Exhibit 10.1


    


     

    AGREEMENT
      AND PLAN OF MERGER

     

    This
      Agreement and Plan of Merger (this “Agreement”) is made and entered into as of
      August 1, 2006 (the “Agreement Date”), by and among (i) OccuLogix, Inc., a
      Delaware corporation (“Parent”), (ii) OccuLogix Mergeco, Inc., a Delaware
      corporation and a wholly owned Subsidiary of Parent (“Merger Sub”), (iii) Solx,
      Inc., a Delaware corporation (the “Company”) and (iv) Doug P. Adams, John
      Sullivan and Peter M. Adams, acting, in each case, in his capacity as a member
      of the Stockholder Representative Committee referred to herein. Capitalized
      terms used herein without definition shall have the respective meanings set
      forth in Section 10.2.

     

    WHEREAS,
      on March 26, 2006, Parent and the Company entered into a letter of intent
      outlining Parent’s expression of interest in exploring with the Company and its
      stockholders the basis for an acquisition by Parent of 100% of the Company
      (the
“Letter of Intent”);

     

    WHEREAS,
      as contemplated in the Letter of Intent, on April 4, 2006, Parent advanced
      to
      the Company a bridge loan in the principal amount of $2,000,000, which bridge
      loan is evidenced by a promissory note of the Company which provides, among
      other things, that Parent shall have the right to acquire 10% of the issued
      and
      outstanding capital stock of the Company on a fully diluted basis under certain
      conditions, including if the principal amount of such bridge loan shall remain
      outstanding and owing after October 2, 2006;

     

    WHEREAS,
      the board of directors of Parent (the “Parent Board”) has approved and adopted
      the form of this Agreement and the consummation of the transactions contemplated
      hereby, including the merger of Merger Sub with and into the Company (the
“Merger”), following which the Company shall continue as the surviving
      corporation (the “Surviving Corporation”);

     

    WHEREAS,
      the Parent Board has considered carefully the terms of this Agreement and has
      determined that the terms and conditions of the transactions contemplated
      hereby, including the Merger, are fair and advisable and in the best interests
      of Parent and the holders of the shares of Common Stock, par value $.001 per
      share, of Parent (“Parent Common Stock”); 

     

    WHEREAS,
      the board of directors of the Company (the “Company Board”) has approved and
      adopted the form of this Agreement and the consummation of the transactions
      contemplated hereby, including the Merger, and has determined to submit the
      execution and delivery of this Agreement and the certificate of merger,
      substantially in the form attached hereto as Exhibit A (the “Merger
      Certificate”), and has authorized and approved the performance of the
      transactions contemplated hereby and thereby to the holders of the shares of
      Common Stock, par value $.001 per share, of the Company (the “Company Common
      Stock”) for their approval by majority written consent in accordance with
      Section 228 of the Delaware General Corporation Law (“Delaware Law”) and to the
      holder of the shares of Series A Preferred Stock, par value $.001 per share,
      of
      the Company (the “Series A Preferred Stock”) for its approval by unanimous
      written consent in accordance with the Amended and Restated Certificate of
      Incorporation of the Company dated June 14, 2004 (the “Company Certificate of
      Incorporation”), the Amended and Restated Stockholders Agreement, dated as of
      June 17, 2004, by and among the Company, Boston Scientific Corporation and
      the
      stockholders listed on Exhibit A thereto (the “Stockholders Agreement”), and
      Section 228 of Delaware Law; and

     

    WHEREAS,
      the Company Board has considered carefully the terms of this Agreement and
      has
      determined that the terms and conditions of the transactions contemplated
      hereby, including the Merger, are fair, advisable and in the best interests
      of
      the Company and the Company Stockholders, and the Company Board recommends
      that
      the Company Stockholders vote for the approval of this Agreement and the
      transactions contemplated hereby, including the Merger.

     

    NOW,
      THEREFORE, in consideration of the foregoing and the mutual covenants and
      agreements herein contained and intending to be legally bound hereby, Parent,
      Merger Sub, the Company and the members of the Stockholder Representative
      Committee hereby agree as follows:

     

    ARTICLE I  

     

    THE
      MERGER

     

    1.1  The
      Merger.
      Subject
      to the other terms and conditions of this Agreement, including those set forth
      in Article 7 hereof, the Merger shall be consummated under the following
      circumstances:

     

    (a)  Merger
      Certificate.

     

    (i)  Within
      five (5) business days after the Agreement Date, the Company shall deliver
      to
      Parent the Merger Certificate, executed by authorized and appropriate officers
      of the Company. The Merger Certificate shall be retained by Parent and filed
      with the Delaware Secretary of State upon the closing of the
      Merger.

     

    (ii)  The
      Company hereby appoints, and agrees to take all such other further action as
      is
      required to appoint, Elias Vamvakas, effective as of the Agreement Date, a
      Vice
      President and Assistant Secretary of the Company solely for the purpose of
      executing the Merger Certificate on the Company’s behalf and filing the Merger
      Certificate with the Delaware Secretary of State; provided, however, that such
      person shall resign as a Vice President and Assistant Secretary of the Company
      immediately following the filing of the Merger Certificate with the Delaware
      Secretary of State or the termination of this Agreement (and in the absence
      or
      delay of such resignation, upon such filing or termination, the Company may
      remove such person from such position); provided, further, that, in the event
      that, at any time after the Agreement Date, Parent elects to replace Elias
      Vamvakas with another employee or agent of Parent for this purpose and so
      notifies the Company, the Company agrees to promptly appoint such replacement
      a
      Vice President and Assistant Secretary of the Company for such purpose,
      effective upon the resignation of Elias Vamvakas.

     

    (iii)  Upon
      the
      terms hereof and subject to the conditions set forth herein, and in accordance
      with Delaware Law, at the Effective Time (as defined in Section 1.1(b)), Merger
      Sub shall be merged with and into the Company and, as a result of the Merger,
      the separate corporate existence of Merger Sub shall cease, and the Company
      shall continue as the Surviving Corporation.

     

    (b)  Consummation
      of the Merger; Effective Time.
      Subject
      to the fulfillment or waiver of all of the conditions contained in Article
      7, a
      closing (the “Closing”) will be held at the offices of Rackemann, Sawyer &
Brewster, Professional Corporation, in Boston, Massachusetts (or such other
      place as the parties may agree). For greater certainty, the date on which the
      Closing is actually held is referred to herein as the “Closing Date.” On the
      Closing Date, Parent, Merger Sub and the Company shall cause the Merger to
      be
      consummated by filing the Merger Certificate with the Delaware Secretary of
      State. The term “Effective Time” means the date and time of the acceptance by
      the Delaware Secretary of State of the filing of the Merger Certificate with
      the
      Delaware Secretary of State (or such later time as may be agreed by each of
      the
      parties hereto and specified in the Merger Certificate in accordance with
      Delaware Law).

     

    1.2  Effect
      of the Merger.
      At the
      Effective Time, the effect of the Merger shall be as provided in the Merger
      Certificate and as provided by the applicable provisions of Delaware Law.
      Without limiting the generality of the foregoing, and subject thereto, upon
      the
      consummation of the Merger, all the property (including Intellectual Property
      and licenses to Intellectual Property), rights, privileges, powers and
      franchises of the Company and Merger Sub shall vest in the Surviving
      Corporation, and all debts, liabilities, obligations, restrictions, disabilities
      and duties of each of those corporations shall become the debts, liabilities,
      obligations, restrictions, disabilities and duties of the Surviving
      Corporation.

     

    1.3  Charter;
      Bylaws.

     

    (a)  At
      the
      Effective Time, the Certificate of Incorporation of the Surviving Corporation
      (the “Surviving Corporation Charter”) shall be the Certificate of Incorporation
      of Merger Sub, as amended by the Merger Certificate.

     

    (b)  At
      the
      Effective Time, the bylaws of the Surviving Corporation shall be the bylaws
      of
      Merger Sub, as in effect immediately prior to the Effective Time, until
      thereafter amended as provided by Delaware Law, the Surviving Corporation
      Charter and such bylaws.

     

    1.4  Directors
      and Officers.
      The
      directors of Merger Sub immediately prior to the Effective Time shall be the
      initial directors of the Surviving Corporation, each to hold office in
      accordance with the Surviving Corporation Charter and the bylaws of the
      Surviving Corporation, and until their respective successors are duly elected
      and qualified or until their earlier death, disability, resignation or removal.
      The officers of the Company immediately prior to the Effective Time shall be
      the
      initial officers of the Surviving Corporation, in each case, until their
      respective successors are duly elected or appointed and qualified or until
      their
      earlier death, disability, resignation or removal.

     

    1.5  Closing
      Date Consideration; Committee Reimbursement Amount.

     

    (a)  The
      consideration to be paid by Parent to the Participating Rights Holders at the
      Closing in connection with the Merger shall be the amount of the Closing Payment
      Amount allocated to each of the Participating Rights Holders pursuant to Section
      2.1.

     

    (b)  $100,000
      of the cash portion of the Closing Payment Amount (together with any additional
      amounts deposited with the Stockholder Representative Committee pursuant to
      Section 1.6(b), the “Committee Reimbursement Amount”) shall not be paid to the
      Participating Rights Holders at the Closing but instead shall be deposited
      by
      Parent with the Stockholder Representative Committee, to be held by the
      Stockholder Representative Committee for the payment of expenses, charges and
      liabilities incurred by the Stockholder Representative Committee in performing
      its duties pursuant to this Agreement. The portion of the Committee
      Reimbursement Amount contributed on behalf of each Participating Rights Holder
      shall be proportionate to the amount of the Closing Payment Amount which such
      Participating Rights Holder otherwise would be entitled to receive but for
      the
      application of this Section 1.5(b). Any amount of the Committee Reimbursement
      Amount that has not been consumed by the Stockholder Representative Committee,
      in accordance with the terms of this Agreement prior to the later of (i) the
      end
      of the period during which Parent, the Surviving Corporation and their
      respective Affiliates, and each of their respective directors, officers,
      employees and representatives, may make claims for indemnification pursuant
      to
      Section 9.2 and (ii) the date on which all such indemnification claims, if
      any,
      have been discharged in full, shall be distributed by the Stockholder
      Representative Committee to the Participating Rights Holders pro rata, based
      on
      their respective rights to participate in the Closing Payment Amount. The
      Committee Reimbursement Amount shall be subject to increase from time to time,
      as provided in Section 2.5.

     

    (c) $180,000
      of the cash portion of the Closing Payment Amount shall not be paid to
      Participating Rights Holders at Closing but instead shall be paid to the
      employees of the Company in the amounts set forth on Schedule
      1.5(c).

     

    1.6  Form
      of Consideration Payable by Parent.

     

    (a)  Parent
      Common Stock.
      Subject
      to the provisions of Sections 1.5(b) and 1.6(b), the Closing Payment Amount
      will
      be satisfied by (i) the payment to the Participating Rights Holders, in cash,
      of
      $7,000,000 and (ii) the issuance to the Participating Rights Holders of an
      aggregate of 8,400,000 shares of Parent Common Stock, with any fraction of
      a
      share of Parent Common Stock being treated as provided in Section 1.6(b) below;
      provided that such number of shares of Parent Common Stock shall not exceed,
      on
      an undiluted basis, 19.9% of the shares of Parent Common Stock that are issued
      and outstanding immediately prior to the Closing. To the extent that 8,400,000
      shares of Parent Common Stock would exceed the aforementioned limit, then Parent
      shall issue to the Participating Rights Holders that number of shares of Parent
      Common Stock as shall equal, on an undiluted basis, 19.9% of the issued and
      outstanding shares of Parent Common Stock and shall pay to the Participating
      Rights Holders, in cash, the amount equal to the Reference Market Value on
      the
      Closing Date multiplied by the difference between (x) 8,400,000 and (y) that
      number of shares of Parent Common Stock as shall equal, on an undiluted basis,
      19.9% of the issued and outstanding shares of Parent Common Stock.

     

    (b)  No
      Fractional Shares.
      No
      certificates or scrip representing fractional shares of Parent Common Stock
      shall be issued. However, instead, an amount in cash equal to the value of
      all
      such fractional shares, based on the Reference Market Value on the Closing
      Date,
      shall be deposited by Parent with the Stockholder Representative Committee
      as
      additional Committee Reimbursement Amount. 

     

    (c)  Securities
      Act and Stock Exchange Legends.
      Any
      certificate issued to any Participating Rights Holders representing shares
      of
      Parent Common Stock shall be imprinted with the following legends (or the
      substantial equivalents thereof):

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF, IN WHOLE
      OR
      IN PART, OTHER THAN PURSUANT TO REGISTRATION UNDER SAID ACT OR IN CONFORMITY
      WITH THE LIMITATIONS OF RULE 144 OR OTHER SIMILAR RULE OR EXEMPTION AS THEN
      IN
      EFFECT, WITHOUT FIRST OBTAINING (I) IF REASONABLY REQUIRED BY THE COMPANY,
      A
      WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, WHICH MAY BE COUNSEL
      TO
      THE COMPANY, TO THE EFFECT THAT THE CONTEMPLATED SALE OR OTHER DISPOSITION
      WILL
      NOT BE IN VIOLATION OF SAID ACT, OR (II) A ‘NO-ACTION’ OR INTERPRETIVE LETTER
      FROM THE STAFF OF THE U.S. SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT
      THAT
      SUCH STAFF WILL TAKE NO ACTION IN RESPECT OF THE CONTEMPLATED SALE OR OTHER
      DISPOSITION.”

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK
      EXCHANGE (THE “TSX”) BUT CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSX
      SINCE THEY ARE NOT FREELY TRANSFERABLE. CONSEQUENTLY, DELIVERY OF ANY
      CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF
      TRANSACTIONS ON THE TSX.”

     

    Parent
      shall cause such legend to be removed in connection with any resale of such
      shares of Parent Common Stock that is made in compliance with, or pursuant
      to a
      valid exemption from, the registration provisions of the Securities Act.


     

    (d)  Contractual
      Restriction Legend.
      Any
      certificate issued to any Participating Rights Holders representing shares
      of
      Parent Common Stock shall be imprinted with the following legend (or the
      substantial equivalent thereof):

     

    “50%
      OF
      THESE SECURITIES ARE SUBJECT TO A LOCK-UP AGREEMENT WHICH WILL TERMINATE ON
■
AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
      OF
      UNTIL SUCH DATE, AND 50% OF THESE SECURITIES ARE SUBJECT TO A LOCK-UP AGREEMENT
      WHICH WILL TERMINATE ON ■ AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
      HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL SUCH DATE. AS OF ■, THIS LEGEND WILL
      BE OF NO FORCE OR EFFECT.” 

     

    1.7  Holdback
      Amount Payment.

     

    (a)  Subject
      to Section 1.7(d), on the first anniversary of the Closing Date, Parent shall
      pay $3,000,000 from the Holdback Amount in cash to the Participating Rights
      Holders, allocated to each of them pursuant to Section 2.1.

     

    (b)  Subject
      to Section 1.7(d), on the second anniversary of the Closing Date, Parent shall
      pay $5,000,000 from the Holdback Amount in cash to the Participating Rights
      Holders, allocated to each of them pursuant to Section 2.1.

     

    (c)  Subject
      to Section 1.7(d), no later than ten (10) calendar days after Parent and the
      Surviving Corporation reasonably believe that the FDA Milestone has been
      achieved, Parent shall pay $5,000,000 from the Holdback Amount (the “FDA
      Milestone Payment”) in cash to the Participating Rights Holders, allocated to
      each of them pursuant to Section 2.1. For greater certainty, such portion of
      the
      Holdback Amount shall not be payable until and unless the FDA Milestone is
      achieved. If the FDA Milestone Payment is not made, the Holdback Amount shall
      be
      reduced by $5,000,000.

     

    (d)  A
      portion
      of the Holdback Amount otherwise payable to the Participating Rights Holders
      pursuant to Sections 1.7(a), 1.7(b) or 1.7(c) (the “Indemnity Holdback Amount”)
      shall not be paid to such Participating Rights Holders if there is outstanding
      any indemnification claim or claims pursuant to Sections 9.2 or 9.3. The
      Indemnity Holdback Amount shall not exceed the lesser of (i) the aggregate
      amount of all such indemnification claims then outstanding and (ii) the
      difference between the Maximum Indemnification Amount and the aggregate amount
      of all indemnification claims pursuant to Sections 9.2 or 9.3, if any, that
      were
      paid or satisfied by, or on behalf of, any of the Company Stockholders or the
      other Participating Rights Holders. 

     

    1.8  Security
      for Holdback Amount Payment.
      To
      evidence the indebtedness of Parent to the Participating Rights Holders in
      the
      aggregate amount of the Holdback Amount, Parent shall deliver, at the Closing,
      to the member of the Stockholder Representative Committee designated as the
      single member thereof upon whose instruction Parent and the Surviving
      Corporation are entitled to rely pursuant to Section 2.5, a duly executed,
      non-interest-bearing promissory note of Parent, in favor of the Stockholder
      Representative Committee on behalf of the Participating Rights Holders, in
      the
      principal amount of the Holdback Amount and in form and substance satisfactory
      to the Company, acting reasonably (the “Promissory Note”). As security for its
      obligations under the Promissory Note from time to time, immediately following
      the Closing, Parent shall cause the Surviving Corporation to provide, in favor
      of the Stockholder Representative Committee on behalf of the Participating
      Rights Holders, a guaranty of the performance of Parent’s obligations under the
      Promissory Note from time to time, which guaranty shall be secured by an
      assignment by the Company of its Intellectual Property. Such guaranty and
      assignment shall be in form and substance satisfactory to the Stockholder
      Representative Committee, acting reasonably, and together with the Promissory
      Note, collectively, are referred to herein as the “Security
      Agreements”.

     

    ARTICLE II  

     

    CONVERSION
      OF SECURITIES; EXCHANGE OF CERTIFICATES; PAYMENTS

     

    2.1  Conversion
      of Securities.

     

    (a)  Common
      Stock.
      Each
      share of the Company Common Stock issued and outstanding immediately prior
      to
      the Effective Time and held by Participating Rights Holders will be converted
      at
      the Effective Time into the right to receive from Parent (i) in accordance
      with
      Section 1.6, the Per Share Common Cash Closing Payment and the Per Share Common
      Stock Closing Payment and (ii) in accordance with Section 1.7, the Per Share
      Common Holdback Amount. Notwithstanding the foregoing, (x) in lieu of the Per
      Share Common Stock Closing Payment contemplated in clause (i) of the immediately
      preceding sentence, each share of Company Common Stock held by Beth Hake
      McHallam (“McHallam”),
      immediately prior to the Effective Time will be converted at the Effective
      Time
      into the right to receive from Parent, in addition to the Per Share Common
      Cash
      Closing Payment and the Per Share Common Holdback Amount, an amount in cash
      equal to the Per Share Common Stock Closing Payment multiplied by the Reference
      Market Value (the aggregate amount of additional cash payable to McHallam with
      respect to all her shares of Company Common Stock as a result of the foregoing
      provision being hereinafter referred to as the “McHallam
      Additional Cash”
and
      the
      aggregate number of shares of Parent Common Stock that would have been payable
      to McHallam but for the foregoing provision being hereinafter referred to as
      the
“Reallocated
      Shares”)
      and
      (y) the cash portion of the Merger Consideration otherwise payable to Doug
      Adams
      pursuant to clause (i) of the immediately preceding sentence shall be decreased
      by the McHallam Additional Cash and the Parent Common Stock portion of such
      Merger Consideration shall be increased by the Reallocated Shares. All such
      shares of Company Common Stock, when so converted, shall no longer be
      outstanding and shall automatically be cancelled and retired and shall cease
      to
      exist, and each holder of a certificate representing any such shares of Company
      Common Stock shall cease to have any rights with respect thereto, except the
      right to receive the Per Share Common Closing Payment upon the surrender of
      such
      certificate in accordance with Section 2.2 and this Section 2.1. Notwithstanding
      the foregoing, in accordance with Section 1.5(b), $100,000 of the cash portion
      of the Closing Payment Amount shall be deposited by Parent with the Stockholder
      Representative Committee as Committee Reimbursement Amount.

     

    (b)  Preferred
      Stock.
      Each
      share of the Series A Preferred Stock issued and outstanding immediately prior
      to the Effective Time and held by Participating Rights Holders will be converted
      at the Effective Time into the right to receive (i) in accordance with Section
      1.6, the Per Share Preferred Cash Closing Payment and the Per Share Preferred
      Stock Closing Payment associated with such series of Company Preferred Stock
      and
      (2) the Per Share Common Cash Closing Payment and the Per Share Common Stock
      Closing Payment that would otherwise be payable with respect to the number
      of
      shares of Company Common Stock into which such share of the Series A Preferred
      Stock is convertible immediately prior to the Effective Time and (ii) in
      accordance with Section 1.7, an amount equal to the Per Share Common Holdback
      Amount that would otherwise be payable with respect to the number of shares
      of
      Company Common Stock into which such share of the Series A Preferred Stock
      is
      convertible immediately prior to the Effective Time; provided, however, that
      in
      no event shall any amount be paid pursuant to this Section 2.1(b) with respect
      to any share of the Series A Preferred Stock in excess of the maximum amount
      that is distributable with respect to such share upon a liquidation of the
      Company, or any other event deemed to be a liquidation of the Company, pursuant
      to the Company Certificate of Incorporation as in effect immediately prior
      to
      the Effective Time. All shares of the Series A Preferred Stock, when so
      converted, shall no longer be outstanding and shall automatically be cancelled
      and retired and shall cease to exist, and each holder of a certificate
      representing any such shares of the Series A Preferred Stock shall cease to
      have
      any rights with respect thereto, except the right to receive the Per Share
      Preferred Closing Payment, the Per Share Common Closing Payment and the Per
      Share Common Holdback Amount. Notwithstanding the foregoing, in accordance
      with
      Section 1.5(b), $100,000 of the cash portion of the Closing Payment Amount
      shall
      be deposited by Parent with the Stockholder Representative Committee as
      Committee Reimbursement Amount.

     

    (c)  Disposition
      of Options.
      All
      options to purchase Company Common Stock issued under the Company’s
      Non-Qualified Stock Option Plan (the “Company Option Plan”) or otherwise listed
      in Section 3.2(c) of the Company Disclosure Schedule, whether or not
      exercisable, whether or not vested, and whether or not performance-based, which
      are outstanding at the Effective Time (each a “Company Option”), shall not be
      assumed by the Surviving Corporation or Parent but shall instead be converted
      at
      the Effective Time into the right to receive, in accordance with Sections 1.6
      and 1.7, payment of an amount equal to the excess, if any, of the aggregate
      Per
      Share Common Closing Payment and the aggregate Per Share Common Holdback Amount
      that would be payable with respect to all shares of Company Common Stock that
      would be issuable upon exercise of such Company Option (the “Option Shares”)
      over the aggregate exercise price otherwise payable by the holder to acquire
      such Option Shares. Notwithstanding the foregoing, in accordance with Section
      1.5(b), $100,000 of the cash portion of the Closing Payment Amount shall be
      deposited by Parent with the Stockholder Representative Committee as Committee
      Reimbursement Amount. 

     

    (d)  Treasury
      Stock.
      Each
      share of Company Common Stock or Company Preferred Stock held in the treasury
      of
      the Company immediately prior to the Effective Time shall be canceled and
      extinguished at the Effective Time without any conversion thereof, and no
      payment shall be made with respect thereto.

     

    (e)  Stock
      of Merger Sub.
      Each
      share of common stock of Merger Sub issued and outstanding immediately prior
      to
      the Effective Time shall be converted into one (1) validly issued fully paid
      and
      non-assessable share of common stock of the Surviving Corporation. 

     

    (f)  Fractional
      Shares.
      No
      holder of Company Common Stock, the Series A Preferred Stock, Company Options
      or
      Company Warrants, after aggregation of all Parent Common Stock issuable to
      such
      holder at the Effective Time, shall be entitled to a fractional share of Parent
      Common Stock, but instead, any such fractional shares shall be treated as set
      forth in Section 1.6(b).

     

    2.2  Exchange
      of Certificates and Instruments for Closing Payment Amount.

     

    (a)  Exchange
      Procedures.

     

    (i)  Within
      a
      reasonable period of time prior to the Closing, Parent will deliver to the
      Company forms of the transmittal materials which Parent or its transfer agent
      will reasonably require from Participating Rights Holders, which transmittal
      materials may include any certifications Parent may request with respect to
      compliance with any withholding obligations of Parent or the Surviving
      Corporation under the Code. The Company will distribute such transmittal
      materials to Participating Rights Holders. As promptly as practicable following
      the Effective Time, Parent will deliver to each Participating Rights Holder
      who
      has completed such transmittal materials and returned them to Parent at or
      prior
      to the Closing, together with the certificate or certificates representing
      outstanding shares of Company Common Stock or the Series A Preferred Stock
      (the
“Certificates”) or certificates or instruments representing outstanding Company
      Options or Company Warrants (“Derivative Instruments”), (x) a certificate
      representing shares of Parent Common Stock issued in respect of such
      Certificates or Derivative Instruments and (y) a check (or, at Parent’s
      election, a wire transfer to the extent that the aggregate amount owed to any
      such holder at the Closing is in excess of $500,000) representing the cash
      portion of the Closing Payment Amount to which such Participating Rights Holder
      is entitled; provided that such payment made by Parent by check may be made
      by
      delivering such checks on the Closing Date to the Stockholder Representative
      Committee, which, in turn, shall distribute such checks to the appropriate
      Participating Rights Holders. The delivery of such certificates and such checks
      (or wire transfers, as applicable) by Parent to the Stockholder Representative
      Committee shall be deemed, for all purposes, to have satisfied in full Parent’s
      Closing Payment Amount obligation to such Participating Rights Holders, and
      Parent shall have no further obligation for such payments. Parent shall not
      be
      required to pay any amount of the Closing Payment Amount to any Participating
      Rights Holder until receipt from such Participating Rights Holder of properly
      completed and executed transmittal materials in the form delivered by Parent.
      Parent shall be entitled to rely solely and entirely on the information
      contained in the Capitalization Certificate and any transmittal materials
      delivered hereunder for purposes of satisfying Parent’s obligation to deliver
      the Closing Payment Amount hereunder.

     

    (ii)  On
      a
      Holdback Payment Date, Parent shall deliver to the member of the Stockholder
      Representative Committee, designated as the single member thereof upon whose
      instruction Parent and the Surviving Corporation are entitled to rely pursuant
      to Section 2.5, the portion of the Holdback Amount payable on such Holdback
      Payment Date pursuant to Section 1.7. Parent shall make such payment in the
      form
      of checks, made payable to each of the Participating Rights Holders,
      representing that portion of the Holdback Amount to which such Participating
      Rights Holder is entitled on such Holdback Payment Date. The Stockholder
      Representative Committee, in turn, shall distribute such checks to the
      appropriate Participating Rights Holders. For greater certainty, the aggregate
      amount represented by such checks shall not exceed the total amount of the
      Holdback Amount payable by Parent to Participating Rights Holders on such
      Holdback Payment Date. The delivery of checks by Parent to the Stockholder
      Representative Committee pursuant to this Section 2.2(a)(ii) shall be deemed,
      upon receipt and acceptance thereof by the member of the Stockholder
      Representative Committee designated as the single member thereof upon whose
      instruction Parent and the Surviving Corporation are entitled to rely pursuant
      to Section 2.5, for all purposes, to have satisfied, in full, Parent’s
      obligation to pay the Holdback Amount to the Participating Rights Holders in
      accordance with Sections 1.7(a) or 1.7(b), as applicable, and Parent shall
      have
      no further obligations for such payments. For purposes of satisfying Parent’s
      obligation to pay the Holdback Amount pursuant to Sections 1.7(a) or 1.7(b),
      as
      applicable, Parent shall be entitled to rely solely and entirely on the
      information contained in the Capitalization Certificate.

     

    (iii)  As
      promptly as practicable after the Effective Time, Parent or its transfer agent
      will send to each Participating Rights Holder who does not submit completed
      transmittal materials to Parent at or before the Closing, as permitted by
      Section 2.2(a)(i) above, transmittal materials for use in exchanging his, her
      or
      its Certificates or Derivative Instruments for the applicable portion of the
      Closing Payment Amount and the Holdback Amount payable, if any, into which
      such
      shares of Company Common Stock or the Series A Preferred Stock (other than
      any
      Dissenting Shares), Company Options or Company Warrants have been converted.
      Until surrendered as contemplated by this Section 2.2, each Certificate or
      Derivative Instrument shall be deemed at any time after the Effective Time
      to
      represent only the right to receive, upon such surrender, the applicable amounts
      of Merger Consideration payable pursuant to Section 2.1. Upon receipt of the
      completed transmittal materials and the applicable Certificates and Derivative
      Instruments, Parent will issue to the Participating Rights Holder a certificate
      representing shares of Parent Common Stock and deliver to the Participating
      Rights Holder a check (or, at Parent’s election, a wire transfer, to the extent
      that the aggregate amount owed to such Participating Rights Holder as of the
      Closing is in excess of $500,000) representing (i) the cash portion of the
      Closing Payment Amount to which such Participating Rights Holder is entitled
      and
      (ii) if and when payable, that portion of the Holdback Amount to which such
      Participating Rights Holder is entitled.

     

    (b)  No
      Further Rights in Certificates or Derivative Instruments.
      After
      the Effective Time, holders of Company Common Stock, the Series A Preferred
      Stock, Company Options or Company Warrants outstanding immediately prior to
      the
      Effective Time will cease to be, and will have no rights as, stockholders or
      rights holders of the Company or the Surviving Corporation, other than (i)
      in
      the case of holders of shares of Company Common Stock and the Series A Preferred
      Stock (other than Dissenting Shares) and holders of Company Options and Company
      Warrants, the rights to receive the applicable portions of the Merger
      Consideration to be issued at the Closing, (ii) in the case of holders of
      Dissenting Shares, the rights afforded under Section 262 of Delaware Law, and
      (iii) rights under this Agreement and the Security Agreements.

     

    (c)  No
      Liability.
      None of
      Parent, the Surviving Corporation or the Company shall be liable to any holder
      of Company Common Stock, the Series A Preferred Stock, Company Options or
      Company Warrants for any portion of the Merger Consideration delivered to an
      appropriate public official pursuant to any abandoned property, escheat or
      similar law.

     

    (d)  Withholding
      Rights.
      Each of
      the Surviving Corporation and Parent shall be entitled to deduct and withhold
      from the consideration otherwise payable pursuant to this Agreement to any
      holder of Company Common Stock, the Series A Preferred Stock, Company Options
      or
      Company Warrants such amounts as it is required to deduct and withhold with
      respect to the making of such payment under the Code, or any provision of state,
      local or foreign Tax Law, regardless of the form of consideration that Parent
      issues in accordance with Section 1.6. To the extent that amounts are so
      withheld by the Surviving Corporation or Parent, as the case may be, such
      withheld amounts shall be treated for all purposes of this Agreement as having
      been paid to such holder in respect of which such deduction and withholding
      was
      made by the Surviving Corporation or Parent, as the case may be.

     

    2.3  Stock
      Transfer Books.
      At the
      Effective Time, the stock transfer books of the Company shall be closed, and
      there shall be no further registration of transfers of the stock of the Company,
      including Company Common Stock and the Series A Preferred Stock, thereafter
      on
      the records of the Company. From and after the Effective Time, the holders
      of
      certificates representing shares of stock of the Company outstanding immediately
      prior to the Effective Time shall cease to have any rights with respect to
      such
      shares except as otherwise provided herein or by any applicable
      laws.

     

    2.4  Dissenting
      Shares.

     

    (a)  Notwithstanding
      any provision of this Agreement to the contrary, Dissenting Shares shall not
      be
      converted into, or represent, the right to receive any portion of the amounts
      to
      be paid pursuant to Section 2.1, but the holders thereof shall only be entitled
      to such rights as are granted by Delaware Law (or California Law, if
      applicable). All Dissenting Shares held by Company Stockholders who shall have
      failed to perfect, or who effectively shall have withdrawn or lost, their
      dissenters’ rights shall thereupon be deemed to have been converted into, and to
      have become exchangeable for, as of the later of the Effective Time or the
      occurrence of such event, the right to receive an appropriate portion of the
      Merger Consideration to be paid pursuant to Section 2.1, without any interest
      thereon, upon surrender, in the manner provided in Section 2.2, of the
      Certificates that formerly evidenced such shares.

     

    (b)  The
      Company shall give Parent (i) prompt notice of any demands for fair value of
      shares of Company Common Stock or the Series A Preferred Stock received by
      the
      Company, withdrawals of such demands and any other instruments served pursuant
      to Delaware Law (or California Law, if applicable), if any, and received by
      the
      Company and (ii) the opportunity to direct all negotiations and proceedings
      with
      respect to all such demands for fair value under Delaware Law (or California
      Law, if applicable). The Company shall not, except with the prior written
      consent of Parent, make any payment with respect to any demands for the fair
      value of shares of Company Common Stock or the Series A Preferred Stock or
      settle or offer to settle any such demands, other than by operation of law
      or
      pursuant to a final order of a court of competent jurisdiction.

     

    2.5  Stockholder
      Representative Committee.

     

    (a)  Appointment
      of Stockholder Representative Committee.
      Each of
      Doug P. Adams, John Sullivan and Peter M. Adams is hereby appointed, effective
      from and after the Effective Time, to act as the Stockholder Representative
      Committee under this Agreement in accordance with the terms of this Section
      2.5.
      The members of the Stockholder Representative Committee shall be required to
      designate (and notify Parent of such designation) a single member of the
      Stockholder Representative Committee upon whose instruction Parent and the
      Surviving Corporation shall be entitled to rely, without any investigation
      or
      inquiry, as having been taken or not taken upon the authority of the Stockholder
      Representative Committee. In the event that one (1) or two (2) members of the
      Stockholder Representative Committee cease to be members as a result of death,
      resignation, incapacity or removal, then the remaining member(s) of the
      Stockholder Representative Committee shall appoint the successor member(s)
      as
      soon as practicable. In the event that there are no members of the Stockholder
      Representative Committee at any time from and after the Effective Time as a
      result of death, resignation, incapacity or removal, then those individuals
      holding the positions of President, Secretary and Treasurer of the Company
      immediately prior to the Effective Time shall be automatically deemed to be
      appointed as successor members of the Stockholder Representative Committee
      and
      Parent shall be entitled to rely, without any investigation or inquiry, on
      the
      instruction of such individuals.

     

    (b)  Authority
      After the Effective Time.
      From
      and after the Effective Time, the Stockholder Representative Committee shall
      be
      authorized, on behalf of the Company Stockholders, to:

     

    (i)  take
      all
      actions required by, and exercise all rights granted to, the Stockholder
      Representative Committee in this Agreement or the Security
      Agreements;

     

    (ii)  receive
      all notices or other documents given or to be given to the Stockholder
      Representative Committee by Parent pursuant to this Agreement or the Security
      Agreements;

     

    (iii)  negotiate,
      undertake, compromise, defend, resolve and settle any suit, proceeding or
      dispute arising under this Agreement or the Security Agreements;

     

    (iv)  execute
      and deliver all agreements, certificates and documents required or deemed
      appropriate by the Stockholder Representative Committee in connection with
      any
      of the transactions contemplated by this Agreement (including executing and
      delivering the Security Agreements);

     

    (v)  engage
      special counsel, accountants and other advisors and incur such other expenses
      in
      connection with any of the transactions contemplated by any of this Agreement
      or
      the Security Agreements;

     

    (vi)  apply
      the
      Committee Reimbursement Amount to the payment of, or to the reimbursement of
      the
      Stockholder Representative Committee for, the expenses, charges and liabilities
      which the Stockholder Representative Committee may incur pursuant to this
      Section 2.5;

     

    (vii)  take
      such
      other action as the Stockholder Representative Committee may deem appropriate,
      including:

     

    (A) agreeing
      to any modification or amendment of any of this Agreement or the Security
      Agreements and executing and delivering an agreement of such modification or
      amendment;

     

    (B) taking
      any actions required or permitted under any of the Security Agreements;
      and

     

    (C) all
      such
      other matters as the Stockholder Representative Committee may deem necessary
      or
      appropriate to carry out the intents and purposes of any of this Agreement
      or
      the Security Agreements.

     

    (c)  Reimbursement
      of Expenses.
      The
      members of the Stockholder Representative Committee shall be entitled to receive
      reimbursement out of the Committee Reimbursement Amount for any and all
      expenses, charges and liabilities, including reasonable attorneys’ fees,
      incurred by the Stockholder Representative Committee in the performance or
      discharge of its obligations, or the exercise of its rights, under this
      Agreement (the “SRC Expenses”). The Committee Reimbursement Amount shall be used
      only for the payment of the SRC Expenses.

     

    (d)  Release
      from Liability; Indemnification; Authority of Stockholder Representative
      Committee.
      Each
      Participating Rights Holder hereby releases the Stockholder Representative
      Committee, and each of its members, from, and each Participating Rights Holder
      agrees to indemnify the Stockholder Representative Committee and each of its
      members, against, liability for any action taken or not taken by him, her or
      it
      in his, her or its capacity as such agent, except for the liability of the
      Stockholder Representative Committee, or any member thereof, to a Participating
      Rights Holder for loss which such holder may suffer from the willful misconduct
      or gross negligence of the Stockholder Representative Committee or such member
      in carrying out his, her or its duties hereunder. By virtue of the adoption
      of
      this Agreement and the approval of the Merger by the stockholders of the
      Company, each Participating Rights Holder (regardless of whether or not such
      Participating Rights Holder votes in favor of the adoption of the Agreement
      and
      the approval of the Merger, whether at a meeting or by written consent in lieu
      thereof) appoints, as of the date of this Agreement, the Stockholder
      Representative Committee as his, her or its true and lawful agent and
      attorney-in-fact to enter into any agreement in connection with the transactions
      contemplated by this Agreement, to exercise all or any of the powers, authority
      and discretion conferred on him under any such agreement, to give and receive
      notices on his, her or its behalf and to be his, her or its exclusive
      representative with respect to any matter, suit, claim, action or proceeding
      arising with respect to any transaction contemplated by any such agreement,
      including, without limitation, the defense, settlement or compromise of any
      claim, action or proceeding for which Parent or the Surviving Corporation may
      be
      entitled to indemnification under Article 9 hereof, and, by virtue of its
      approval of this Agreement, the Stockholder Representative Committee agrees
      to
      act as, and to undertake the duties and responsibilities of, such agent and
      attorney-in-fact. All actions, decisions and instructions of the Stockholder
      Representative Committee shall be conclusive and binding upon all of the
      Participating Rights Holders.

     

    (e)  Reduction
      of Holdback Amount Payments to Replenish Committee Reimbursement
      Amount.
      Upon
      written notice delivered to Parent no less than 20 business days prior to the
      making of any payment of the Holdback Amount pursuant to Section 1.7, the
      Stockholder Representative Committee shall be entitled to cause Parent to deduct
      an amount from the amount of the Holdback Amount then to be paid to the
      Participating Rights Holders, sufficient to (i) replenish the Committee
      Reimbursement Amount to a maximum of $100,000 or (ii) pay the SRC Expenses
      previously incurred by the Stockholder Representative Committee and not
      previously discharged out of the Committee Reimbursement Amount, and to deposit
      such amount with the Stockholder Representative Committee. For greater
      certainty, the Committee Reimbursement Amount may not exceed $100,000 at any
      given time. Any deductions pursuant to this Section 2.5(e) shall be borne by
      the
      Participating Rights Holders pro rata, based on the portion of the Closing
      Payment Amount paid to each of them. In connection with any such deductions
      by
      Parent pursuant to this Section 2.5(e), the Stockholder Representative Committee
      hereby releases Parent from, and agrees to indemnify Parent against, liability
      for any action taken by Parent at the direction of the Stockholder
      Representative Committee in accordance with this Section 2.5(e).

     

    (f)  Release
      from Liability; Indemnification.
      By
      virtue of the adoption of this Agreement and the approval of the Merger by
      the
      stockholders of the Company, each Participating Rights Holder hereby (i)
      releases Parent, the Surviving Corporation and their respective Affiliates,
      and
      each of their respective directors, officers, employees and representatives,
      from and against any and all liability for any action taken or not taken by
      it,
      him or her at the direction of the Stockholder Representative Committee and
      (ii)
      agrees to hold Parent, the Surviving Corporation and their respective
      Affiliates, and each of their respective directors, officers, employees and
      representatives, harmless from and against any claims made by any other
      Participating Rights Holders with respect to any action taken or not taken
      by
      it, him or her at the direction of the Stockholder Representative
      Committee.

     

    ARTICLE III  

     

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

     

    The
      Company hereby represents and warrants to Parent as follows as of each of (i)
      the Agreement Date and (ii) the Closing Date, except as specifically
      contemplated by this Agreement or as set forth on the Company Disclosure
      Schedule. Notwithstanding any other provision of this Agreement or the Company
      Disclosure Schedule, each exception set forth in the Company Disclosure Schedule
      will be deemed to qualify only each representation and warranty set forth in
      this Agreement (x) that is specifically identified (by cross-reference or
      otherwise) in the Company Disclosure Schedule as being qualified by such
      exception or (y) with respect to which the relevance of such exception is
      readily apparent on the face of the disclosure of such exception set forth
      in
      the Company Disclosure Schedule.

     

    3.1  Organization,
      Good Standing and Qualification.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware and has all requisite corporate power
      and authority to carry on its business as now conducted. The Company is duly
      qualified to transact business and is in good standing in each jurisdiction
      in
      which the failure to so qualify would have a Material Adverse Effect. The
      Company has all requisite corporate power and authority to own and operate
      its
      properties and assets, to execute and deliver this Agreement, to perform its
      obligations under, and to carry out the provisions of, this Agreement and to
      carry on its business as currently conducted and as currently proposed to be
      conducted.

     

    3.2  Capitalization
      and Voting Rights.

     

    (a)  The
      authorized capital of the Company consists of (except as otherwise disclosed
      in
      the Company Disclosure Schedule):

     

    (i)  1,000,000
      shares of Company Preferred Stock, all of which shares have been designated
      Series A Preferred Stock. The respective rights, restrictions, privileges and
      preferences of the Company Preferred Stock are as stated in the form of the
      Company Certificate of Incorporation; and

     

    (ii)  4,000,000
      shares of Company Common Stock.

     

    (b)  The
      number of shares of each series of Company Preferred Stock and of Company Common
      Stock issued and outstanding is set forth on Section 3.2(b) of the Company
      Disclosure Schedule.

     

    (c)  Except
      as
      set forth in Section 3.2(c) of the Company Disclosure Schedule, there are not
      outstanding any options, warrants, instruments, rights (including conversion
      or
      pre-emptive rights and rights of first refusal), proxy or stockholder
      agreements, or other agreements or instruments of any kind, including
      convertible debt instruments, for the purchase or acquisition from the Company
      of any Securities. Except for the Stockholders Agreement and the bylaws of
      the
      Company, the Company is not a party or subject to any agreement or
      understanding, and, to the Company’s knowledge, there is no agreement or
      understanding between any other persons that affects or relates to the voting
      or
      giving of written consents with respect to any Security or by a director of
      the
      Company.

     

    (d)  All
      of
      the issued and outstanding shares of Company Common Stock and Company Preferred
      Stock (i) have been duly authorized and validly issued and are fully paid and
      non-assessable and (ii) were issued in compliance with all applicable state
      and
      federal laws concerning the issuance of securities.

     

    (e)  Except
      as
      set forth in Section 3.2(e) of the Company Disclosure Schedule, each share
      of
      the Series A Preferred Stock is presently convertible into Company Common Stock
      on a one-for-one basis, and the consummation of the transactions contemplated
      hereunder will not result in any anti-dilution adjustment or other similar
      adjustment to the outstanding shares of the Series A Preferred
      Stock.

     

    (f)  Section
      3.2(f) of the Company Disclosure Schedule sets forth the name and address of
      each Securityholder and the Securities beneficially owned by each
      Securityholder, and, in the case of options, warrants, instruments and other
      rights to acquire capital stock of the Company, (i) the per-share exercise
      price
      payable therefor, (ii) the number of shares of the Company’s capital stock as to
      which each option, warrant, instrument or other right is vested or exercisable
      as of the Agreement Date, (iii) whether the holder of such option, warrant,
      instrument or other right is an employee of the Company, (iv) whether the
      vesting of such option, warrant, instrument or other right shall be accelerated
      by a change of control of the Company, including as a result of the Merger
      and
      (v) whether or not any such options, warrants, instruments or other rights
      are
      intended to be “incentive stock options” as such term is defined in the
      Code.

     

    3.3  Subsidiaries.
      The
      Company does not own or control, directly or indirectly, any interest in any
      other corporation, association, partnership, limited liability company or other
      business entity. The Company is not a participant in any joint venture or
      similar arrangement.

     

    3.4  Authorization;
      Binding Obligations; Governmental Consents.

     

    (a)  Except
      for the Initial Stockholder Approval, all corporate action on the part of the
      Company, its officers, directors and stockholders necessary for the
      authorization, execution and delivery of this Agreement, and the performance
      of
      all obligations of the Company hereunder, have been taken prior to the Agreement
      Date. This Agreement is a valid and legally binding obligation of the Company,
      enforceable in accordance with its terms, except (i) as limited by applicable
      bankruptcy, insolvency, reorganization, moratorium and other laws of general
      application affecting enforcement of creditors’ rights and (ii) as limited by
      laws relating to the availability of specific performance, injunctive relief
      or
      other equitable remedies. 

     

    (b)  No
      consent, approval, permit, order or authorization of, or registration,
      qualification, designation, declaration or filing with, any federal, state
      or
      local Governmental Authority on the part of the Company is required in
      connection with the execution and delivery of this Agreement or the consummation
      of the transactions contemplated hereby, except for (i) the filing of merger
      documents with the Delaware Secretary of State, (ii) such consents, approvals,
      orders, authorizations, registrations, declarations and filings as may be
      required under applicable state and federal securities laws and the securities
      laws of any foreign country in connection with the issuance of Parent Common
      Stock in the Merger, (iii) such filings as may be required under the HSR Act
      or
      any applicable state or foreign anti-takeover and similar laws and (iv) such
      other consents, authorizations, filings, approvals and registrations which,
      if
      not obtained or made, would not have a Material Adverse Effect on the Company
      and would not prevent, or materially alter or delay, any of the transactions
      contemplated by this Agreement.

     

    3.5  Financial
      Statements.

     

    (a)  The
      Company has made available to Parent, and included in the Company Disclosure
      Schedule are, the Financial Statements. The Financial Statements are complete
      and correct in all material respects and, except as set forth on Section 3.5(a)
      of the Company Disclosure Schedule, have been prepared in accordance with GAAP.
      The Financial Statements accurately set out and describe the financial condition
      of the Company on a consolidated basis as of the dates and during the periods
      indicated therein, subject, in the case of the unaudited financial statements,
      to normal year-end audit adjustments which are neither individually nor in
      the
      aggregate material. Except as set forth on Section 3.5(a) of the Company
      Disclosure Schedule, the Company maintains and will continue to maintain a
      standard system of accounting established and administered in accordance with
      GAAP.

     

    (b)  Except
      for Indebtedness reflected in the Financial Statements, the Company has no
      Indebtedness in excess of $100,000 in the aggregate outstanding at the date
      hereof. Except as set forth in Section 3.5(b) of the Company Disclosure
      Schedule, the Company is not in default with respect to any outstanding
      Indebtedness or any instrument relating thereto, nor is there any event which,
      with the passage of time or giving of notice, or both, would (i) result in
      a
      default under or termination of any such instrument, (ii) cause the Indebtedness
      under such instrument to become due and payable prior to its stated maturity
      or
      (iii) give rise to any other remedies by a counterparty to any such instrument,
      and no such Indebtedness or any instrument or agreement relating thereto
      purports to limit the issuance of any Securities by the Company or the operation
      of the business of the Company. Complete and correct copies of all instruments
      (including all amendments, supplements, waivers and consents) relating to any
      Indebtedness of the Company have been furnished to Parent.

     

    (c)  The
      current liabilities (as such term is understood under GAAP) of the Company
      as of
      June 30, 2006 do not exceed $4,030,400.

     

    3.6  Liabilities.
      Except
      as set forth in Section 3.6 of the Company Disclosure Schedule, the Company
      has
      no material liabilities not disclosed in the Financial Statements, and, to
      the
      best of its knowledge, the Company knows of no material contingent liabilities
      not disclosed in the Financial Statements, except current liabilities incurred
      in the ordinary course of business consistent with past practice subsequent
      to
      the Financial Statements.

     

    3.7  Litigation.
      Except
      as set forth on Section 3.7 of the Company Disclosure Schedule, there is no
      action, suit, proceeding or investigation pending or, to the knowledge of the
      Company, currently threatened against the Company or any of its officers or
      directors, nor is the Company aware that there is any basis for any of the
      foregoing. The foregoing includes actions, suits, proceedings or investigations
      pending or, to the knowledge of the Company, threatened (or any basis therefor
      known to the Company) involving the prior employment of any of the Company’s
      employees, the use by any of the Company’s employees in connection with the
      Company’s business of any information or techniques allegedly proprietary to any
      of his or her former employers or the obligations of any of the Company’s
      employees under any agreements with prior employers. The Company is not a party
      or subject to the provisions of any order, writ, injunction, judgment or decree
      of any court or government agency or instrumentality. There is no action, suit,
      proceeding or investigation by the Company currently pending or that the Company
      intends to initiate.

     

    3.8  Intellectual
      Property.

     

    (a)  Section
      3.8(a) of the Company Disclosure Schedule sets forth a complete and accurate
      list of (i) all Intellectual Property owned, licensed or used by the Company,
      all applications therefor and all licenses, assignments and other agreements
      relating thereto to which the Company is a party and (ii) all written agreements
      relating to technology, know-how and processes which the Company has licensed
      or
      authorized for use by others.

     

    (b)  The
      operation of the business of the Company as currently conducted, or as currently
      contemplated by the Company to be conducted, does not interfere with, conflict
      with, infringe upon, misappropriate or otherwise violate the Intellectual
      Property rights of any third party, and no action or claim is pending or, to
      the
      knowledge of the Company, threatened, alleging that the operation of such
      business interferes with, conflicts with, infringes upon, misappropriates or
      otherwise violates the Intellectual Property rights of any third party, and,
      to
      the knowledge of the Company, there is no basis therefor.

     

    (c)  The
      Company is the sole owner of the entire right, title and interest in and to,
      or
      has a valid license or other legal right under, Company Owned Intellectual
      Property and the Company Licensed Intellectual Property used in the operation
      of
      its business as currently conducted or as currently proposed by the Company
      to
      be conducted, subject to the terms of the license agreements governing the
      Company Licensed Intellectual Property.

     

    (d)  There
      are
      no outstanding options, licenses or agreements of any kind relating to the
      Company’s Intellectual Property, nor is the Company bound by, or a party to, any
      options, licenses or agreements of any kind with respect to Intellectual
      Property other than Company Licensed Intellectual Property.

     

    (e)  The
      Company has no present knowledge from which it could reasonably conclude that
      the Company Owned Intellectual Property and any Intellectual Property licensed
      to the Company under the Company Licensed Intellectual Property, are invalid
      or
      unenforceable, and the same have not been adjudged invalid or unenforceable,
      in
      whole or in part. The Company Owned Intellectual Property and the Company
      Licensed Intellectual Property constitute all of the Intellectual Property
      used
      in, and necessary for, the operation of the business of the Company as currently
      conducted or as currently proposed by the Company to be conducted. The Company
      has complied with all of its obligations of confidentiality in respect of the
      claimed trade secrets or proprietary information of others and knows of no
      violation of such obligations of confidentiality as are owed to it.

     

    (f)  Except
      as
      set forth in Section 3.8(f) of the Company Disclosure Schedule, no claims or
      actions have been asserted, are pending or, to the knowledge of the Company,
      threatened against the Company (i) based upon or challenging or seeking to
      deny
      or restrict the ownership by the Company, or license rights of the Company,
      of
      any of the Company Owned Intellectual Property or Company Licensed Intellectual
      Property, (ii) alleging that any services provided by, processes used by or
      products manufactured or sold by the Company infringe or misappropriate any
      Intellectual Property right of any third party or (iii) alleging that the
      Company Licensed Intellectual Property is being licensed or sublicensed in
      conflict with the terms of any license or other agreement, and, to the knowledge
      of the Company, there is no basis for such a claim.

     

    (g)  As
      of the
      Agreement Date, to the knowledge of the Company, no person is engaging in any
      activity that infringes or misappropriates the Company Owned Intellectual
      Property or Company Licensed Intellectual Property. Except as set forth in
      Section 3.8(g) of the Company Disclosure Schedule, the Company has not granted
      any license or other right to any third party with respect to the Company Owned
      Intellectual Property or Company Licensed Intellectual Property. The execution,
      delivery and performance of this Agreement by the Company, and the consummation
      of the transactions contemplated by this Agreement, will not breach, violate
      or
      conflict with any instrument or agreement concerning the Company Owned
      Intellectual Property, will not cause the forfeiture or termination, or give
      rise to a right of forfeiture or termination, of any of the Company Owned
      Intellectual Property or materially impair the right of Parent to license,
      or to
      bring any action for the infringement of, any material Company Owned
      Intellectual Property.

     

    (h)  The
      Company has delivered or made available to Parent correct and complete copies
      of
      all the licenses of the Company Licensed Intellectual Property, other than
      licenses of commercial off-the-shelf computer software. With respect to each
      such license:

     

    (i)  such
      license is valid and binding and in full force and effect and represents the
      entire agreement between the respective licensor and licensee with respect
      to
      the subject matter of such license;

     

    (i)  such
      license will not cease to be valid and binding and in full force and effect
      on
      terms identical in all material respects to those currently in effect as a
      result of the consummation of the transactions contemplated by this Agreement,
      nor will the consummation of the transactions contemplated by this Agreement
      constitute a material breach or default under such license or otherwise so
      as to
      give the licensor or any other person a right to terminate such
      license;

     

    (ii)  except
      as
      set forth in Section 3.8(h)(iii) of the Company Disclosure Schedule, the Company
      has not (A) received any notice of termination or cancellation under such
      license, (B) received any notice of breach or default under such license, which
      breach has not been cured or (C) granted to any other third party any rights,
      adverse or otherwise, under such license that would constitute a material breach
      of such license; and

     

    (iii)  neither
      the Company nor, to the knowledge of the Company, any other party to such
      license is in material breach or default thereof, and, to the knowledge of
      the
      Company, no event has occurred that, with notice or lapse of time, or both,
      would constitute such a material breach or default or permit termination,
      modification or acceleration under such license.

     

    (iv)  Except
      as
      set forth in Section 3.8(i) of the Company Disclosure Schedule, the Company
      has
      no knowledge that any of its respective employees, officers, directors, agents
      or consultants is (i) subject to confidentiality restrictions in favor of any
      third person, the breach of which could subject the Company to any liability
      or
      (ii) obligated under any contract (including licenses, covenants or commitments
      of any nature) or other agreement, or subject to any judgment, decree or order
      of any court or administrative agency, that would interfere with their duties
      to
      the Company, or that would conflict with the Company’s business as currently
      conducted or currently proposed to be conducted. Each employee and officer
      of,
      and consultant to, the Company has executed a proprietary information and
      inventions (or similar) agreement containing substantially the same material
      terms as those set forth in the form of agreement attached as Exhibit B hereto.
      No current or former employee or officer of, or consultant to, the Company
      has
      excluded works or inventions made prior to his or her employment or relationship
      with the Company from his or her assignment of inventions pursuant to such
      employee, officer or consultant’s proprietary information and inventions
      agreement.

     

    (j)  The
      Company has taken reasonable steps in accordance with normal industry practice
      to maintain the confidentiality of its trade secrets and other confidential
      Intellectual Property. To the knowledge of the Company, (i) there has been
      no
      misappropriation of any material trade secrets or other material confidential
      Company Owned Intellectual Property by any person, (ii) no employee, independent
      contractor or agent of the Company has misappropriated any trade secrets of
      any
      other person in the course of such performance as an employee, independent
      contractor or agent and (iii) no employee, independent contractor or agent
      of
      the Company is in material default or breach of any term of any employment
      agreement, non-disclosure agreement, assignment of invention agreement or
      similar agreement or contract relating in any way to the protection, ownership,
      development, use or transfer of Company Owned Intellectual
      Property.

     

    (k)  None
      of
      the execution or delivery of this Agreement, the carrying on of the Company’s
      business by the employees of, and consultants to, the Company or the conduct
      of
      the Company’s business, as currently conducted or as currently proposed to be
      conducted, will, to the knowledge of the Company, conflict with or result in
      a
      breach of the terms, conditions or provisions of, or constitute a default under,
      any contract, covenant or instrument under which any of such employees is now
      obligated. Except to the extent already validly assigned to the Company, the
      Company does not believe that it is, or will be, necessary to utilize any
      inventions or proprietary information of any of its respective employees (or
      people it currently intends to hire) made prior to their employment by the
      Company.

     

    3.9  Compliance
      with Other Instruments.
      Except
      as set forth in Section 3.9 of the Company Disclosure Schedule, the Company
      is
      not in violation or default of any provision of the Company Certificate of
      Incorporation or bylaws, or of any mortgage, indenture, contract, agreement,
      instrument, judgment, order, writ, decree or contract to which it is a party
      or
      by which it is bound that could reasonably be expected to result in a Material
      Adverse Effect or, to the Company’s knowledge, of any provision of any federal
      or state statute, rule or regulation applicable to the Company that could
      reasonably be expected to result in a Material Adverse Effect. The execution,
      delivery and performance of this Agreement will not result in any such violation
      or be in conflict with or constitute, with or without the passage of time or
      giving of notice, or both, either a default under any such provision,
      instrument, judgment, order, writ, decree or material contract or result in
      the
      creation of any mortgage, pledge, lien, charge or encumbrance upon any of the
      properties or assets of the Company or the suspension, revocation, impairment,
      forfeiture or non-renewal of any permit, license, authorization or approval
      applicable to the business, operations or any of the assets or properties of
      the
      Company.

     

    3.10  Agreements;
      Actions.

     

    (a)  Except
      as
      set forth in Section 3.10(a) of the Company Disclosure Schedule, there are
      no
      agreements, understandings or proposed transactions between the Company and
      any
      of its officers, directors, Affiliates or any Affiliate thereof.

     

    (b)  Section
      3.10(b) of the Company Disclosure Schedule sets forth all agreements,
      understandings, instruments, contracts, proposed transactions, judgments,
      orders, writs or decrees to which the Company is a party or by which it is
      bound
      that involve (i) obligations (contingent or otherwise) of, or payments to,
      the
      Company in excess of $50,000 or that may not be extinguished on thirty (30)
      days
      notice or less, (ii) the license, assignment or transfer of any patent,
      copyright, trade secret or other proprietary right to or from the Company (other
      than licenses to the Company arising from the purchase of off-the-shelf or
      other
      standard products), (iii) the manufacture, marketing, sale or distribution
      of
      any products of the Company, in any jurisdiction, or any restrictions on the
      Company’s exclusive rights to develop, manufacture, assemble, distribute, market
      and sell its products, (iv) indemnification by the Company with respect to
      infringements of proprietary rights (other than indemnification obligations
      arising from purchase, sale or license agreements entered into in the ordinary
      course of business), (v) any supply agreements or (vi) other agreements that
      are
      otherwise material to the business of the Company.

     

    (c)  The
      Company has delivered, or has caused to be delivered, to Parent correct and
      complete copies of each contract, agreement or other arrangement listed in
      Section 3.10 of the Company Disclosure Schedule, as such contracts, agreements
      and arrangements are amended to date. Except as set forth in Section 3.10(c)
      of
      the Company Disclosure Schedule, each such contract, agreement or other
      arrangement is a valid, binding and enforceable obligation of the Company,
      and,
      to the knowledge of the Company, of the other party or parties thereto, and
      is
      in full force and effect. Except as set forth in Section 3.10(c) of the Company
      Disclosure Schedule, neither the Company nor, to the knowledge of the Company,
      the other party or parties thereto is in breach or non-compliance, or, to the
      knowledge of the Company, is considered to be in breach or non-compliance by
      the
      other party thereto, of any term of any such contract, agreement or other
      arrangement. Except as set forth in Section 3.10(c) of the Company Disclosure
      Schedule, the Company has not received notice of any default or threat thereof
      with respect to any such contract, agreement or other arrangement, and the
      Company does not have any reasonable basis for suspecting that any such default
      exists or will arise. Subject to obtaining any necessary consents by the other
      party or parties to any such contract, agreement or other arrangement (as
      further set forth in Section 3.10(c) of the Company Disclosure Schedule), no
      contract, agreement or other arrangement listed in Section 3.10 of the Company
      Disclosure Schedule includes or incorporates any provision, the effect of which
      would be to enlarge or accelerate any obligations of the Company or give
      additional rights to any other party thereto or will, in any other way, be
      adversely affected by, or terminate or lapse by reason of, the transactions
      contemplated by this Agreement.

     

    (d)  Except
      as
      set forth in Section 3.10(d) of the Company Disclosure Schedule, the Company
      has
      not (i) declared or paid any dividends or authorized or made any distribution
      upon or with respect to any class or series of its capital stock, (ii) incurred
      any Indebtedness for money borrowed or any other liabilities individually in
      excess of $50,000 or, in the case of Indebtedness or liabilities individually
      less than $50,000, in excess of $250,000 in the aggregate, (iii) made any loans
      or advances to any person, other than ordinary advances for travel expenses
      or
      (iv) sold, exchanged or otherwise disposed of any of its assets or rights,
      other
      than in the ordinary course of business.

     

    (e)  For
      the
      purposes of Section 3.10(b), all liabilities, agreements, understandings,
      instruments, contracts and proposed transactions involving the same person
      (or
      persons the Company has reason to believe are affiliated with one another)
      shall
      be aggregated for the purpose of meeting the individual minimum dollar amounts
      of the provisions of Section 3.10(b).

     

    3.11  Related-Party
      Transactions.
      Except
      as set forth in Section 3.11 of the Company Disclosure Schedule, no employee,
      officer or director of, or consultant to, the Company, or any member of his
      or
      her immediate family, is indebted to the Company, nor is the Company indebted
      (or committed to make loans or extend or guarantee credit) to any of them,
      other
      than (a) for payment of salary or fees (in the case of consultants) for services
      rendered, (b) reimbursement for reasonable expenses incurred on behalf of the
      Company and (c) for other standard employee benefits made generally available
      to
      all employees (including stock option agreements outstanding under the Company
      Option Plan). Except as set forth in Section 3.11 of the Company Disclosure
      Schedule, to the knowledge of the Company, none of such persons has any direct
      or indirect ownership interest in any firm or corporation with which the Company
      is Affiliated or with which the Company has a business relationship, or any
      firm
      or corporation that competes with the Company, except that employees, officers
      or directors of the Company and members of their respective immediate families
      may own stock in publicly traded companies that may compete with the Company.
      No
      member of the immediate family of any officer or director of the Company is
      directly or indirectly interested in any material contract with the Company.
      Except as may be disclosed in the Financial Statements, the Company is not
      a
      guarantor or indemnitor of any Indebtedness of any other person.

     

    3.12  Changes.
      Except
      as reflected in the Financial Statements provided to Parent, since the date
      of
      such Financial Statements, there has not been:

     

    (a)  Any
      change in the assets, liabilities, financial condition or operations of the
      Company from that reflected in the Financial Statements, other than changes
      in
      the ordinary course of business consistent with past practice, none of which,
      individually or in the aggregate, has had or could reasonably be expected to
      have a Material Adverse Effect;

     

    (b)  Any
      resignation or termination of any key officers or employees of the
      Company;

     

    (c)  Any
      material change, except in the ordinary course of business consistent with
      past
      practice, in the contingent obligations of the Company by way of guaranty,
      endorsement, indemnity, warranty or otherwise;

     

    (d)  Any
      damage, destruction or loss, whether or not covered by insurance, which has
      had,
      or could reasonably be expected to have, a Material Adverse Effect;

     

    (e)  Any
      waiver by the Company of a right or of a debt owed to it;

     

    (f)  Any
      direct or indirect loans made by the Company to any stockholder, employee,
      officer or director of the Company, other than advances made in the ordinary
      course of business consistent with past practice;

     

    (g)  Any
      material change in any compensation arrangement or agreement with any employee,
      officer, director or stockholder of the Company, except as set forth in Section
      3.12(g) of the Company Disclosure Schedule;

     

    (h)  Any
      declaration or payment of any dividend or other distribution of the assets
      of
      the Company;

     

    (i)  Any
      labor
      organization activity;

     

    (j)  Any
      Indebtedness, obligation or liability incurred, assumed or guaranteed by the
      Company, except those for immaterial amounts and for current liabilities
      incurred in the ordinary course of business consistent with past
      practice;

     

    (k)  Any
      sale,
      assignment, transfer or license of any patents, trademarks, copyrights, trade
      secrets or other intangible assets of the Company;

     

    (l)  Any
      change in any material agreement to which the Company is a party, or by which
      it
      is bound, which has had, or could reasonably be expected to have, a Material
      Adverse Effect; or

     

    (m)  Except
      as
      set forth in Section 3.12(m) of the Company Disclosure Schedule, to the
      knowledge of the Company, any other event or condition of any character that,
      either individually or cumulatively, has had, or could reasonably be expected
      to
      have, a Material Adverse Effect.

     

    3.13  Compliance
      with Laws; Permits.
      The
      Company is not in violation of any applicable statute, rule, regulation, order,
      judgment, decree, writ or restriction of any domestic or foreign government
      or
      any instrumentality or agency thereof in respect of the conduct of its business
      or the ownership of its properties that could reasonably be expected to result
      in a Material Adverse Effect. The Company has all Permits necessary for the
      conduct of its business as now being conducted by it. As of the date hereof,
      no
      suspension or cancellation of any of the Permits is pending or, to the knowledge
      of the Company, threatened.

     

    3.14  Environmental,
      Zoning and Safety Laws.
      Except
      as set forth in Section 3.14 of the Company Disclosure Schedule, (a) neither
      the
      activities carried on by the Company at the facilities, offices or properties
      leased by the Company nor, to the knowledge of the Company, such facilities,
      offices or properties, are in material violation of any Environmental Laws,
      or
      any other zoning, health or safety law or regulation, (b) neither the Company
      nor, to the knowledge of the Company, any operator of its past or present
      properties is or has been in violation, or alleged violation, of, or has any
      liability or threatened liability under, any Environmental Laws, (c) none of
      the
      properties currently or formerly owned, leased or operated by the Company
      (including soils and surface and ground waters) are contaminated with any
      Hazardous Substance, (d) the Company is not actually, potentially or allegedly
      liable for any off-site contamination by Hazardous Substances, (e) the Company
      is not actually, potentially or allegedly liable under any Environmental Law
      (including pending or threatened liens), (f) the Company has all Environmental
      Permits, (g) the Company has always been, and continues to be, in compliance
      with its Environmental Permits and (h) neither the execution and delivery of
      this Agreement nor the consummation of the transactions contemplated hereby
      will
      require any investigation, remediation or other action with respect to Hazardous
      Substances, or any notice to or consent of Governmental Authorities or third
      parties, pursuant to any applicable Environmental Law or Environmental Permit.
      Attached as Section 3.14 of the Company Disclosure Schedule are all reports
      and
      other analyses in the Company’s possession relating to the condition of the
      property on which the Company conducts, or has conducted, any
      operations.

     

    3.15  Manufacturing
      and Marketing Rights.
      Except
      as set forth in Section 3.15 of the Company Disclosure Schedule, the Company
      has
      not granted rights to manufacture, produce, assemble, license, market or sell
      its products to any other person and is not bound by any agreement that affects
      the Company’s exclusive right to develop, manufacture, assemble, distribute,
      market or sell its products.

     

    3.16  Disclosure.
      The
      Company has provided Parent with all the information that Parent has requested
      for deciding whether to execute and deliver this Agreement. Neither this
      Agreement (including all the exhibits and schedules hereto) nor any of the
      other
      statements or certificates made or delivered in connection herewith contains
      any
      untrue statement of a material fact or omits to state a material fact necessary
      to make the statements herein not misleading in light of the circumstances
      under
      which they were made. Except as set forth in this Agreement, to the knowledge
      of
      the Company, there is no material fact that the Company has not disclosed to
      Parent and of which any of its officers, directors or executive employees is
      aware that could reasonably be expected to result in a Material Adverse Effect
      on the Company or which could reasonably be expected to be material to
      Parent.

     

    3.17  Registration
      or First Offer Rights.
      Except
      as set forth in Section 3.17 of the Company Disclosure Schedule, the Company
      has
      not granted or agreed to grant any registration rights, including piggyback
      rights, or any right of first offer to any person.

     

    3.18  Insurance.
      The
      Company maintains the insurance policies and binders which are set forth in
      Section 3.18 of the Company Disclosure Schedule. Such policies and binders
      are
      in full force and effect, and the Company has complied in all material respects
      with each of such insurance policies and binders (including with respect to
      the
      payment of premiums) and has not been notified by any of its insurers, and
      does
      not have any reason to believe, that such policies will not be renewed on
      substantially the terms currently in effect.

     

    3.19  Employee
      Benefit Plans.

     

    (a)  Identification
      of Plans.
      Except
      as disclosed in Section 3.19(a) of the Company Disclosure Schedule, the Company
      does not currently maintain or contribute to, and does not have any outstanding
      liability to or in respect of or obligation under, any pension, profit-sharing,
      deferred compensation, bonus, stock option, employment, share appreciation
      right, severance, group or individual health, dental, medical, life insurance,
      survivor benefit or similar plan, policy, arrangement or agreement, whether
      formal or informal, written or oral, for the benefit of any current or former
      director, officer or employee of, or consultant to, the Company. Each of the
      arrangements set forth in Section 3.19(a) of the Company Disclosure Schedule
      is
      herein referred to as an “Employee Benefit Plan”, except that any such
      arrangement which is a multi-employer plan shall be treated as an Employee
      Benefit Plan only for purposes of Sections 3.19(d)(ii) and (vi) and 3.19(g)
      below.

     

    (b)  Delivery
      of Documents.
      The
      Company has heretofore delivered to the Parent true, correct and complete copies
      of each Employee Benefit Plan and, with respect to each such Employee Benefit
      Plan, true, correct and complete copies of (i) any associated trust, custodial,
      insurance or service agreements, (ii) any annual report, actuarial report or
      disclosure materials (including specifically any summary plan descriptions)
      submitted to any governmental agency or distributed to participants or
      beneficiaries thereunder in the current calendar year or any of the three (3)
      preceding calendar years and (iii) the most recently received IRS determination
      letters, if any, and any governmental advisory opinions, rulings, compliance
      statements, closing agreements or similar materials specific to such Employee
      Benefit Plan.

     

    (c)  Compliance
      with Terms and Law.
      Each
      Employee Benefit Plan is, and has heretofore been, maintained and operated
      in
      material compliance with the terms of such Employee Benefit Plan and in material
      compliance with the requirements prescribed (whether as a matter of substantive
      law or as necessary to secure favorable tax treatment) by any and all applicable
      statutes, governmental or court orders or governmental rules or regulations
      in
      effect from time to time, including ERISA and the Code, and applicable to such
      Employee Benefit Plan. Each Employee Benefit Plan which is intended to qualify
      under Section 401(a) of the Code and each trust or other entity intended to
      qualify as a “voluntary employee benefit association” within the meaning of
      Section 501(c)(9) of the Code and associated with any Employee Benefit Plan
      is
      expressly identified as such in Section 3.19(c) of the Company Disclosure
      Schedule and has been determined to be so qualified by the IRS, may rely on
      an
      opinion letter issued by the IRS with respect to a standardized prototype plan
      adopted in accordance with the requirements for such reliance, or has time
      remaining for application to the IRS for a determination of the qualified status
      of such Employee Benefit Plan, and, to the knowledge of the Company, nothing
      has
      occurred as to each which has resulted, or is likely to result in, the
      revocation or denial of such determination or which, to the knowledge of the
      Company, would not reasonably be expected to be resolved without such revocation
      or denial under the compliance resolution programs of the IRS to preserve such
      qualification.

     

    (d)  Absence
      of Certain Events and Arrangements.
      Except
      as set forth in Section 3.19(d) of the Company Disclosure Schedule:

     

    (i)  there
      is
      no pending or, to the knowledge of the Company, threatened legal action,
      proceeding or investigation, other than routine claims for benefits, concerning
      any Employee Benefit Plan or, to the knowledge of the Company, any fiduciary
      or
      service provider thereof, and, to the knowledge of the Company, there is no
      basis for any such legal action or proceeding;

     

    (ii)  no
      liability (contingent or otherwise) to the PBGC or any multi-employer plan
      has
      been incurred by the Company (other than insurance premiums satisfied in due
      course);

     

    (iii)  no
      reportable event, or event or condition which presents a material risk of
      termination by the PBGC has occurred with respect to any Employee Benefit
      Plan;

     

    (iv)  no
      Employee Benefit Plan or any party in interest with respect thereof has, to
      the
      knowledge of the Company, engaged in a prohibited transaction which could
      subject the Company or any of its Subsidiaries directly or indirectly to
      liability under Section 409 or 502(i) of ERISA or Section 4975 of the
      Code;

     

    (v)  no
      Employee Benefit Plan provides welfare benefits subsequent to termination of
      employment to employees or their beneficiaries, except to the extent required
      by
      applicable state laws and Title I, Part 6 of ERISA;

     

    (vi)  the
      Company has not announced any intention to modify or terminate any Employee
      Benefit Plan or adopt any arrangement or program which, once established, would
      come within the definition of an Employee Benefit Plan; and

     

    (vii)  the
      Company has not undertaken to maintain any Employee Benefit Plan for any period
      of time, and each Employee Benefit Plan is terminable at the sole discretion
      of
      the sponsor thereof, subject only to such constraints as may be imposed by
      applicable law.

     

    (e)  Funding
      of Certain Plans.
      With
      respect to each Employee Benefit Plan for which a separate fund of assets is
      or
      is required to be maintained, full and timely payment has been made of all
      amounts required of the Company under the terms of each such Employee Benefit
      Plan or applicable law, through the Closing Date, and no accumulated funding
      deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
      whether or not waived, exists with respect to any such Employee Benefit Plan.
      The current value of the assets of each Employee Benefit Plan, as of the end
      of
      the most recently ended plan year of that Employee Benefit Plan, equals or
      exceeds the current value of all benefits liabilities under that Employee
      Benefit Plan.

     

    (f)  Effect
      of Transactions.
      The
      execution and delivery of this Agreement and the consummation of the Merger
      and
      the other transactions contemplated by this Agreement will not, by themselves
      or
      in combination with any other event (regardless of whether that other event
      has
      or will occur), result in any payment (whether of severance pay or otherwise)
      becoming due from or under any Employee Benefit Plan (including any employment
      agreement) to any current or former director, officer or employee of, or
      consultant to, the Company or result in the vesting, acceleration of payment
      or
      increases in the amount of any benefit payable to or in respect of any such
      current or former director, officer or employee of, or consultant to, the
      Company.

     

    (g)  Multi-employer
      Plans.
      No
      Employee Benefit Plan is a multi-employer plan.

     

    (h)  Definitions.
      For
      purposes of this Section 3.19, “multi-employer plan”, “party in interest”,
“current value”, “reportable event” and “benefit liability” have the same
      meanings assigned such terms under Sections 3, 4043(b) or 4001(a) of ERISA,
      and
“affiliate” means any entity which, under Section 414 of the Code, is treated as
      a single employer with the Company, determined, however, without regard to
      this
      Agreement.

     

    3.20  FDA
      and Regulatory Matters.

     

    (a)  (i)
      With
      respect to the Company Products and, to the extent applicable, products
      currently under development by the Company (collectively, the “Products”), (A)
      except as set forth on Section 3.20 of the Company Disclosure Schedule, the
      Company has obtained all necessary and applicable approvals, clearances,
      authorizations, licenses and registrations required by United States or foreign
      governments or government agencies, to permit the design, development,
      pre-clinical and clinical testing, manufacture, labeling, sale, distribution
      and
      promotion of the Products in jurisdictions where it currently conducts such
      activities or contemplates conducting such activities (the “Activities to Date”)
      with respect to each Product (collectively, the “Company Licenses”), (B) the
      Company is in material compliance with all terms and conditions of each Company
      License and with all applicable Laws pertaining to the Activities to Date with
      respect to each Product which is not required to be the subject of a Company
      License, (C) the Company is in compliance with all applicable Laws regarding
      registration, license, certification for each site at which a Product is
      manufactured, labeled, sold or distributed and (D) to the extent any Product
      has
      been exported from the United States, the Company has exported such Product
      in
      compliance in all material respects with applicable Law; (ii) all manufacturing
      operations performed by or on behalf of the Company have been, and are being,
      conducted in all material respects in compliance with the Quality Systems
      regulations of the FDA and, to the extent applicable to the Company, counterpart
      regulations in the European Union, Canada and all other countries where
      compliance is required; (iii) all non-clinical laboratory studies of Products
      under development, sponsored by the Company and intended to be used to support
      regulatory clearance or approval, have been and are being conducted in
      compliance with the FDA’s Good Laboratory Practice for Non-Clinical Studies
      regulations (21 CFR Part 58) in the United States and, to the extent applicable
      to the Company, counterpart regulations in the European Union, Canada and all
      other countries; and (iv) the Company is in compliance with all applicable
      reporting requirements for all Company Licenses or plant registrations described
      in clause (i) above, including, but not limited to, applicable adverse event
      reporting requirements in the United States and outside of the United States
      under applicable Law.

     

    (b)  The
      Company is in compliance with all requirements of the FDA and non-United States
      equivalent agencies and similar state and local Laws applicable to the
      maintenance, compilation and filing of reports, including medical device
      reports, with regard to the Products. Section 3.20(b) of the Company Disclosure
      Schedule sets forth a list of all applicable adverse event reports related
      to
      the Products, including any Medical Device Reports (as defined in 21 CFR 803).
      Set forth on Section 3.20(b) of the Company Disclosure Schedule are complaint
      review and analysis reports of the Company through the date hereof, including
      information regarding complaints by product and root cause analysis of closed
      complaints, and such reports are correct in all material respects.

     

    (c)  The
      Company has not received any written notice or other written communication
      from
      the FDA or any other Governmental Authority (i) contesting the pre-market
      clearance or approval of, the uses of or the labeling and promotion of any
      of
      the Products or (ii) otherwise alleging any violation of any Laws by the
      Company.

     

    (d)  There
      have been no recalls, field notifications or seizures ordered or adverse
      regulatory actions taken (or, to the knowledge of the Company, threatened)
      by
      the FDA or any other Governmental Authority with respect to any of the Products,
      including any facilities where any such Products are produced, processed,
      packaged or stored, and the Company has not, within the last three (3) years,
      either voluntarily or at the request of any Governmental Authority, initiated
      or
      participated in a recall of any Product or provided post-sale warnings regarding
      any Product.

     

    (e)  The
      Company has conducted, and is continuing to conduct, all of its clinical trials
      with reasonable care and in accordance with all applicable Laws and the stated
      protocols for such clinical trials.

     

    (f)  All
      filings with and submissions to the FDA and any corollary entity in any other
      jurisdiction made by the Company with regard to the Products, whether oral,
      written or electronically delivered, were true, accurate and complete as of
      the
      date made and, to the extent required to be updated, as so updated, remain
      true,
      accurate and complete as of the date hereof and do not materially misstate
      any
      of the statements or information included therein or omit to state a material
      fact necessary to make the statements therein not misleading.

     

    3.21  Brokers;
      Expenses.
      No
      finder, broker, agent or other similar intermediary has acted for or on behalf
      of the Company or its stockholders in connection with the negotiation of this
      Agreement or the consummation of the transactions contemplated
      hereby.

     

    3.22  Consents.
      Except
      as set forth in Section 3.22 of the Company Disclosure Schedule, no permit,
      approval, authorization or consent of any person (excluding Governmental
      Authorities) is required in connection with the execution, delivery and
      performance by the Company of this Agreement or the consummation of the Merger
      or the other transactions contemplated hereby.

     

    3.23  Taxes.
      

     

    (a)  Filing
      of Tax Returns and Payment of Taxes.
      The
      Company has timely filed all Tax Returns required to be filed by it, each such
      Tax Return has been prepared in compliance with all applicable laws and
      regulations, and all such Tax Returns are true, accurate and complete in all
      respects. All Taxes that have become due and payable by the Company have been
      timely paid, and the Company is not and will not be liable for any additional
      Taxes in respect of any Taxable period or any portion thereof ending on or
      before the date of the unaudited consolidated financial statements forming
      part
      of the Financial Statements included in the Company Disclosure Schedule in
      an
      amount that exceeds the corresponding reserve therefor separately identified
      in
      Section 3.23(a) of the Company Disclosure Schedule, if any, as reflected in
      such
      Financial Statements, and any Taxes of the Company arising after such date
      and
      at or before the Effective Time have been or will be incurred in the ordinary
      course of the Company’s business. The Company has delivered to Parent true,
      correct and complete copies of all Tax Returns with respect to income Taxes
      filed by or with respect to it with respect to Taxable periods ended on or
      after
      December 31, 1999 (the “Delivered Tax Returns”), and has delivered or made
      available to the Parent all relevant documents and information with respect
      thereto, including without limitation work papers, records, examination reports,
      and statements of deficiencies proposed, assessed against or agreed to by the
      Company. 

     

    (b)  Deficiencies.
      No
      deficiency or adjustment in respect of Taxes has been proposed, asserted or
      assessed by any Taxation Authority against the Company. There are no outstanding
      refund claims with respect to any Tax or Tax Return of the Company.

     

    (c)  Liens.
      There
      are no liens for Taxes (other than current Taxes not yet due and payable) on
      any
      of the assets of the Company.

     

    (d)  Extensions
      to Statute of Limitations for Assessment of Taxes.
      The
      Company has not consented to extend the time in which any Tax may be assessed
      or
      collected by any Taxation Authority.

     

    (e)  Extensions
      of the Time for Filing Tax Returns.
      The
      Company has not requested or been granted an extension of the time for filing
      any Tax Return that has not yet been filed, except as described in Section
      3.23(e) of the Company Disclosure Schedule.

     

    (f)  Pending
      Proceedings.
      There
      is no action, suit, Taxation Authority proceeding, or audit with respect to
      any
      Tax now in progress, pending or, to the knowledge of the Company, threatened
      against or with respect to the Company.

     

    (g)  No
      Failures to File Tax Returns.
      No
      claim has ever been made by a Taxation Authority in a jurisdiction where the
      Company does not pay Tax or file Tax Returns that the Company is or may be
      subject to Taxes assessed by such jurisdiction.

     

    (h)  Tax
      Attributes, Etc.
      Set
      forth in Section 3.23(h) of the Company Disclosure Schedule are the net
      operating loss, net capital loss, credit, minimum Tax, charitable contribution
      and other Tax carryforwards (by type of carryforward and expiration date, if
      any) of the Company. Except as set forth in Section 3.23(h) of the Company
      Disclosure Schedule, none of those carryforwards are presently subject to
      limitation under Sections 382, 383, or 384 of the Code, or the federal
      consolidated return regulations, or any analogous provision of foreign, state,
      or local Tax Law.

     

    (i)  Elections.
      All
      elections with respect to Taxes affecting the Company that were not made in
      the
      Delivered Tax Returns are described in Section 3.23(i) of the Company Disclosure
      Schedule.

     

    (j)  Membership
      in Affiliated Groups, Liability for Taxes of Other Persons, Etc.
      The
      Company has never been a member of any affiliated group of corporations (as
      defined in Section 1504(a) of the Code) or filed or been included in a combined,
      consolidated or unitary Tax Return. The Company is neither a party to, nor
      bound
      by, any Tax sharing or allocation agreement. The Company is not presently
      liable, nor does the Company have any potential liability, for the Taxes of
      another person (i) under Treasury Regulations Section 1.1502-6 (or comparable
      provision of state, local or foreign law), (ii) as transferee or successor
      or
      (iii) by contract of indemnity or otherwise.

     

    (k)  Adjustments
      under Section 481.
      The
      Company will not be required, as a result of a change in method of accounting
      for any period ending on or before or including the Effective Time, to include
      any adjustment under Section 481(c) of the Code (or any similar or corresponding
      provision or requirement under any other Tax Law) in Taxable income for any
      period ending on or after the Effective Time.

     

    (l)  Withholding
      Taxes.
      The
      Company has timely withheld and timely paid all Taxes which are required to
      have
      been withheld and paid by it in connection with amounts paid or owing to any
      employee, independent contractor, creditor or other person.

     

    (m)  Permanent
      Establishments and Branches Outside the United States.
      The
      Company does not have a permanent establishment in any country with which the
      United States of America has a relevant Tax treaty, as defined in such relevant
      Tax treaty, and does not otherwise operate or conduct business through any
      branch in any country other than the United States.

     

    (n)  U.S.
      Real Property Holding Corporation.
      The
      Company is not and has not been a United States real property holding
      corporation within the meaning of Code Section 897(c)(2), during the applicable
      period specified in Code Section 897(c)(1)(A)(ii).

     

    (o)  Safe
      Harbor Lease Property.
      None of
      the property owned or used by the Company is subject to a Tax benefit transfer
      lease executed in accordance with Section 168(f)(8) of the Internal Revenue
      Code
      of 1954, as amended by the Economic Recovery Tax Act of 1981.

     

    (p)  Tax-Exempt
      Use Property.
      None of
      the property owned by the Company is “tax-exempt use property” within the
      meaning of Section 168(h) of the Code.

     

    (q)  Security
      for Tax-Exempt Obligations.
      None of
      the assets of the Company directly or indirectly secures any Indebtedness,
      the
      interest on which is tax-exempt under Section 103(a) of the Code, and the
      Company is not directly or indirectly an obligor or a guarantor with respect
      to
      any such Indebtedness.

     

    (r)  Parachute
      Payments, Etc.
      The
      Company has not made any payments, is not obligated to make any payments, and
      is
      not a party to any agreement that under certain circumstances could obligate
      it
      to make any payments, that will not be deductible under Code Sections 162(m)
      or
      280G.

     

    (s)  Rulings.
      There
      are no outstanding rulings of, or requests for rulings by, any Taxation
      Authority addressed to the Company that are, or if issued would be, binding
      on
      the Company.

     

    (t)  Divisive
      Transactions.
      The
      Company has never been either a “distributing corporation” or a “controlled
      corporation” in connection with a distribution of stock qualifying for tax-free
      treatment, in whole or in part, pursuant to Section 355 of the
      Code.

     

    (u)  Section
      83(b) Elections.
      All
      persons who have purchased shares of the Company’s stock that at the time of
      such purchase were subject to a substantial risk of forfeiture under Section
      83
      of the Code have timely filed elections under Section 83(b) of the Code and
      any
      analogous provisions of applicable state and local Tax Laws.

     

    3.24  Books
      and Records.
      The
      books of account, minute books, stock record books and other records of the
      Company, all of which have been made available to Parent, are complete and
      correct and have been maintained in accordance with sound business practices
      and
      the requirements, including the maintenance of an adequate system of internal
      controls. The minute books of the Company contain minutes of all meetings of
      the
      board of directors, of committees of directors and of stockholders since the
      date of incorporation of the Company and reflect all corporate actions and
      transactions referred to in such minutes accurately in all material respects.
      On
      the Closing Date, all such books and records shall be in the possession of
      the
      Company.

     

    3.25  Employees.
      The
      Company has no collective bargaining agreements with any of its employees.
      There
      is no labor union organizing activity pending or, to the Company’s knowledge,
      threatened with respect to the Company. To the Company’s knowledge and except as
      set forth in Section 3.25 of the Company Disclosure Schedule, no employee of
      the
      Company, nor any consultant with whom the Company has contracted, is in
      violation of any term of any employment contract, proprietary information
      agreement or any other agreement relating to the right of any such individual
      to
      be employed by, or to contract with, the Company because of the nature of the
      business to be conducted by the Company; and to the Company’s knowledge, the
      continued employment by the Company of its present employees, and the
      performance of the Company’s contracts with its independent contractors, will
      not result in any such violation. The Company has not received any notice
      alleging that any such violation has occurred. Except as set forth in Section
      3.25 of the Company Disclosure Schedule, no employee of the Company has been
      granted the right to continued employment by the Company or to any material
      compensation following termination of employment with the Company. The Company
      is not aware that any officer or key employee, or that any key group of
      employees, intends to terminate his, her or its employment with the Company,
      nor
      does the Company have a present intention to terminate the employment of any
      officer, key employee or key group of employees.

     

    3.26  Obligations
      of Management.
      Except
      as set forth in Section 3.26 of the Company Disclosure Schedule, each executive
      officer of the Company is currently devoting 100% of his or her business time
      to
      the conduct of the business of the Company. The Company is not aware of any
      officer or key employee of the Company planning to work less than full time
      at
      the Company in the future.

     

    3.27  Title
      to Properties and Assets; Liens, Etc.
      The
      Company has good and marketable title to all of its properties and assets,
      including the properties and assets reflected in the most recent balance sheet
      included in the Financial Statements, and good title to its leasehold estates,
      in each case, not subject to any mortgage, pledge, lien, lease, encumbrance
      or
      charge, other than (a) those resulting from Taxes which have not yet become
      delinquent, (b) minor liens and encumbrances which do not materially detract
      from the value of the property subject thereto or materially impair the
      operations of the Company or (c) those that have otherwise arisen in the
      ordinary course of business. All facilities, machinery, equipment, fixtures,
      vehicles and other properties owned, leased or used by the Company are in good
      operating condition and repair and, subject to normal wear and tear, are
      reasonably fit and usable for the purposes for which they are being used. The
      Company is in compliance with all material terms of each lease to which it
      is a
      party or is otherwise bound.

     

    3.28  Information
      Supplied.
      As of
      the time such is supplied to Parent, none of the information supplied, or to
      be
      supplied, by the Company for inclusion or incorporation by reference in any
      registration statement, permit application or proxy statement in connection
      with
      the issuance of Parent Common Stock pursuant to Section 1.6, will contain any
      untrue statement of a material fact or omit to state any material fact required
      to be stated therein or necessary in order to make the statements therein in
      light of the circumstances under which they were made not misleading.
      Notwithstanding the foregoing, the Company makes no representation, warranty
      or
      covenant with respect to any information supplied or required to be supplied
      by
      Parent which is contained in or omitted from any of the foregoing
      documents.

     

    ARTICLE IV  

     

    REPRESENTATIONS
      AND WARRANTIES OF PARENT AND MERGER SUB

     

    Parent
      and Merger Sub, jointly and severally, hereby represent and warrant to the
      Company as of the Agreement Date, and (except with respect to the
      representations and warranties in Section 4.5) as of the Closing Date, as
      follows, subject, in each case, to such exceptions as are specifically expressed
      in this Agreement:

     

    4.1  Organization,
      Good Standing and Qualification.
      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 has all requisite
      corporate power and authority to carry on its business as now conducted. Each
      of
      Parent and Merger Sub is duly qualified to transact business and is in good
      standing in each jurisdiction in which the failure to so qualify would have
      a
      Material Adverse Effect. Each of Parent and Merger Sub has all requisite
      corporate power and authority to own and operate its respective properties
      and
      assets, to execute and deliver this Agreement, to carry out the provisions
      of
      this Agreement, and to perform its respective obligations under, and carry
      out
      the provisions of, this Agreement, and to carry on its respective business
      as
      currently conducted and as currently proposed to be conducted.

     

    4.2  Authorization;
      Binding Obligations; Governmental Consents.

     

    (a)  All
      corporate actions on the part of Parent and Merger Sub and their respective
      officers, directors and stockholders, that are necessary for the authorization,
      execution and delivery of this Agreement and the performance of all obligations
      of Parent and Merger Sub hereunder, have been taken. This Agreement is a valid
      and binding obligation of Parent and Merger Sub, enforceable against them in
      accordance with its terms, except as such enforcement may be limited by (x)
      the
      effect of bankruptcy, insolvency, reorganization, receivership, conservatorship,
      arrangement, moratorium or other laws affecting or relating to the rights of
      creditors generally or (y) the rules governing the availability of specific
      performance, injunctive relief or other equitable remedies and general
      principles of equity, regardless of whether considered in a proceeding in law
      or
      equity.

     

    (b)  No
      consent, approval, permit, order or authorization of, or registration,
      qualification, designation, declaration or filing with, any federal, state
      or
      local Governmental Authority on the part of Parent or Merger Sub is required
      in
      connection with the execution and delivery of this Agreement or the consummation
      by Parent or Merger Sub of the transactions contemplated hereby, except for
      (i)
      the filing of merger documents with the Delaware Secretary of State, (ii) such
      consents, approvals, orders, authorizations, registrations, declarations and
      filings as may be required under applicable state and federal securities laws
      and the securities laws of any foreign country in connection with the issuance
      of Parent Common Stock in connection with the Merger, (iii) such filings as
      may
      be required under the HSR Act or any applicable state or foreign anti-takeover
      and similar laws, (iv) the approval of the Toronto Stock Exchange for the
      listing of the Parent Common Stock to be issued pursuant hereto and the filing
      of a Notification Form: Change in the Number of Shares Outstanding with The
      NASDAQ Stock Market, Inc., and (v) such other consents, authorizations, filings,
      approvals and registrations which, if not obtained or made, would not have
      a
      Material Adverse Effect on Parent and would not prevent, or materially alter
      or
      delay any of the transactions contemplated by this Agreement.

     

    4.3  Compliance
      with Other Instruments.
      Neither
      the execution, delivery and performance of this Agreement nor the issuance
      of
      Parent Common Stock in connection with the Merger will (a) violate the
      Certificate of Incorporation or bylaws of Parent or Merger Sub, (b) breach
      or
      result in a violation of any Law applicable to Parent or Merger Sub or the
      transactions contemplated by this Agreement or (c) constitute a material breach
      of the terms, conditions, provisions of, or constitute a default under, any
      judgment, order, or decree of any court or arbitrator to which Parent or Merger
      Sub is a party or any material contract of Parent.

     

    4.4  Brokers.
      Parent
      and Merger Sub have not incurred, nor will they incur, any liability for
      brokerage or finders’ fees or agents’ commissions in connection with this
      Agreement or the consummation of the transactions contemplated hereby or
      thereby.

     

    ARTICLE V  

     

    CONDUCT
      OF BUSINESS PENDING THE MERGER

     

    AND
      RELATED COVENANTS

     

    5.1  Conduct
      of Business of the Company.
      The
      Company covenants and agrees that, during the period beginning on the Agreement
      Date and ending upon the earlier to occur of (i) the Effective Time and (ii)
      the
      termination of this Agreement, unless the Parent shall otherwise agree in
      writing, the business of the Company shall be conducted only in, and the Company
      shall not take any action except in, the ordinary course of business and in
      a
      manner consistent with past practice; and the Company shall use commercially
      reasonable efforts to preserve intact its business organization, to keep
      available the services of the current officers and employees of and consultants
      to the Company; and to preserve the current relationships of the Company with
      customers, suppliers and other persons with which the Company has significant
      business relations. Without limiting the foregoing, the Company shall not,
      directly or indirectly do, or propose to do, any of the following without the
      prior written consent of the Parent, with it being understood that each of
      such
      clauses below shall constitute an independent obligation of the Company, not
      qualified by any other such clause, and shall be deemed to be
      cumulative:

     

    (a)  Charter
      Documents.
      Cause
      or permit any amendments to the Company Certificate of Incorporation or
      bylaws;

     

    (b)  Dividends;
      Repurchases; Changes in Capital Stock.
      Except
      as may be otherwise specifically contemplated in this Agreement, (i) declare
      or
      pay any dividends on, or make any other distributions (whether in cash, stock
      or
      property) in respect of, any of its capital stock, (ii) issue or authorize
      the
      issuance of any other securities in respect of, in lieu of or in substitution
      for shares of its capital stock, (iii) repurchase or otherwise acquire, directly
      or indirectly, any shares of its capital stock (other than pursuant to
      repurchase rights of the Company that permit the Company to repurchase
      securities from the holders thereof at the original purchase price therefor
      in
      connection with the termination of services of such holder as an employee of
      or
      consultant to the Company) or (iv) issue or authorize the issuance of Securities
      other than for the purpose of effecting a Financing;

     

    (c)  Stock
      Option Plans, Warrants, Etc.
      Accelerate, except with respect to grants already outstanding pursuant to the
      existing terms thereof, amend or change the period of exercisability or vesting
      of options or other rights granted under the Company Option Plan, establish
      any
      new or additional stock option plan, amend the Company Option Plan (including
      by
      increasing the number of shares of Company Common Stock subject to the grant
      of
      options thereunder), grant any options, warrants or other rights to acquire
      shares of capital stock of the Company, including Company Common Stock or the
      Series A Preferred Stock;

     

    (d)  Material
      Contracts.
      Enter
      into any material contract or commitment (other than as required in the ordinary
      course of business), or violate, amend or otherwise modify or waive (other
      than
      as required in the ordinary course of business) any of the terms of any
      agreements, understandings, instruments or contracts which are material to
      the
      business of the Company as currently conducted and as proposed to be conducted
      other than (x) contracts that are entered into in the ordinary course of
      business, or (y) contracts which are terminable by the Company upon less than
      ninety (90) days’ notice without penalty or surviving obligations. For purposes
      of this Section 5.1(d), the parties hereto acknowledge that any such actions
      with respect to any contract or commitment having a value in excess of $25,000
      shall not be deemed to be in the ordinary course of business. Notwithstanding
      the foregoing, the Company may enter into service agreements, provided that
      (i)
      any such agreement shall be terminable by the Company within ninety (90) days
      after the Effective Date, (ii) any such agreement shall be entered into in
      good
      faith by the Company on commercially reasonable terms and (iii) the Company
      shall not enter into any such agreement which would cause the total amount
      required to be paid to terminate all such agreements to exceed $25,000 in the
      aggregate, without the prior written consent of Parent (which consent will
      not
      be unreasonably delayed or withheld);

     

    (e)  Issuance
      of Securities.
      Issue,
      deliver or sell, or authorize or propose the issuance, delivery or sale of,
      or
      purchase or propose the purchase of, any shares of its capital stock or
      securities or other instruments (including notes or other evidences of
      Indebtedness) convertible into, or subscriptions, rights, warrants or options
      to
      acquire, or other agreements or commitments of any character obligating it
      to
      issue, any such shares or other convertible instruments or securities, other
      than (i) shares of Company Common Stock issuable upon conversion of shares
      of
      the Series A Preferred Stock or (ii) shares of Company Common Stock issuable
      upon exercise of Company Options.

     

    (f)  Intellectual
      Property.

     

    (i)  Sell,
      license, assign or transfer any Intellectual Property of the Company to any
      other person other than Parent or encumber any Intellectual Property of the
      Company; or

     

    (ii)  License,
      or otherwise acquire, any Intellectual Property not owned by the Company or
      Parent from any third party on terms requiring any royalty payments or imposing
      other obligations on the Company (other than pursuant to “shrink-wrap” licenses
      for off-the-shelf software);

     

    (g)  Marketing
      or Other Rights.
      Enter
      into or amend any agreement pursuant to which any other party is granted
      manufacturing, marketing or other development or distribution rights of any
      type
      or scope with respect to any of the Company’s products or technology, other than
      agreements that (i) are terminable within ninety (90) days and (ii) would not
      require any payment upon its termination, or enter into any agreement that
      would
      limit the ability of the Surviving Corporation, Parent or any of their
      respective Affiliates to operate in a specific area of business or specific
      geographic area after the consummation of the Merger; 

     

    (h)  Dispositions;
      Obligations.
      Except
      for the sale of the Company’s inventory in the ordinary course of business,
      sell, lease, license or otherwise dispose of or encumber any of its properties
      or assets which are material, individually or in the aggregate, taken as a
      whole, or otherwise incur obligations that would become obligations of Parent
      at
      the Effective Time;

     

    (i)  Indebtedness.
      Incur
      any Indebtedness (other than to Parent) for borrowed money or guarantee any
      such
      Indebtedness or issue or sell any debt securities or guarantee any debt
      securities of others, provided that the Company may incur Permitted Indebtedness
      up to an aggregate amount of $15,000;

     

    (j)  Leases.
      Enter
      into any operating lease with an annual commitment in excess of $15,000 or
      with
      a duration of more than one (1) year;

     

    (k)  Capital
      Expenditures.
      Make
      any capital expenditures, capital additions or capital improvements in excess
      of
      $15,000, except as otherwise expressly permitted by this Agreement;

     

    (l)  Insurance.
      Materially reduce the amount of any material insurance coverage provided by
      existing insurance policies;

     

    (m)  Termination
      or Waiver.
      Terminate or waive any right of substantial value, other than in the ordinary
      course of business;

     

    (n)  Employee
      Benefit Plans; New Hires; Pay Increases.
      Adopt
      or amend any employee benefit, pay any special bonuses or special remuneration
      to any employee or director (other than pre-existing obligations) or increase
      the salaries, bonuses or wage rates of its employees;

     

    (o)  Severance
      Arrangements.
      Adopt
      or approve any severance, bonus or benefit acceleration arrangements (whether
      individually or more broadly) that could be triggered after the consummation
      of
      the Merger;

     

    (p)  Lawsuits.
      Commence a lawsuit other than (i) for the routine collection of bills, (ii)
      in
      such cases where it, in good faith, determines that failure to commence suit
      would result in the material impairment of a valuable aspect of its business,
      provided that it consults with the Parent prior to the filing of such a suit,
      or
      (iii) with respect to this Agreement;

     

    (q)  Acquisitions.
      Acquire, or agree to acquire, by merging or consolidating with, or by purchasing
      a substantial portion of the assets of, or by any other manner, any business
      or
      any corporation, partnership, association or other business organization or
      division thereof;

     

    (r)  Taxes.
      Make or
      change any election in respect of Taxes, adopt or request permission of any
      Taxation Authority to change any accounting method in respect of Taxes, enter
      into any closing agreement in respect of Taxes, settle any claim or assessment
      in respect of Taxes, surrender or allow to expire any right to claim a refund
      of
      Taxes, consent to any extension or waiver of the limitation period applicable
      to
      any claim or assessment in respect of Taxes, or take (or permit any Subsidiary
      to take) any such actions with respect to any Subsidiary;

     

    (s)  Notices.
      Fail to
      give any notices and other information required to be given to the employees
      of
      the Company, any collective bargaining unit representing any group of employees
      of the Company, or any applicable Governmental Authority under the Worker
      Adjustment and Retraining Act (the WARN Act), the National Labor Relations
      Act,
      the Code, the Consolidated Omnibus Reconciliation Act (COBRA) or other
      applicable law in connection with the transactions provided for in this
      Agreement;

     

    (t)  Other
      Transactions.
      Merge
      or consolidate with any entity other than Parent, Merger Sub or an Affiliate
      of
      Parent, or liquidate, dissolve or effect a recapitalization or reorganization
      in
      any form of transaction;

     

    (u)  Confidentiality
      Agreements.
      Hire or
      retain, or continue to retain or employ, any employee or consultant having
      access to confidential or proprietary information of the Company unless such
      employee or consultant enters into, or has entered into, a proprietary
      information and inventions agreement with the Company in the form of Exhibit
      B
      attached hereto, or amend or otherwise modify, or grant a waiver under, any
      such
      confidentiality or proprietary information agreement with any such
      person;

     

    (v)  Related
      Party Transactions.
      Enter
      into or be a party to any transaction with any director, officer, employee,
      significant Company Stockholder or family member of, or consultant to, any
      such
      person, corporation or other entity which beneficially owns 10% or more of
      the
      equity interests of the Company, or has 10% or more of the voting power attached
      to the shares of the capital stock of the Company;

     

    (w)  Principal
      Business.
      Engage
      in any business other than the business being conducted by the Company on the
      Agreement Date;

     

    (x)  Other
      Activities.
      Knowingly engage in any other activity which could reasonably be expected to
      impair the ability of Parent, Merger Sub or the Company to consummate the
      Merger;

     

    (y)  Subsidiaries.
      Incorporate or otherwise acquire any Subsidiary; and

     

    (z)  General.
      Authorize, commit to or agree to take, or voluntarily permit to occur, any
      of
      the foregoing actions.

     

    5.2  Clinical
      Trials.
      From
      time to time and at the reasonable request of Parent, the Company shall provide
      Parent with updates concerning the progress of and developments in and results
      of the Company's clinical trials. The Company shall furnish to Parent for its
      review and comment, and the Company shall consult with Parent regarding,
      clinical trial protocols, and any modifications thereto, for any of its proposed
      clinical trials (the “Draft Protocols”) prior to finalizing such Draft Protocols
      and engaging in such clinical trials. If Parent fails to comment or respond
      to
      the Company’s Draft Protocols within thirty (30) days of their receipt, then
      Company shall be entitled to finalize such Draft Protocols and engage in the
      clinical trials thereunder after expiration of such thirty (30)-day
      period.

     

    5.3  FDA
      Approval Matters.

     

    (a)  The
      Company shall notify Parent of any material communications with the FDA or
      any
      corollary entity in any other jurisdiction, including outside of the United
      States of America, or any other Governmental Authority, whether written or
      oral,
      as soon as reasonably practicable, but in no event later than five (5) business
      days after the receipt of such communication, and within such same time period,
      the Company shall provide Parent with copies of any such written communications
      and written summaries of any such oral communications. For purposes of this
      Section 5.3(a), “material communications” with the FDA shall include any
      communications in which the FDA or any corollary entity provides feedback,
      comments, questions or other information to the Company which addresses, or
      is
      reasonably likely to impact, the development by the Company of the products
      to
      which such communication pertains or the timeline and prospects for approval
      of
      such products by the FDA or such corollary entity, as the case may be, whether
      positive or adverse.

     

    (b)  From
      time
      to time and at the reasonable request of Parent, the Company shall provide
      Parent with updates concerning the progress of the Company’s regulatory filings
      and strategy for obtaining necessary regulatory approvals to market and sell
      the
      products of the Company. The Company shall furnish such updates to Parent for
      its review and comment, and Parent shall provide such comments, if any, as
      soon
      as reasonably practicable but, in no event, later than thirty (30) business
      days
      after the receipt of such request for comment. The Company shall consult with
      Parent regarding any material regulatory filing prior to finalizing such filings
      and delivering them to the relevant regulatory authorities.

     

    5.4  Notice
      of Developments.
      Parent,
      on the one hand, and the Company, on the other hand, shall give prompt written
      notice to the other party of any material development causing, or reasonably
      likely to cause, a breach of any of its own representations and warranties
      in
      this Agreement.

     

    5.5  Payment
      of Taxes, Etc.
      The
      Company shall timely file all of its Tax Returns as they become due (taking
      all
      timely filed proper extension requests into account), all such Tax Returns
      to be
      true, correct and complete, and the Company shall timely pay and discharge,
      as
      they become due and payable, all Taxes (other than Taxes contested in good
      faith
      by the Company in appropriate proceedings), assessments and other governmental
      charges or levies imposed upon it or its income or any of its property as well
      as all claims of any kind (including claims for labor, materials and supplies)
      that, if unpaid, may by law become a lien or charge upon its
      properties.

     

    5.6  Board
      Observation Rights.
      The
      Company shall permit a representative of Parent to attend all meetings of the
      Company Board in a non-voting observer capacity, other than those parts of
      meetings of the Company Board, if any, at which a Superior Proposal will be
      discussed. In this respect, the Company shall give such representative copies
      of
      all notices, minutes, consents and other materials that the Company provides
      to
      members of the Company Board, except to the extent that such notices, minutes,
      consents and other materials relate to any Superior Proposal.

     

    ARTICLE VI  

     

    ADDITIONAL
      AGREEMENTS

     

    6.1  Notices;
      Consents; Filings.
      From
      and after the execution and delivery of this Agreement, the Company shall use
      its best efforts, at the Company’s expense (which efforts and expenses shall not
      be deemed to require the expenditure of unreasonable resources or monies by
      the
      Company), to obtain the consents described in Section 3.22 of the Company
      Disclosure Schedule. In the event that the Company shall fail to obtain any
      third party consent necessary for the consummation of the transactions
      contemplated hereby, the Stockholder Representative Committee shall use
      commercially reasonable efforts, and take any such actions reasonably requested
      by Parent, to minimize any adverse effect upon the Company, the Surviving
      Corporation and Parent, their respective Subsidiaries, and their respective
      businesses resulting, or which could reasonably be expected to result after
      the
      Effective Time, from the failure to obtain such consent; provided, however,
      that
      any such efforts used, or actions taken, by the Stockholder Representative
      Committee shall not abrogate or derogate from any of the rights of Parent or
      Merger Sub hereunder.

     

    6.2  HSR
      Act.
      In the
      event that Parent or the Company reasonably determines that it is required
      to
      make a pre-merger notification filing (an “Antitrust Filing”) under the
      Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
      Act”), or any corresponding law or regulation of any foreign Governmental
      Authority (a “Foreign Antitrust Filing”) with respect to the Merger and the
      other transactions contemplated hereby, such party shall promptly notify the
      other parties of such requirement, and, thereafter, each of the parties
      will:

     

    (a)  as
      promptly as is practicable, make its required filings under the HSR Act or
      any
      laws mandating a Foreign Antitrust Filing;

     

    (b)  as
      promptly as is practicable after receiving any governmental request under the
      HSR Act or any corresponding law or regulation of any foreign Governmental
      Authority for additional information, documents or other materials, use its
      commercially reasonable best efforts to comply with such request;

     

    (c)  cooperate
      with the other parties in connection with resolving any governmental inquiry
      or
      investigation, whether domestic or foreign, relating to their respective HSR
      Act
      filings, Foreign Antitrust Filings, the Merger or any related inquiry or
      investigation;

     

    (d)  promptly
      inform the other parties of any communication with, and any proposed
      understanding, agreement or undertaking with, any Governmental Authority (for
      greater certainty, whether domestic or foreign) relating to their respective
      HSR
      Act filings, Foreign Antitrust Filings, the Merger or any related inquiry or
      investigation; and

     

    (e)  to
      the
      extent reasonably practicable, give the other parties reasonable advance notice
      of, and the opportunity to participate in (directly or through their
      representatives), any meeting or conference with any Governmental Authority
      (for
      greater certainty, whether domestic or foreign) relating to their respective
      HSR
      Act filings, Foreign Antitrust Filings, the Merger or any related inquiry or
      investigation.

     

    6.3  Further
      Assurances.

     

    (a)  Following
      the execution and delivery of this Agreement, each of Parent and the Company
      will:

     

    (i)  use
      its
      commercially reasonable best efforts to take, or cause to be taken, all
      appropriate action, and to do, or cause to be done, all things necessary, proper
      or advisable under applicable laws and regulations to consummate and make
      effective the Merger and the transactions contemplated hereby, including using
      its commercially reasonable best efforts to obtain all permits, consents,
      approvals, authorizations, qualifications and orders of Governmental Authorities
      as are necessary for the consummation of the Merger and the other transactions
      contemplated hereby and to fulfill the conditions set forth in Article 7;
      provided that Parent shall not be required by Section 6.2 or this Section 6.3(a)
      to enter into any consent decree, hold separate orders or other arrangements
      that would have such an effect or, in any event, any consent decree, hold
      separate order or other arrangements that would require Parent or the Company
      to
      dispose of any existing assets of such party, and, in the event that Parent
      elects to abandon its efforts to obtain approval under the HSR Act in accordance
      with the terms of this Section 6.3(a), Parent shall promptly give notice of
      such
      abandonment to the Company. In case, at any time after the Effective Time,
      any
      further action is necessary or desirable to carry out the purposes of this
      Agreement, the proper officers and directors of each party to this Agreement
      shall use their commercially reasonable best efforts to take all such action;
      and

     

    (ii)  cooperate
      and use its commercially reasonable best efforts to vigorously contest and
      resist any action, including administrative or judicial action, and to have
      vacated, lifted, reversed or overturned any decree, judgment, injunction or
      other order (whether temporary, preliminary or permanent) that is in effect
      and
      that restricts, prevents or prohibits the consummation of the Merger and the
      other transactions contemplated hereby, including by vigorously pursuing all
      available avenues of administrative and judicial appeal.

     

    (b)  From
      the
      Agreement Date until the Effective Time, the Company will take all further
      action that is necessary or desirable to carry out the purposes of this
      Agreement, and the proper officers and directors of the Company shall use their
      commercially reasonable best efforts to take all such action and shall refrain
      from taking any actions which would be contrary to, inconsistent with or
      against, or would frustrate the essential purposes of the Merger and the other
      transactions contemplated by this Agreement.

     

    6.4  Stockholder
      Approval.
      Following the execution and delivery of this Agreement, the Company will
      promptly solicit and obtain the approval, by written consent, of the execution
      and delivery by the Company of this Agreement, and the consummation of the
      Merger and the other transactions contemplated hereby, by Company Stockholders
      holding the requisite number of shares of each class of the capital stock of
      the
      Company required to approve the execution and delivery of this Agreement and
      the
      consummation of the Merger and the other transactions contemplated hereby (the
      “Initial Stockholder Approval”). The Company shall take all other action
      necessary or advisable to secure the vote or consent of Company Stockholders
      required by Delaware Law to obtain such approval. The Company shall provide
      notice of the availability of dissenters’, appraisal or similar rights in
      compliance with Section 262 of Delaware Law at least 20 days prior to the
      Closing Date. 

     

    6.5  Exclusivity.

     

    (a)  From
      and
      after the date of this Agreement until the Effective Time or termination of
      this
      Agreement pursuant to Article 8, the Company will not, nor will it authorize
      or
      permit any of its officers, directors, Affiliates or employees or any investment
      banker, attorney or other advisor or representative retained by it to, directly
      or indirectly, (i) solicit, initiate or induce the making, submission or
      announcement of any Acquisition Proposal, (ii) participate in any discussions
      or
      negotiations regarding, or furnish to any person any non-public information
      with
      respect to, or take any other action to facilitate any inquiries or the making
      of any proposal that constitutes or may reasonably be expected to lead to,
      any
      Acquisition Proposal, (iii) engage in discussions with any person with respect
      to any Acquisition Proposal, except as to disclose the existence of these
      provisions, (iv) endorse or recommend any Acquisition Proposal, provided that,
      notwithstanding anything to the contrary set forth in this Agreement, nothing
      in
      this Agreement shall prevent the Company Board from recommending a Superior
      Proposal or (v) enter into any letter of intent or similar document or any
      contract, agreement or commitment contemplating or otherwise relating to any
      Superior Proposal; provided, however, that prior to the adoption of this
      Agreement by the required Company Stockholder vote, this Section 6.5(a) shall
      not prohibit the Company from furnishing non-public information regarding the
      Company to, entering into a confidentiality agreement with or entering into
      discussions with, any person or group in response to a Superior Proposal or
      any
      offer or proposal that the Company Board reasonably determines in good faith
      is
      reasonably likely to lead to a Superior Proposal submitted by such person or
      group (and not withdrawn) or the Company Board from recommending that the
      Company Stockholders approve a Superior Proposal if (1) neither the Company
      nor
      any representative of the Company shall have violated any of the restrictions
      set forth in this Section 6.5, including obligations under clause (i) above,
      (2)
      the Company Board concludes in good faith, after consultation with its outside
      legal counsel, that such action is required in order for the Company Board
      to
      comply with its fiduciary obligations to the Company Stockholders under Delaware
      Law, (3) prior to furnishing any such non-public information to, or entering
      into discussions with, such person or group, the Company gives Parent written
      notice of the identity of such person or group and of the Company’s intention to
      furnish non-public information to, or enter into discussions with, such person
      or group and the Company receives from such person or group an executed
      confidentiality agreement containing customary limitations on the use and
      disclosure of all non-public written and oral information furnished to such
      person or group by or on behalf of the Company and (4) contemporaneously with
      furnishing any such non-public information to such person or group, the Company
      furnishes such non-public information to Parent (to the extent such non-public
      information has not been previously furnished by the Company to Parent);
      provided, further, that the Company shall not consummate any transaction(s)
      contemplated by any Superior Proposal unless and until the Company has first
      terminated this Agreement pursuant to Section 8.1(g) hereof. The Company will,
      and will cause its officers, directors, affiliates, employees, investment
      bankers, attorneys and other advisors and representatives to, immediately cease
      any and all existing activities, discussions or negotiations with any parties
      conducted heretofore with respect to any Acquisition Proposal. Without limiting
      the foregoing, it is understood that any violation of the restrictions set
      forth
      in the preceding two sentences by any officer, director or employee of the
      Company or any investment banker, attorney or other advisor or representative
      of
      the Company shall be deemed to be a breach of this Section 6.5 by the
      Company.

     

    (b)  In
      addition to the obligations of the Company set forth in Section 6.5(a), the
      Company as promptly as practicable shall advise Parent in writing of any
      Acquisition Proposal or of any request for non-public information or other
      inquiry which the Company reasonably believes could lead to an Acquisition
      Proposal, the material terms and conditions of such Acquisition Proposal (to
      the
      extent known) and the identity of the person or group making any such request,
      inquiry or Acquisition Proposal. The Company agrees to keep Parent informed
      on a
      current basis of the status and details (including any material amendments
      or
      proposed amendments) of any such request, inquiry or Acquisition
      Proposal.

     

    6.6  Reasonable
      Access.
      From
      and after the Agreement Date until the Effective Time or the termination of
      this
      Agreement pursuant to Article 8, whichever occurs earlier, the Company will
      afford to Parent and its authorized representatives, upon reasonable notice,
      reasonable access during normal business hours to all properties, books,
      records, contracts and documents of the Company as Parent and such authorized
      representatives may reasonably request and an opportunity to make such
      investigations as Parent and such authorized representatives reasonably request,
      and the Company will furnish or cause to be furnished to Parent and its
      authorized representatives all such information with respect to the affairs
      and
      businesses of the Company as they may reasonably request. All information
      obtained by Parent pursuant to this Section 6.6 shall be kept confidential
      in
      accordance with the Confidentiality and Non-Disclosure Agreement, dated March
      30, 2006, between Parent and the Company (the “Confidentiality Agreement”). No
      investigation pursuant to this Section 6.6 shall affect any representation
      or
      warranty in this Agreement of any party hereto or any condition to the
      obligations of the parties hereto.

     

    6.7  Public
      Announcements.
      Prior
      to the consummation of the Merger, Parent shall not issue any press release
      or
      otherwise make any public statements with respect to this Agreement or the
      transactions contemplated hereby without having first provided a copy of any
      such announcement to the Company, except as may be required by (i) Law, (ii)
      the
      SEC or any Canadian securities regulatory authorities, (iii) the Securities
      Act,
      the Exchange Act or other applicable securities laws or (iv) any listing
      agreement with the NASDAQ National Market System or the Toronto Stock Exchange
      to which the Parent is subject. Nothing herein, express or implied, shall
      require Parent to consult with the Company regarding a public announcement
      following the consummation of the Merger. The Company and the Company
      Stockholders shall not, without the prior written consent of Parent, issue
      any
      press release or otherwise make any public statements with respect to this
      Agreement, the Merger or the other transactions contemplated hereby, except
      as
      may be required by Law. 

     

    6.8  GAAP
      Accounting.
      As soon
      as reasonably practicable after the Agreement Date, the Company shall use
      reasonable efforts to implement and maintain a standard system of accounting
      established and administered in accordance with GAAP and prepare its financial
      statements in accordance with GAAP.

     

    6.9  Parent
      Efforts.
      After
      the Effective Time, Parent shall pursue the FDA Milestone diligently and shall
      use its best efforts and undertake all necessary tasks and activities, provided
      that they are commercially reasonable, in order to ensure that the FDA Milestone
      is attained.

     

    ARTICLE VII  

     

    CONDITIONS
      TO THE MERGER

     

    7.1  Conditions
      to the Obligations of Each Party.
      The
      obligations of the Company, Parent and Merger Sub to consummate the Merger
      are
      subject to the satisfaction of each of the following conditions:

     

    (a)  no
      order,
      stay, decree, judgment or injunction shall have been entered, issued or enforced
      by any court of competent jurisdiction which prohibits the consummation of
      the
      Merger, and there shall not be any action taken by any Governmental Authority,
      or any statute, rule, regulation or order enacted, entered, enforced or deemed
      applicable to the Merger, which makes the consummation of the Merger illegal
      or
      substantially deprives Parent, the Company or the Participating Rights Holders
      of any of the anticipated benefits of the Merger or the related transactions,
      taken as a whole;

     

    (b)  all
      actions by or in respect of or filings with any Governmental Authority required
      to permit the consummation of the Merger in accordance with the terms hereof
      shall have been obtained (other than those actions or filings which, if not
      obtained or made prior to the consummation of the Merger, would not have a
      Material Adverse Effect on the Company prior to or after the Effective Time
      or a
      Material Adverse Effect on Parent after the Effective Time or be reasonably
      likely to subject the Company, Parent, Merger Sub, or any of their respective
      Subsidiaries or any of their respective officers or directors to substantial
      penalties or criminal liability); and

     

    (c)  the
      Initial Stockholder Approval shall have been obtained.

     

    7.2  Conditions
      to the Obligations of Parent and Merger Sub.
      The
      obligations of Parent and Merger Sub to consummate the Merger are subject to
      the
      satisfaction of the following further conditions (any one of which may be waived
      in whole or part by Parent, in its sole discretion, by giving written notice
      to
      the Company in compliance with Section 10.1):

     

    (a)  the
      Company shall have performed all of its obligations hereunder required to be
      performed by it at or prior to the Effective Time and (ii) Parent shall have
      received a certificate signed by an executive officer of the Company to the
      foregoing effect;

     

    (b)  each
      of
      the representations and warranties of the Company contained in this Agreement
      shall have been true and correct in all material respects at the time originally
      made and shall be true and correct as of the Effective Time with the same force
      and effect as if such representations and warranties had been made at and as
      of
      the Effective Time and (ii) the Company shall deliver to Parent at the Closing
      a
      certificate, dated as of the Closing Date and signed by the Company’s President
      and Chief Executive Officer, certifying to that effect;

     

    (c)  each
      of
      the Participating Rights Holders shall deliver to Parent at the Closing a signed
      certificate, dated as of the Closing Date, certifying that he, she or it (i)
      is
      experienced in evaluating and investing in securities, (ii) is able to fend
      for
      himself, herself or itself, (iii) can bear the economic risk of his, her or
      its
      investment in Parent Company Stock that he, she or it will receive as his,
      her
      or its portion of the Merger Consideration, (iv) has such knowledge and
      experience in financial or business matters that he, she or it is capable of
      evaluating the merits and risks of such investment and (v) is an “Accredited
      Investor” as such term is defined in Regulation D under the Securities
      Act;

     

    (d)  each
      of
      the Participating Rights Holders shall enter into a lock-up agreement with
      Parent, in form and substance satisfactory to Parent, acting reasonably,
      pursuant to which such Participating Rights Holder covenants that he, she or
      it
      will not, without the prior written consent of Parent which may be withheld
      in
      its sole discretion, offer, sell, contract to sell, pledge or otherwise dispose
      of, or enter into any transaction which is designed to, or might reasonably
      be
      expected to, result in the disposition of (whether by actual disposition or
      effective economic disposition) any of the shares of Parent Common Stock issued
      to him, her or it in full or partial payment of his, her or its proportionate
      share of the Merger Consideration; provided that 50% of such shares shall become
      free of such restriction on the 180th day following the Closing Date and,
      provided, further, that, the balance of such shares shall become free of such
      restriction on the anniversary of the Closing Date;

     

    (e)  any
      persons or other officers of the Company hired after the Agreement Date and
      responsible for oversight of any of the (i) research and development, (ii)
      operations, (iii) clinical and (iv) general management functions of the Company,
      and any replacements for such persons or officers of the Company, shall have
      executed and delivered non-competition agreements with Parent in form and
      substance satisfactory to Parent, acting reasonably;

     

    (f)  Doug
      Adams shall have executed and delivered an employment agreement with Parent
      in
      form and substance reasonably satisfactory to Parent and Doug Adams, provided
      that the employment agreement currently in effect between Doug Adams and the
      Company shall be terminated immediately prior to the Effective Time, with no
      cash payment or other compensation being made to him thereunder as a consequence
      of this Agreement or the transactions contemplated hereby, including the
      Merger;

     

    (g)  no
      Material Adverse Effect shall have occurred or been discovered by Parent since
      the Agreement Date;

     

    (h)  no
      injunction or other decree shall have been issued by any court of competent
      jurisdiction prohibiting the sale of any of the Company Products by the Company
      or Parent on the basis of any rights held by a third party (including any rights
      of any third party in any Intellectual Property);

     

    (i)  Rackemann,
      Sawyer & Brewster, Professional Corporation, or other legal counsel to the
      Company approved by Parent, in its sole discretion, will have issued a legal
      opinion substantially in the form attached hereto as Exhibit C;

     

    (j)  the
      Company shall have delivered a properly executed statement, dated as of the
      Closing Date, in a form reasonably acceptable to Parent conforming to the
      requirements of Treasury Regulation Section 1.1445-2(c)(3);

     

    (k)  the
      Company shall have delivered to Parent and Merger Sub a certificate that sets
      forth the information required to be set forth on Section 3.2 of the Company
      Disclosure Schedule as of the Effective Time (the “Capitalization Certificate”),
      and the Capitalization Certificate shall be deemed to be a representation and
      warranty of the Company hereunder;

     

    (l)  the
      Company shall have obtained the consent or approval of each person whose consent
      or approval shall be required in connection with the Merger under all notes,
      bonds, mortgages, indentures, contracts, agreements, leases, licenses, permits,
      franchises and other instruments or obligations to which it is a
      party;

     

    (m)  any
      and
      all rights, warrants, options or other instruments or rights to purchase shares
      of capital stock of the Company, including Company Common Stock or the Series
      A
      Preferred Stock, (other than Company Options and Company Warrants, which shall
      be converted into the right to receive a portion of the Merger Consideration
      in
      accordance with Section 2.1) outstanding immediately prior to the Closing,
      whether or not exercisable, whether or not vested, and whether or not
      performance- based, shall have been exercised, terminated or waived, and all
      outstanding convertible notes shall have been cancelled or converted into
      capital stock of the Company;

     

    (n)  holders
      of no more than 1.0% of the aggregate outstanding shares of Company Common
      Stock, as of the Effective Time, shall have elected to, or continue to have
      contingent rights to, exercise dissenters’, appraisal or similar rights under
      Delaware Law (or California Law, if applicable), with respect to such
      shares;

     

    (o)  the
      Company Option Plan, and all outstanding Company Options and all agreements
      relating thereto, shall be terminated and no longer be of any force or
      effect;

     

    (p)  the
      Company shall have obtained from the Trustees of Boston University an
      acknowledgement and agreement, in form and substance satisfactory to Parent,
      acting reasonably, that the Trustees of Boston University have no ownership
      or
      other claim in any of the Intellectual Property made, created or developed,
      on
      or prior to the Closing Date, under or pursuant to, or in connection with,
      the
      Incubation Agreement or the Sponsored Research Agreement; 

     

    (q)  The
      Company shall have obtained from Dr. Gabriel Simon a waiver, in form and
      substance satisfactory to Parent, acting reasonably, of any claim by Dr. Gabriel
      Simon under the Employment Agreement dated as of November 1, 2001 between Dr.
      Gabriel Simon and the Company, as amended to date, that the consummation of
      the
      transactions contemplated by this Agreement constitutes “Good Reason” as defined
      in such Employment Agreement; and

     

    (r)  The
      Parent Common Stock to be issued hereunder shall have been conditionally
      approved for listing on the Toronto Stock Exchange, subject only to notice
      of
      issuance and the satisfaction of the standard filing requirements and payment
      of
      requisite filing fees.

     

    7.3  Conditions
      to the Obligations of the Company.
      The
      obligations of the Company to consummate the Merger are subject to the
      satisfaction of the following further conditions (any one of which may be waived
      in whole or part by the Company, in its sole discretion, by giving written
      notice to Parent in compliance with Section 10.1) :

     

    (a)  Parent
      and Merger Sub shall have performed all of their respective material obligations
      hereunder required to be performed by them at or prior to the Effective Time
      and
      (ii) the Company shall have received a certificate from each of Parent and
      Merger Sub, each signed by an executive officer of Parent or Merger Sub, as
      appropriate, to the foregoing effect;

     

    (b)  each
      of
      the representations and warranties of Parent and Merger Sub contained in this
      Agreement shall have been true and correct in all material respects at the
      time
      made and shall be true and correct in all material respects as of the Effective
      Time with the same force and effect as if such representations and warranties
      had been made at and as of the Effective Time;

     

    (c)  Parent
      shall execute and deliver a registration rights agreement, in a form
      satisfactory to the Company and Parent, acting reasonably, pursuant to which
      Parent shall agree (i) to file with the SEC, within 30 days of the Closing
      Date,
      a registration statement on Form S-3 covering the resale of the shares of Parent
      Company Stock issued as all or a part of the Merger Consideration, (ii) to
      use
      commercially reasonable efforts to cause such registration statement to be
      declared by the SEC within 90 days of the Closing Date, in the event that the
      SEC does not conduct a review of such registration statement, and within 120
      days of the Closing Date, in the event that the SEC conducts a review of such
      registration statement and (iii) to provide customary piggy back registration
      rights to the Participating Rights Holders as of and after the Effective
      Time;

     

    (d)  Parent
      shall execute and deliver the Promissory Note; and

     

    (e)  Torys
      LLP
      or other legal counsel to Parent and Merger Sub approved by the Company, in
      its
      sole discretion, will have issued a legal opinion substantially in the form
      attached hereto as Exhibit D.

     

    ARTICLE VIII  

     

    TERMINATION

     

    8.1  Termination.
      This
      Agreement may be terminated and the Merger may be abandoned at any time prior to
      the Effective Time, notwithstanding any requisite approval and adoption of
      this
      Agreement and the transactions contemplated hereby by the Company
      Stockholders:

     

    (a)  by
      duly
      authorized mutual written consent executed by each of Parent, Merger Sub and
      the
      Company;

     

    (b)  by
      Parent
      or by the Company, if the Effective Time shall not have occurred before the
      thirty-first (31st) day (the “Termination Date”) after the Agreement Date;
      provided, however, that (i) in the event that (x) one or both of Parent and
      the
      Company (or any stockholder thereof) are required or deem it advisable to make
      an Antitrust Filing under the HSR Act, or under similar foreign statutes or
      regulations, or seek any other governmental approvals or authorizations as
      may
      be reasonably necessary in connection with the closing of the Merger, or the
      payment of the consideration required to be paid to the Participating Rights
      Holders in connection with the Merger, including any filings or notifications
      as
      may be reasonably necessary that are to be made with or to the SEC or under
      Delaware Law (including any filings necessary to satisfy any of the conditions
      set forth in Section 1.6 hereof), the Termination Date shall be delayed, without
      further action of the parties, until the tenth (10th) business day after the
      date on which any applicable waiting periods thereunder have expired or been
      terminated or such other approvals and authorizations are received and (ii)
      the
      right to terminate this Agreement under this Section 8.1(b) shall not be
      available to Parent in the event that the failure of the Effective Time to
      occur
      on or before such date arises out of or is related to Parent’s failure to
      fulfill any obligation under this Agreement and the right to terminate this
      Agreement under this Section 8.1(b) shall not be available to the Company in
      the
      event that the failure of the Effective Time to occur on or before such date
      arises out of or is related to the failure by the Company or any of the Company
      Stockholders to fulfill any obligation under this Agreement;

     

    (c)  automatically
      if there shall be any law that makes the consummation of the Merger illegal
      or
      otherwise prohibited or if any court of competent jurisdiction or Governmental
      Authority shall have issued an order, decree, ruling or taken any other action
      restraining, enjoining or otherwise prohibiting the Merger and such order,
      decree, ruling or other action shall have become final and
      non-appealable;

     

    (d)  by
      Parent, by giving written notice to the Company at any time prior to the
      Closing, in the event that the Company has given Parent any notice pursuant
      to
      Section 5.4, if the breach or breaches described in such notice would,
      individually or in the aggregate, render any condition to the Merger contained
      in Sections 7.1 or 7.2 hereof impossible of being satisfied;

     

    (e)  by
      the
      Company, by giving written notice to Parent at any time prior to the Closing
      in
      the event that Parent has given the Company any notice pursuant to Section
      5.4,
      if the breach or breaches described in such notice would, individually or in
      the
      aggregate, render any condition to the Merger contained in Sections 7.1 or
      7.3
      hereof impossible of being satisfied;

     

    (f)  automatically,
      in the event that Parent delivers notice of abandonment of its efforts under
      the
      HSR Act in accordance with Section 6.3(a); or

     

    (g)  by
      the
      Company, in the event that the Company Board has received a Superior Proposal
      prior to the adoption and approval of this Agreement and the transactions
      contemplated hereby by the Company Stockholders and adopts a resolution electing
      to terminate the Agreement under this Section 8.1(g); provided that any
      termination under this Section 8.1(g) shall not be effective until the Company
      has made payment of the fee and expenses required by Section
      8.3(c).

     

    8.2  Effect
      of Termination.
      Except
      as provided in Section 8.1 hereof, in the event of the termination of this
      Agreement pursuant to Section 8.1, this Agreement shall forthwith become void,
      there shall be no liability under this Agreement on the part of Parent, Merger
      Sub or the Company or any of their respective officers, directors or
      stockholders, and all rights and obligations of any party hereto shall cease,
      except for liabilities arising from a breach of this Agreement prior to such
      termination; provided that the provisions of this Article 8 and Articles 9
      and
      10 shall survive the termination of this Agreement for any reason.

     

    8.3  Expenses;
      Termination Fee.

     

    (a)  If
      the
      Company terminates this Agreement pursuant to Sections 8.1(b) or 8.1(e), then
      Parent shall pay to the Company, within one (1) business day after request
      by
      the Company (accompanied by reasonably detailed documentation to the extent
      reasonably requested by Parent) from time to time, all of the Company’s
      out-of-pocket expenses and fees incurred in connection with this Agreement
      and
      the transactions contemplated hereby (including all reasonable fees and expenses
      of counsel, financial advisors, accountants, experts and
      consultants).

     

    (b)  If
      Parent
      terminates this Agreement pursuant to Sections 8.1(b) or 8.1(d), then the
      Company shall pay to Parent, within one (1) business day after request by Parent
      (accompanied by reasonably detailed documentation to the extent reasonably
      requested by the Company) from time to time, all of Parent’s out-of-pocket
      expenses and fees incurred in connection with this Agreement and the
      transactions contemplated hereby (including all reasonable fees and expenses
      of
      counsel, financial advisors, accountants, experts and consultants).

     

    (c)  Notwithstanding
      anything to the contrary in Section 8.2, if the Company terminates this
      Agreement pursuant to Section 8.1(g), then, at the sole option of Parent, the
      indebtedness of the Company evidenced by the Company Promissory Note may be
      converted immediately into that number of Conversion Shares (as such term is
      defined in the Company Promissory Note) as shall be equal to 10% of the issued
      and outstanding capital stock of the Company on a Fully Diluted Basis (as such
      term is defined in the Company Promissory Note), and, upon such conversion,
      if
      any, Parent shall have all of the rights and benefits under the Company
      Promissory Note to which Parent would have been entitled, if and as though
      Parent had exercised its right of conversion pursuant to Section 3.2 of the
      Company Promissory Note.

     

    ARTICLE IX  

     

    INDEMNIFICATION

     

    9.1  Indemnification
      by Parent and Merger Sub.
      Subject
      to the limitations set forth in Section 9.5 hereof, from and after the Effective
      Time, Parent and the Surviving Corporation, jointly and severally, will
      indemnify, defend, and hold harmless each of the Company Stockholders, the
      Participating Rights Holders and each of their respective directors, officers,
      employees, representatives and other Affiliates, from and against any and all
      Damages related to or arising out of or in connection with any breach by Parent
      or Merger Sub of any representation, warranty, covenant, agreement, obligation
      or undertaking made by Parent or Merger Sub in this Agreement (including any
      schedule or exhibit hereto), or any other agreement, instrument, certificate,
      or
      other document delivered by or on behalf of Parent or Merger Sub in connection
      with this Agreement, the Merger or any of the other transactions contemplated
      hereby.

     

    9.2  Indemnification
      by the Participating Rights Holders.
      Subject
      to the limitations set forth in Section 9.5 hereof and the methods of payment
      specified in Section 9.4, by virtue of the approval of the execution and
      delivery by the Company of this Agreement, from and after the Effective Time,
      each of the Company Stockholders (regardless of whether or not such Company
      Stockholder has actually voted his, her or its shares of Company Common Stock
      or
      the Series A Preferred Stock in favor of the execution and delivery by the
      Company of this Agreement and the Merger) and the other Participating Rights
      Holders shall be deemed to have agreed, severally (as provided in Section 9.4
      below and pro rata as set forth in Section 1.7(d)) and not jointly, to
      indemnify, defend and hold harmless Parent, the Surviving Corporation and their
      respective Affiliates, and each of their respective directors, officers,
      employees and representatives, from and against any and all Damages related
      to
      or arising out of or in connection with:

     

    (a)  any
      breach by the Company or any Company Stockholder of any representation,
      warranty, covenant, agreement, obligation or undertaking made by such party
      in
      or pursuant to this Agreement, or any other agreement, instrument, certificate
      or other document delivered by or on behalf of the Company or any Participating
      Rights Holder in connection with this Agreement, the Merger or any of the other
      transactions contemplated hereby, including the Capitalization
      Certificate;

     

    (b)  any
      obligation or liability of the Company to any employee, former employee or
      beneficiary of any Employee Benefit Plan, including those arising in connection
      with or by virtue of the employment up to and including the Closing Date or
      termination of employment of any such employee or former employee by the Company
      prior to the Closing Date (collectively, “Benefit Claims”);

     

    (c)  any
      actual or alleged liability of the Company, the Surviving Corporation or any
      of
      their respective Affiliates for death or injury to person or property as a
      result of any actual or alleged defect in any product manufactured or sold
      by
      the Company at or prior to the Effective Time, or any actual or alleged
      warranty, recall or similar liability for any product sold by or for the Company
      at or prior to the Effective Time, or any statutory liability of the Company,
      the Surviving Corporation or any of their respective Affiliates or any liability
      of the Company, the Surviving Corporation or any of their respective Affiliates
      assessed with respect to any failure to warn arising out of products sold at
      or
      prior to the Effective Time (collectively, “Product Liability
      Claims”);

     

    (d)  any
      liability of the Company, the Surviving Corporation or any of their respective
      Affiliates under any Environmental Laws relating to any occurrences at or prior
      to the Effective Time (collectively, “Environmental Claims”);

     

    (e)  any
      of
      the matters described in Section 3.7 of the Company Disclosure Schedule (the
      “Known Claims”);

     

    (f)  any
      payments made by Parent, Merger Sub or the Surviving Corporation after the
      Effective Time with respect to any Dissenting Shares to the extent that such
      payments exceed the portion of the Closing Payment Amount to which the holders
      of such Dissenting Shares would have been entitled had such Dissenting Shares
      not been Dissenting Shares, with any claims made pursuant to this Section 9.2(f)
      being referred to hereafter sometimes as the “Appraisal Claims”;

     

    (g)  any
      costs
      and expenses paid or payable by the Company in connection with the preparation,
      negotiation, execution and delivery of this Agreement and the agreements and
      other documents related to this Agreement, including, without limitation, the
      Company Promissory Note and the Security Agreements, and the consummation of
      the
      transactions contemplated hereby and thereby (including any fees and expenses
      of
      legal counsel, financial advisors and consultants) (collectively, “Transaction
      Cost Claims”), but only to the extent that such fees exceed $150,000 in the
      aggregate; 

     

    (h)  any
      claim, allegation or assertion that the development, manufacture, use,
      marketing, distribution or sale of the Company Products (“Company Activities”)
      infringes or violates (either directly or indirectly such as by inducement
      or
      contribution) any Intellectual Property of any third party, provided that such
      claim, allegation or assertion is not a result of any action taken by Parent
      or
      the Surviving Corporation after the Effective Time that deviates materially
      from
      the Company Activities as undertaken or contemplated by the Company (wherein
      “contemplated” means a definitive intention to undertake) as evidenced by the
      written records of the Company as of the Effective Time and which action causes
      the Company Activities to infringe or violate any Intellectual Property of
      any
      third party (collectively “Intellectual Property Claims”); 

     

    (i)  any
      breach of any representation or warranty in Section 3.23 of this Agreement
      and
      (ii) to the extent not duplicative of clause (i), any actual or asserted
      liability for Taxes of or owed by the Company or any Subsidiary of the Company
      in respect of any full or partial Tax period ending on or prior to the Closing
      Date (claims for indemnification under this Section 9.2(i) are referred to
      herein as “Tax Claims”); provided that for purposes of applying this
      subparagraph (i), Parent and the Company shall use appropriate methods to
      allocate liability in respect of any Taxes of the Company or any Subsidiary
      of
      the Company attributable to any Tax period that includes but ends after the
      Closing Date (each, a “Straddle Period”), which appropriate methods shall
      include the following:

     

    (A)  for
      any
      income Taxes or any transactional Taxes, including Taxes based on sales or
      revenue, the allocation of Taxes to pre- and post-Closing portions of a Straddle
      Period shall be determined using a closing-of-the-books method assuming that
      the
      applicable Straddle Period consists of two Taxable periods, one ending at the
      close of the Closing Date and one beginning at the opening of the day after
      the
      Closing Date, and

     

    (B)  for
      any
      Taxes based on net worth, capital, intangibles, or similar items, and for any
      real estate Taxes or other property or tangible asset-based Taxes, the
      allocation of Taxes to pre- and post-Closing portions of a Straddle Period
      shall
      be determined on a per diem basis taking into account the number of days in
      the
      Straddle Period through and including the Closing Date and the number of days
      in
      the entire Straddle Period; or

     

    (j)  any
      claims made by any Company Stockholder based upon any alleged breach of
      fiduciary or other duty by any officer, director or stockholder of the Company
      in connection with this Agreement or the transactions contemplated hereby,
      or
      any claims by any officer, director or stockholder of the Company to
      indemnification by the Company or the Surviving Corporation with respect to
      any
      such claims (collectively, “Fiduciary Duty Claims”).

     

    9.3  Third
      Party Claims.

     

    (a)  In
      the
      event that any Indemnified Party desires to make a claim against an Indemnifying
      Party (which term shall be deemed to include all Indemnifying Parties if more
      than one) in connection with any third party litigation, arbitration, action,
      suit, proceeding, claim or demand at any time instituted against or made upon
      it
      for which it may seek indemnification hereunder (a “Third Party Claim”), the
      Indemnified Party will promptly notify the Indemnifying Party (or if the
      Indemnifying Party is the Company, the Company Stockholders or the Participating
      Rights Holders, the Stockholder Representative Committee) of such Third Party
      Claim and of its claims of indemnification with respect thereto; provided that
      failure to promptly give such notice will not relieve the Indemnifying Party
      of
      its indemnification obligations under this Section 9.3, except to the extent,
      if
      any, that the Indemnifying Party has actually been prejudiced
      thereby.

     

    (b)  The
      Indemnifying Party will have the right to assume the defense of the Third Party
      Claim with counsel of its choice reasonably satisfactory to the Indemnified
      Party by written notice to the Indemnified Party within twenty (20) days after
      the Indemnifying Party has received notice of the Third Party Claim; provided,
      however, that the Indemnifying Party must conduct the defense of the Third
      Party
      Claim actively and diligently thereafter in order to preserve its rights in
      this
      regard; and provided, further, that the Indemnified Party may retain separate
      co-counsel at its sole cost and expense and participate in the defense of the
      Third Party Claim. In addition, in the event that the Indemnifying Party assumes
      the defense of any Third Party Claim in accordance with this Section 9.3(b),
      the
      limitations on recovery set forth in Section 9.5 below shall not apply to any
      Damages incurred by the Indemnified Party in connection with such Third Party
      Claim.

     

    (c)  The
      Indemnifying Party will not consent to the entry of any judgment or enter into
      any settlement with respect to the Third Party Claim without the prior written
      consent of the Indemnified Party (which consent will not be unreasonably
      withheld or delayed) unless the judgment or proposed settlement (i) includes
      an
      unconditional release of all liability of each Indemnified Party with respect
      to
      such Third Party Claim and (ii) involves only the payment of money damages
      that
      are fully covered by the Indemnifying Party (including amounts deemed to be
      paid
      by the Participating Rights Holders pursuant to Section 9.4 by the withholding
      by Parent, if any, of the Indemnity Holdback Amount pursuant to Section 1.7(d))
      and does not impose an injunction or other equitable relief upon the Indemnified
      Party. So long as the Indemnifying Party has assumed and is conducting the
      defense of the Third Party Claim in accordance with Section 9.3(b), the
      Indemnified Party will not consent to the entry of any judgment or enter into
      any settlement with respect to the Third Party Claim without the prior written
      consent of the Indemnifying Party (which consent will not be unreasonably
      conditioned, withheld or delayed by the Indemnifying Party).

     

    (d)  In
      the
      event the Indemnifying Party fails to assume the defense of the Third Party
      Claim in accordance with Section 9.3(b), (i) the Indemnified Party may defend
      against, and consent to the entry of any judgment or enter in to any settlement
      with respect to, the Third Party Claim in any manner it reasonably and in good
      faith may deem appropriate (and the Indemnified Party need not consult with,
      or
      obtain any consent from, the Indemnifying Party in connection therewith,
      provided, however, that no admission of liability shall be made under this
      Section 9.3(d) by an Indemnified Party on behalf of an Indemnifying Party
      without first consulting with, and obtaining the consent of, such Indemnifying
      Party, which consent will not be unreasonably conditioned, withheld or delayed
      by such Indemnifying Party) and (ii) the Indemnifying Party will remain
      responsible for any Damages the Indemnified Party may suffer as a result of
      such
      Third Party Claim to the extent subject to indemnification under this Article
      9.

     

    (e)  Notwithstanding
      the foregoing, Parent and the Surviving Corporation shall be responsible for
      the
      prosecution and defense of all Product Liability Claims and any claims relating
      to the Intellectual Property of the Company (collectively, the “Parent-Handled
      Claims”). Except to the extent that any such disclosure could cause a waiver of
      applicable attorney-client privilege, the Stockholder Representative Committee
      shall have the right to monitor the progress of Parent-Handled Claims, to review
      on a timely basis all pleadings and other filings relating thereto and to
      discuss with counsel to Parent and the Surviving Corporation such matters
      relating to Parent-Handled Claims as may be reasonably appropriate. Parent
      and
      the Surviving Corporation shall pursue in good faith, through counsel of their
      selection, the prosecution or defense of all Parent-Handled Claims.

     

    (f)  Parent
      shall, to the extent that Parent and the Surviving Corporation are entitled
      to
      indemnification for Damages pursuant to this Article 9 and it could reasonably
      be expected that Parent may recover a substantial portion of the Damages
      relating to such Parent-Handled Claim pursuant to this Article 9, (i) provide
      the Stockholder Representative Committee with access to appropriate employees
      of
      Parent and the Surviving Corporation for the purpose of discussing matters
      relating to Parent-Handled Claims as the Stockholder Representative Committee
      may from time to time reasonably request and (ii) permit the Stockholder
      Representative Committee, upon its reasonable request, to participate in the
      process of any settlement or other resolution of any Parent-Handled Claims
      pursuant to this Article 9; provided that Parent shall be entitled to settle,
      control, compromise or otherwise dispose of Parent-Handled Claims in its sole
      discretion and without obtaining the consent of the Indemnified Party; provided,
      further, that no admission of liability shall be made under this Section 9.3(f)
      by Parent on behalf of an Indemnifying Party without first consulting with,
      and
      obtaining the consent of, such Indemnifying Party, which consent will not be
      unreasonably conditioned, withheld or delayed by such Indemnifying
      Party.

     

    9.4  Payment
      of Claims.
      In the
      event of any bona fide claim for indemnification hereunder, the Indemnified
      Party will advise the Indemnifying Party that it is required to provide
      indemnification therefor in writing. With respect to liquidated claims for
      Damages, if within thirty (30) days the Indemnifying Party has not contested
      such claim in writing, the Indemnifying Party will pay the full amount thereof,
      subject to the limitations set forth in Section 9.5 and, except as set forth
      in
      the following sentence of this Section 9.4, within ten (10) days after the
      expiration of such period. In order to satisfy any indemnification obligations
      of the Company, the Company Stockholders and the Participating Rights Holders
      pursuant to this Article 9, Parent, the Surviving Corporation and their
      respective Affiliates (and the respective directors, officers, employees and
      representatives of any of them) shall have the right to recover Damages that
      have been incurred, or may be incurred, first from the Indemnity Holdback Amount
      which Parent is entitled to withhold pursuant to Section 1.7(d) and then by
      setting off any indemnity payments owed by Parent and the Surviving Corporation
      pursuant to Section 9.1. In the event that the aggregate of the Indemnity
      Holdback Amount which Parent is entitled to withhold pursuant to Section 1.7(d)
      and any indemnity payments owed by Parent and the Surviving Corporation pursuant
      to Section 9.1 is less than the Damages incurred by any or all of Parent, the
      Surviving Corporation and their respective Affiliates (and the respective
      directors, officers, employees and representatives of any of them), none of
      such
      Indemnified Parties shall have any further recourse to any of the Company
      Stockholders or the Participating Rights Holders. Notwithstanding anything
      to
      the contrary herein and for purposes of clarification, except in the case of
      fraud, the liability of the Company Stockholders and the Participating Rights
      Holders, including indemnification obligations and claims of Parent and the
      Surviving Corporation and any Affiliate thereof and their respective
      Representatives for Damages shall be limited solely to (and payable in the
      order
      set forth in the third sentence of this Section 9.4) (x) any indemnity payments
      owed by Parent and the Surviving Corporation pursuant to Section 9.1 and (y)
      the
      Maximum Indemnification Amount (as defined in Section 9.5(b)) and payable solely
      from monies in the Indemnity Holdback Amount, as adjusted downward if the FDA
      Milestone Payment is not made, and once any payment from the Indemnity Holdback
      Amount is released to the Participating Rights Holders (or the Closing Amount
      has been paid to the Participating Rights Holders, except in the case of fraud
      by the Company), Parent, the Surviving Corporation and any Affiliate thereof,
      and their respective Representatives, shall have no further claim to any amount
      under this Agreement from the Company Stockholders and the Participating Rights
      Holders other than Parent and Surviving Corporation offsets against
      indemnification payments pursuant to Section 9.1. All such recoveries from
      the
      Indemnity Holdback Amount and offsets against indemnification payments shall
      be
      made on a pro rata basis from all Participating Rights Holders in the same
      proportions in which they would otherwise be entitled to receive payments of
      the
      Holdback Amount or indemnification payments, except that, to the extent of
      any
      claim arising under Section 9.2(a) that was caused by a breach of any
      Participating Rights Holder, such recoveries shall be made severally from the
      Participating Rights Holder responsible for such breach and no other
      Participating Rights Holder shall have any liability. Any indemnification
      obligations of Parent or Merger Sub pursuant to this Article 9 shall be paid,
      at
      Parent’s election, (i) in cash, (ii) by issuing Parent Common Stock (each share
      of which shall be valued for such purpose at the Reference Market Value of
      Parent Common Stock as of the date of such issuance), subject to the conditions
      set forth in Section 1.6(b), (iii) by setting off against (i.e., reducing)
      any
      indemnification payments owed to Parent pursuant to this Article 9 or (iv)
      through a combination of the methods specified in clauses (i), (ii) and (iii).
      The parties agree that, for Tax purposes, to the greatest extent possible,
      the
      payment of any indemnity hereunder shall be treated as an adjustment to the
      Merger Consideration paid by Parent hereunder.

     

    Notwithstanding
      anything to the contrary contained herein and except in the case of fraud,
      the
      sole and exclusive remedy of Parent, the Surviving Corporation and any Affiliate
      thereof in respect of any and all claims relating to this Agreement, the
      transactions contemplated hereby and any certificate, document or other
      instrument delivered pursuant to or in connection with this Agreement shall
      be
      the rights to indemnification set forth in this Article IX and to make claims
      against the Indemnity Holdback Amount and offsets against indemnification
      payments in accordance with the terms of this Agreement.

     

     

     

    9.5  Limitations
      of Liability.

     

    (a)  Threshold.
      No
      Indemnifying Party will be required to indemnify an Indemnified Party hereunder
      until such time as the aggregate amount of Damages for which (i) Parent, the
      Surviving Corporation and their respective Affiliates, and each of the
      directors, officers, employees or representatives, as applicable, on the one
      hand, or (ii) the Company, the Company Stockholders and the Participating Rights
      Holders and their respective directors, officers, employees or representatives,
      as applicable, on the other hand, are otherwise entitled to indemnification
      pursuant to this Agreement exceeds $150,000, at which time, the Indemnifying
      Party shall be obligated to indemnify the Indemnified Party for the full amount
      of such Damages subject to the limitations of this Article 9. Notwithstanding
      anything to the contrary in this Section 9.5, the threshold limits imposed
      by
      this Section 9.5(a) shall not apply to any Damages arising out of or in
      connection with any breach by the Company or any Participating Rights Holders
      of
      (x) any Special Representations, (y) any Special Claims or (z) any intentional
      or willful breaches of this Agreement, or fraud or similar
      circumstances.

     

    (b)  Maximum
      Liability.
      The
      parties specifically agree that, notwithstanding any provision of this Agreement
      to the contrary, the maximum aggregate liability of all of the Participating
      Rights Holders, on the one hand, and Parent and the Surviving Corporation,
      on
      the other hand, for indemnification under this Article 9, except in the case
      of
      intentional or willful breach of this Agreement, fraud or similar circumstances,
      will not exceed a maximum amount equal to 15% of the aggregate of the Closing
      Payment Amount and the Holdback Amount (the “Maximum Indemnification Amount”),
      which Maximum Indemnification Amount shall be reduced by 15% of $5,000,000
      if
      the FDA Milestone Payment is not made. For purposes of this Section 9.5(b),
      the
      Closing Payment Amount shall be deemed to be a dollar amount equal to (i)
      8,400,000, multiplied by the Reference Market Value on the Closing Date, and
      (ii) $7,000,000.

     

    (c)  Time
      Limit.
      

     

    (A) All
      representations and warranties in this Agreement shall survive the Closing
      and
      shall expire on, and no Indemnifying Party will be liable for any Damages
      hereunder with respect to a breach of such representations and warranties or
      a
      claim for indemnification pursuant to Section 9.2(a) unless a written claim
      for
      indemnification is given by the Indemnified Party to the Indemnifying Party
      with
      respect thereto prior to, the 540th day following the Closing Date; provided
      that Tax Claims shall survive until the earlier of (i) the second anniversary
      of
      the Closing Date and (ii) sixty (60) days after the expiration of the applicable
      statutes of limitations.

     

    (B) All
      claims for indemnification pursuant to Sections 9.2(b), 9.2(c), 9.2(d), 9.2(e),
      9.2(f), 9.2(g), 9.2(h), 9.2(i) and 9.2(j) shall survive the Closing and shall
      expire on, and no Indemnifying Party will be liable for any Damages hereunder
      with respect to any such claim for indemnification unless a written claim for
      indemnification is given by the Indemnified Party to the Indemnifying Party
      with
      respect thereto prior to, the second anniversary of the Closing Date
      .

     

    9.6  Right
      to Bring Action; No Contribution.
      Notwithstanding anything in this Article 9 or elsewhere in this Agreement to
      the
      contrary, only the Stockholder Representative Committee shall have the right,
      power and authority to commence any action, suit or proceeding, including any
      arbitration proceeding, by and on behalf of any or all Participating Rights
      Holders against Parent or the Surviving Corporation, or any other Indemnified
      Party, and in no event shall any Participating Rights Holder himself, herself
      or
      itself have the right to commence any action, suit or proceeding, including
      any
      arbitration proceeding, against Parent or the Surviving Corporation, or any
      other Indemnified Party. Each Participating Rights Holder waives, and
      acknowledges and agrees that he, she or it shall not have and shall not exercise
      or assert (or attempt to exercise or assert), any right of contribution, right
      of indemnity or other right or remedy against the Surviving Corporation in
      connection with any indemnification obligation or any other liability to which
      he may become subject under or in connection with this Agreement.

     

    ARTICLE X  

     

    GENERAL
      PROVISIONS

     

    10.1  Notices.
      All
      notices, claims and demands hereunder, and all other communications which are
      required to be given in writing pursuant to this Agreement, shall be in writing
      and shall be given (and shall be deemed to have been duly given upon receipt)
      by
      delivery in person or facsimile (received at the facsimile machine to which
      it
      is transmitted prior to 5 p.m., local time, on a business day for the party
      to
      which it is sent, or if received after 5 p.m., local time, as of the next
      business day) or by registered or certified mail (postage prepaid, return
      receipt requested) to the respective parties at the following addresses (or
      at
      such other address for a party as shall be specified in a notice given in
      accordance with this Section 10.1):

     

    if
      to
      Parent or Merger Sub:

     

    OccuLogix,
      Inc.

    2600
      Skymark Avenue, Building 9, Suite 201

    Mississauga,
      Ontario

    L4W
      5B2

    Attention:
      Chief Executive Officer

    Facsimile:
      905-602-7623

    


    with
      a
      copy to:

    


    Torys
      LLP

    Suite
      3000, 79 Wellington Street West

    Toronto-Dominion
      Centre

    Toronto,
      Ontario

    M5K
      1N2

    Attention:
      David A. Chaikof

    Facsimile:
      416-865-7380

    


    if
      to the
      Company:

    


    Solx,
      Inc.

    8
      Saint
      Mary’s Street

    Boston,
      MA 02215

    Attention:
      President 

    Telephone:
      617-353-1277

    Facsimile:
      617-358-1933

    


    with
      a
      copy to:

    


    Rackemann,
      Sawyer & Brewster, Professional Corporation

    One
      Financial Center

    Boston,
      MA 02111

    Attention:
      Jamey A. Wachta, Esq.

    Telephone:
      617-951-1141

    Facsimile:
      617-542-7437

     

     

     

    and
      if to
      the Stockholder Representative Committee:

    


    Doug
      P.
      Adams

    Solx,
      Inc.

    8
      Saint
      Mary’s Street

    Boston,
      MA 02215

    Telephone:
      617-353-1277

    Facsimile:
      617-358-1933

    


    and:

    


    John
      Sullivan

    2751
      Donald Ross Rd E

    Sarasota,
      FL 34240

    Telephone:
      941-378-1023

    Facsimile:
      

    


    and:

    


    Peter
      M.
      Adams

    5562
      Morningside Drive

    San
      Jose,
      CA 95138

    Telephone:
      408-274-5943

    Facsimile:
      408-238-8539

    


    10.2  Certain
      Definitions.
      For
      purposes of this Agreement, the term:

     

    “Acquisition
      Proposal” means any bona fide offer or proposal (other than an offer or proposal
      by Parent) relating to any Acquisition Transaction.

     

    “Acquisition
      Transaction” means (i) any transaction or series of related transactions other
      than the transactions contemplated by this Agreement involving the purchase
      of
      all or any significant portion of the capital stock or assets of the Company,
      (ii) any agreement to enter into a business combination with the Company, (iii)
      any agreement made, other than in the ordinary course of business, with regard
      to the Intellectual Property owned or licensed by the Company and (iv) any
      other
      extraordinary business transaction involving, or otherwise relating to, the
      Company or any Intellectual Property owned or licensed by the
      Company.

     

    “Affiliate”
      means, with respect to any person, any person that, directly or indirectly,
      through one or more intermediaries, controls or is controlled by, or is under
      common control with, such person. For greater certainty, until the consummation
      of the Merger, the Company shall not be deemed, for any purposes of this
      Agreement, to be an Affiliate of Parent or Merger Sub.

     

    “California
      Law” means the California Corporations Code of the State of California, as
      amended.

     

    “Closing
      Payment Amount” means 8,400,000 shares of Parent Common Stock and
      $7,000,000.

     

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

     

    “Company
      Disclosure Schedule” means the schedule of disclosures and exceptions to the
      representations and warranties made by the Company in Article 3.

     

    “Company
      Licensed Intellectual Property” means all Intellectual Property licensed to the
      Company by any third party.

     

    “Company
      Owned Intellectual Property” means all Intellectual Property owned by the
      Company.

     

    “Company
      Preferred Stock” means shares of the preferred stock of the Company, par value
      $.001 per share, including the Series A Preferred Stock.

     

    “Company
      Products” means, collectively, the Titanium Sapphire Laser, the Gold Shunt and
      the Nanoparticles and the use thereof and any other product or process which
      is
      the subject matter of any patent or patent application owned by or licensed
      to
      the Company as of the Effective Time, each of which is sometimes referred to
      herein as a “Company Product”.

     

    “Company
      Promissory Note” means the Convertible Unsecured Promissory Note of the Company,
      in the principal amount of $2,000,000, dated April 4, 2006 and granted in favor
      of Parent.

     

    “Company
      Stockholders” means holders of shares of capital stock of the Company, including
      Company Common Stock and Company Preferred Stock.

     

    “Company
      Warrants” means all outstanding unexercised rights, warrants or options not
      subject to the Company Option Plan to purchase shares of capital stock of the
      Company immediately prior to the Effective Time.

     

    “Damages”
      means all damages, losses, costs and expenses actually incurred or suffered
      by a
      party with respect to, or relating to, an event, circumstance or state of facts.
      Damages shall specifically include court costs and the reasonable fees and
      expenses of legal counsel arising out of, or relating to, any direct or third
      party claims, demands, actions, causes of action, suits, litigations,
      arbitrations or liabilities. 

     

    “Dissenting
      Shares” means shares of Company Common Stock or Company Preferred Stock that are
      outstanding immediately prior to the Effective Time and which are held by
      Company Stockholders who shall have not voted in favor of the Merger or
      consented thereto in writing and who shall have exercised dissenters’ rights or
      rights of appraisal for such shares of Company Common Stock or Company Preferred
      Stock in accordance with Delaware Law (or California Law, if applicable) and
      who, as of the Effective Time, have not effectively withdrawn or lost such
      dissenters’ rights.

     

    “Environmental
      Law” means any judgment, decree, order, law, license, rule or regulation
      pertaining to environmental matters, including those arising under any federal,
      state or local statute, regulation, ordinance, order or decree relating to
      the
      environment, or any other zoning, health or safety law or
      regulation.

     

    “Environmental
      Permit” means material permits, licenses and other authorizations required under
      Environmental Law.

     

    “ERISA”
      means the Employee Retirement Income Security Act of 1974.

     

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

     

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

     

    “Holdback
      Payment Date” means a date on which Parent pays a portion of the Holdback
      Payment Amount in accordance with Section 1.7.

     

    “Incubation
      Agreement” means the Incubation Agreement, dated June 23, 2000, between the
      Trustees of Boston University and the Company, as amended.

    
      “FDA
        Milestone” means the receipt by the Company, on or prior to December 31, 2007,
        of written notice from the FDA granting final written approvals for the
        marketing and sale of the Gold Shunt in the United States for the glaucoma
        shunting indication, which approval shall not be subject to limitations that
        would inhibit marketing or selling to a significant portion of the market
        for
        the approved indication.

       

      “Financial
        Statements” means unaudited consolidated financial statements of the Company
        (including balance sheet, income statement and statement of cash flows) (i)
        as
        of the twelve months ended May 31, 2005, (ii) as of the seven months ended
        December 31, 2005 and (iii) as of the fiscal quarter ended March 31, 2006
        and a supplemental statement for the month ended April 30, 2006, which the
        Company has made available to Parent and which are included in the Company
        Disclosure Schedule.

       

      “Financing”
        means any equity financing for the account of the Company in which shares
        of
        Company Common Stock or Company Preferred Stock, or other equity securities,
        directly or indirectly, convertible or exercisable into or exchangeable for
        Company Common Stock or Company Preferred Stock, are issued.

       

      “Fully-diluted
        basis” means, with respect to the number of shares of Company Common Stock
        outstanding as of a particular time, the sum of (i) the aggregate number
        of
        shares of Company Common Stock issued and outstanding at such time, (ii)
        the
        maximum number of shares of Company Common Stock issuable at such time upon
        the
        exercise of unexercised Company Options, Company Warrants and other options,
        warrants or rights to acquire shares of Company Common Stock issued and
        outstanding at such time (whether or not fully vested), and upon the conversion
        of all convertible notes or other convertible securities outstanding at such
        time, and (iii) the maximum number of shares of Company Common Stock issuable
        at
        such time upon the conversion of the Company Preferred Stock, including any
        shares of Company Preferred Stock issuable upon exercise of the options,
        warrants and other rights described in (ii) above.

       

      “Fully-Diluted
        Common Stock Number” means the number of shares of Company Common Stock
        outstanding on a fully-diluted basis immediately prior to the Effective Time
        (including Dissenting Shares, but excluding shares of Company Common Stock
        and
        Company Preferred Stock held by the Company, if any).

       

      “GAAP”
        means generally accepted accounting principles consistently
        applied.

       

      “Gold
        Shunt” means the Company’s implantable device intended to reduce intraocular
        pressure in the anterior chamber of the eye.

       

      “Governmental
        Authority” means any United States (federal, state or local) or foreign
        government or governmental, regulatory or administrative authority, agency
        or
        commission or securities exchange.

       

      “Hazardous
        Substance” means (i) those substances defined in, or regulated under, the
        following federal statutes and their state counterparts and all regulations
        thereunder: the Hazardous Materials Transportation Act, the Resource
        Conservation and Recovery Act, the Comprehensive Environmental Response,
        Compensation and Liability Act, the Clean Water Act, the Safe Drinking Water
        Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and Rodenticide
        Act and the Clean Air Act, (ii) petroleum and petroleum products, including
        crude oil and any fractions thereof, (iii) natural gas, synthetic gas and
        any
        mixtures thereof, (iv) polychlorinated biphenyls, asbestos and radon, (v)
        any
        other contaminant and (vi) any substance, material or waste regulated by
        any
        Governmental Authority pursuant to any Environmental Laws.

       

      “Holdback
        Amount” means $13,000,000, as adjusted pursuant to Section 1.7(c).

       

    

    “Indebtedness”
      means, as applied to any person, (i) all indebtedness for borrowed money,
      whether current or funded, or secured or unsecured, (ii) all indebtedness for
      the deferred purchase price of property or services represented by a note or
      other security, (iii) all indebtedness created or arising under any conditional
      sale or other title retention agreement with respect to property acquired (even
      though the rights and remedies of the seller or lender under such agreement
      in
      the event of default are limited to repossession or sale of such property),
      (iv)
      all indebtedness secured by a purchase money mortgage or other lien to secure
      all or part of the purchase price of property subject to such mortgage or lien,
      (v) all obligations under leases which shall have been or must be, in accordance
      with GAAP, recorded as capital leases in respect of which such person is liable
      as lessee, (vi) any liability in respect of banker’s acceptances or letters of
      credit and (vii) all indebtedness referred to in clause (i), (ii), (iii), (iv),
      (v) or (vi) above which is, directly or indirectly, guaranteed by or which
      such
      person has agreed, contingently or otherwise, to purchase or otherwise acquire
      or in respect of which it has otherwise assured a creditor against
      loss.

     

    “Indemnified
      Party” means any person entitled to seek indemnification pursuant to Article
      9.

     

    “Indemnifying
      Party” means any person against whom indemnification may be sought pursuant to
      Article 9.

     

    “Intellectual
      Property” means intellectual property or proprietary rights of any description,
      including (i) rights in any patent, patent application (including any
      provisionals, continuations, divisions, continuations-in-part, extensions,
      renewals, reissues, revivals and reexaminations, any national phase PCT
      applications, any PCT international applications and all foreign counterparts),
      copyright, industrial design, URL, domain name, trademark, service mark, logo,
      trade dress or trade name, (ii) related registrations and applications for
      registration, (iii) trade secrets, moral rights or publicity rights, (iv)
      inventions, discoveries, improvements, modification, know-how, technique,
      methodology, writing, work of authorship, design or data, whether or not
      patented, patentable, copyrightable or reduced to practice, including any
      inventions, discoveries, improvements, modification, know-how, technique,
      methodology, writing, work of authorship, design or data embodied or disclosed
      in any (1) computer source codes (human readable format) and object codes
      (machine readable format), (2) specifications, (3) manufacturing, assembly,
      test, installation, service and inspection instructions and procedures, (4)
      engineering, programming, service and maintenance notes and logs, (5) technical,
      operating and service and maintenance manuals and data, (6) hardware reference
      manuals and (7) user documentation, help files or training materials and (v)
      goodwill related to any of the foregoing.

     

    “IRS”
      means the Internal Revenue Service.

     

    “Law”
      means any United States or foreign judgment, decree, order, law, license,
      statute, ordinance, rule or regulation.

     

    “Material
      Adverse Effect” means with respect to the Company or Parent, as the case may be,
      any change or effect that, when taken individually or together with all other
      adverse changes or effects, is or is reasonably likely to be materially adverse
      to the business, results of operations and financial condition of the Company
      or
      Parent, as the case may be, and their respective Subsidiaries, taken as a
      whole.

     

    “Merger
      Consideration” means the aggregate amount of the Purchase Price.

     

    “Nanoparticles”
      means the Company’s chromophores used to enhance the effect of the Titanium
      Sapphire Laser in performing laser trabeculoplasty.

     

    “Participating
      Rights Holders” means those persons (other than the holders of Dissenting
      Shares, the Company or Parent) who, immediately prior to the Effective Time,
      will be holders of Company Common Stock, Company Preferred Stock, Company
      Warrants or Company Options and whose interests therein, as the result of the
      Merger, are converted into rights to receive a portion of the Closing Payment
      Amount.

     

    “PBGC”
      means the Pension Benefit Guaranty Corporation created pursuant to
      ERISA.

     

    “Permits”
      means all franchises, permits, licenses and any similar authority.

     

    “Permitted
      Indebtedness” means indebtedness, in an aggregate amount not to exceed $15,000,
      that is not secured by a lien on, and does not in any way encumber, the assets
      of the Company, including the Intellectual Property of the Company.

     

    “Per
      Share Common Cash Closing Payment” means the dollar amount equal to the quotient
      obtained by dividing (x) $7,000,000 minus the Preferred Closing Cash Payment
      Amount, by (y) the Fully-Diluted Common Stock Number.

     

    “Per
      Share Common Closing Payment” means the Per Share Common Cash Closing Payment
      and the Per Share Common Stock Closing Payment.

     

    “Per
      Share Common Holdback Amount” means the amount equal to the quotient obtained by
      dividing (x) the amount of the Holdback Amount, by (y) the Fully-Diluted Common
      Stock Number.

     

    “Per
      Share Common Stock Closing Payment” means the number of shares of Parent Common
      Stock equal to the quotient obtained by dividing (x) 8,400,000 minus the
      Preferred Closing Stock Payment Amount, by (y) the Fully-Diluted Common Stock
      Number.

     

    “Per
      Share Preferred Cash Closing Payment” means, with respect to each share of the
      Series A Preferred Stock outstanding immediately prior to the Effective Time,
      the cash portion of the Closing Payment Amount allocable to such share, in
      preference to any share of Company Common Stock pursuant to the Company
      Certificate of Incorporation as in effect immediately prior to the Effective
      Time.

     

    “Per
      Share Preferred Closing Payment” means the Per Share Preferred Cash Closing
      Payment and the Per Share Preferred Stock Closing Payment.

     

    “Per
      Share Preferred Stock Closing Payment” means, with respect to each share of the
      Series A Preferred Stock outstanding immediately prior to the Effective Time,
      the portion of the Closing Payment Amount which consists of shares of Parent
      Common Stock, allocable to such share of the Series A Preferred Stock, in
      preference to any share of Company Common Stock pursuant to the Company
      Certificate of Incorporation as in effect immediately prior to the Effective
      Time.

     

    “Preferred
      Closing Cash Payment Amount” means an amount equal to the sum of all Per Share
      Preferred Cash Closing Payments for all outstanding shares of Series A Preferred
      Stock.

     

    “Preferred
      Closing Stock Payment Amount” means a number of shares of Parent Common Stock
      equal to the sum of all Per Share Preferred Stock Closing Payments for all
      outstanding shares of Series A Preferred Stock.

     

    “Purchase
      Price” means the Closing Payment Amount plus the Holdback Amount.

     

    “Reference
      Market Value” means the average closing sale price of a share of Parent Common
      Stock on the NASDAQ National Market System for the fifteen (15) consecutive
      trading day period ending on the day immediately prior to the date on which
      such
      Reference Market Value is determined.

     

    “SEC”
      means the U.S. Securities and Exchange Commission.

     

    “Securities”
      means shares of Company Common Stock and Company Preferred Stock and options,
      warrants, convertible notes, rights of conversion and other rights to acquire
      capital stock of the Company, and all shares issuable upon exercise or
      conversion of Company Preferred Stock, options, warrants, convertible notes,
      rights of conversion and other rights to acquire stock of the Company,
      outstanding from time to time, whether or not then currently vested, exercisable
      or convertible.

     

    “Securities
      Act” means the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Securityholder”
      means a holder of Securities.

     

    “Special
      Claims” means any Known Claims, Appraisal Claims, Tax Claims, Fiduciary Duty
      Claims, Transaction Cost Claims, Intellectual Property Claims and claims
      relating to a breach of Special Representations. 

     

    “Special
      Representations” means any representations or warranties relating to the
      Capitalization Certificate or contained in Sections 3.2, 3.8, 3.20 or
      3.27.

     

    “Sponsored
      Research Agreement” means the Sponsored Research Agreement, dated August 23,
      2005, between the Trustees of Boston University and the Company, relating to
      manufacturing research supervised by Professor Thomas Bifano.

     

    “Stockholder
      Representative Committee” means the group of individuals appointed to serve as
      such under Section 2.5.

     

    “Subsidiary
      or Subsidiaries” of any person means 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.

     

    “Superior
      Proposal” means an unsolicited, bona fide written offer made by a third party to
      consummate any of the following transactions: (i) a merger, consolidation,
      business combination, recapitalization, liquidation, dissolution or similar
      transaction involving the Company pursuant to which the Company Stockholders
      immediately preceding such transaction hold less than 50% of the equity interest
      in the surviving or resulting entity of such transaction; (ii) a sale or other
      disposition by the Company of all or substantially all of its assets; or (iii)
      the acquisition by any person or group (including by way of a tender offer
      or an
      exchange offer or issuance by the Company), directly or indirectly, of
      beneficial ownership or a right to acquire beneficial ownership of shares
      representing in excess of 50% of the voting power of the then outstanding shares
      of capital stock of the Company, in each case, on terms that the Company Board
      determines, in its reasonable judgment (after consultation with a reputable
      financial advisor), to be more favorable to the Company Stockholders than the
      terms of the Merger (after taking into account all relevant factors, including
      all conditions to the offer, the timing of the transaction contemplated by
      the
      offer, the risk of non-consummation thereof and the need for any required
      governmental or other consents, filings or approvals); provided, however, that
      any such offer shall not be deemed to be a “Superior Proposal” if any financing
      required to consummate the transaction contemplated by such offer is not
      committed and is not likely, in the reasonable judgment of the Company Board,
      to
      be obtained by such third party on a timely basis.

     

    “Tax”
or
      “Taxes” (and with correlative meaning, “Taxable”) means any United States
      federal, state or local, or non-United States income, gross receipts, franchise,
      estimated, alternative minimum, add-on minimum, sales, use, transfer,
      registration, value added, excise, natural resources, severance, stamp,
      withholding, occupation, premium, windfall profit, environmental, customs,
      duties, real property, personal property, capital stock, net worth, intangibles,
      social security, unemployment, disability, payroll, license, employee or other
      tax, or similar levy, of any kind whatsoever, including any interest, penalties
      or additions to tax in respect of any of the foregoing.

     

    “Tax
      Return” means any return, declaration, report, claim for refund, information
      return or other document (including any related or supporting estimates,
      elections, schedules, statements or information) filed, or required to be filed,
      in connection with the determination, assessment or collection of any Tax or
      the
      administration of any laws, regulations or administrative requirements relating
      to any Tax.

     

    “Taxation
      Authority” means any Governmental Authority having any responsibility for (i)
      the determination, assessment or collection or payment of any Tax or (ii) the
      administration, implementation or enforcement of, or compliance with, any Law
      relating to Tax.

     

    “Titanium
      Sapphire Laser” means the Company’s flashlamp pumped laser intended for use in
      performing laser trabeculoplasty.

     

     

     

    The
      following table sets forth certain other defined terms and the Section of the
      Agreement in which the meaning of each such term appears:

     

    
      	 	
              Section(s)

               

            
	
              “Activities
                to Date”

               

            	
              3.20(a)

               

            
	
              “Agreement”

               

            	
              Preamble

               

            
	
              “Agreement
                Date”

               

            	
              Preamble

               

            
	
              “Antitrust
                Filing”

               

            	
              6.2

               

            
	
              “Appraisal
                Claims”

               

            	
              9.2(f)

               

            
	
              “Benefit
                Claims”

               

            	
              9.2(b)

               

            
	
              “Capitalization
                Certificate”

               

            	
              7.2(k)

               

            
	
              “Certificates”

               

            	
              2.2(a)(i)

               

            
	
              “Closing”

               

            	
              1.1(b)

               

            
	
              “Closing
                Date”

               

            	
              1.1(b)

               

            
	
              “Committee
                Reimbursement Amount”

               

            	
              1.5(b)

               

            
	
              “Company”

               

            	
              Preamble

               

            
	
              “Company
                Activities” 

               

            	
              9.2(h)

               

            
	
              “Company
                Board”

               

            	
              Preamble

               

            
	
              “Company
                Certificate of Incorporation”

               

            	
              Preamble

               

            
	
              “Company
                Common Stock”

               

            	
              Preamble

               

            
	
              “Company
                Licenses”

               

            	
              3.20(a)

               

            
	
              “Company
                Option”

               

            	
              2.1(c)

               

            
	
              “Company
                Option Plan”

               

            	
              2.1(c)

               

            
	
              “Confidentiality
                Agreement”

               

            	
              6.6

               

            
	
              “Delaware
                Law”

               

            	
              Preamble

               

            
	
              “Delivered
                Tax Returns”

               

            	
              3.23(a)

               

            
	
              “Derivative
                Instruments”

               

            	
              2.2(a)(i)

               

            
	
              “Effective
                Time”

               

            	
              1.1(b)

               

            
	
              “Employee
                Benefit Plan”

               

            	
              3.19(a)

               

            
	
              “Environmental
                Claims”

               

            	
              9.2(d)

               

            
	
              “FDA
                Milestone Payment”

               

            	
              1.7(c)

               

            
	
              “Fiduciary
                Duty Claims”

               

            	
              9.2(j)

               

            
	
              “Foreign
                Antitrust Filing”

               

            	
              6.2

               

            
	
              “HSR
                Act”

               

            	
              6.2

               

            
	
              “Indemnity
                Holdback Amount”

               

            	
              1.7(d)

               

            
	
              “Initial
                Stockholder Approval”

               

            	
              6.4

               

            
	
              “Intellectual
                Property Claims”

               

            	
              9.2(h)

               

            
	
              “Known
                Claims”

               

            	
              9.2(e)

               

            
	
              “Maximum
                Indemnification Amount”

               

            	
              9.5(b)

               

            
	
              “McHallam”

               

            	
              2.1(a)

               

            
	
              “McHallam
                Additional Cash”

               

            	
              2.1(a)

               

            
	
              “Merger”

               

            	
              Preamble

               

            
	
              “Merger
                Certificate”

               

            	
              1.1(a)(i)

               

            
	
              “Merger
                Sub”

               

            	
              Preamble

               

            
	
              “Option
                Shares”

               

            	
              2.1(c)

               

            
	
              “Parent”

               

            	
              Preamble

               

            
	
              “Parent
                Board”

               

            	
              Preamble

               

            
	
              “Parent
                Common Stock”

               

            	
              Preamble

               

            
	
              “Parent-Handled
                Claims”

               

            	
              9.3(e)

               

            
	
              “Promissory
                Note”

               

            	
              1.8

               

            
	
              “Product
                Liability Claims”

               

            	
              9.2(c)

               

            
	
              “Products”

               

            	
              3.20(a)

               

            
	
              “Reallocated
                Shares”

               

            	
              2.1(a)

               

            
	
              “Security
                Agreements”

               

            	
              1.8

               

            
	
              “Series
                A Preferred Stock”

               

            	
              Preamble

               

            
	
              “SRC
                Expenses”

               

            	
              2.5(c)

               

            
	
              “Stockholders
                Agreement”

               

            	
              Preamble

               

            
	
              “Straddle
                Period”

               

            	
              9.2(i)

               

            
	
              “Surviving
                Corporation”

               

            	
              Preamble

               

            
	
              “Surviving
                Corporation Charter”

               

            	
              1.3(a)

               

            
	
              “Tax
                Claims”

               

            	
              9.2(i)

               

            
	
              “Termination
                Date”

               

            	
              8.1(b)

               

            
	
              “Third
                Party Claim”

               

            	
              9.3(a)

               

            
	
              “Transaction
                Cost Claims”

               

            	
              9.2(g)

               

            


    

    


    10.3  Payments.
      As used
      in each instance, in this Agreement, any and all references, of whatever kind
      or
      nature, to dollars are references to United States dollars.

     

    10.4  Severability.
      If any
      term or other provision of this Agreement is invalid, illegal or incapable
      of
      being enforced by any rule of applicable law, or public policy, all other
      conditions and provisions of this Agreement shall nevertheless remain in full
      force and effect so long as the economic or legal substance of the Merger is
      not
      affected in any manner materially adverse to any party. Upon such determination
      that any term or other provision is invalid, illegal or incapable of being
      enforced, the parties hereto shall negotiate in good faith to modify this
      Agreement so as to effect the original intent of the parties as closely as
      possible in a mutually acceptable manner in order that the Merger be consummated
      as originally contemplated to the fullest extent possible.

     

    10.5  Entire
      Agreement; Assignment.
      This
      Agreement, together with the Confidentiality Agreement, constitutes the entire
      agreement among the parties with respect to the subject matter hereof and
      thereof and supersedes all prior agreements and undertakings, both written
      and
      oral, among the parties, or any of them, with respect to the subject matter
      hereof and thereof. This Agreement shall not be assigned by operation of law
      or
      otherwise, except that Parent and Merger Sub may assign all or any of their
      rights and obligations hereunder to (i) any Affiliate of Parent (provided,
      that
      no such assignment to an Affiliate shall relieve the assigning party of its
      obligations hereunder), and (ii) Parent may assign all of its rights and
      obligations hereunder to a person that acquires all of the capital stock, or
      substantially all of the assets, of the Company or any division or business
      unit
      of Parent responsible for the business of the Company (provided that, in the
      event of such an assignment, the amount of the Holdback Amount theretofore
      unpaid, less the amount of the Indemnity Holdback Amount permitted to be
      withheld pursuant to Section 1.7(b), if any, shall be paid immediately to the
      Participating Rights Holders and allocated among them in accordance with Section
      2.1, and provided, further, that such person assumes this Agreement, in writing,
      and agrees to be bound by and to comply with all of the terms and conditions
      hereof); provided that the Company’s prior written consent shall be required in
      connection with any assignment pursuant to the foregoing clause (ii) if such
      person, at the time of such proposed assignment, is actively engaged in
      marketing and selling or in phase III clinical studies of a pharmaceutical
      treatment for glaucoma that is competitive with the Company Products and does
      not at such time maintain a surgical or medical device-related sales force.
      Notwithstanding the foregoing, a change of control of Parent shall not be deemed
      to be an assignment hereunder.

     

    10.6  Parties
      in Interest.
      This
      Agreement shall be binding upon and inure solely to the benefit of each party
      hereto and nothing in this Agreement, express or implied is intended to or
      shall
      confer upon any other person any right, benefit or remedy of any nature
      whatsoever under or by reason of this Agreement.

     

    10.7  Specific
      Performance.
      The
      parties hereto agree that irreparable damage would occur in the event any
      provision of this Agreement was not performed in accordance with the terms
      hereof and that the parties shall be entitled to specific performance of the
      terms hereof, in addition to any other remedy at law or equity.

     

    10.8  Governing
      Law.
      This
      Agreement shall be governed by, and construed in accordance with the laws of
      the
      State of Delaware applicable to contracts executed in and to be performed in
      that state.

     

     

    10.9  Consent
      to Jurisdiction.

     

    (a)  EACH
      OF
      PARENT, THE COMPANY AND MERGER SUB HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
      JURISDICTION OF THE STATE COURTS OF DELAWARE AND TO THE JURISDICTION OF THE
      UNITED STATES DISTRICT COURT FOR THE STATE OF DELAWARE, FOR THE PURPOSE OF
      ANY
      ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND EACH
      OF
      PARENT, THE COMPANY AND MERGER SUB HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
      IN
      RESPECT TO SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED EXCLUSIVELY
      IN
      ANY DELAWARE STATE OR FEDERAL COURT SITTING IN THE CITY OF WILMINGTON. EACH
      OF
      PARENT, THE COMPANY AND MERGER SUB AGREES THAT A FINAL JUDGMENT IN ANY ACTION
      OR
      PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
      SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

     

    (b)  EACH
      OF
      PARENT, THE COMPANY AND MERGER SUB IRREVOCABLY CONSENTS TO THE SERVICE OF THE
      SUMMONS AND COMPLAINT AND ANY OTHER PROCESS IN ANY OTHER ACTION OR PROCEEDING
      RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ON BEHALF OF ITSELF
      OR ITS PROPERTY, BY THE PERSONAL DELIVERY OF COPIES OF SUCH PROCESS TO SUCH
      PARTY. NOTHING IN THIS SECTION 10.9 SHALL AFFECT THE RIGHT OF ANY PARTY TO
      SERVE
      LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

     

    10.10  Headings;
      Interpretation.
      The
      descriptive headings contained in this Agreement are included for convenience
      of
      reference only and shall not affect in any way the meaning or interpretation
      of
      this Agreement. Whenever the word “include,” “includes,” or “including” appears
      in this Agreement, it shall be deemed in each instance to be followed by the
      words “without limitation.”

     

    10.11  Counterparts.
      This
      Agreement may be executed and delivered (including by facsimile transmission)
      in
      one or more counterparts, and by the different parties hereto in separate
      counterparts, each of which, when executed and delivered, shall be deemed to
      be
      an original but all of which taken together shall constitute one and the same
      agreement.

     

    10.12  Fees
      and Expenses.
      Except
      as provided in Section 8.3, all costs and expenses incurred in connection with
      this Agreement and the Merger by the Company or the Participating Rights Holders
      shall be paid by the Company and the Participating Rights Holders, respectively,
      subject to the provisions of Section 9.2(g). Except as provided in Section
      8.3,
      all costs and expenses incurred in connection with this Agreement and the Merger
      by Parent or Merger Sub shall be paid by Parent.

     

    10.13  Amendment.
      This
      Agreement may not be amended except by an instrument in writing, duly authorized
      by the appropriate boards of directors, signed by Parent or its designee, Merger
      Sub and the Company and by the Stockholder Representative
      Committee.

     

    10.14  Waiver.
      At any
      time prior to the Effective Time, Parent and the Company may agree to (a) extend
      the time for the performance of any obligation or other act of the other
      (including, in the case of Parent, Merger Sub) party hereto, (b) waive any
      inaccuracy in the representations and warranties of the other contained herein
      or in any document delivered pursuant hereto and (c) waive compliance by the
      other, as the case may be, with any agreement or condition contained herein.
      Any
      such extension or waiver shall be valid if set forth in an instrument in writing
      signed by the party or parties to be bound thereby.

     

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      remainder of the page is intentionally left blank.]

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        -
           -

      

    


    IN
      WITNESS WHEREOF, Parent, Merger Sub, the Company and the members of the
      Stockholder Representative Committee have duly executed this Agreement as an
      instrument under seal as of the date first above written.

     

    

      
        	 	
                 

                                OCCULOGIX,
                  INC.

                 

              
	
                 

                                By:

                 

              	
                 

                /s/ Elias Vamvakas

              
	 	
                Name: Elias
                  Vamvakas

                 

              
	 	
                Title: Chief
                  Executive Officer

                 

              
	 	
                 

                                OCCULOGIX
                  MERGECO, INC.

                 

              
	
                 

                                By:

                 

              	
                 

                /s/ Elais Vamvakas

              
	 	
                Name: Elias
                  Vamvakas

                 

              
	 	
                Title: President

                 

              
	 	
                 

                                SOLX,
                  INC.

                 

              
	
                 

                                By:

                 

              	
                 

                /s/ Doug P. Adams

              
	 	
                Name:
                  Doug P. Adams

                 

              
	 	
                Title:

                 

              


      

       

      

        
          	 	
                   

                                         
                    STOCKHOLDER REPRESENTATIVE COMMITTEE

                   

                
	 	/s/
                  Doug P. Adams
	 	
                   

                  Doug
                    P. Adams

                   

                
	 	/s/
                  John Sullivan 
	 	
                   

                  John
                    Sullivan

                   

                
	 	/s/
                  Peter M. Adams
	 	
                   

                  Peter
                    M. Adams

                   

                
	 	 


        

      

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        -
           -

      

    


    


     

    
      	
              LIST
                OF EXHIBITS

               

            
	
              Exhibit
                A

               

            	
              Merger
                Certificate

               

            
	
              Exhibit
                B

               

            	
              Invention
                and Non-Disclosure Agreement

               

            
	
              Exhibit
                C

               

            	
              Form
                of Legal Opinion of Rackemann, Sawyer & Brewster, Professional
                Corporation

               

            
	
              Exhibit
                D

               

            	
              Form
                of Legal Opinion of Torys LLP