPRESENTATIONS AND
WARRANTIES OF THE COMPANY





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





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





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





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


-14-


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





3.5           Company Capital
Structure.





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


-15-


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





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





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


-16-


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





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





3.10           Taxes





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





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





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





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





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





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


-17-


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





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





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





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





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





(l)           No
claim has ever been made by a taxing authority in a jurisdiction where the
Company does not file Returns that it is, or may be, subject to taxation by that
jurisdiction.





(m)           The
Company has not engaged in a transaction that is the same as, or substantially
similar to, one of the types of transactions that the Internal Revenue Service
has determined to be a tax avoidance transaction and identified by notice,
regulation or other form of published guidance as a listed transaction, as set
forth in Treasury Regulation §1.6011-4(b)(2).





3.11          Restrictions on Business
Activities.  Section 3.11 of the
Company Disclosure Schedule sets forth a complete and accurate list of each
Contract (non-competition or otherwise), judgment, injunction, order or decree
to which the Company is a party, or that is otherwise binding upon the Company,
which has, or may reasonably be expected to have, the effect of prohibiting or
impairing any business practice of the Company (including any restrictions on
selling, licensing, manufacturing or otherwise distributing any of its
technology or products or providing services to customers or potential customers
or any class of customers, in any geographic area, during any period of time, or
in any segment of the market, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company or
otherwise limiting the freedom of the Company to engage in any line of business
or to compete with any person.)





3.12          Properties


-18-


(a)           The
Company does not own any real property, nor has the Company ever owned any real
property.  Section 3.12(a) of
the Company Disclosure Schedule sets forth a complete and accurate list of all
real property currently leased by the Company or otherwise used or occupied by
the Company for the operation of the Company’s business (the “Company Leased Real
Property”), the name of the lessor, the name and date of each lease
agreement related thereto and each amendment thereto.  The Company has
provided Parent true, correct and complete copies of all leases, lease
guaranties, subleases and agreements for the leasing, use or occupancy of, or
otherwise granting a right in, or relating to, the Company Leased Real Property,
including all amendments, terminations and modifications thereof, and there are
no other lease agreements for real property affecting the Company Leased Real
Property or by which the Company is bound.  All such lease Contracts
are valid and enforceable, and the Company is not in default under any of them,
and no rentals are past due, and no circumstance exists, which, with notice, the
passage of time or both, could constitute a default under any such
Contract.  The Company has received no notice of a default, or alleged
failure to perform, or any offset or counterclaim, with respect to any such
Contract, which has not been fully remedied or withdrawn.  The
consummation of the Merger and the other transactions contemplated hereby will
not affect the enforceability against any person of any such Contract or the
Company’s rights to the continued use and possession of the Company Leased Real
Property for the conduct of business as presently conducted.  The
Company Leased Real Property is in good operating condition and repair, free
from structural, physical and mechanical defects, is maintained in a manner
consistent with standards generally followed with respect to similar properties
and is structurally sufficient and otherwise suitable for the conduct of the
Company’s business as presently conducted.





(b)           The
Company has good and valid title to, or, in the case of leased properties and
assets, valid leasehold interests in, all of its tangible properties and assets,
real, personal and mixed, used or held for use in its business, free and clear
of any Liens, except Liens for Taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which do not detract from the
value of, or interfere with the present use of, the property subject thereto or
affected thereby.  The foregoing assets and the Company’s Intellectual
Property and the Company’s Intellectual Property Rights constitute all of the
assets used in, and necessary for, the Company’s business as currently conducted
or currently contemplated to be conducted.





(c)           Section 3.12(c) of
the Company Disclosure Schedule contains a complete and accurate list of all
material items of equipment owned or leased by the Company, and such equipment
is adequate for the conduct of the Company’s business, as currently conducted
and as currently contemplated to be conducted, and is in good operating
condition, regularly and property maintained, subject to normal wear and
tear.





3.13          Material
Contracts





(a)           Section 3.13 of the
Company Disclosure Schedule sets forth a complete and accurate list of the
following Contracts of the Company in effect as of the date hereof (together
with the Contracts set forth in Section 3.11
(Restrictions on Business Activities), the “Company Material
Contracts” and, individually, a “Company Material
Contract”):


-19-


(i)          
  any employment or consulting Contract with an employee or individual
consultant or salesperson or any consulting or sales Contract with a firm or
other organization;





(ii)        
   any Contract or plan, including any stock option plan, stock
appreciation rights plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated hereby;





(iii)           any
Contract relating to the lease of personal property involving future payments in
excess of $10,000 individually or $25,000 in the aggregate;





(iv)           any
Contract relating to capital expenditures and involving future payments in
excess of $10,000 individually or $25,000 in the aggregate;





(v)      
     any Contract relating to the disposition or
acquisition of assets or any interest in any business enterprise outside the
ordinary course of the Company’s business;





(vi)           any
mortgages, indentures, guarantees, loans, credit agreements, security agreements
or other Contracts relating to the borrowing of money or the extension of credit
(other than trade payables in the ordinary course of business consistent with
past practices);





(vii)    
     any Contract for the purchase by the Company of
goods or services involving in excess of $10,000 individually or $25,000 in the
aggregate;





(viii)         any
Contract for the purchase by customers of goods or services involving in excess
of $10,000 individually or $25,000 in the aggregate;





(ix)           any
dealer, distribution, joint marketing, strategic alliance or development
Contract;





(x)      
     any standstill or similar Contract;





(xi)           any
non-employee sales representative, original equipment manufacturer,
manufacturing, value added, remarketer, reseller or independent software vendor
Contract or other Contract for the use or distribution of the Company’s
products, technology or services;





(xii)          any
Contract granting a power of attorney, agency or similar authority to another
person or entity;


-20-


(xiii)         any
other Contract that (a) involves future payments in excess of $10,000
individually or $25,000 in the aggregate or more and that is not cancelable
without penalty within 30 days, (b) has an unexpired term as of the Company
Current Balance Sheet Date in excess of 12 months and is not otherwise listed on
Section 3.13 of
the Company Disclosure Schedule or (c) is otherwise material to the business of
the Company and not otherwise listed on Section 3.13 of the
Company Disclosure Schedule; or





(xiv)         any
Contract pursuant to which the Company has agreed to no limitation on the
Company’s liability thereunder.





(b)           The
Company is in compliance with and has not breached, violated or defaulted under,
or received notice that it has breached, violated or defaulted under, any of the
terms or conditions of any Company Material Contract, nor does the Company have
any Knowledge of any event that would constitute such a breach, violation or
default with the lapse of time, the giving of notice or both.  Each
Company Material Contract is in full force and effect, enforceable in accordance
with its terms, and the Company is not in default thereunder, nor, to the
Knowledge of the Company, is any party that is obligated to the Company pursuant
to any such Company Material Contract in default
thereunder.  Following the Effective Time, the Surviving Corporation
will be permitted to exercise all of its rights under the Company Material
Contracts without the payment of any additional amounts or consideration, other
than ongoing fees, royalties or payments which the Company would otherwise be
required to pay pursuant to the terms of the Company Material Contracts
regardless of the transactions contemplated by this Agreement.





3.14          Insurance.  Section 3.14 of the
Company Disclosure Schedule contains a complete and accurate list of all
insurance policies and bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company (each,
a “Company Insurance
Policy”).  There is no claim by the Company pending under any
Company Insurance Policy as to which coverage has been questioned, denied or
disputed or that the Company has a reason to believe will be denied or disputed
by the underwriters of such Company Insurance Policy.  In addition,
there is no pending claim of which the total value (inclusive of defense
expenses) will exceed the policy limits.  All premiums due and payable
under all Company Insurance Policies have been paid (or if installment payments
are due, will be paid if incurred prior to the Closing Date), and the Company is
otherwise in material compliance with the terms of all Company Insurance
Policies.  The Company has no Knowledge or reasonable belief of
threatened termination of, or premium increase with respect to, any Company
Insurance Policy.





3.15          Litigation.  There
is no action, suit, claim or proceeding of any nature pending or, to the
Knowledge of the Company, threatened, against the Company, its properties
(tangible or intangible) or any of its officers or directors (in their capacity
as such), nor, to the Knowledge of the Company, is there any reasonable basis
therefor.  There is no investigation or other proceeding pending or,
to the Knowledge of the Company, threatened, against the Company, any of its
properties (tangible or intangible) or any of its officers or directors (in
their capacity as such) by or before any Governmental Authority, nor, to the
Knowledge of the Company, is there any reasonable basis therefor.  No
Governmental Authority has, at any time, challenged or questioned the legal
right of the Company to conduct its operations as presently or previously
conducted or as presently contemplated to be conducted.


-21-


3.16          Governmental
Authorization.  Each consent, license, permit, grant or other
authorization (i) pursuant to which the Company currently operates or holds any
interest in any of its properties or (ii) which is required for the operation of
the Company’s business as currently conducted or currently contemplated to be
conducted or the holding of any such interest (collectively, the “CompanyAuthorizations”) has
been issued or granted to the Company.  The Company Authorizations are
in full force and effect and constitute all authorizations required to permit
the Company to operate or conduct its business or hold any interest in its
properties or assets.





3.17          Compliance with
Laws.  The Company has complied with, is not in violation of,
and has not received any notices of violation with respect to, any foreign,
federal, state or local statute, law or regulation applicable to the Company,
its business or its assets (whether tangible or intangible).





3.18          Minute Booksand
Records.  The minutes of the Company made available to counsel
for Parent are, since the time of incorporation of the Company, the only minutes
of the Company and contain accurate summaries of all meetings or actions by
written consent of the board of directors (or committees thereof) of the Company
and contain all stockholder actions by written consent.  The Company
has delivered to counsel for Parent copies of any and all agreements, dated or
effective on or after the date of incorporation of the Company, (i) relating to
the purchase of any Company Capital Stock, (ii) relating to rights of
stockholders of the Company and (iii) between and among stockholders of the
Company relating to the Company Capital Stock, including any and all stock
purchase agreements, registration rights agreements, voting agreements, right of
first refusal agreements and stockholders agreements, the existence of which the
Company has Knowledge.





3.19          Brokers’ and Finders’
Fees.  The Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders’ fees or agents’
commissions or any similar charges in connection with this Agreement or any of
the transactions contemplated hereby.





3.20          Representations and
Warranties Complete.  None of the representations and
warranties made by the Company herein or in the Schedules or Exhibit hereto,
including the Company Disclosure Schedule, or in any certificate or other
document furnished by the Company pursuant to this Agreement or in connection
with the transactions contemplated hereby, contains, or will contain at the
Effective Time, any untrue statement of a material fact or omits, or will omit
at the Effective Time, to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.


-22-


ARTICLE
IV





REPRESENTATIONS AND
WARRANTIES


OF PARENT AND MERGER
SUB





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





4.1           Organization, Standing and
Power.  Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and each of Parent and Merger Sub has the corporate power to own its
properties and to carry on its business as now being conducted and is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed would have a
Parent Material Adverse Effect.





4.2           Authority.  Each
of Parent and Merger Sub has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby.  The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of Parent and Merger Sub.
The board of directors of Parent has unanimously approved this Agreement, the
Merger and the other transactions contemplated hereby.  This Agreement
has been duly executed and delivered by Parent and Merger Sub and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable against each of Parent and Merger Sub in accordance with its
terms.





4.3           No
Conflicts.  The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not, (x)
conflict with, or result in any Conflict with, (i) any provision of the
Certificate of Incorporation or Bylaws of Parent or of Merger Sub, (ii) any
Contract to which Parent or any of its properties or assets are subject and
which has been filed as an exhibit to Parent’s Annual Report on Form 10-K for
the year ended December  31, 2007 (“Parent 10-K”) or to such
other filings under the Securities Act or the Exchange Act which are made
subsequent to the Parent 10-K and prior to the date hereof, (iii) any judgment,
order or decree applicable to Parent or Merger Sub or (iv) any statute, law,
ordinance, rule or regulation applicable to Parent or Merger Sub or their
respective properties or assets, except in the case of this clause (iv) where
such Conflict would not have a Parent Material Adverse Effect, or (y) result in
the imposition or creation of any Lien upon, or with respect to, any of the
assets owned or used by Parent.





4.4           Consents.  No
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority or any third party is
required by or with respect to Parent or Merger Sub in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws, (ii) the requisite approval of the Stockholders and
Parent’s stockholders, as contemplated herein, (iii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings that,
if not obtained or made, would not have a Parent Material Adverse Effect and
(iv) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware.


-23-


4.5           Parent Capital
Structure





(a)         
  The authorized capital stock of Parent consists of 75,000,000 shares
of common stock and 10,000,000 shares of preferred stock.  As of the
date hereof, the capitalization of Parent is as set forth in Section 4.5(a) of the
Parent Disclosure Schedule.  The total number of shares of Parent
Common Stock outstanding immediately prior to the Effective Time (assuming the
conversion, exercise or exchange of all securities convertible into, or
exercisable or exchangeable for, shares of Parent Common Stock and the exercise
of all options, warrants or other rights to purchase Parent Common Stock) will
be as set forth in Section 4.5(a) of the
Parent Disclosure Schedule.  All outstanding shares of Parent Common
Stock are duly authorized, validly issued, fully paid and non-assessable and are
not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Parent or any agreement to which Parent is a party or
by which it is bound.  All outstanding shares of Parent Common Stock
and all outstanding options, warrants or other rights to purchase Parent Common
Stock have been issued or repurchased (in the case of shares that were
outstanding and repurchased by Parent) in compliance with all applicable
federal, state, foreign or local statutes, laws, rules and regulations,
including federal and state securities laws.  Parent has not, and will
not have, suffered or incurred any Liability relating to, or arising out of, the
issuance or repurchase of any shares of Parent Common Stock or rights to
purchase Parent Common Stock or out of any agreements or arrangements relating
thereto.  There are no declared or accrued but unpaid dividends with
respect to any shares of Parent Common Stock.  Parent has no other
capital stock issued and outstanding.





(b)      
     Except as set forth in Section 4.5(a) of the
Parent Disclosure Schedule, there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which Parent is
a party or by which it is bound, obligating Parent to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of Parent Common Stock or obligating Parent to grant,
extend, accelerate the vesting of, or change the price of, or otherwise amend or
enter into, any such option, warrant, call, right, commitment or
agreement.  There are no outstanding or authorized stock appreciation,
phantom stock or profit participation rights, or other similar rights, with
respect to Parent.  Except as contemplated hereby, there are no voting
trusts or proxies, or other agreements or understandings, with respect to the
voting stock of Parent.





(c)            Immediately
prior to the Effective Time, Parent will have a sufficient number of authorized
and unissued shares of its common stock reserved for issuance to complete the
transactions contemplated by this Agreement.  Immediately prior to the
Effective Time, the Merger Shares will have been duly authorized and, upon
consummation of the transactions contemplated by this Agreement, will be validly
issued, fully paid and non-assessable and will be free of any
Liens.


-24-


4.6           Subsidiaries.  Except
as set forth in Section 4.6 of the
Parent Disclosure Schedule, Parent does not have any subsidiaries orany “affiliated”
companies (within the meaning of Rule 144 promulgated under the Securities Act)
and does not otherwise own any shares of capital stock or any interest in, and
does not control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity.





4.7           Financial
Statements.  Section 4.7 of the
Parent Disclosure Schedule sets forth Parent’s unaudited balance sheet as of
March 31, 2008, and the related unaudited statements of income, cash flow and
stockholders’ equity for the three-month period then ended, and the audited
balance sheets as of December 31, 2007 and 2006 and the related audited
statements of income, cash flow and stockholders’ equity for the twelve-month
periods then ended (the “Parent Financial
Statements”).  The Parent Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated and consistent with each other (except that the unaudited
Parent Financial Statements do not contain footnotes and other presentation
items that may be required by GAAP).  The Parent Financial Statements
present fairly, in all material respects, the Parent’s financial condition and
operating results as of the dates and during the periods indicated
therein.  The Parent’s unaudited balance sheet as of March 31, 2008,
is referred to hereinafter in this Article IV as the
“Parent Current
Balance Sheet”, and the date thereof is referred to herein as the “Parent Current Balance Sheet
Date”.  Parent maintains, and shall continue to maintain, an
adequate system of internal controls established and administered in accordance
with GAAP.





4.8           No Undisclosed
Liabilities.  Except as set forth in Section 4.8 of the
Parent Disclosure Schedule, Parent has no Liability (whether or not required to
be reflected in financial statements in accordance with GAAP), except
Liabilities (i) incurred reflected in the Parent Current Balance Sheet or (ii)
incurred in the ordinary course of business consistent with past practices since
the Parent Current Balance Sheet Date and which do not exceed $25,000 in the
aggregate.





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





4.10          Taxes


-25-


(a)           As
of the Closing Date, Parent will have (i) prepared and timely filed all material
required Returns relating to any and all Taxes concerning or attributable to
Parent or its operations, and all such Returns are, or will be, true and correct
and have been, or will be, completed in accordance with applicable law and (ii)
timely paid all material Taxes it is required to pay.





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





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





(d)           No
audit or other examination of any Return of Parent is presently in progress, nor
has Parent been notified of any request for such an audit or other examination,
other than ordinary course audits or examinations with respect to Returns
relating to the Canadian federal Goods and Services Tax.





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





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





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





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





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





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


-26-


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





(l)        
    No claim has ever been made by a taxing authority in a
jurisdiction where Parent does not file Returns that it is, or may be, subject
to taxation by that jurisdiction.





(m)           None
of the outstanding indebtedness of Parent constitutes indebtedness with respect
to which any interest deductions may be disallowed under Sections 163(i), 163(l)
or 279 of the Code or under any other provision of applicable law.





(n)      
     Parent has not engaged in a transaction that is
the same as, or substantially similar to, one of the types of transactions that
the Internal Revenue Service has determined to be a tax avoidance transaction
and identified by notice, regulation or other form of published guidance as a
listed transaction, as set forth in Treasury Regulation Section
1.6011-4(b)(2).





4.11          Restrictions on Business
Activities.  Section 4.11 of the
Parent Disclosure Schedule sets forth a complete and accurate list of each
Contract (non-competition or otherwise), judgment, injunction, order or decree
to which Parent is a party, or that is otherwise binding upon Parent, which has,
or may reasonably be expected to have, the effect of prohibiting or impairing
any business practice of Parent (including any restrictions on selling,
licensing, manufacturing or otherwise distributing any of its technology or
products or providing services to customers or potential customers or any class
of customers, in any geographic area, during any period of time, or in any
segment of the market, any acquisition of property (tangible or intangible) by
Parent or the conduct of business by Parent or otherwise limiting the freedom of
Parent to engage in any line of business or to compete with any
person).





4.12          Properties.





(a)           Parent
does not own any real property, nor has Parent ever owned any real
property.  Section 4.12(a) of
the Parent Disclosure Schedule sets forth a complete and accurate list of all
real property currently leased by Parent or otherwise used or occupied by Parent
for the operation of Parent’s business (the “Parent Leased Real
Property”), the name of the lessor, the name and date of each lease
agreement related thereto and each amendment thereto.  Parent has
provided the Company true, correct and complete copies of all leases, lease
guaranties, subleases and agreements for the leasing, use or occupancy of, or
otherwise granting a right in, or relating to, the Parent Leased Real Property,
including all amendments, terminations and modifications thereof, and there are
no other lease agreements for real property affecting the Parent Leased Real
Property or by which Parent is bound.  All such lease Contracts are
valid and enforceable, and Parent is not in default under any of them, and no
rentals are past due, and no circumstance exists, which, with notice, the
passage of time or both, could constitute a default under any such
Contract.  Parent has received no notice of a default, or alleged
failure to perform, or any offset or counterclaim, with respect to any such
Contract, which has not been fully remedied or withdrawn.  The
consummation of the Merger and the other transactions contemplated hereby will
not affect the enforceability against any person of any such Contract or the
rights of Parent or the Surviving Corporation to the continued use and
possession of the Parent Leased Real Property for the conduct of business as
presently conducted.  The Parent Leased Real Property is in good
operating condition and repair, free from structural, physical and mechanical
defects, is maintained in a manner consistent with standards generally followed
with respect to similar properties and is structurally sufficient and otherwise
suitable for the conduct of Parent’s business as presently
conducted.


-27-


(b)       
    Parent has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except Liens for Taxes not yet due and
payable and such imperfections of title and encumbrances, if any, which do not
detract from the value of, or interfere with the present use of, the property
subject thereto or affected thereby.  The foregoing assets and
Parent’s Intellectual Property and Parent’s Intellectual Property Rights
constitute all of the assets used in, and necessary for, the business of Parent
as currently conducted or currently contemplated to be conducted.





(c)     
      Section 4.12(c) of
the Parent Disclosure Schedule contains a complete and accurate list of all
material items of equipment owned or leased by Parent, and such equipment is
adequate for the conduct of the business of Parent, as currently conducted and
as currently contemplated to be conducted, and is in good operating condition,
regularly and properly maintained, subject to normal wear and tear.





4.13          Material Contracts.





(a)    
       Section 4.13(a) of
the Parent Disclosure Schedule sets forth a complete and accurate list of the
following Contracts of Parent in effect as of the date hereof (together with the
Contracts set forth in Section 4.11
(Restrictions on Business Activities) and Section 4.12(a)
(Leases) of the Parent Disclosure Schedule,the “Parent Material
Contracts” and, individually, a “Parent Material
Contract”):





(i)      
      any employment or consulting Contract with an
employee or individual consultant or salesperson or any consulting or sales
Contract with a firm or other organization;





(ii)     
      any Contract or plan, including any stock
option plan, stock appreciation rights plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated hereby;





(iii)           any
Contract relating to the lease of personal property involving future payments in
excess of $10,000 individually or $25,000 in the aggregate;


-28-


(iv)           any
Contract relating to capital expenditures and involving future payments in
excess of $10,000 individually or $25,000 in the aggregate;





(v)           any
Contract relating to the disposition or acquisition of assets or any interest in
any business enterprise outside the ordinary course of Parent’s
business;





(vi)           any
mortgages, indentures, guarantees, loans, credit agreements, security agreements
or other Contracts relating to the borrowing of money or the extension of credit
(other than trade payables in the ordinary course of business consistent with
past practices);





(vii)          any
Contract for the purchase by Parent of goods or services involving in excess of
$10,000 individually or $25,000 in the aggregate;





(viii)         any
Contract for the purchase by customers of goods or services involving in excess
of $10,000 individually or $25,000 in the aggregate;





(ix)           any
dealer, distribution, joint marketing, strategic alliance or development
Contract;





(x)      
     any standstill or similar Contract;





(xi)           any
non-employee sales representative, original equipment manufacturer,
manufacturing, value added, remarketer, reseller or independent software vendor
Contract or other Contract for the use or distribution of Parent’s products,
technology or services;





(xii)          any
Contract granting a power of attorney, agency or similar authority to another
person or entity;





(xiii)         any
other Contract that (a) involves future payments in excess of $10,000
individually or $25,000 in the aggregate or more and that is not cancelable
without penalty within 30 days, (b) has an unexpired term as of the Parent
Current Balance Sheet Date in excess of 12 months and is not otherwise listed on
Section 4.13 of
the Parent Disclosure Schedule or (c) is otherwise material to the business of
Parent and not otherwise listed on Section 4.13 of the
Parent Disclosure Schedule; or





(xiv)         any
Contract pursuant to which Parent has agreed to no limitation on Parent’s
liability thereunder.





(b)           Except
as set forth in Section 4.13(b) of
the Parent Disclosure Schedule, Parent is in compliance with and has not
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any Parent
Material Contract, nor does Parent have any Knowledge of any event that would
constitute such a breach, violation or default with the lapse of time, the
giving of notice or both.  Except as set forth in Section 4.13(b) of
the Parent Disclosure Schedule, each Parent Material Contract is in full force
and effect, enforceable in accordance with its terms, and Parent is not in
default thereunder, nor, to the Knowledge of Parent, is any party that is
obligated to Parent pursuant to any such Parent Material Contract in default
thereunder.


-29-


4.14          Employees.





(a)           Section 4.14(a) of
the Parent Disclosure Schedule identifies all bonus, deferred or incentive
compensation, profit sharing, retirement, vacation, sick leave, hospitalization,
severance, stock option, equity compensation, retention, disability, employee
benefit plans and other benefit plans of any kind sponsored, maintained or
contributed to by Parent (each, a “Parent
Plan”).





(b)           All
contributions, premiums or payments under or with respect to each Parent Plan
which are due on or before the Closing Date have been paid, and all
contributions, premiums or payments under or with respect to each Parent Plan
which are not due on or before the Closing Date have been paid or properly
accrued.





(c)           To
its knowledge, Parent is in material compliance with the applicable laws
regarding the classification of workers as independent contractors or
employees.





(d)           No
action, suit, proceeding, hearing or investigation with respect to any Parent
Plan (other than routine claims for benefits) is pending or, to the knowledge of
Parent, threatened, and, to the knowledge of Parent, there is no basis for any
such action, suit, proceeding, hearing or investigation.





(e)           Except
as set forth in Section 4.14(e) of
the Parent Disclosure Schedule, the execution and delivery by Parent of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby will not (either alone or in connection with the termination
of employment or engagement, or change of position of, any employee following,
or in connection with, the consummation of the Merger and the other transactions
contemplated hereby) constitute an event under any Parent Plan or with respect
to any benefit or compensation that will, or may, result in any material payment
(whether of severance pay or otherwise), material acceleration of payment,
forgiveness of indebtedness, vesting, distribution, material increase in
benefits or obligation to fund benefits with respect to any employee of
Parent.





(f)           Each
stock option granted by Parent to employees, independent contractors and other
parties was granted with an exercise price that the board of directors of
Parent, in good faith, determined in accordance with the applicable valuation
under the Code and at no less than the fair market value of a share of Parent
Common Stock on the date on which such stock option was
granted.  Except as set forth in Section 4.14(f) of
the Parent Disclosure Schedule, no reduction in the exercise price of a stock
option granted by Parent has been made subsequent to such stock option’s grant
date.





4.15          Insurance.  Section 4.15 of the
Parent Disclosure Schedule contains a complete and accurate list of all
insurance policies and bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of Parent or any
Parent Affiliate (each, a “Parent Insurance
Policy”).  There is no claim by Parent or any Parent Affiliate
pending under any Parent Insurance Policy as to which coverage has been
questioned, denied or disputed or that Parent or any Parent Affiliate has a
reason to believe will be denied or disputed by the underwriters of such Parent
Insurance Policy.  In addition, there is no pending claim of which the
total value (inclusive of defense expenses) will exceed the policy
limits.  All premiums due and payable under all Parent Insurance
Policies have been paid (or if installment payments are due, will be paid if
incurred prior to the Closing Date), and Parent and Parent Affiliates are
otherwise in material compliance with the terms of all Parent Insurance
Policies.  Parent has no Knowledge or reasonable belief of threatened
termination of, or premium increase with respect to, any Parent Insurance
Policy.


-30-


4.16          Litigation.  Except
as set forth in Section 4.16 of the
Parent Disclosure Schedule, there is no action, suit, claim or proceeding of any
nature pending or, to the Knowledge of Parent, threatened, against Parent, its
properties (tangible or intangible) or any of its officers or directors (in
their capacity as such), nor, to the Knowledge of Parent, is there any
reasonable basis therefor.  There is no investigation or other
proceeding pending or, to the Knowledge of Parent, threatened, against Parent,
any of its properties (tangible or intangible) or any of its officers or
directors (in their capacity as such) by or before any Governmental Authority,
nor, to the Knowledge of Parent, is there any reasonable basis
therefor.  No Governmental Authority has, at any time, challenged or
questioned the legal right of Parent to conduct its operations as presently or
previously conducted or as presently contemplated to be conducted.





4.17          Governmental
Authorization.  Each consent, license, permit, grant or other
authorization (i) pursuant to which Parent currently operates or holds any
interest in any of its properties or (ii) which is required for the operation of
Parent’s business as currently conducted or currently contemplated to be
conducted or the holding of any such interest (collectively, the “Parent
Authorizations”) has been issued or granted to Parent.  The
Parent Authorizations are in full force and effect and constitute all
authorizations required to permit Parent to operate or conduct its business or
hold any interest in its properties or assets.





4.18          Compliance with
Laws.  Parent has complied with, is not in violation of, and
has not received any notices of violation with respect to, any foreign, federal,
state or local statute, law or regulation applicable to Parent, its business or
its assets (whether tangible or intangible), except where any non-compliance or
violation would not have a Parent Material Adverse Effect.





4.19          Minute Books and
Records.  The minutes of Parent made available to counsel for
the Company are, since the time Parent became an SEC registrant, the only
minutes of Parent and contain accurate summaries of all meetings or actions by
written consent of the board of directors (or committees thereof) of Parent and
contain all stockholder actions by written consent.  Parent has
delivered to counsel for the Company copies of any and all agreements, dated or
effective on or after the date on which Parent became an SEC registrant, (i)
relating to the purchase of any capital stock of Parent, (ii) relating to rights
of the stockholders of Parent and (iii) between and among Parent’s stockholders
relating to the capital stock of Parent, including any and all stock purchase
agreements, registration rights agreements, voting agreements, right of first
refusal agreements and stockholder agreements, the existence of which Parent has
Knowledge.


-31-


4.20          Parent SEC
Documents.  A true and complete copy of each annual, quarterly
and other report, registration statement and definitive proxy statement filed by
Parent with the SEC (the “ParentSEC Documents”) is
available on the Web site maintained by the SEC at
http://www.sec.gov.  As of their respective filing dates, except as
noted therein or to the extent corrected by a subsequently filed Parent SEC
Document, the Parent SEC Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder, applicable to such
Parent SEC Documents.  Except as noted therein or to the extent
corrected by a subsequently filed Parent SEC Document, none of the Parent SEC
Documents contained, on its filing date, 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.





4.21          Brokers’ and Finders’
Fees.  Neither Parent nor Merger Sub has incurred, nor will
either of them incur, directly or indirectly, any liability for brokerage or
finders’ fees or agents’ commissions or any similar charges in connection with
this Agreement or any of the transactions contemplated hereby.





4.22          Representations and
Warranties Complete.  None of the representations and
warranties made by Parent herein or in the Schedules or Exhibit hereto,
including the Parent Disclosure Schedule, or in any certificate or other
document furnished by Parent pursuant to this Agreement or in connection with
the transactions contemplated hereby, contains, or will contain at the Effective
Time, any untrue statement of a material fact or omits, or will omit at the
Effective Time, to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.





ARTICLE
V





COVENANTS RELATING TO THE
CONDUCT OF BUSINESS


PRIOR TO THE EFFECTIVE
TIME





5.1           Conduct of Business.
During the period from the date hereof and continuing until the Effective Time,
each of the Company, Parent and the Merger Sub agrees, as to itself,
that:





(a)           it
shall conduct its business and operations (including working capital and cash
management practices and the collection of accounts receivable) in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted, pay its debts and Taxes when due, pay or perform its other
obligations when due and, to the extent consistent with such business, preserve
intact its present business organizations, keep available the services of its
present officers, key employees and consultants and preserve its relationships
with customers, suppliers, distributors, licensors, licensees and others having
business dealings with it, all with the goal of preserving unimpaired its
goodwill and ongoing businesses at the Effective Time; and


-32-


(b)           it
shall not (except as expressly contemplated herein or permitted hereby or to the
extent that the other parties consent in writing):





(i)          
  cause or permit any amendments to its Certificate of Incorporation,
Bylaws or other organizational documents;





(ii)        
   declare, set aside, or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock (except upon conversion of any
shares of preferred stock), or repurchase, redeem or otherwise acquire, directly
or indirectly, any shares of its capital stock (or options, warrants or other
rights exercisable therefor);





(iii)           issue,
grant, deliver or sell, or authorize or propose the issuance, grant, delivery or
sale of, or purchase or propose the purchase of, any shares of its capital stock
or any securities convertible into, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any character
obligating it to issue or purchase any such shares or other convertible
securities, except for issuances of its capital stock pursuant to the exercise
of outstanding options, warrants or other rights exercisable
therefor;





(iv)           incur
any indebtedness (other than trade payables in the ordinary course of business
consistent with past practices) or guarantee any indebtedness or issue or sell
any debt securities or guarantee any debt securities of others;





(v)       
    make any expenditures (including any capital
expenditures) or enter into any commitment or transaction exceeding $10,000
individually or $25,000 in the aggregate, other than payment of expenses
(including reasonable atttorney’s fees) incurred in connection with the
transactions contemplated hereby;





(vi)           sell,
lease, license or otherwise dispose of any of its properties or assets (whether
tangible or intangible);





(vii)          revalue
any of its assets (whether tangible or intangible), other than in accordance
with past practice or as required by GAAP;





(viii)         make
or change any election in respect of Taxes, adopt or change any accounting
method or practices (other than as required by GAAP), enter into any 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;





(ix)           waive
or release any right or claim of the Company;


-33-


(x)        
   commence, threaten or settle any litigation;





(xi)           (A)
sell, license or transfer to any person or entity any rights to any of the
Company’s Intellectual Property Rights or enter into any agreement with respect
to any of the Company’s Intellectual Property with any person or entity, (B) buy
or license any Intellectual Property or enter into any agreement with respect to
the Intellectual Property of any person or entity or (C) enter into any
agreement with respect to the development of any Intellectual Property with a
third party;





(xii)          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 otherwise acquire or agree to acquire any assets;





(xiii)         enter
into, renew, fail to renew, renegotiate, amend, or otherwise modify, or
materially breach the terms of any Company Material Contract or Parent Material
Contract;





(xiv)         terminate,
amend or fail to renew any Company Insurance Policy or Parent Insurance
Policy;





(xv)          terminate
or fail to renew or preserve any Company Authorization or Parent Authorization,
with respect to which the termination or failure to renew or preserve would
reasonably be expected to result in a Company Material Adverse Effect or a
Parent Material Adverse Effect, respectively; or





(xvi)         take,
or agree in writing or otherwise to take, any of the foregoing actions or any
other action that would (A) prevent the party from performing, or cause the
party not to perform, its respective covenants hereunder or (B) cause any of its
respective representations and warranties contained herein to be untrue or
incorrect or result in any of them being untrue or incorrect.





ARTICLE
VI





ADDITIONAL
AGREEMENTS





6.1           Stockholder
Securities Law Compliance and Approval.





(a)           Parent
shall issue the shares of Parent Common Stock to be issued to the holders of
Company Common Stock pursuant to Section 2.6 hereof,
pursuant to an exemption or exemptions from registration under Section 4(2) of
the Securities Act or Regulation D promulgated under the Securities Act and an
exemption or exemptions from qualification under applicable state securities
laws.  It is acknowledged and understood that Parent is relying on
written representations made by each Stockholder pursuant to an Investor
Representation Statement in substantially the form attached hereto as Exhibit
A.  Nothing in this Agreement shall be construed as obligating
Parent to register any of the Merger Shares under the Securities Act or to issue
any Merger Shares to any Stockholder who does not duly complete, and execute and
deliver, an Investor Representation Letter in substantially the form attached
hereto as Exhibit
A.


-34-


(b)           As
soon as practicable following the execution of this Agreement, each of the
Company and Parent will take all action necessary in accordance with the DGCL
and the CGCL, as applicable, and its respective Certificate of Incorporation and
Bylaws to (i) convene a special meeting of its stockholders to be held as
promptly as practicable for the purpose of obtaining, or (ii) obtain, by written
consent, the requisite approval of the Merger by such stockholders.





6.2           Commercially Reasonable
Efforts; Governmental Approvals; Contract Consents.  Subject to
the terms and conditions set forth in this Agreement, each of the parties hereto
shall use commercially reasonable efforts to take promptly, or cause to be taken
promptly, all actions, and to do promptly, or cause to be done promptly, all
things necessary, proper or advisable under applicable laws and regulations to
satisfy the conditions set forth in Article VII hereof and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement.





(a)           Each
of the Company and Parent shall promptly execute and file, or join in the
execution and filing of, any application, notification or other document that
may be necessary in order to obtain the authorization, approval or consent of
any Governmental Authority, whether federal, state, local or foreign, which may
be reasonably required, or which Parent may reasonably request, in connection
with the consummation of the Merger and the other transactions contemplated
hereby.  Each of the Company and Parent shall use commercially
reasonable efforts to obtain all such authorizations, approvals and
consents.  Each of the Company and Parent shall promptly inform the
other of any material communication between the Company and Parent (as
applicable) and any Governmental Authority regarding the Merger or any other
transactions contemplated hereby.  If the Company or Parent or any
Affiliate thereof shall receive any formal or informal request from any
Governmental Authority for supplemental information or documentary material with
respect to the Merger or any other transactions contemplated hereby, then the
Company or Parent (as applicable) shall make, or cause to be made, as soon as
reasonably practicable, a response in compliance with such
request.  Each of the Company and Parent shall direct, in its sole
discretion, the making of such response but shall consider in good faith the
views of the other.





(b)           The
Company shall use commercially reasonable efforts to obtain all necessary
consents, waivers and approvals of any parties to any Contract as are required
thereunder in connection with the Merger or for any such Contracts to remain in
full force and effect so as to preserve all rights of, and benefits to, the
Surviving Corporation under such Contract from and after the Effective
Time.





6.3           Notification of Certain
Matters.  The Company shall give prompt notice to Parent of:
(i) the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which has caused, or is likely to cause, any representation
and warranty of the Company set forth in this Agreement to be untrue or
inaccurate at, or at any time prior to, the Effective Time and (ii) any failure
of the Company to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder.  Parent shall give
prompt notice to the Company of: (i) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which has caused, or is likely to
cause, any representation and warranty of Parent set forth in this Agreement to
be untrue or inaccurate at, or at any time prior to, the Effective Time and (ii)
any failure of Parent to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.  No
information or knowledge obtained pursuant to this Section 6.3 shall
affect or be deemed to modify any representation and warranty contained herein
or the conditions to the obligations of the parties to consummate the Merger in
accordance with the terms and provisions hereof.


-35-


6.4           Public
Disclosure.  No party shall issue or make any statement or
other communication or disclosure to any third party (other than their
respective agents or employees) regarding this Agreement, the Merger or the
other transactions contemplated hereby, including, if applicable, the
termination of this Agreement and the reasons therefor, without the consent of
the other party hereto, subject to Parent’s obligation to comply with applicable
laws, rules and regulations.





6.5           Spreadsheet.  At
least five business days prior to the Closing Date, the Company shall deliver to
Parent a spreadsheet (the “Spreadsheet”) in form
and substance acceptable to the Exchange Agent and Parent, which spreadsheet
shall be certified as complete and correct by the Chief Executive Officer of the
Company as of the Closing and which shall separately list, as of the Closing,
all Stockholders and their respective addresses, the number of shares of Company
Common Stock held by each such Stockholder and the number of Merger Shares to be
issued to each such Stockholder.





6.6           Expenses.  Whether
or not the Merger is consummated, all fees and expenses incurred in connection
with the Merger, including all legal, accounting, financial advisory, consulting
and all other fees and expenses of third parties incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses.





6.7           Company Audited Financial
Statements.  The Company shall provide to Parent on or before
the date that is 75 days after the Closing Date audited financial statements
meeting the requirements for filing on Form 8-K under the Exchange Act, as
required in connection with the Merger.





6.8           Working Capital
Requirements.  Parent shall use commercially reasonable efforts
to ensure that Parent is capitalized with at least $4,000,000 of unrestricted
cash at the Effective Time, which cash shall be available to fund working
capital and general and administrative expenses of Parent and the Surviving
Corporation.


-36-


6.9           Board of
Directors.  Parent shall use commercially reasonable efforts to
take all necessary corporate action to ensure that, effective immediately after
the Closing, the board of directors of Parent shall consist of Eric Donsky,
Richard Lindstrom, Adrienne Graves, Thomas Davidson, Donald Rindell and Elias
Vamvakas.





6.10          Directors and Officers
Insurance.  At all times from and after the Effective Time,
Parent shall use best efforts to maintain directors and officers insurance for
the protection and benefit of its then current directors and officers as well as
all of its former directors and officers.  Without limiting the
generality of the foregoing, Parent shall use best efforts to pay timely all
premiums due and payable under such insurance policy or policies and to remain
in compliance, at all times, with all of the terms and conditions
thereof.  Such insurance policy or policies shall provide coverage in
amount and scope, as is appropriate in the surrounding circumstances from time
to time, provided that such coverage, at all times, shall be at least equal in
amount and scope to the coverage provided by the directors and officers
insurance policy of Parent that is in place on the date hereof.





ARTICLE
VII





CONDITIONS TO THE
MERGER





7.1           Conditions to Obligations of
Each Party.  The respective obligations of the Company and
Parent to effect the Merger shall be subject to the satisfaction, at or prior to
the Effective Time, of the following conditions:





(a)No Orders or Governmental
Proceedings.  No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting the consummation of the Merger or any other transaction
contemplated hereby. No Governmental Authority shall have commenced, or notified
either Parent or the Company or any of its respective representatives that such
Governmental Authority intends to commence proceedings to restrain, prohibit,
condition, rescind or take any substantially similar action with respect to any
of the transactions contemplated by this Agreement, unless such Governmental
Authority shall have withdrawn such notice and abandoned all such
proceedings.





(b)           No
Injunctions.  No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other similar legal restraint shall be in effect that has the
effect of prohibiting the consummation of the Merger or any other transaction
contemplated hereby.





(c)           Governmental
Approvals.  Parent and the Company shall have obtained all
consents and approvals from any Governmental Authority that are necessary to
consummate the Merger and the other transactions contemplated
hereby.


-37-


(d)           Requisite Stockholder
Approval.  This Agreement shall have been adopted, and the
Merger shall have been approved, by the (i) holders of a majority of the
outstanding shares of Company Common Stock, voting together as a separate class,
(ii) holders of more than fifty percent of the outstanding shares of the
Company’s Preferred Stock and (iii) holders of a majority of the outstanding
shares of Parent Common Stock, and such approvals shall not have been rescinded,
revoked or otherwise repudiated.





(e)           Debt and Working Capital
Requirements.  As of the Closing Date, Parent shall be
capitalized with at least $4,000,000 of unrestricted cash, which cash shall be
available to fund the working capital and general and administrative expenses of
Parent and the Surviving Corporation.





7.2           Conditions to the
Obligations of Parent and Merger Sub.  The obligations of
Parent and Merger Sub to consummate the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Effective Time, of each of the following conditions, any of which may be waived,
in writing, exclusively by Parent and Merger Sub:





(a)           Representations and
Warranties.  The representations and warranties of the Company
set forth herein, disregarding all qualifications contained therein relating to
materiality or a Company Material Adverse Effect or any similar standard or
qualification, shall be true and correct on and as of the Closing Date with the
same force and effect as if they had been made on the Closing Date (except for
any such representations or warranties that, by their terms, speak only as of a
specific date or dates, in which case such representations and warranties shall
be true and correct on and as of such specified date or dates), except where the
failure of such representations and warranties to be true or correct would not
have, individually or in the aggregate, a Company Material Adverse
Effect.





(b)           Covenants.  The
Company shall have performed and complied, in all material respects, with all
covenants and obligations under this Agreement required to be performed and
complied with by the Company as of the Closing.





(c)           No Company Material Adverse
Effect.  Since the date of this Agreement, there shall not have
occurred any event or condition of any kind or character that has had, or is
reasonably likely to have, a Company Material Adverse Effect.





(d)           Litigation.  There
shall be no action, suit, claim, order, injunction or proceeding of any nature
pending or threatened against Parent or the Company, its respective properties
or any of its respective officers or directors (in their capacities as such)
arising out of, or in any way connected with, the Merger or the other
transactions contemplated hereby.





(e)           Certificate of the
Company.  Parent shall have received a certificate of the
Company, executed by the Chief Executive Officer of the Company, certifying as
to the matters set forth in Section 7.2(a), Section 7.2(b) and
Section 7.2(c),
which certificate will include a reaffirmation of the representations and
warranties of the Company set forth in this Agreement as of the Effective
Time.


-38-


(f)           Good Standing
Certificates.  Parent shall have received a good standing
certificate with respect to the Company issued by the Secretary of State of the
State of Delaware and a tax good standing certificate with respect to the
Company issued by the Delaware Franchise Tax Board, each dated within a
reasonable period prior to the Closing.





(g)           Indemnity.  Parent
shall have executed and delivered to each individual who is a director or
officer of Parent immediately prior to the Effective Time a contractual
indemnity substantially in the form attached hereto as Exhibit
B.





(h)           Assumption of Company
Options.  Without derogating from the generality of Section 7.2(b), each
holder of Company Options shall have executed and delivered a written consent,
in form and substance satisfactory to Parent acting reasonably, to the
assumption of Company Options by Parent in accordance with Section
2.6(d)(i).





(i)       
    Investment Representation
Letter.  Each Stockholder shall have duly completed, and
executed and delivered, an Investment Representation Letter in substantially the
form attached hereto as Exhibit
A.





7.3           Conditions to Obligations of
the Company.  The obligations of the Company to consummate the
Merger and the other transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the
Company:





(a)           Representations and
Warranties.  The representations and warranties of Parent and
Merger Sub set forth in Article IV,
disregarding all qualifications contained therein relating to materiality or a
Parent Material Adverse Effect or any similar standard or qualification, shall
be true and correct on and as of the Closing Date with the same force and effect
as if they had been made on the Closing Date (except for any such
representations and warranties that, by their terms, speak only as of a specific
date or dates, in which case such representations and warranties shall be true
and correct on and as of such specified date or dates), except where the failure
of such representations or warranties to be true or correct would not have,
individually or in the aggregate, a Parent Material Adverse Effect.





(b)           Covenants.  Each
of Parent and Merger Sub shall have performed and complied, in all material
respects, with all covenants and obligations of this Agreement required to be
performed and complied with by it as of the Closing Date.





(c)           No Parent Material Adverse
Effect.  Since the date of this Agreement, there shall not have
occurred any event or condition of any kind or character that has had, or is
reasonably likely to have, a Parent Material Adverse Effect.


-39-


(d)           Litigation.  There
shall be no action, suit, claim, order, injunction or proceeding of any nature
pending or threatened against Parent or the Company, its respective properties
or any of its respective officers or directors (in their capacities as such)
arising out of, or in any way connected with, the Merger or the other
transactions contemplated hereby.





(e)           Good Standing
Certificates.  The Company shall have received a good standing
certificate with respect to Parent issued by the Secretary of State of the State
of Delaware and a tax good standing certificate with respect to Parent issued by
the Delaware Franchise Tax Board, each dated within a reasonable period prior to
the Closing.





(f)           Opinion of
Counsel.  The Company shall have received an opinion dated the
Closing Date from counsel for Parent and Merger Sub, in form and substance
reasonably satisfactory to the Company and its legal counsel, stating that the
Merger Shares are being issued in compliance with federal and state security
laws.





(g)           Board of
Directors.  Parent shall have used commercially reasonable
efforts to take all necessary corporate action to ensure that effective
immediately after the Closing, (i) Eric Donsky, Richard Lindstrom, Adrienne
Graves, Thomas Davidson, Donald Rindell and Elias Vamvakas are the only
directors of Parent and (ii) the officers of Merger Sub shall be as designated
by the Company.





(h)           Certificate of
Parent.  The Company shall have received a certificate of
Parent, executed by a duly authorized officer of Parent, certifying as to the
matters set forth in Section 7.3(a), Section 7.3(b) and
Section
7.3(c).





(i)           Consent, Waiver and
Election.  The Company shall have received a Consent, Waiver
and Election, the form of which has been delivered to Parent and counsel for
Parent, from the requisite Stockholders (including each Stockholder who holds
preemptive rights to purchase shares of the Company Capital Stock) consenting
to, among other things, the waiver and termination of preemptive rights, the
termination of the Company’s Preferred Stock Investor Rights Agreement dated as
of November 30, 2006, the termination of the Company’s Incentive Stock Plan, the
amendment and restatement of the Company’s Certificate of Incorporation, the
election of the Company’s preferred stockholders to convert outstanding shares
of the Company’s Preferred Stock to Company Common Stock and the approval of the
Merger.





ARTICLE
VIII





TERMINATION, AMENDMENT AND
WAIVER





8.1           Termination.  Except
as provided in Section
8.2, this Agreement may be terminated and the Merger abandoned at any
time prior to the Closing:





(a)           by
unanimous agreement of Parent and the Company;


-40-


(b)           by
Parent or the Company, if the Closing Date shall not have occurred by August 30,
2008; provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall
not be available to any party whose action or failure to act has been a
principal cause of, or resulted in, the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement;





(c)           by
Parent or the Company, if the requisite Company or Parent stockholder approval
has not been obtained; provided, however, that the right to
terminate this Agreement under this Section 8.1(c) shall
not be available to any party whose action or failure to act has been a
principal cause of, or resulted in, the failure to obtain the requisite Company
or Parent stockholder approval and such action or failure to act constitutes a
breach of this Agreement;





(d)           by
Parent or the Company, if (i) a court of competent jurisdiction or other
Governmental Authority shall have issued a non-appealable final order, decree or
ruling or taken any other action, in each case, having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger or any other material
transaction contemplated hereby, or (ii)  any statute, rule,
regulation or order is enacted, promulgated or issued by any Governmental
Authority that would make consummation of the Merger illegal;





(e)           by
Parent, if (i) it is not in material breach of its obligations under this
Agreement and (ii) there has been a breach of any representation, warranty,
covenant or agreement of the Company contained in this Agreement such that the
conditions set forth in Section 7.2(a) or
(b) hereof
would not be satisfied at the time of such breach and such breach has not been
cured within 10 business days after written notice thereof to the Company; provided, however, that no cure period
shall be required for a breach which, by its nature, cannot be cured;
or





(f)           by
the Company, if (i) the Company is not in material breach of its obligations
under this Agreement and (ii) there has been a breach of any representation,
warranty, covenant or agreement of Parent or Merger Sub contained in this
Agreement such that the conditions set forth in Section 7.3(a) or
(b) hereof
would not be satisfied and such breach has not been cured within 10 business
days after written notice thereof to Parent; provided, however, that no cure period
shall be required for a breach which, by its nature, cannot be
cured.





8.2           Effect of
Termination.  In the event of termination of this Agreement
pursuant to Section
8.1 hereof, this Agreement shall forthwith become void and there shall be
no liability or obligation on the part of Parent, Merger Sub or the Company or
any of its respective officers, directors, stockholders or representatives, if
applicable; provided,
however, that (i) each
party hereto shall remain liable for any breaches of this Agreement prior to its
termination; and (ii) the provisions of Section 6.4 (Public
Disclosure) and Section 6.6
(Expenses) hereof, Article
IX hereof and this Section 8.2 shall
remain in full force and effect and survive any termination of this Agreement
pursuant to the terms of this Article
VII.


-41-


8.3           Amendment.  The
parties hereto may amend this Agreement at any time solely by executing an
instrument in writing signed on behalf of the party against whom enforcement is
sought.





8.4           Extension and
Waiver.  At any time prior to the Closing, Parent and the
Company may, to the extent legally permitted, (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein.  Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.





ARTICLE
IX





GENERAL
PROVISIONS





9.1           Notices.  All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally, or by commercial messenger or courier
service, or mailed by registered or certified mail (return receipt requested),
or sent via facsimile (with acknowledgment of complete transmission), to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice); provided, however, that notices sent by
mail will not be deemed given until received:





(a)           if
to Parent or Merger Sub, to:





OccuLogix,
Inc.


2600
Skymark Avenue, Building 9, Suite 201


Mississauga,
Ontario


L4W
5B2


Attention:  General
Counsel


Telephone
No.:  (905) 602-0887


Facsimile
No.:  (905) 602-7623





with a
copy to:





Torys
LLP


237 Park
Avenue


New York,
New York  10017-3142


Attention:  Andrew
J. Beck, Esq.


Telephone
No.:  (212) 880-6000


Facsimile
No.:  (212) 682-0200


-42-


(b)           if
to the Company, to:





OcuSense,
Inc.


12707
High Bluff Drive


San
Diego, California  92130


Attention:  Chief
Executive Officer


Telephone
No.:  (858) 794-1422


Facsimile
No.:  (858) 794-1493





with a
copy to:





Wilson
Sonsini Goodrich & Rosati


Professional
Corporation


12235 El
Camino Real, Suite 200


San
Diego, California  92130


Attention:  Martin
J. Waters, Esq.


Telephone
No.: (858) 350-2308


Facsimile
No.: (858) 350-2399





9.2           Counterparts.  This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party, it being understood that all parties need not sign the same
counterpart.





9.3           Entire Agreement
..  This Agreement, and the Schedules and the Exhibit hereto, including
the Company Disclosure Schedule and the Parent Disclosure Schedule, and the
documents and instruments and other agreements among the parties hereto
referenced herein constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.





9.4           Third Party
Beneficiaries.  No provisions of this Agreement are intended,
nor shall be interpreted, to provide or create any third party beneficiary
rights or any other rights of any kind in any client, customer, employee,
affiliate, stockholder, partner or any party hereto or any other person unless
specifically provided otherwise herein, and, except as so provided, all
provisions hereof shall be personal solely between the parties to this
Agreement, except that Article II is
intended to benefit Stockholders and except, further, that Section 6.10 is
intended to benefit Parent’s directors and officers and all of its former
directors and officers.





9.5           Assignment.  This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent may assign its rights and delegate its obligations hereunder to Parent
Affiliates as long as Parent remains ultimately liable for all of Parent’s
obligations hereunder.





9.6           Severability.  In
the event that any provision of this Agreement or the application thereof
becomes, or is declared by a court of competent jurisdiction to be, illegal,
void or unenforceable, the remainder of this Agreement will continue in full
force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto.  The parties hereto further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of such void or unenforceable provision.


-43-


9.7           Other
Remedies.  Any and all remedies herein expressly conferred upon
a party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other
remedy.





9.8           Governing
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.  Each of the parties hereto irrevocably consents to the
exclusive jurisdiction and venue of any court within the State of Delaware, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction, venue and such process.





9.9           WAIVER OF JURY
TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.





9.10          Specific
Performance.   The parties hereto agree that irreparable
damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to seek
an injunction or injunctions to prevent breaches of this Agreement, in addition
to any other remedy to which they are entitled at law or in equity.





[Remainder
of page intentionally left blank.]


-44-


IN
WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement
to be executed as of the date first above written.








OCCULOGIX,
      INC.By:
            /s/Elias VamvakasName:
            Elias
      VamvakasTitle:
            CEOOCUSENSE
      ACQUIRECO, INC.By:
            /s/Elias VamvakasName:
            Elias
      VamvakasTitle:
            CEOOCUSENSE,
      INC.By:
            /s/Eric DonskyName:
            Eric
      DonskyTitle:
            CEO






SIGNATURE
PAGE TO
  AGREEMENT
AND PLAN OF MERGER AND REORGANIZATION