Document:

Discover Financial Services Change-in-Control Severance Policy

 Exhibit 10.6 
 DISCOVER FINANCIAL SERVICES 
 CHANGE IN CONTROL SEVERANCE POLICY 
 Effective September 21, 2007 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page
	1.	  	Purpose	  	1
			
	2.	  	Effective Date	  	1
			
	3.	  	Definitions	  	1
			
	4.	  	Eligibility	  	5
			
	5.	  	Eligible Termination Reasons	  	5
			
	6.	  	Non-Eligible Termination Reasons	  	6
			
	7.	  	Change in Control Severance Benefits	  	6
			
	8.	  	Non-competition Agreement and Consideration	  	8
			
	9.	  	Certain Additional Payments	  	9
			
	10.	  	Requirement of Release and Restrictive Covenant	  	11
			
	11.	  	Method of Payment	  	11
			
	12.	  	Offsets	  	12
			
	13.	  	Re-employment and Other Employment	  	12
			
	14.	  	Funding	  	12
			
	15.	  	Administration	  	12
			
	16.	  	Amendment or Termination of the Policy	  	13
			
	17.	  	Limitation on Individually Negotiated Severance Arrangements	  	13
			
	18.	  	Miscellaneous	  	13
			
	19.	  	Review Procedure	  	13
		
	Rights Under the Employee Retirement Income Security Act (ERISA)	  	14
		
	Additional Information	  	16
		
	Exhibit A	  	17
		
	Exhibit B	  	18

  

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	1.	Purpose 

 This change in control severance
policy (the “Policy”) is established by Discover Financial Services, a Delaware corporation, to (i) enable Discover to secure for the benefit of the Company the services of the Eligible Executives in the event of a Change in Control
without concern for whether such executives might be hindered in discharging their duties by the personal uncertainties and risks associated with a Change in Control, by affording such executives the opportunity to protect the share value they have
helped create as of the date of any Change in Control and (ii) offer income protection to such executives in the event their employment terminates involuntarily or for Good Reason in connection with a Change in Control. The Policy also provides
income protection to Eligible Employees who enter into non-competition agreements with the Company following their termination of employment in connection with a Change in Control. 
 This Policy shall constitute a “welfare plan” within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”) and shall be construed in a manner consistent with such intent. 
  

	2.	Effective Date 

 The effective date of this
Policy is September 21, 2007 (the “Effective Date”). 
  

	3.	Definitions 

 The following terms when used
in this Policy and capitalized shall have the respective meanings set forth below: 
 Base Salary means the Eligible
Executive’s current annualized rate of gross base cash compensation as paid on each regularly scheduled payday for the executive’s regular work schedule as of his or her Termination Date. Base Salary shall not include taxable or nontaxable
fringe benefits or awards, vacation, performance awards, bonus, commission or other incentive pay, or any payments which are not made on each regular payday, regardless of how such payments may be characterized. 
 Board means the Board of Directors of Discover. 
 Cause means: 
 (a) any act or omission which constitutes a material breach of an Eligible
Executive’s obligations to the Company or an Eligible Executive’s failure or refusal to perform satisfactorily any duties reasonably required of an Eligible Executive, which breach, failure or refusal (if susceptible to cure) is not
corrected (other than failure to correct by reason of an Eligible Executive’s incapacity due to Disability) within ten (10) business days after written notification thereof to the Eligible Executive by the Company; 
 (b) any act or omission by an Eligible Executive that constitutes (i) fraud or intentional misrepresentation, (ii) embezzlement,
misappropriation or conversion of assets of, or business opportunities considered by, the Company or (iii) any other act which has caused or may reasonably be expected to cause material injury to the interest or business reputation of the
Company; or 
 (c) violation by an Eligible Executive of any securities, commodities or banking laws, any rules or regulations issued
pursuant to such laws, or rules or regulations of any securities or commodities 

  

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exchange or association of which the Company is a member or of any policy of the Company relating to compliance with any of the foregoing. 
 Change in Control means, except as provided otherwise below, the first to occur of any of the following events: 
 (a) any person (as defined in Section 3(a)(9) of the Exchange Act, as such term is modified in Sections 13(d) and 14(d) of the Exchange Act), other
than (i) any employee plan established by the Company or any of its Subsidiaries, (ii) any group of employees holding shares subject to agreements relating to the voting of such shares, (iii) the Company or any of its affiliates (as
defined in Rule 12b-2 promulgated under the Exchange Act), (iv) an underwriter temporarily holding securities pursuant to an offering of such securities, or (v) a corporation owned, directly or indirectly, by stockholders of the Company in
substantially the same proportions as their ownership of the Company, is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired
directly from the Company or its affiliates other than in connection with the acquisition by the Company or its affiliates of a business) representing thirty percent (30%) or more of either the total fair market value or total voting power of
the stock of the Company; 
 (b) a change in the composition of the Board such that individuals who, as of the date of an Eligible
Executive’s termination of employment, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a member of the Board
subsequent to the date of an Eligible Executive’s termination of employment whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; 
 (c) the consummation of a merger or consolidation of the Company with any other corporation or other entity, or the issuance of voting securities in
connection with a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (i) a merger or consolidation which results in the voting securities
of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity
or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (determined pursuant to
clause (a) above) is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates
other than in connection with the acquisition by the Company or its affiliates of a business) representing thirty percent (30%) or more of either the then outstanding shares of the Company’s common stock or the combined voting power of the
Company’s then outstanding voting securities; 
 (d) the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets 

  

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to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by persons in substantially the same
proportions as their ownership of the Company immediately prior to such sale; or 
 (e) any sale by Discover of all or substantially all of
its interest in the U.K. Business. 
 Provided that a Change in Control of the U.K. Business shall not be deemed to be a Change in Control
with respect to Discover. 
 Notwithstanding the foregoing, no Change in Control of Discover shall be deemed to have occurred if there is
consummated any transaction or series of integrated transactions immediately following which the beneficial holders of the Company’s common stock immediately prior to such transaction or series of transactions continue to have substantially the
same proportionate ownership in an entity which owns substantially all of the assets of the Company immediately prior to such transaction or series of transactions. 
 Change in Control Severance Benefits means the benefits payable to an Eligible Executive pursuant to Section 7 of this Policy. 
 Committee means the Compensation Committee of the Board or its delegate or successor. 
 Company means Discover Financial Services and all its Subsidiaries, and any successor thereto (whether direct or indirect, by purchase,
merger, consolidation, reorganization or otherwise, including, without limitation, any successor due to a Change in Control) to the business or assets of Discover, except that for purposes of Section 16 hereof, the definition of Change in
Control and other provisions where the context so requires, Company means Discover or any such successor thereto. 
 Competitive
Activity means: 
 (a) becoming, or entering into any arrangement as, an employee, officer, partner, member, proprietor, director,
independent contractor, consultant, advisor, representative or agent of, or serving in any similar position or capacity with, a Competitor, where an Eligible Executive will be responsible for providing, or managing or supervising others who are
providing, services (i) that are similar or substantially related to the services that the Eligible Executive provided to the Company, or (ii) that the Eligible Executive had direct or indirect managerial or supervisory responsibility at
the Company, or (iii) that calls for the application of the same or similar specialized knowledge or skills as those utilized by the Eligible Executive in his or her services for the Company, in each such case, at any time during the year
preceding the termination of the Eligible Executive’s employment with the Company; or 
 (b) either alone or in concert with others,
forming, or acquiring a five percent (5%) or greater equity ownership, voting interest or profit participation in, a Competitor. 
 Competitor means any corporation, partnership or other entity that engages in (or that owns a significant interest in any corporation, partnership or other entity that engages in) (i) the business of consumer lending,
including, without limitation, credit card issuance or electronic payment services or (ii) any other business in which the Eligible Executive has been involved in or had significant knowledge of, which has been conducted by the Company at any
time during the Eligible Executive’s employment with the Company. For the avoidance of doubt, a competitor of any entity which results from a corporate transaction involving the Company that constitutes a Change in Control shall be considered a
Competitor for purposes of this Policy. 
  

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 Disability means a “permanent and total disability” as defined in
Section 22(e)(3) of the Internal Revenue Code. 
 Discover means Discover Financial Services, a Delaware corporation.

 Eligible Executive means an Executive Committee Member or an individual who holds the title of Vice President or Director
with respect to (a) Discover or the (b) U.K. Business, in both cases, on the earlier of his or her Termination Date and the date of a Change in Control or at any time during the six (6) months immediately preceding the occurrence of a
Change in Control. 
 Exchange Act means the Securities Exchange Act of 1934, as amended. 
 Executive Committee Member means an individual who is a member of Discover’s Executive Committee. 
 Good Reason means the occurrence of any of the following upon, or within six (6) months prior to or twenty-four (24) months after
the occurrence of, as applicable, a Change in Control of Discover where an Eligible Executive is employed or the U.K. Business where an Eligible Executive is employed, without the Eligible Executive’s prior written consent: 
 (a) (i) any material diminution in an Eligible Executive’s assigned duties, responsibilities and/or authority, including the assignment to an
Eligible Executive of any duties, responsibilities or authority inconsistent with the duties, responsibilities and authority assigned to the Eligible Executive immediately prior to such assignment, an Eligible Executive’s removal from, or any
failure to re-elect an Eligible Executive to, any of such positions, except in connection with the termination of an Eligible Executive’s employment as a result of his or her death or Disability, by the Company for Cause or by an Eligible
Executive other than for Good Reason or (ii) a material diminution in the authority, duties, or responsibilities of the supervisor to whom an Eligible Executive is required to report; 
 (b) any material reduction in an Eligible Executive’s base compensation, including the employee benefits provided to him or her; provided,
however, that Company-initiated across-the-board reductions in compensation or benefits affecting substantially all eligible Company employees shall alone not be considered “Good Reason,” unless the compensation or benefits reductions
exceed twenty percent (20%) of his or her base compensation; 
 (c) a material diminution of the budget over which an Eligible Executive
has authority; 
 (d) the Company’s requiring an Eligible Executive to be based at a location that (i) is in excess of thirty-five
(35) miles from the location of his or her principal job location or office immediately prior to the Change in Control, or (ii) results in an increase in his or her normal daily commuting time by more than ninety (90) minutes, except
for required travel on Company’s business to an extent substantially consistent with his or her then present business travel obligations; or 
 (e) any other action or inaction that constitutes a material breach by the Company of any agreement pursuant to which an Eligible Executive provides services to the Company. 
 For purposes of this definition, the duties, responsibilities and/or authority assigned to an Eligible Executive shall be deemed to be the greatest of
those in effect prior to or after the Change in Control. Unless an Eligible Executive becomes Disabled, the Eligible Executive’s right to terminate his or her employment for Good Reason shall not be affected by his or her incapacity due to
physical or mental illness. The Eligible Executive’s continued employment shall not constitute consent to, or a waiver of 

  

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rights with respect to, any circumstance constituting Good Reason. Notwithstanding the foregoing, Good Reason shall not exist unless the Eligible Executive
gives the Company written notice thereof within 30 days after its occurrence and the Company shall not have remedied the action within 30 days after such written notice. 
 Incentive Compensation Plans means the Discover Financial Services Omnibus Incentive Plan and any other similar plan maintained from time to time by the Company. 
 Internal Revenue Code means the United States Internal Revenue Code of 1986, as amended, and the rules, regulations and guidance
thereunder. 
 Plan Administrator means the Committee. 
 Named Fiduciary means (a) the Committee, (b) another fiduciary designated in writing by the Company as a Named Fiduciary, and
(c) any successor to any of the foregoing. 
 Non-competition Benefits means the benefits payable to an Eligible Executive
pursuant to Section 8 of this Policy. 
 Subsidiary means (a) a corporation or other entity with respect to which
Discover, directly or indirectly, has the power, whether through the ownership of voting securities, by contract or otherwise, to elect at least a majority of the members of such corporation’s board of directors or analogous governing body, or
(b) any other corporation or other entity in which Discover, directly or indirectly, has an equity or similar interest and which the Committee designates as a Subsidiary for purposes of the Policy. 
 Termination Date means the date on which the Eligible Executive’s employment with the Company terminates for a reason set forth under
Section 5. 
 United Kingdom (U.K.) Business means the Company’s U.K. credit card issuing business. 
 Vice President means an individual who is not an Executive Committee Member and who holds the title of Executive Vice President, Senior
Vice President or Vice President with respect to (a) Discover or the (b) U.K. Business, in both cases, on the earlier of his or her Termination Date and the date of a Change in Control or at any time during the six (6) months
immediately preceding the occurrence of a Change in Control. 
  

	4.	Eligibility 

 All Eligible Executives who
have been on the Company’s or a Company Subsidiary’s payroll prior to the earlier of his or her Termination Date and the date of a Change in Control shall be eligible to receive benefits according to the terms of this Policy. 

 

	5.	Eligible Termination Reasons 

 An Eligible
Executive shall have a right, subject to the terms of this Policy, to Change in Control Severance Benefits and Non-competition Benefits upon termination of the Eligible Executive’s employment with the Company during the period commencing six
(6) months prior to and ending twenty-four (24) months after the date of (i) the Change in Control of Discover or (ii) for an Eligible Executive who is employed by a Subsidiary registered in the U.K., the Change in Control of the
U.K. Business by (i) action by the Company (including in the case of an Eligible Executive employed by a Subsidiary, action by such Subsidiary) to involuntarily terminate the employment of an Eligible Executive with the 

  

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Company (and its Subsidiaries) other than for Cause, (ii) voluntary termination of employment by an Eligible Executive for Good Reason or
(iii) termination of employment due to the death or Disability of an Eligible Executive. 
  

	6.	Non-Eligible Termination Reasons 

 A
non-eligible termination reason is any reason for an Eligible Executive’s termination of employment by the Company that is not an Eligible Termination Reason described in Section 5. 
  

	7.	Change in Control Severance Benefits 

 All
provisions of this Section shall be subject, without limitation, to the provisions of Sections 10, 11, 12 and 13 hereof. 
 (a) Change in
Control Severance Pay. If an Eligible Executive is entitled to Change in Control Severance Benefits under this Policy, the Company shall pay the Eligible Executive the following amounts based on the Eligible Executive’s position at the time
of his or her Termination Date: 
  

	 	(1)	Executive Committee Members. 

 (A)
An amount equal to 1.5 multiplied by the sum of (i) the Eligible Executive’s Base Salary and (ii) the average cash bonus paid to the Eligible Executive with respect to the three (3) immediately preceding years, or if lesser, the
number of years the executive has been employed by the Company, pursuant to the Company’s Incentive Compensation Plans. 
 (B) A prorated amount of the Eligible Executive’s target cash bonus under the Company’s Incentive Compensation Plans (or, if no target cash bonus has been established for such executive, the cash bonus amount determined under
Section 7(g)) for the year in which the Termination Date occurs. Such prorated amount shall be equal to the product of (1) the Eligible Executive’s target cash bonus for the year in which the Termination Date occurs and (2) the
ratio of the number of days elapsed during such year prior to the Termination Date to 365. 
  

	 	(2)	Vice Presidents. 

 (A) An amount
equal to the sum of the Eligible Executive’s Base Salary and the average cash bonus paid to the Eligible Executive with respect to the three (3) immediately preceding years, or if lesser, the number of years the executive has been employed
by the Company, pursuant to the Company’s Incentive Compensation Plans. 
 (B) A prorated amount of the Eligible
Executive’s target cash bonus under the Company’s Incentive Compensation Plans (or, if no target cash bonus has been established for such executive, the cash bonus amount determined under Section 7(g)) for the year in which the
Termination Date occurs. Such prorated amount shall be equal to the product of (1) the Eligible Executive’s target cash bonus for the year in which the Termination Date occurs and (2) the ratio of the number of days elapsed during
such year prior to the Termination Date to 365. 
  

	 	(3)	Directors. 

  

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 (A) An amount equal to the sum of the Eligible Executive’s Base Salary and the
average cash bonus paid to the Eligible Executive with respect to the three (3) immediately preceding years, or if lesser, the number of years the executive has been employed by the Company, pursuant to the Company’s Incentive Compensation
Plans. 
 (B) A prorated amount of the Eligible Executive’s target cash bonus under the Company’s Incentive
Compensation Plans (or, if no target cash bonus has been established for such executive, the cash bonus amount determined under Section 7(g)) for the year in which the Termination Date occurs. Such prorated amount shall be equal to the product
of (1) the Eligible Executive’s target cash bonus for the year in which the Termination Date occurs and (2) the ratio of the number of days elapsed during such year prior to the Termination Date to 365. 
 (b) Continued Health Benefits Coverage. If an Eligible Executive is entitled to Change in Control Severance Benefits under this
Policy, the Company shall give the Eligible Executive and his or her eligible dependents the opportunity to elect continued group health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (“COBRA”) with
respect to all group health plans in which the Eligible Executive and his or her dependents were participating immediately prior to such termination. Provided that the Eligible Executive (and/or his or her dependents) timely elects such coverage,
the Company shall as soon as practicable thereafter pay to the Eligible Executive, as an additional Change in Control Severance Benefit, a lump sum approximately equal to the difference in cost between COBRA premiums and active employee premiums for
twenty-four (24) months of coverage, in the case of an Eligible Executive with the title of Executive Committee Member or Vice President on his or her Termination Date, and twelve (12) months of coverage, in the case of an Eligible
Executive with the title of Director on his or her Termination Date, as calculated by the Company in its discretion as of the Termination Date, which payment shall constitute taxable income to the Eligible Executive and which shall be paid in a lump
sum on the first date in which the Eligible Executive begins to receive Change in Control Severance Benefits payments under this Policy. An Eligible Executive receiving Change in Control Severance Benefits under this Policy shall not be entitled to
receive any other perquisites after such date. Notwithstanding the foregoing, the executive’s continued group health coverage under this subsection shall cease as of the date the executive becomes eligible to receive such benefits under a
subsequent employer’s benefit programs, to the extent permitted under COBRA. 
 (c) Equity-Based Awards. If an
Eligible Executive is entitled to Change in Control Severance Benefits under this Policy, all outstanding equity-based awards granted to the Eligible Executive under the Company’s Incentive Compensation Plans (including but not limited to
grants of nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit and performance awards) shall, notwithstanding any contrary provisions contained in any agreement relating thereto, become fully vested
and exercisable or payable and any applicable performance period shall lapse and performance shall be deemed to be satisfied at the target level (or, if greater, based upon actual performance), in each case, as of the later of the effective date of
the Change in Control and the date of the Eligible Executive’s Termination Date. In addition, the Eligible Executive shall be deemed to remain employed by the Company for the purposes of such awards until the expiration of the original term of
the award. 
 (d) Outplacement. If an Eligible Executive is entitled to Change in Control Severance Benefits under this
Policy, the Company shall provide outplacement services selected by the Company for a period of twenty-four (24) months, in the case of an Eligible Executive with the title of Executive Committee Member or Vice President on his or her
Termination Date, and twelve (12) months, in the case of an Eligible Executive with the title of Director on his or her Termination Date. Under no 

  

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circumstances shall any Eligible Executive be eligible to receive a cash payment in lieu of outplacement services. 
 (e) Legal Fees. If an Eligible Executive makes a claim under Section 19 hereof or commences litigation and as a result
thereof, whether by judgment or settlement, becomes entitled to receive benefits in an amount greater than prior to such claim or litigation, the Company shall pay the reasonable legal fees and related expenses incurred by the Eligible Executive in
connection with such claim or litigation. 
 (f) Multiple Positions. If an Eligible Executive holds more than one of
the positions described in the preceding subsections (a), (b), and (d), the Eligible Executive shall be entitled to the benefits under each such subsection relating to the position held by the Eligible Executive which provides the largest amount and
no benefits under such subsection relating to a position that provide for lesser amounts. 
 (g) For purposes of this
Section 7, if an Eligible Executive’s annual target cash bonus has not yet been established for the year in which the Termination Date occurs, the Eligible Executive’s annual cash bonus for the immediately preceding year shall be used
to determine the Eligible Executive’s Change in Control Severance Benefits. If no such prior year cash bonus exists with respect to the Eligible Executive, the prior year cash bonus established for a similarly situated Eligible Executive shall
be used, as determined by the Committee. 
  

	8.	Non-competition Agreement and Consideration 

 The provisions of this Section are subject, without limitation, to the provisions of Sections 10, 11, 12 and 13 hereof. 
 (a)
Non-competition Benefits. If an Eligible Executive who is either an Executive Committee Member or a Vice President is eligible for Non-competition Benefits under this Policy, the Eligible Executive shall be given the opportunity to enter into
a non-competition agreement with the Company (in a form substantially the same as attached hereto as Exhibit A) upon such Eligible Executive’s termination of employment with the Company for a reason set forth under Section 5 hereof. Upon
the Company’s acceptance of the Eligible Executive’s fully executed non-competition agreement, the Eligible Executive shall become entitled to receive the following amounts: 
 (1) Executive Committee Members. If the Eligible Executive agrees pursuant to such non-competition agreement to refrain from
Competitive Activity for a period of eighteen (18) months from his or her Termination Date, the Company shall pay the Eligible Executive an amount equal to 1.5 multiplied by the sum of (i) the Eligible Executive’s Base Salary and
(ii) the average cash bonus paid to the Eligible Executive with respect to the three (3) immediately preceding years, or if lesser, the number of years the executive has been employed by the Company, pursuant to the Company’s
Incentive Compensation Plans. The Company shall pay such amount to the Eligible Executive in accordance with the provisions of Section 11 hereof. 
 (2) Vice Presidents. If the Eligible Executive agrees pursuant to such non-competition agreement to refrain from Competitive Activity for a period of twelve (12) months from his or her Termination Date,
the Company shall pay the Eligible Executive an amount equal to the sum of the Eligible Executive’s Base Salary and the average cash bonus paid to the Eligible Executive with respect to the three (3) immediately preceding years, or if
lesser, the number of years the executive has been employed by the Company, pursuant to the Company’s Incentive 

  

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Compensation Plans. The Company shall pay such amount to the Eligible Executive in accordance with the provisions of Section 11 hereof. 
 (b) For purposes of this Section 8, if an Eligible Executive’s annual cash bonus has not yet been established for the year in which the
Termination Date occurs, and no prior year cash bonus exists with respect to the Eligible Executive with respect to the three (3) immediately preceding years, the prior year cash bonus established for a similarly situated Eligible Executive
shall be used, as determined by the Committee. 
  

	9.	Certain Additional Payments 

 (a)
Notwithstanding anything in this Policy to the contrary, in the event it is determined that any payments or benefits provided by the Company to or on behalf of an Eligible Executive (whether pursuant to the terms of this Policy or otherwise) (any
such payments or benefits being referred to in this Section as “Payments”), but determined without taking into account any additional payments required under this Section, would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code, or any interest or penalties are incurred by the Eligible Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, collectively referred to herein as the “Excise
Tax”), then the Eligible Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount so that after payment by the Eligible Executive of all federal, state and local taxes (including any interest or
penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, the Eligible Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing, if it is
determined that the Eligible Executive otherwise would be entitled to a Gross-Up Payment, but that the Payments to the Eligible Executive do not exceed 110% of the amount which is one dollar less than the smallest amount that would give rise to any
Excise Tax (the “Reduced Amount”), then no Gross-Up Payment shall be made to the Eligible Executive and the Payments shall be reduced to the Reduced Amount. In such event, the reduction will occur in the following order unless the Eligible
Executive elects in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the date on which the event that triggers the Payment occurs): (i) reduction of cash payments;
(ii) cancellation of accelerated vesting of equity awards; and (iii) reduction of other employee benefits. If acceleration of vesting of compensation from an Eligible Executive’s equity awards is to be reduced, such acceleration of
vesting shall be cancelled in the reverse order of the date of grant unless the Eligible Executive elects in writing a different order for cancellation. 
 (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be used in arriving at such determination, shall be made by the independent registered public accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control (the
“Accounting Firm”). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint another nationally recognized independent
registered public accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). The Accounting Firm shall provide its calculations, together with detailed supporting
documentation, to the Company and the Eligible Executive within fifteen (15) calendar days after the date on which the Eligible Executive’s right to Payment is triggered (if requested at that time by the Company or the Eligible Executive)
or such other time as requested by the Company or the Eligible Executive. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Eligible Executive within five days of the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by the Eligible 

  

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Executive, it shall furnish the Eligible Executive with a written opinion that no Excise Tax will be imposed. Any good faith determination by the Accounting
Firm shall be binding upon the Company and the Eligible Executive. As a result of the uncertainty in the application of Section 4999 of the Internal Revenue Code at the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies
pursuant to Section 9(c) and the Eligible Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Eligible Executive. 
 (c) The Eligible Executive shall notify the Plan Administrator in
writing at the address provided below under the Section titled “Additional Information” of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten (10) business days after the Eligible Executive is informed in writing of such claim and shall apprise the Plan Administrator of the nature of such claim and the date on which such
claim is requested to be paid. The Eligible Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Eligible Executive gives such notice to the Plan Administrator (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Eligible Executive in writing prior to the expiration of such period that it desires to contest such claim, the Eligible Executive shall:

 (1) give the Company any information reasonably requested by the Company relating to such claim; 
 (2) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; 
 (3) cooperate with the Company in good faith in order to effectively contest such claim; and 
 (4) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred by the
Eligible Executive in connection with such contest and shall indemnify and hold the Eligible Executive harmless, on an after-tax basis, for any Excise Tax or federal, state or local income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Eligible Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and the Eligible Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided further, that if the Company directs the Eligible Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Eligible Executive on an interest-free basis and
shall indemnify and hold the Eligible Executive harmless, on an after-tax basis, from any Excise Tax or federal, state or local income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and provided further, that any extension of the 

  

 10 

 
statute of limitations relating to payment of taxes for the taxable year of the Eligible Executive with respect to which such contested amount is claimed to
be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Eligible Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 
 (d) If, after
the receipt by the Eligible Executive of an amount advanced by the Company pursuant to Section 9(c), the Eligible Executive becomes entitled to receive, and receives, any refund with respect to such claim, the Eligible Executive shall (subject
to the Company’s complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the
Eligible Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Eligible Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Eligible
Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 
  

	10.	Requirement of Release and Restrictive Covenant 

 The provision of all Change in Control Severance Benefits and Non-competition Benefits under this Policy is conditioned upon the Eligible Executive timely signing and delivering to Discover an agreement and release with respect to any and
all claims the Eligible Executive may have against them, including but not limited to any contract, tort, or wage and hour claims, and any claims under Title VII, the ADEA, the ADA, ERISA, and other federal, state or local laws and containing
non-solicitation and similar covenants in a form substantially the same as attached hereto as Exhibit B. No Change in Control Severance Benefits and Non-competition Benefits will commence under this Policy prior to the time such agreement and
release becomes irrevocable pursuant to its terms. 
  

	11.	Method of Payment 

 Change in Control
Severance Benefits payable in cash hereunder to an Eligible Executive on account of a termination of employment shall be paid in the form of a lump sum. Non-competition Benefits payable in cash hereunder to an Eligible Executive shall be made in the
form of substantially equal installments consistent with the Company’s executive payroll practice during the period of payment. Except to the extent permitted by Section 409A of the Internal Revenue Code and the regulations promulgated
thereunder, payment of Change in Control Severance Benefits and Non-competition Benefits under this Policy payable in cash shall commence on or as soon as administratively practical following the date which is six (6) months after the Eligible
Executive’s Termination Date. In no event shall payment of any Change in Control Severance Benefit or Non-competition Benefit be made prior to the effective date the release described in Section 10 above becomes irrevocable pursuant to its
terms. In all cases, the payment of Change in Control Severance Benefits and Non-competition Benefits under this Policy shall comply with the provisions of Section 409A of the Internal Revenue Code to the extent applicable. If an Eligible
Executive dies after becoming eligible for Change in Control Severance Benefits and Non-competition Benefits and executing an agreement and release but before full receipt of all cash Change in Control Severance Benefits and Non-competition
Benefits, the remaining cash Change in Control Severance Benefits will be paid to the Eligible Executive’s estate in one lump sum and no further Non-competition Benefits will be payable under this Policy. If an Eligible Executive dies after
becoming eligible for Change in Control Severance Benefits or Non-competition Benefits but before executing an agreement and release, the Change in Control Severance Benefits with respect to the Eligible 

  

 11 

 
Executive will be payable to his or her estate and no Non-competition Benefits will be payable under this Policy. All payments under this Policy will be net
of amounts withheld with respect to taxes, offsets, or other obligations. 
  

	12.	Offsets 

 The Company may, in its discretion
and to the extent permitted under applicable law, offset against the Eligible Executive’s benefits under this Policy any other severance or termination benefits payable to the Eligible Executive by the Company (without regard to whether such
amounts are payable in connection with a Change in Control), the value of unreturned property, and any outstanding loan, debt or other amount the Eligible Executive owes to the Company. The Company may recover any overpayment of benefits made to an
Eligible Executive or an Eligible Executive’s estate under this Policy or, to the extent permitted by applicable law, offset any other overpayment made to the Eligible Executive against any Policy benefits or other amount the Company owes the
Eligible Executive or the Eligible Executive’s estate. 
  

	13.	Re-employment and Other Employment 

 In the
event an Eligible Executive is re-employed by the Company prior to the full payment to the Eligible Executive of all Change in Control Severance Benefits or Non-competition Benefits under this Policy, the payment of any Change in Control Severance
Benefits or Non-competition Benefits payable with respect to the prior termination will cease immediately and such Change in Control Severance Benefits and Non-competition Benefits shall no longer be payable under this Policy. 
 Subject to Sections 8 and 10 of this Policy, if an Eligible Executive obtains employment (other than with the Company) while receiving Change in Control
Severance Benefits or Non-competition Benefits, the Eligible Executive shall continue to receive any remaining cash Change in Control Severance Benefits and Non-competition Benefits in accordance with the payment schedule then in effect, but, except
as otherwise required under applicable law, he or she will no longer be eligible to receive continued benefits under Section 7(b) of this Policy as of the date the executive becomes eligible to receive such benefits under a subsequent
employer’s benefit programs. 
  

	14.	Funding 

 This Policy shall be funded through
the creation of a grantor trust. As soon as administratively practicable upon the commencement of a transaction which, if consummated, would result in a Change in Control, but in no event later than the date Discover’s shareholders approve any
such transaction, the Company shall make a contribution to the trust in an amount equal to the difference between (i) the sum of (a) the excess of the aggregate of all Change in Control Severance Benefits and Non-competition Benefits due
under the Policy upon the occurrence of a Change in Control and (b) an additional five percent (5%) of the amount thereof to cover reasonably anticipated expenses of the trust and the legal expenses payable pursuant to Section 7(e)
hereof, including, but not limited to, legal expenses of the trust and (ii) the assets, if any, held in the trust as of such date; provided, however, that if the Company has not agreed to a transaction within seven (7) months of the
date when the trust is funded pursuant to this Section 14 which, when consummated, would result in an actual Change in Control, or if such an agreement is reached but subsequently revoked prior to the consummation of the transaction, such
amount shall revert to the Company. Notwithstanding the foregoing, Eligible Executives entitled to benefits hereunder shall have only the rights of general creditors of the Company. 
  

	15.	Administration 

  

 12 

 This Policy shall be administered by the Committee. For purposes of administering this Policy, all
benefit determinations made hereunder, including, but not limited to, the determination of eligibility, the position held by an Eligible Executive and the Base Salary or bonus of an Eligible Executive, shall be determined based on the Eligible
Executive’s position prior to any event or events that constitute Good Reason. 
  

	16.	Amendment or Termination of the Policy 

 The
Company reserves the right to amend or terminate this Policy at any time in its sole discretion upon twelve (12) months written notice to the Eligible Executives; provided, however, that (i) no modification to this Policy shall be made
during the period commencing upon the Effective Date and ending twenty-four (24) months following such date and (ii) no modification to this Policy made during the period commencing six (6) months prior to and ending twenty-four
(24) months following a Change in Control shall be effective without the written consent of each affected Eligible Executive. Notwithstanding anything in this Policy to the contrary, the Company reserves the right to amend this Policy at any
time as (A) the Committee determines (i) with the advice of counsel to be reasonably necessary to avoid the imposition of the additional tax imposed under Section 409A of the Internal Revenue Code or (ii) in the written opinion
of counsel to be necessary to comply with applicable law, provided that any such amendment to comply with applicable law shall be made in a manner which as strictly as is possible preserves the original intent of this Policy, and (B) the Chief
Executive Officer determines to be reasonably necessary for the administration of this Policy; provided, however, that any amendment made pursuant to clause B of this sentence is de minimis in nature and does not adversely affect any of the
rights or benefits of any Eligible Executive under this Policy. 
  

	17.	Limitation on Individually Negotiated Severance Arrangements 

 As of the Effective Date, subject to the terms of the outstanding equity-based awards granted to the Eligible Executive under the Company’s Incentive Compensation Plans, this Policy is intended to be the sole
source of severance and change in control benefits for Eligible Executives. Absent prior Board approval, no individual agreement shall be entered into with any Eligible Executive or any person being considered for promotion or hire as an Eligible
Executive which would provide severance or change in control-type benefits. 
  

	18.	Miscellaneous 

 No executive shall vest in
any entitlement to or eligibility for benefits under this Policy until he or she has satisfied all requirements for eligibility and the conditions required to receive the benefits specified in this Policy have been satisfied. No interest shall
accrue on any benefit to which an Eligible Executive may be entitled under this Policy. No benefits hereunder, whether or not in pay status, shall be subject to any pledge or assignment, and no creditor may attach or garnish any Eligible
Executive’s Policy benefits. This Policy does not create any contract of employment or right to employment for any period of time. Employment with the Company is at-will, and may be terminated by either the Company or the Eligible Executive at
any time for any reason. Amounts shall be payable under this Policy upon the first Change in Control event to occur after the Effective Date and subsequent transactions will not result in a Change in Control event for purposes of this Policy.

  

	19.	Review Procedure 

 Executives eligible to
receive benefits under this Policy will be notified of such eligibility as soon as administratively practicable after the events occur which give rise to the provision of Policy benefits. If an executive who believes he or she is eligible to receive
Policy benefits does not receive such notice or 

  

 13 

 
disagrees with the amount of benefits set forth in such notice, or if an executive is informed that he or she is not eligible for benefits under this Policy,
the executive (or his or her legal representative) may file a written claim for benefits with the Company’s human resources department or such other body or officer designated by the Committee for this purpose. The written claim must include
the facts supporting the claim, the amount claimed, and the executive’s name and mailing address. 
 If the claim is denied in part or
in full, the Company’s senior human resources executive (or other designated officer or body) will notify the executive by mail no later than 90 days (or 180 days in special circumstances) after receipt of the written claim. The notice of
denial will state the specific reasons for the denial, the provisions of the Policy on which the denial is based, a description of any additional information or material required by the Committee to consider the claim if applicable, as well as an
explanation as to why such information or material is necessary, an explanation of the Policy’s review procedures and the time limits applicable to such procedures, and the executive’s right to bring a civil action under ERISA
Section 502(a) in the event of an adverse determination upon review. 
 An executive (or his or her legal representative) may appeal the
denial by filing a written appeal with the Committee. The written appeal must be received no later than 60 days after the executive or legal representative received the notice of denial. During the same 60-day period, the executive or legal
representative may have reasonable access to pertinent documents and may submit written comments and supporting documents, records and other materials to the Committee. The Committee will review the appeal and notify the executive or legal
representative by mail of its final decision no later than the next regularly scheduled Committee meeting, or if the appeal is received less than 30 days before such meeting, the second regularly scheduled meeting after the Committee receives the
written appeal. 
 Rights Under the Employee Retirement Income Security Act (ERISA) 
 As a participant in the Policy, an Eligible Executive is entitled to certain rights and protections under ERISA which provides that all Policy
participants shall be entitled to: 
 Receive Information About the Policy and Benefits 
 The executive may examine, without charge, at the plan administrator’s office and at other specified locations such as worksites, all documents
governing the plan and a copy of the latest annual report (Form 5500 Series) filed with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration. 
 The executive may obtain, upon written request to the plan administrator, copies of documents governing the operation of the Policy including copies of
the latest annual report (Form 5500 Series). The administrator may make a reasonable charge for the copies. 
 The executive may receive a
summary of the plan’s annual financial report. The plan administrator is required by law to furnish each participant with a copy of this summary annual report. 
 Prudent Actions by Policy Fiduciaries 
 In addition to creating rights for Policy participants,
ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate the Policy, called “fiduciaries” of the Policy, have a duty to do so prudently and in the interest of the
Policy participants and beneficiaries. No one, including an executive’s employer or any other person, may fire an executive or otherwise discriminate against an executive in any way to 

  

 14 

 
prevent such executive from obtaining a welfare benefit or exercising his or her rights under ERISA. 
 Enforcement of Rights 
 If an
executive’s claim for benefits is denied or ignored, in whole or in part, the executive has a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain
time schedules. 
 Under ERISA, there are steps that can be taken to enforce the above rights. For example, if an executive requests a copy of
Policy documents or the latest annual report from the Policy and does not receive them within 30 days, the executive may file suit in a Federal court. In such a case, the court may require the plan administrator to provide the materials, and pay the
executive up to $110 a day until the executive receives the materials, unless the materials were not sent because of reasons beyond the control of the administrator. If an executive has a claim for benefits which is denied or ignored, in whole or in
part, he or she may file suit in a state or Federal Court. If it should happen that the Policy fiduciaries misuse the plan’s money, or if an executive is discriminated against for asserting his or her rights, the executive may seek assistance
from the U.S. Department of Labor, or may file a suit in a Federal court. The court will decide who should pay court costs and legal fees. If the executive is successful the court may order the person the executive has sued to pay these costs and
fees. If the executive loses, the court may order the executive to pay these costs and fees, for example, if it finds the executive’s claim is frivolous. 
 Assistance With Questions 
 An executive who has questions about the Policy should contact the
plan administrator. If an executive has any questions about this statement or about his or her rights under ERISA, or if the executive needs assistance in obtaining documents from the plan administrator, he or she should contact the nearest office
of the Employee Benefits Security Administration, U.S. Department of Labor, listed in a telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution
Avenue, NW, Washington, D.C. 20210. The executive may also obtain certain publications about his or her rights and responsibilities under ERISA by calling the publication’s hotline of the Employee Benefits Security Administration. 

 

 15 

 ADDITIONAL INFORMATION 
 The details on the following chart are provided for the Eligible Executive’s information and possible use. 
  

					
	Name of Policy	  	Type of Policy	  	Policy Year:
			
	 Discover Financial Services Change in
 Control Severance
Policy
	  	Welfare	  	1/1 – 12/31

 Type of Policy Administration 
 Self-Administered 
 Policy Sponsor 
 Discover Financial Services 
 2500 Lake Cook Road 
 Riverwoods, IL 60015 
 Plan Administrator 
 Compensation Committee of the Board of Directors 
 c/o Discover Financial Services 
 Human Resources Department 
 2500 Lake Cook Road 
 Riverwoods, IL 60015 
 Agent for Service of Legal Process 

Discover Financial Services 
 Legal and Compliance Department 

2500 Lake Cook Road 
 Riverwoods, IL 60015 
 In addition, service of legal process may be made upon the Plan Administrator. 
 Identification Number (Policy Sponsor) 
 36-2517428 
 Identification Number (Policy) 
 509 
 THIS DESCRIPTION OF DISCOVER FINANCIAL SERVICES CHANGE IN CONTROL SEVERANCE POLICY SERVES AS THE OFFICIAL PLAN DOCUMENT AND AS THE LEGAL SUMMARY PLAN DESCRIPTION. 
  

 16 

 EXHIBIT A 
 FORM OF AGREEMENT 
 NON-COMPETITION AGREEMENT 
 [Note: Pursuant to the Discover Financial Services Change in Control Severance 
 Policy, this Agreement applies to VP’s and above.] 
 This Non-Competition
Agreement dated as of ________, 20___, (“Agreement”) is made by and between Discover Financial Services (the “Company”), and ___________________ (the “Executive”). In consideration of the promises and mutual agreements
contained herein and in the Discover Financial Services Change in Control Severance Policy effective September 21, 2007 (the “Severance Policy”) pursuant to which the Executive is eligible for certain benefits, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged by both parties, the parties hereby agree as follows: 
 1. No Competitive Activity. The Executive hereby acknowledges that, by virtue of the Executive’s unique relationship with the Company, the Executive has acquired and had access to trade secrets and other confidential
information and has also developed a unique and comprehensive familiarity with the Company and its business, which the Executive would not have otherwise had but for the Executive’s employment with the Company, and which the Executive
acknowledges are valuable assets of the Company. Accordingly, the Executive agrees that except as expressly authorized by the Company in furtherance of the Executive’s employment duties, during the remainder of the Executive’s employment
with the Company (if any) and for the [12] [18]-month period thereafter, the Executive shall not directly or indirectly engage in any Competitive Activity as defined in the Severance Policy. The Executive acknowledges that these obligations
are reasonably designed to protect the legitimate business interests of the Company, without unreasonably restricting the Executive’s post-employment opportunities. For the purposes of this Agreement, “Company” shall have the same
meaning as set forth in the Severance Policy. [INCLUDE ONLY FOR ATTORNEYS: Notwithstanding anything to the contrary herein, nothing in this Section 1 shall apply to Executive’s activities that constitute the practice of law with respect
to a Competitor as defined in the Severance Policy. At all times, whether or not the Executive is engaged in activity that constitutes the practice of law, the Executive acknowledges and agrees that the Executive shall be bound by, and shall comply
with, any and all applicable codes, rules and canons of professional conduct and/or responsibility (as may be amended from time to time) that are applicable to the Executive’s prior professional relationship with the Company as a lawyer for the
Company.] 
 2. Payments and Benefits. Subject to Section 3 of this Agreement and the terms and conditions of the
Severance Policy (including without limitation Sections 8, 10 and 13) and provided that the Executive complies with the Executive’s obligations under this Agreement, the Severance Policy and the Release of Claims (as defined in Section 3
below), the Company will provide the Executive with the Non-Competition Benefits defined in the Severance Policy, payment of which will be made in accordance with the terms of the Severance Policy. 

 3. Condition Precedent. Without modifying or otherwise affecting any term of the Severance
Policy, this Agreement will not be effective and the Executive shall not be entitled to receive any Non-Competition Benefits unless and until the Executive executes a valid and enforceable release of claims as set forth in Section 10 of the
Severance Policy (a “Release of Claims”) [without revoking it per its terms]. This Agreement shall be null and void and shall be of no force and effect in the event that the Executive does not execute[, or revokes,] a valid
and enforceable Release of Claims. 
 4. Remedies. The Executive acknowledges and agrees that a breach of any provision of
Section 1 will result in immediate and irreparable harm to the Company for which full damages cannot readily be calculated and for which damages are an inadequate remedy. Accordingly, the Executive agrees that the Company shall be entitled to
injunctive relief to prevent any such actual or threatened breach or any continuing breach by the Executive (without posting a bond or other security), without limiting any other remedies that may be available to it. The Executive further agrees to
reimburse the Company for all costs and expenditures, including but not limited to reasonable attorneys’ fees and court costs, incurred by it in connection with the successful enforcement of its rights under Section 1. 
 5. Assignment. This Agreement is enforceable by the Company and may be assigned or transferred by the Company to, and shall be binding upon
and inure to the benefit of, any parent, affiliate or other related entity of the Company or any entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets, stock or business of the Company.
The Executive may not assign any of the Executive’s rights or obligations under this Agreement. 
 6. Amendment and
Waiver. This Agreement may not be amended orally and may only be amended by written instrument signed by both parties (subject to Section 10 herein). A waiver by either party hereto of any of its rights or remedies under this Agreement
on any occasion shall not be a bar to the exercise of the same right or remedy on any subsequent occasion or of any other right or remedy at any time. 
 7. Governing Law. This Agreement shall be governed by the internal laws of the state of [Illinois], without regard to its conflict of laws rules. Nothing herein shall modify or otherwise affect
the Severance Policy. In the event of a conflict between the terms of this Agreement and the Severance Policy, the terms of the Severance Policy shall govern. 
 8. Headings and Defined Terms. The Section headings used herein are for convenience of reference only and are not to be considered in construction of the provisions of this Agreement. Capitalized terms
not defined in this Agreement shall have the same meaning set forth in the Severance Policy. 
 9. Entire Agreement. This
Agreement, the Severance Policy and the Release of Claims contain the entire agreement between the parties with respect to the subject matter contained herein and supersedes all prior or contemporaneous negotiations, understandings or agreements
between the parties, whether written or oral, with respect to such subject matter. 
  

 18 

 10. Severability. The parties agree that in the event any of the prohibitions or
restrictions set forth in Section 1 of this Agreement (including without limitation as contained in the definition of Competitive Activity as defined in the Severance Policy) are found by a court of competent jurisdiction to be unreasonable or
otherwise unenforceable, it is the purpose and intent of the parties that any such prohibitions or restrictions be deemed modified or limited so that, as modified or limited, such prohibitions or restrictions may be enforced to the fullest extent
possible. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law
(after any appropriate modification or limitation pursuant to the foregoing sentence), such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining
provisions of this Agreement. 
 11. Counterparts. This Agreement may be executed in two counterparts, each of which shall be
deemed an original, and both of which together shall constitute one and the same instrument. 
 THE PARTIES ACKNOWLEDGE BY SIGNING BELOW THAT THEY HAVE
READ AND UNDERSTAND THE ABOVE AND INTEND TO BE BOUND THEREBY: 
  

									
	[EXECUTIVE]	 		 	DISCOVER FINANCIAL SERVICES,
					
		 	DRAFT	 		 	By:	 	DRAFT
					
	Date:  	 	 	 		 	Position:  	 	 
					
		 		 		 	Date:	 	 
		 		 		 		 	

  

 19 

 EXHIBIT B 
 FORM OF AGREEMENT 
 AGREEMENT AND GENERAL RELEASE OF CLAIMS 
 _______________________ (the “Executive”) and Discover Financial Services, (the “Company”) hereby enter into this Agreement and
General Release of Claims (“Agreement”) pursuant to, and as a condition of the Executive’s entitlement to severance benefits under, the Discover Financial Services Change in Control Severance Policy effective September 21, 2007
(the “Severance Policy”). 
  
 1. Change in Control
Severance Benefits. Subject to the terms and conditions of this Agreement and the Severance Policy, and provided that the Executive complies with this Agreement, the Executive will be entitled to the Severance Benefits pursuant to and in
accordance with the Severance Policy, provided that the Executive signs and returns this Agreement to the Company within [10] [21] [45] calendar days after (but not before) the effective date of the Executive’s termination of employment
(the “Termination Date”) [and does not revoke this Agreement in accordance with Section 9 below]. The Executive acknowledges and agrees that the Executive would not be entitled to receive any benefits under the Severance Policy
but for the Executive’s undertakings in this Agreement. 
 2. Confidential Information. The Executive hereby acknowledges
that during the course of the Executive’s employment with the Company, the Executive has acquired confidential information and trade secrets of the Company and, in certain situations, of certain third parties who provide information to the
Company subject to confidentiality and non-use restrictions. For the purposes of this Agreement, the term “Confidential Information” shall mean all such confidential, trade secret and proprietary information, including without limitation
information regarding the Company’s business, operations, legal matters and resolution or settlement thereof, internal investigations, customer and employee information and lists, hiring, staffing and compensation practices, studies and
analyses, business plans, funding, financing and methods of doing business. The Executive acknowledges and agrees that all Confidential Information is of irreplaceable value to the Company and such third parties. Except as required to perform the
Executive’s obligations to the Company (including without limitation any post-employment obligations to the Company under this Agreement), to comply with law or regulation, or as authorized in writing in advance by the Company, the Executive
shall not, at any time, use, disclose, or take any action which may result in the use or disclosure of, any Confidential Information. The Executive agrees that the Executive does not have and shall not assert any claim of ownership or other property
interest in any Confidential Information. The Executive agrees to permit the Company to inspect upon the termination of Executive’s employment any material that the Executive seeks to remove from the Company’s offices or otherwise retain
to determine the presence or absence of any Confidential Information. 

 3. Non-solicitation. Except as expressly authorized by the Company in furtherance of the
Executive’s duties for the Company, the Executive shall not directly or indirectly (through any person, corporation, partnership or any other business entity of any kind): 
 (a) for ninety (90) days following the “Termination Date”, solicit, entice away or in any manner attempt to persuade any
client or customer, or prospective client or customer of the Company to (i) discontinue or diminish his, her or its relationship or prospective relationship with the Company or (ii) otherwise divert his, her, or its relationship or
prospective relationship to any person, corporation, partnership, or other business entity that engages in any line of business in which the Company is engaged. Notwithstanding anything to the contrary herein, the restrictions in this
Section 3(a) only apply to clients or customers for whom the Executive performed services or solicited on behalf of the Company or had substantial contact or acquired or had access to Confidential Information or other substantial information
relating to such client or customer as a result of the Executive’s employment during the [180 days] preceding the date of the notice of the termination of the Executive’s employment; and 
 (b) for 180 days following the “Termination Date” hire, solicit, recruit, induce, entice, influence, or encourage any individual
employed by the Company on or during the [180 days] preceding the date of the notice of termination of the Executive’s employment, whom the Executive supervised (directly or indirectly) or otherwise worked with, or who worked in or with
the Executive’s business unit, to leave the Company or become hired or engaged by any other person or entity. 
 4. Return of
Company Property. The Executive represents and warrants that the Executive has (or immediately shall) return to the Company all Confidential Information and any other property of the Company or of any third parties in the Executive’s
possession or control by virtue of the Executive’s employment by the Company, including without limitation any Company car, computer or other similar equipment, corporate credit cards, cell phones and other wireless devices, keys, calling
cards, and all documents concerning the Company (whether in tangible or electronic format and whether such documents or things contain any Confidential Information) in the Executive’s possession, custody, or control. 
 5. Injunctive Relief. The Executive acknowledges that the obligations contained in Sections 2, 3 and 4 of this Agreement are reasonably
designed to protect the legitimate business interests of the Company, without unreasonably restricting the Executive’s post-employment opportunities. Without limiting in any way the Company’s or the other Released Parties’ (as defined
below in Section 6(c)) rights to pursue any other legal or equitable remedies available to any of them, the Executive recognizes and agrees that a breach of any or all of the provisions of Sections 2, 3, or 4 of this Agreement will cause
immediate and irreparable harm to the Company and the other Released Parties for which damages cannot be readily calculated and are an inadequate remedy. Accordingly, the Executive acknowledges and agrees that the Company and the other Released
Parties shall be entitled (without the need to post any bond or other security) to injunctive relief restraining and enjoining any further actual or threatened breaches by the Executive in addition to any other relief that may be available. The
Executive agrees to reimburse the Company and the Released Parties for any costs and expenses (including without limitation, reasonable attorneys’ fees) incurred by any of them in connection with the successful enforcement by any of them or
their rights under Sections 2, 3 or 4 of this Agreement. 
  

 21 

 6. Release of Claims. The Executive, and anyone claiming through the Executive or on the
Executive’s behalf, agrees to and hereby releases the Company and the other Released Parties (as defined below) with respect to any and all claims, whether currently known or unknown, that the Executive now has, has ever had, or may ever have
against the Company and any of the other Released Parties arising from or related to any act, omission, or thing occurring or existing at any time prior to or on the date on which the Executive signs this Agreement. Without limiting the foregoing,
the claims waived and released by the Executive hereunder include, but are not limited to: 
 (a) all claims for or related in
any way to the Executive's employment, compensation, other terms and conditions of employment, or termination from employment with the Company or any other Employer; 
 (b) all claims that were or could have been asserted by the Executive or on the Executive’s behalf: (i) in any federal, state,
or local court, commission, or agency; (ii) under any common law theory; or (iii) under any employment, contract, tort, federal, state, or local law, regulation, ordinance, constitutional provision, or executive order; and 
 (c) all claims that were or could have been asserted by the Executive or on the Executive’s behalf arising under any of the following
laws, as amended from time to time: the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Americans with Disabilities Act, the Employee Retirement Income Security Act, the Worker Adjustment
and Retraining Notification Act, and any and all state and local laws comparable to any of the foregoing laws. 
 The consideration offered herein is
accepted by the Executive as being in full accord, satisfaction, compromise and settlement of any and all claims or potential claims, and the Executive expressly agrees that the Executive is not entitled to and shall not receive any further
payments, benefits, or other compensation or recovery of any kind from the Company or any of the other Released Parties. In the event of any further proceedings whatsoever based upon any matter released herein, the Company and each of the other
Released Parties shall have no further monetary or other obligation of any kind to the Executive, including without limitation any obligation for any costs, expenses and attorneys’ fees incurred by or on behalf of the Executive. For the
purposes of this Agreement, “Released Parties” means: (a) the Company and its past, present, and future parents, divisions, subsidiaries, partnerships, affiliates, and other related entities (whether or not they are wholly owned); and
(b) the past, present, and future owners, trustees, fiduciaries, administrators, shareholders, directors, officers, partners, agents, representatives, members, associates, employees, and attorneys of each entity listed in subpart
(a) above; and (c) the predecessors, successors, and assigns of each entity listed in subparts (a) and (b) above. 
 7.
Representations and Warranties. The Executive represents and warrants that: (a) the Executive has not filed or initiated any legal or other proceedings against any of the Released Parties; (b) no such proceedings have been
initiated against any of the Released Parties on the Executive’s behalf; (c) the Executive is the sole owner of the claims that are released in Paragraph 6 above; (d) none of these claims has been transferred or assigned or caused to
be transferred or assigned to any other person, firm or other legal entity; and (e) the Executive has the full right and power to grant, execute, and deliver the releases, undertakings, and agreements contained in this Agreement. 
  

 22 

 8. Acknowledgments. [IF 40 OR OVER] THE EXECUTIVE ACKNOWLEDGES, UNDERSTANDS, AND AGREES
THAT: (a) THE EXECUTIVE HAS READ AND UNDERSTANDS THE TERMS AND EFFECT OF THIS AGREEMENT; AND (b) THE EXECUTIVE RELEASES AND WAIVES CLAIMS UNDER THIS WAIVER AND RELEASE KNOWINGLY AND VOLUNTARILY, IN EXCHANGE FOR CONSIDERATION IN ADDITION TO
ANYTHING OF VALUE TO WHICH THE EXECUTIVE ALREADY IS ENTITLED (INCLUDING WITHOUT LIMITATION BENEFITS PURSUANT TO THE SEVERANCE POLICY); AND (c) THE EXECUTIVE HEREBY IS AND HAS BEEN ADVISED OF THE EXECUTIVE’S RIGHT TO HAVE THE
EXECUTIVE’S ATTORNEY REVIEW THIS AGREEMENT BEFORE SIGNING IT; AND (d) THE EXECUTIVE HAS [21] [45] DAYS IN WHICH TO CONSIDER WHETHER TO EXECUTE THIS AGREEMENT, EACH EXECUTED AGREEMENT TO BE RETURNED TO _________________________[;
AND (e) WITHIN SEVEN (7) DAYS FROM THE DATE ON WHICH THE EXECUTIVE SIGNS THIS AGREEMENT, THE EXECUTIVE MAY, AT THE EXECUTIVE’S SOLE OPTION, REVOKE THE AGREEMENT UPON WRITTEN NOTICE TO ______________________________]. 

[OR] 
 Acknowledgments.
[IF UNDER 40] THE EXECUTIVE ACKNOWLEDGES, UNDERSTANDS, AND AGREES THAT: (a) THE EXECUTIVE HAS READ AND UNDERSTANDS THE TERMS AND EFFECT OF THIS AGREEMENT; AND (b) THE EXECUTIVE RELEASES AND WAIVES CLAIMS UNDER THIS WAIVER AND RELEASE
KNOWINGLY AND VOLUNTARILY, IN EXCHANGE FOR CONSIDERATION IN ADDITION TO ANYTHING OF VALUE TO WHICH THE EXECUTIVE ALREADY IS ENTITLED (INCLUDING WITHOUT LIMITATION BENEFITS PURSUANT TO THE SEVERANCE POLICY); AND (c) THE EXECUTIVE HEREBY IS AND
HAS BEEN ADVISED OF THE EXECUTIVE’S RIGHT TO HAVE THE EXECUTIVE’S ATTORNEY REVIEW THIS AGREEMENT BEFORE SIGNING IT; AND (d) THE EXECUTIVE HAS 10 DAYS IN WHICH TO CONSIDER WHETHER TO EXECUTE THIS AGREEMENT, EACH EXECUTED
AGREEMENT TO BE RETURNED TO _________________________[. 
 9. Effective Date of Agreement. [IF UNDER 40This Agreement
shall become effective and shall be irrevocable on the date that it is fully executed by the parties.] OR [IF 40 OR OVER: This Agreement will become effective and irrevocable after the seven-day revocation period in Section 8(e) above has
expired without any revocation of this Agreement]. 
 10. Non-Admission. Nothing in this Waiver and Release is intended to
or shall be construed as an admission by the Company or any of the other Released Parties that any of them violated any law, interfered with any right, breached any obligation or otherwise engaged in any improper or illegal conduct with respect to
the Executive or otherwise. The Company and the other Released Parties expressly deny any such illegal or wrongful conduct. 
  

 23 

 11. Non-Disclosure of This Agreement. Except as required by law, the Executive agrees to
not disclose, or cause, or permit to be disclosed in any way the existence or terms of this Agreement, with the exception of the Executive’s financial representative or accountants, legal representatives, spouse (provided that such individuals
or entities agree to maintain the confidentiality of this Agreement as set forth herein), or for the purpose of enforcing this Agreement. 
 12. Non-Disparagement and No Entitlement to Employment. The Executive agrees not to engage in conduct that disparages or damages or could disparage or damage the reputation, goodwill, or standing in the community of the
Company or any of the other Released Parties or any of their respective businesses, strategic plans, products, practices, policies, directors, or employees. The Executive acknowledges that the Executive has no present or future right to employment
with the Company or any of the other Released Parties. 
 13. Future Cooperation. The Executive agrees to cooperate with and
assist the Company in connection with any investigation, regulatory matter, lawsuit or arbitration in which the Company is a subject, target or party and as to which the Executive may have pertinent information. The Executive agrees to be fully
available for preparation for hearings, proceedings or litigation and for attendance at any pre-trial discovery and trial sessions. The Company agrees to make reasonable efforts to provide the Executive with reasonable notice in the event the
Executive’s participation is requested or required. The Company agrees to reimburse reasonable out-of-pocket costs incurred by the Executive as the direct result of such participation, provided that such out-of-pocket costs are supported by
appropriate documentation and have prior authorization of the Company. Without in any way limiting the foregoing, the Executive agrees to give written notice to the Company, with as much advance notice as possible (but in any event within two
business days of the Executive’s receipt) to [Insert name, address and fax number] by facsimile or overnight mail, of any subpoena or judicial, administrative, or regulatory inquiry or proceeding, or lawsuit in which the Executive is
requested or required to disclose information which relates in any way to the Company or the Executive’s duties for or on behalf of the Company. The Executive agrees to meet with such individual(s) and at such time(s) designated by the Company
in advance of giving any such testimony or information. Nothing in this Agreement shall prohibit or restrict the Executive from communicating, providing relevant information to or otherwise cooperating with governmental authorities with
responsibility for the administration of fair employment practices laws regarding a possible violation of such laws or responding to any such inquiry from such authority. 
 14. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law. In the event any of the prohibitions or
restrictions set forth in any of Sections 2, 3, or 4 of this Agreement are found by a court of competent jurisdiction to be unreasonable or otherwise unenforceable, it is the purpose and intent of the parties that any such prohibitions or
restrictions be deemed modified or limited so that, as modified or limited, such prohibitions or restrictions may be enforced to the fullest extent possible. If any provision of this Agreement is held to be prohibited by or invalid under applicable
law (after any appropriate modification or limitation pursuant to the foregoing sentence, as applicable), such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement. 
  

 24 

 15. Section Headings, Amendment, and Choice of Law. The Section headings used herein are
for convenience of reference only and are not to be considered in construction of the provisions of this Agreement. This Agreement may not be amended orally and may only be amended by written instrument signed by both parties. A waiver by either
party hereto of any of such party’s rights or remedies under this Agreement on any occasion shall not be a bar to the exercise of the same right or remedy on any subsequent occasion or of any other right or remedy at any time. This Agreement
shall be construed and interpreted in accordance with the internal laws of the State of [Illinois], without regard to its conflict of law rules. 
 16. Assignment. This Agreement is enforceable by the Company and may be assigned or transferred by the Company to, and shall be binding upon and inure to the benefit of, any of affiliate of the Company
or any entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets, stock or business of the Company. The Executive may not assign any of the Executive’s rights or obligations under this
Agreement. 
 17. Entire Agreement. This Agreement together with the Severance Policy [and any non-competition agreement
between the Executive and the Company] contain the entire agreement between the parties with respect to the subject matter contained herein and supersedes all prior and/or contemporaneous negotiations, understandings or agreements between the
parties, whether written or oral, with respect to such subject matter. This Agreement shall continue in full force and effect notwithstanding the termination of the Executive’s employment with the Company. 
 18. Counterparts. This Agreement may be executed in counterparts, each of which taken together shall constitute one and the same
instrument. 
 19. [INCLUDE FOR 40 OR OVER GROUP TERMINATION: Table of Ages and Job Titles. The Executive acknowledges and agrees
that the Executive received with this Agreement and reviewed a written document specifying, among other things, the job titles (or positions) and ages (or dates of birth) of certain other employees described further in that written document.]

  

 25 

 THE PARTIES HAVE READ AND UNDERSTAND THE FOREGOING AND KNOWINGLY AND VOLUNTARILY INTEND TO BE BOUND THERETO:

  

									
	[EXECUTIVE]	 		 	DISCOVER FINANCIAL SERVICES
				
	 	 		 	By:	 	 
					
	Dated:  	 	 	 		 	Its:	 	 
					
		 		 		 	Dated:Arrangement Agreement

 Exhibit 10.1 
 NATUS MEDICAL INCORPORATED 
 - and - 
 4437713 CANADA INC. 
 - and - 
 EXCEL-TECH LTD. 
  

ARRANGEMENT AGREEMENT 
 October 9, 2007 
  

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page
	 ARTICLE 1 INTERPRETATION
	  	1
	 1.1
	  	 Definitions
	  	1
	 1.2
	  	 Singular, Plural, etc.
	  	10
	 1.3
	  	 Deemed Currency
	  	10
	 1.4
	  	 Headings, etc.
	  	10
	 1.5
	  	 Date for any Action
	  	10
	 1.6
	  	 Governing Law
	  	10
	 1.7
	  	 Knowledge
	  	10
	 1.8
	  	 Incorporation of Exhibits
	  	11
		
	 ARTICLE 2 THE ARRANGEMENT
	  	11
	 2.1
	  	 The Arrangement
	  	11
	 2.2
	  	 Implementation Steps by the Company
	  	11
	 2.3
	  	 Interim Order
	  	13
	 2.4
	  	 Articles of Arrangement
	  	13
	 2.5
	  	 Circular
	  	13
	 2.6
	  	 Preparation of Filings
	  	14
	 2.7
	  	 Dissenting Shareholders
	  	15
	 2.8
	  	 Amendment
	  	15
	 2.9
	  	 List of Shareholders
	  	15
	 2.10
	  	 Withholding
	  	15
	 2.11
	  	 Alternative Transaction Structure
	  	16
	 2.12
	  	 Closing
	  	16
	 2.13
	  	 Consideration
	  	16
	 2.14
	  	 Safe-Income Transactions
	  	17
	 2.15
	  	 Confidentiality Agreement
	  	18
	 2.16
	  	 Registrar and Transfer Agent
	  	18
		
	 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBCO
	  	18
	 3.1
	  	 Organization and Qualification
	  	18
	 3.2
	  	 Authority Relative to this Agreement
	  	18
	 3.3
	  	 No Violation
	  	19
	 3.4
	  	 Circular
	  	19
	 3.5
	  	 Funds Available
	  	19
	 3.6
	  	 Share Ownership
	  	19
	 3.7
	  	 Knowledge
	  	20
	 3.8
	  	 Other Agreements
	  	20
		
	 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	  	20
	 4.1
	  	 Organization and Qualification
	  	20
	 4.2
	  	 Subsidiaries
	  	20
	 4.3
	  	 Authority Relative to this Agreement
	  	20
	 4.4
	  	 Support of the Arrangement
	  	21
	 4.5
	  	 Circular
	  	21
	 4.6
	  	 No Violation
	  	21
	 4.7
	  	 Capitalization
	  	22
	 4.8
	  	 No Material Adverse Effect
	  	23

  

 - i - 

					
	 4.9
	  	 Advisory Fees
	  	23
	 4.10
	  	 Conduct of Business
	  	23
	 4.11
	  	 Licences, Permits
	  	24
	 4.12
	  	 Financial Statements and Public Disclosure
	  	25
	 4.13
	  	 Material Contracts
	  	25
	 4.14
	  	 Litigation
	  	25
	 4.15
	  	 Officer Obligations
	  	26
	 4.16
	  	 Reporting Issuer Status
	  	26
	 4.17
	  	 Business in Compliance with Laws
	  	26
	 4.18
	  	 Employment Matters
	  	26
	 4.19
	  	 Tax Matters
	  	27
	 4.20
	  	 Environmental Matters
	  	29
	 4.21
	  	 Real Property
	  	29
	 4.22
	  	 Intellectual Property Rights
	  	30
	 4.23
	  	 Insurance
	  	32
	 4.24
	  	 Absence of Undisclosed Liabilities
	  	32
	 4.25
	  	 Net Debt
	  	32
	 4.26
	  	 Restrictions on Business Activities
	  	32
	 4.27
	  	 Relationships with Licensees, Customers, Suppliers, Distributors and Sales Representatives
	  	33
	 4.28
	  	 Rights Plan
	  	33
	 4.29
	  	 Related Party Transactions
	  	33
	 4.30
	  	 No Expropriation
	  	33
	 4.31
	  	 Full Disclosure
	  	33
	 4.32
	  	 Government Regulation
	  	33
	 4.33
	  	 No “Collateral Benefit” under OSC Rule 61-501.
	  	34
	 4.34
	  	 Investment Canada Act (Canada)
	  	34
	 4.35
	  	 Effect of Disclosure
	  	34
		
	 ARTICLE 5 CONDUCT OF BUSINESS
	  	34
	 5.1
	  	 Conduct of Business by the Company
	  	34
		
	 ARTICLE 6 COVENANTS OF THE COMPANY
	  	37
	 6.1
	  	 Non-Solicitation
	  	37
	 6.2
	  	 Right to Match
	  	39
	 6.3
	  	 Termination Fee and Expense Reimbursement
	  	39
	 6.4
	  	 Injunctive Relief
	  	41
	 6.5
	  	 Board of the Company
	  	41
	 6.6
	  	 Additional Covenants
	  	41
	 6.7
	  	 Accuracy of Representations
	  	42
	 6.8
	  	 Pre-Closing Reorganization
	  	42
	 6.9
	  	 Real Property Restrictive Covenants
	  	42
		
	 ARTICLE 7 OTHER COVENANTS OF PARENT
	  	43
	 7.1
	  	 Accuracy of Representations
	  	43
	 7.2
	  	 Indemnification
	  	43
	 7.3
	  	 Employment and Benefits Matters
	  	44
	 7.4
	  	 Additional Covenants
	  	44
		
	 ARTICLE 8 MUTUAL COVENANTS
	  	44
	 8.1
	  	 Notice Provisions
	  	44
	 8.2
	  	 Additional Agreements and Filings
	  	44
	 8.3
	  	 Access to Information
	  	45

  

 - ii - 

					
	 8.4
	  	 Publicity
	  	45
		
	 ARTICLE 9 CONDITIONS TO THE ARRANGEMENT
	  	45
	 9.1
	  	 Conditions to the Obligations of Each Party
	  	45
	 9.2
	  	 Conditions to the Obligations of Parent and Subco.
	  	46
	 9.3
	  	 Conditions to the Obligation of the Company
	  	47
		
	 ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER
	  	47
	 10.1
	  	 Termination
	  	47
	 10.2
	  	 Effect of Termination
	  	48
	 10.3
	  	 Amendment
	  	49
	 10.4
	  	 Waiver
	  	49
		
	 ARTICLE 11 GENERAL PROVISIONS
	  	49
	 11.1
	  	 Notices
	  	49
	 11.2
	  	 Miscellaneous
	  	51
	 11.3
	  	 Binding Effect and Assignment
	  	51
	 11.4
	  	 Expenses
	  	51
	 11.5
	  	 No Personal Liability
	  	51
	 11.6
	  	 Survival
	  	52
	 11.7
	  	 Counterpart Execution
	  	52

  

 - iii - 

 ARRANGEMENT AGREEMENT 
 THIS AGREEMENT made October 9, 2007 
 BETWEEN: 
 NATUS MEDICAL INCORPORATED, a corporation incorporated under the laws of the State of Delaware
(“Parent”) 
 - and - 
 4437713 CANADA INC., a corporation incorporated under the laws of Canada (“Subco”) 
 - and - 
 EXCEL-TECH LTD., a corporation incorporated under the laws of Canada (the “Company”). 
 WHEREAS subject to the terms and conditions of this Agreement, the parties hereto intend to propose a statutory plan of arrangement under the CBCA
pursuant to which Parent will cause Subco to, and Subco will, acquire all of the outstanding Shares for $3.25 per Share in cash on the terms set forth in the Plan of Arrangement; 
 WHEREAS the board of directors of the Company (the “Board”) desires to support and facilitate the Plan of Arrangement on the
terms set forth in this Agreement and has unanimously concluded, after receiving financial and legal advice and following the receipt and review of recommendations from its special committee of the Board (the “Special Committee”),
that it is in the best interests of the Company and the Shareholders to enter into this Agreement; and 
 WHEREAS concurrently with
the execution of this Agreement, and as a condition and inducement to Parent’s willingness to enter into this Agreement, the Supporting Shareholders, holding an aggregate of 4,575,314 Shares (being approximately 24.0% of the issued and
outstanding Shares) are each entering into a Support Agreement with Parent and Subco. 
 NOW THEREFORE THIS AGREEMENT WITNESSES
that, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party, the Parties hereby covenant and agree as
follows: 
 ARTICLE 1 INTERPRETATION 
  

	1.1	Definitions 

 In this Agreement, unless there is
something in the subject matter or context inconsistent therewith, the following terms have the meanings set forth below. 
 “Acquisition
Proposal” means, other than the transactions contemplated by this Agreement, (i) any take-over bid, merger, amalgamation, arrangement, business combination, consolidation, recapitalization, liquidation or winding-up in respect of the
Company (excluding a bona fide internal reorganization) by a Person other than Parent or an Affiliate of Parent (or any Person acting jointly or in concert with Parent or 

 
an Affiliate of Parent); (ii) any sale, lease, license, mortgage, hypothecation, pledge, transfer or other disposition of all or a material portion of
the assets of the Company, whether in a single transaction or series of transactions to a Person other than Parent or an Affiliate of Parent (or any Person acting jointly or in concert with Parent or an Affiliate of Parent); (iii) any sale,
acquisition or issuance of 20% or more of the Company’s securities of any class or rights or interests therein or thereto in a single transaction or series of transactions; (iv) any similar business combination or transaction of or
involving the Company, other than with Parent or an Affiliate of Parent (or any Person acting jointly or in concert with Parent or an Affiliate of Parent); (v) any other transaction, the consummation of which would reasonably be expected to
impede, interfere with, prevent or materially delay the Arrangement, or (vi) any proposal or offer to, or public announcement of an intention to, do any of the foregoing from any Person, other than Parent or an Affiliate of Parent (or any
Person acting jointly or in concert with Parent or an Affiliate of Parent). 
 “Adjusted Current Liabilities” means current liabilities,
including bank indebtedness, but excluding the current portion of long term debt. 
 “Affiliate” has the meaning ascribed to the term
“affiliated entity” in OSC Rule 61-501. 
 “Agreement”, “this Agreement”, “herein”,
“hereto”, and “hereof” and similar expressions refer to this agreement, including the Schedule hereto, as the same may be amended or supplemented from time to time. 
 “Arrangement” means the arrangement involving Subco, Parent and the Company under the provisions of section 192 of the CBCA on the terms and conditions
set forth in this Agreement resulting, inter alia, in the direct acquisition by Subco, or any successor thereof, of all of the outstanding Shares all on such terms and subject to the conditions set out in this Agreement and as more
particularly described in the Plan of Arrangement, subject to any amendments or variations thereto made in accordance with this Agreement or the Plan of Arrangement or made at the direction of the Court. 
 “Arrangement Resolution” means the special resolution of the Shareholders approving the Arrangement to be considered at the Company Meeting,
substantially in the form of Exhibit B, and any amendments or variations thereto made in accordance with the provisions of this Agreement or made at the direction of the Court in the Interim Order or otherwise. 
 “Articles of Arrangement” means the articles of arrangement of the Company to be filed with the Director in connection with the Arrangement. 

“Board” has the meaning set forth in the recitals to this Agreement. 
 “Business Day” means any day excepting a Saturday, Sunday or statutory holiday in Toronto, Ontario. 
 “Cashed-Out Options” means any Options (whether vested or unvested) that are outstanding immediately before the Effective Time. 
 “CBCA” means the Canada Business Corporations Act, as amended. 
 “Certificate of Arrangement” means the
Certificate of Arrangement to be issued by the Director pursuant to section 192(7) of the CBCA in respect of the Articles of Arrangement. 
 “Change
of Recommendation” means (a) any action taken or any resolution or any agreement made to take any action by the Board, or any committee of the Board, to: (i) withdraw, amend, change, modify or qualify in a manner adverse to Parent
or Subco, or propose publicly to withdraw, amend, change, modify or qualify in a manner adverse to Parent or Subco, the approval, recommendation or declaration of 

 
advisability by the Board or any such committee of this Agreement or the Arrangement; or (ii) recommend, or propose publicly to recommend, the approval
or adoption of any Acquisition Proposal, or (b) any failure by the Board to reaffirm support of the Arrangement within five Business Days following an announcement made by a third party in respect of any Acquisition Proposal or any reasonable
request to do so from Parent. 
 “Charter Documents” means articles and by-laws or similar constating documents, and shareholders’
agreements, partnership agreements and declarations of trust in respect of a corporation, partnership, trust or bank, as applicable. 
 “Circular” means the notice of meeting and management information circular of the Company to be prepared and sent to Shareholders in connection with the Company Meeting, including the exhibits thereto. 
 “Closing” has the meaning set forth in Section 2.12. 
 “Closing Date” has the meaning set forth in Section 2.12. 
 “Collective Agreement” means each contract or
agreement with any trade union, council of trade unions or employee association, employee bargaining agent or affiliated bargaining agent in respect of the Company or any of its employees. 
 “Common Shares” means the common shares in the capital of the Company. 
 “Company Expense Reimbursement” has the meaning set forth in Section 6.3(c). 
 “Company
Intellectual Property” means all Intellectual Property that is used in the business of the Company as such business is currently conducted. 
 “Company Meeting” means the special meeting of the Shareholders (including any adjournments or postponements thereof) to be held to consider, inter alia, the Arrangement Resolution. 
 “Company Plans” means all health, welfare, supplemental unemployment benefit, bonus, profit sharing, option, unit, insurance, incentive, incentive
compensation, deferred compensation, share purchase, share compensation, disability, pension, retention or retirement plans and other employee or director compensation or benefit plans, policies or arrangements which are maintained by the Company.

 “Company Public Disclosure” means all documents filed by the Company after April 13, 2006 on the System for Electronic Document
Analysis and Retrieval (SEDAR). 
 “Confidentiality Agreement” means the confidentiality agreement dated July 19, 2007 between Parent
and the Company. 
 “Consultants” means all consultants engaged by the Company on a full-time, part-time or temporary basis by the Company.

 “Contaminant” means pollutants, substances of a deleterious, dangerous or hazardous nature or contaminants that are regulated under
applicable Environmental Laws with respect to their presence, use, collection, storage, transportation, treatment or disposal. 
 “Contract”
means any contract, agreement, undertaking, licence, note, bond, mortgage, indenture, loan or deed of trust. 

 “Court” means the Ontario Superior Court of Justice (Commercial List). 
 “Data Room Information” means the documents and information described in an index to the dataroom (the “Data Room”), as of 6:00 p.m.
(Toronto time) on October 5, 2007, a copy of which is annexed to the Disclosure Letter of the Company. 
 “Depositary” means the
registrar and transfer agent of the Company as of the date of this Agreement or any successor thereto. 
 “Deferred Share Unit” has the
meaning set forth in Section 4.7. 
 “Director” means the Director appointed pursuant to the CBCA. 
 “Disclosure Letter of the Company” means the letter of the Company dated the date of this Agreement and delivered by the Company to Parent concurrently
herewith. 
 “Dissent Rights” means the rights of dissent in favour of registered Shareholders in respect of the Arrangement as described in
the Interim Order and the Plan of Arrangement. 
 “DSU Holder” means a holder of Deferred Share Units. 
 “Effective Date” means the date upon which the Arrangement becomes effective as established by the date of issue shown on the Certificate of
Arrangement. 
 “Effective Time” means the time at which Articles of Arrangement are issued by the Director on the Effective Date.

 “Employees” means all Persons employed by the Company on a full-time, part-time or temporary basis including all such Persons on
disability leave, parental leave or other absence from work. 
 “Encumbrances” means any pledge, lien, priority, security interest,
hypothec, lease, title retention agreement, restriction, easement, right-of-way, title defect, option, adverse claim, trust or deemed trust or encumbrance of any kind or character whatsoever. 
 “Environmental Laws” means all applicable federal, state, provincial and municipal statutes, laws, ordinances, bylaws, rules, certificates, orders,
injunctions, arbitral awards, grants, regulations and other authorizations of any Governmental Authority imposing liability or standards of conduct for or relating to the regulation of activities, materials, substances, wastes or Contaminants in
connection with or for or to the protection of human health, safety, the environment or natural resources (including ambient air, surface water, groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic species and vegetation) and
under common law. 
 “Final Order” means the order of the Court approving the Arrangement as such order may be amended at any time prior to
the Effective Date or, if appealed, then unless such appeal is withdrawn or dismissed, as affirmed or as amended on appeal. 
 “Financial
Statements” means the comparative audited consolidated financial statements of the Company prepared in accordance with GAAP for the fiscal year ended January 31, 2007 and 2006 including the notes thereto and auditor’s report
thereon and the comparative unaudited consolidated financial statements of the Company prepared in accordance with GAAP for the six month periods ended July 31, 2007 and July 31, 2006 including the notes thereto. 
 “GAAP” means Canadian generally accepted accounting principles. 

 “Governmental Authority” means (i) any federal, provincial, territorial, state, regional,
municipal, local, foreign or supranational regulatory authority or other government, or public department or agency, commission, ministry, office, court, tribunal, arbitral body, board, bureau, Crown corporation, stock exchange, whether foreign or
domestic, and any other entity with the power to establish Laws having jurisdiction or claiming to have jurisdiction over any of the Parties, (ii) any subdivision, agent, commission, board or authority of any of the foregoing, or (iii) any
quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing, and includes the Securities Authorities. 
 “Healthcare Law” means the following laws or regulations relating to the regulation of the healthcare industry (as such laws are currently enforced or as interpreted as of the date hereof by existing,
publicly available judicial and administrative decisions and regulations): (i) Sections 1877, 1128, 1128A or 1128B of the Social Security Act (the “SSA”); (ii) the licensure, certification or registration requirements of
healthcare facilities, services, medical devices, or equipment; (iii) any state or provincial certificate of need or similar law governing the establishment and regulation of healthcare facilities or services or the making of healthcare capital
expenditures; (iv) any state or provincial law relating to billing, fee-splitting or the practice of medicine; (v) any state or provincial regulations defining professional misconduct, including physician self-referral prohibition or state
anti-kickback law; (vi) any criminal or regulatory offense relating to the delivery of, or claim for payment for, a healthcare item or service under any federal, state or provincial healthcare program; and (vii) any federal, state or
provincial law relating to the interference with or obstruction of any investigation into any criminal offense. 
 “Holdco”, “Holdco
Agreement”, “Holdco Alternative”, “Holdco Election”, “Holdco Election Deadline”, “Holdco Shareholders”, “Holdco Shares” have the meanings set forth in
Section 2.14. 
 “including” means including without limitation, and “include” and “includes” have a
corresponding meaning. 
 “Intellectual Property” means all: 
  

	 	(a)	copyrights, including copyright registrations and applications and unregistered copyrights; 

  

	 	(b)	trade-marks, trade names, Internet domain names; 

  

	 	(c)	patents and inventions and applications therefor and patents which may be issued from current applications (including divisionals, reissues, renewals, re-examinations,
continuations, continuations-in-part and extensions) applied for or registered; 

  

	 	(d)	trade secrets and confidential information; 

  

	 	(e)	industrial designs; 

  

	 	(f)	any other right relating to intellectual or industrial property, whether arising under statute, common law, civil law or otherwise; and 

  

	 	(g)	all rights and interest in or relating to any of the foregoing under licenses, waivers or agreements. 

 “Interim Order” means the interim order of the Court made pursuant to the motion contemplated by Section 2.3. 

 “Laws” means all applicable laws, statutes, by-laws, rules, regulations, orders, codes, policies,
notices and directions and judicial, arbitral, administrative, ministerial or departmental judgments, awards, or other requirements of any Governmental Authority, court or other authority having jurisdiction over the applicable Party. 
 “Matching Period” has the meaning set forth in Section 6.1(e). 
 “Material Adverse Effect” means an effect, event, circumstance, fact or occurrence that, individually or in the aggregate with other such effects, events, circumstances, facts or occurrences, is or
would reasonably be expected to (x) be material and adverse to the financial condition, business, assets, operations or the results of operations of the Company or (y) result in a material impairment on the ability of Parent and Subco to
continue operating the business of the Company after the Effective Date in substantially the same manner as it was operated immediately prior to the date of this Agreement, except any such effect, event, circumstance, fact or occurrence resulting
from or arising in connection with: (a) any change in GAAP; (b) any adoption, proposal, implementation or change in applicable Law or any interpretation thereof by any Governmental Authority that is affecting the Company; (c) any
change in Canadian, United States or global political conditions (including the outbreak of war or acts of terrorism) or in general economic, business, regulatory, political or market conditions or in Canadian, United States or global financial or
capital markets; (d) any change affecting any of the industries in which the Company operates; (e) any natural disaster; (f) the execution, announcement or performance of this Agreement or consummation of the transactions contemplated
hereby, including, without limitation, any loss or threatened loss of, or adverse change or threatened adverse change in, the relationship of the Company with any of its customers, employees, financing sources, creditors or shareholders as a direct
consequence of the foregoing; (g) any change in the market price or trading volume of any securities of the Company (it being understood that the causes underlying such change in market price may be taken into account in determining whether a
Material Adverse Effect has occurred), or any general decline in the trading prices of, or any suspension of trading in, securities generally on any securities exchange on which any securities of the Company trade; (h) the failure of the
Company in and of itself to meet any internal or public projections, forecasts or estimates of revenues or earnings (it being understood that the causes underlying such failure may be taken into account in determining whether a Material Adverse
Effect has occurred); (i) any actions taken (or omitted to be taken) upon the request of Parent; (j) any fluctuations in domestic or foreign currency exchange rates; or (k) any action taken by the Company which is required pursuant to
this Agreement; provided, however, that with respect to clauses (a), (b), (c), (d) and (e) such action does not have a materially disproportionate effect on the Company relative to other comparable companies and entities operating in the
industries in which the Company operates, and unless expressly provided in any particular section of this Agreement, references in certain sections of this Agreement to dollar amounts are not intended to be, and shall not be deemed to be,
illustrative or interpretive for purposes of determining whether a “Material Adverse Effect” has occurred. 
 “Material Contract”
means: (a) any Contract which, if terminated or modified or if it ceased to be in effect or could not be replaced on similar terms within a reasonable timeframe, would reasonably be expected to have a Material Adverse Effect; (b) any
Contract under which indebtedness in excess of $100,000 is or may become outstanding; (c) any Contract providing for the sale or exchange of, or option to sell or exchange, any property or asset where the sale price or agreed value or fair
market value of such property or asset is in excess of $250,000, or the purchase or exchange of, or option to purchase or exchange, any property or asset where the purchase price or agreed value or fair market value of such property or asset is in
excess of $250,000, in either case entered into in the past 12 months or entered into more than 12 months prior to the date hereof in respect of which the applicable transaction has not yet been substantially consummated; (d) any Contract under
which the Company is obligated to make or expect to receive payments on an annual basis in excess of $250,000 over the remaining term of the Contract; (e) any Contract that limits or otherwise restricts, in a manner material to the Company
(i) the ability of the Company to compete in any material geographic area or material line of business or (ii) the scope of Persons to whom the Company may sell products or deliver services; (f) any Contract granting 

 
“most favoured nation” pricing, exclusive sales, distribution, marketing or other exclusive rights, rights of refusal, rights of first negotiation
or similar rights and/or terms to any Person; (g) all contracts involving the payment of royalties or other amounts calculated based upon the revenues or income of the Company or any Subsidiary or income or revenues related to any product of
the Company or any Subsidiary to which the Company or any Subsidiary is a party; (h) all joint venture, partnership, strategic alliance and business acquisition or divestiture agreements; (i) all material agreements between the Company,
any Subsidiary or any affiliate of the Company or any Subsidiary, on the one hand, and the Company, any Subsidiary or any affiliate of the Company or any Subsidiary, on the other hand; (j) any material license, technology transfer, franchise or
other Contract in respect of any Intellectual Property that is used in the business of the Company as currently conducted (other than standard off-the-shelf software or other software readily available on standard commercial terms); (k) all
material licenses, sublicenses and other Contracts as to which the Company is a party and pursuant to which any Person is authorized to use any of the Company Intellectual Property; (l) any material Contract providing for the development of any
software, content or technology, independently or jointly, by or for the Company; (m) all licenses, sublicenses and other Contracts pursuant to which the Company has agreed to any restriction on the right of the Company to use or enforce any of
the Company Intellectual Property, or pursuant to which the Company has agreed to encumber, transfer or sell rights in or with respect to any of the Company Intellectual Property; (n) any Contract to license or authorize any third party to
manufacture or reproduce any of Company’s products; (o) any material settlement agreement; or (p) any material Contract with any Governmental Authority. 
 “Misrepresentation” has the meaning ascribed thereto in the Securities Act. 
 “Net Debt”
means the sum of the current portion of long term debt and (without duplication) the long term debt including the capitalized lease obligations. 
 “Notice Date” has the meaning set forth in Section 6.1(e). 
 “Officer Obligations” means any obligations or
liabilities of the Company to pay any amount to its officers and/or directors and/or Consultants (other than for salary, bonuses, benefits, consultancy fees and directors’ fees in the ordinary course in each case in amounts consistent with past
practice) and, without limiting the generality of the foregoing, Officer Obligations shall include the obligations of the Company to officers and/or directors and/or Consultants for severance or termination payments on a change of control of the
Company pursuant to any employment agreements, consulting agreements or otherwise in existence on the date hereof. 
 “Option” has the
meaning set forth in Section 4.7. 
 “Optionholder” means a holder of one or more Options. 
 “OSC Rule 61-501” means Ontario Securities Commission Rule 61-501—Insider Bids, Issuer Bids, Business Combinations and Related Party
Transactions. 
 “Outside Date” means 90 days from the date of this Agreement, subject to the right of either Parent or the Company to
postpone the Outside Date for up to an additional 30 days (in increments of 15 days) if the Regulatory Approvals have not been obtained and have not been denied by a non-appealable decision of a Governmental Authority, by giving written notice to
the other Parties to such effect no later than 5:00 p.m. (Toronto time) on the date that is ten days (or such shorter period as is practical in the circumstances) prior to the original Outside Date (and any subsequent Outside Date), or such later
date as may be agreed to in writing by Parent and the Company. 
 “Parent Expense Reimbursement” has the meaning set forth in
Section 6.3(b). 

 “Parties” means, collectively, Parent, Subco and the Company and “Party” means either
of them. 
 “Permitted Encumbrances” means the Encumbrances listed in the Disclosure Letter of the Company. 
 “Person” means any individual, sole proprietorship, partnership, firm, entity, unincorporated association, unincorporated syndicate, unincorporated
organization, trust, corporation, limited liability company, unlimited liability company, governmental, regulatory or court authority, and a natural person in such person’s capacity as trustee, executor, administrator or other legal
representative. 
 “Plan of Arrangement” means, in relation to the Arrangement, the plan of arrangement in the form and having the content
of Exhibit A and any amendments or variations thereto made in accordance with the provisions hereof or made at the direction of the Court in the Final Order. 
 “Pre-Acquisition Reorganization” has the meaning set forth in Section 6.8(a). 
 “Property” means the lands
municipally known as 2568 Bristol Circle, Oakville, Ontario, and the buildings, fixtures and other premises located thereon. 
 “Purple”
means Purple Knights Development Inc. 
 “Regulatory Approvals” means: (a) all approvals and/or filings that are necessary or desirable
under the Securities Laws (if any); (b) the Interim Order; (c) the Final Order; and (d) all Canadian and foreign government or regulatory approvals, waivers, permits, consents, reviews, orders, rulings, decisions and exemptions
(including, without limitation, those of applicable Securities Authorities) that in Parent’s reasonable judgment are necessary or desirable to complete the Arrangement. 
 “Reorganization Resolution” has the meaning set forth in Section 6.8(b). 
 “Representatives” has the meaning set forth in Section 6.1(a). 
 “Required Consents and Approvals of the
Company” means the consents, waivers, approvals or authorizations of, or declarations, filings or notices to, Governmental Authorities or other third parties necessary for the consummation of the transactions contemplated by this Agreement
to be obtained by the Company, as set forth in Section 4.6 of the Disclosure Letter of the Company, including, for greater certainty, the Regulatory Approvals and Shareholder Approval. 
 “Required Consents and Approvals of Parent and Subco” means the consents, waivers, approvals or authorizations of, or declarations, filings or notices
to, Governmental Authorities or other third parties necessary for the consummation of the transactions contemplated by this Agreement to be obtained by Parent and/or Subco (if any). 
 “Response Period” has the meaning set forth in Section 6.2(a)(ii). 
 “Restrictive
Covenants” has the meaning set forth in Section 6.9. 
 “Securities Act” means the Securities Act (Ontario) and the
published rules and regulations made thereunder, as now in effect and as they may be amended from time to time. 
 “Securities Authorities”
means the TSX and the appropriate securities commissions or similar regulatory authorities in each of the provinces of Canada. 
 “Securities
Laws” means applicable Canadian provincial securities Laws. 

 “Share Consideration” has the meaning set forth in Section 2.13(a). 
 “Shareholder Approval” means approval of the Arrangement Resolution by not less than two-thirds of the votes cast by Shareholders who are represented at
the Company Meeting, in accordance with applicable Law and the Interim Order. 
 “Shareholders” means the holders of Shares. 
 “Shares” means the Common Shares. 
 “Special
Committee” has the meaning set forth in the recitals to this Agreement. 
 “Subsidiary” has the meaning ascribed to the term
“subsidiary entity” in OSC Rule 61-501. 
 “Superior Proposal” means a bona fide Acquisition Proposal that was not
solicited in contravention of Section 6.1 hereof, made by a third party in writing after the date hereof with whom the Company deals at arm’s length (as such term is interpreted for the purposes of the Tax Act): (i) to purchase or
otherwise acquire directly or indirectly by means of a takeover bid, merger, amalgamation, plan of arrangement, business combination, consolidation, recapitalization, liquidation or winding-up or similar transaction, all of the Shares or all or
substantially all of the assets of the Company on a consolidated basis; (ii) that is made available on substantially the same terms and conditions to all Shareholders of the Company and offers or makes available the same consideration in form
and amount per Share to be purchased or otherwise acquired, (iii) that, taking into account to the extent considered appropriate by the Board, all financial, legal, regulatory and other aspects of such proposal and the Person making such
proposal, is reasonably capable of being completed without undue delay in accordance with its terms; (iv) which is not subject to a financing condition and the Board is reasonably satisfied that the Person has or will have the funds to complete
the Acquisition Proposal, (v) which is not subject to a due diligence and/or access condition which would allow access to the books, records, personnel or properties of the Company or its representatives beyond 5:00 p.m. (Eastern Standard Time)
on the tenth day after which access is afforded to the third party making the Acquisition Proposal (provided, however, that the foregoing shall not restrict the ability of such third party to continue to review information provided to it by the
Company during such ten-day period); and (vi) that the Board determines, in its good faith judgment, after receiving the advice of its outside legal and financial advisors and after taking into account all the terms and conditions of the
Acquisition Proposal, is on terms and conditions that are more favourable from a financial point of view to the Shareholders than those contemplated by this Agreement. 
 “Support Agreements” means the support agreements between Parent, Subco and the Supporting Shareholders executed and delivered concurrently with this Agreement pursuant to which the Supporting
Shareholders have agreed, inter alia, to vote all Common Shares held by them in favour of the Arrangement Resolution and to otherwise support the transactions contemplated by this Agreement subject to the terms of such agreements. 

“Supporting Shareholders” means each director and officer of the Company that owns (of record or beneficially), or has voting or dispositive power
with respect to, Shares and/or Options, John Mumford, Regina Mumford and any trust or other entity controlled by any such director, officer, John Mumford or Regina Mumford. 
 “Tax Act” means the Income Tax Act (Canada), as amended. 
 “Taxes” means all taxes,
duties, fees, premiums, assessments, levies and other fees of any kind whatsoever levied by any Governmental Authority or to be paid under any tax laws (including but not limited to income tax, property tax, corporate tax, withholding tax, tax on
capital, sales tax, goods and services tax, customs duties and transfer fees) and payroll, employment, health, social services, worker compensation or similar contributions, premiums or surtaxes, other government pension plan premiums or
contributions, and including any interest, penalties or fines in respect thereof. 

 “Tax Returns” means all returns, reports, declarations, elections, notices, filings, information returns
and statements (whether in tangible, electronic or other form) and including any amendments, schedules, attachments, appendices and exhibits thereto, filed or required to be filed by Laws in respect of Taxes. 
 “Termination Fee” has the meaning set forth in Section 6.3(a). 
 “TSX” means the Toronto Stock Exchange. 
 “Working Capital” means current assets minus
Adjusted Current Liabilities, in each case determined in accordance with GAAP applied on a basis consistent with the Financial Statements. 
  

	1.2	Singular, Plural, etc. 

 In this Agreement, words
importing the singular number include the plural and vice versa and words importing gender include the masculine, feminine and neuter genders. 
  

	1.3	Deemed Currency 

 Unless otherwise expressly stated,
all references to currency herein shall be deemed to be references to Canadian currency. 
  

	1.4	Headings, etc. 

 The division of this Agreement into
Articles, Sections, Paragraphs, Subparagraphs and Schedules, the provision of a table of contents hereto and the insertion of the recitals and headings are for convenience of reference only and shall not affect the construction or interpretation of
this Agreement and, unless otherwise stated, all references in this Agreement or in the Schedules hereto to Articles, Sections, Paragraphs, Subparagraphs, Schedules and Exhibits refer to Articles, Sections, Paragraphs, Subparagraphs, Schedules and
Exhibits of and to this Agreement or of the Schedules or Exhibits in which such reference is made, as applicable. 
  

	1.5	Date for any Action 

 In the event that any date on
which any action is required to be taken hereunder by any of the Parties is not a Business Day, such action shall be required to be taken on the next succeeding day that is a Business Day. 
  

	1.6	Governing Law 

 This Agreement shall be governed,
including as to validity, interpretation and effect, by the laws of the Province of Ontario and the laws of Canada applicable therein, and shall be construed and treated in all respects as a Ontario contract. Each of the Parties hereby irrevocably
attorns to the non-exclusive jurisdiction of the Courts of the Province of Ontario in respect of all matters arising under and in relation to this Agreement and the Arrangement. 
  

	1.7	Knowledge 

 In this Agreement, unless otherwise
stated, references to “the knowledge of” the Company means to the knowledge, information and belief of Mr. John Mumford and Mr. Peter Kastelic after due enquiry and shall include any matter that would be expected to be
known by an officer holding a similar position in a public company of similar size and scope. Nothing in this section shall give rise to or be construed as giving rise to any personal liability on the part of Mr. John Mumford or Mr. Peter
Kastelic. 

	1.8	Incorporation of Exhibits 

 The Exhibits attached
hereto and described below shall, for all purposes hereof, form an integral part of this Agreement. 
  

			
	Exhibit A:	 	Plan of Arrangement
	Exhibit B:	 	Arrangement Resolution

 ARTICLE 2 THE ARRANGEMENT 
  

	2.1	The Arrangement 

 The Parties agree, on the terms
and subject to the conditions of this Agreement, to carry out the Arrangement in accordance with this Agreement on the terms set out in the Plan of Arrangement, subject to such changes as may be mutually agreed to by the parties in accordance with
this Agreement. 
  

	2.2	Implementation Steps by the Company 

 The Company
covenants in favour of Subco and Parent that the Company shall: 
  

	 	(a)	file the initial press release contemplated by Section 8.4, together with a material change report in prescribed form and a copy of this Agreement as a material contract, with
the Securities Authorities; 

  

	 	(b)	as soon as reasonably practicable after the execution and delivery of this Agreement, and in any event no later than 15 Business Days from the date of this Agreement, bring a motion
before the Court pursuant to section 192 of the CBCA for the Interim Order in a manner and form acceptable to Parent, acting reasonably, providing for, inter alia, the calling and holding of the Company Meeting, and thereafter proceed with
such application and diligently pursue obtaining the Interim Order in such form; 

  

	 	(c)	fix a record date for the purposes of determining the Shareholders entitled to receive notice of the Company Meeting in accordance with the Interim Order; 

 

	 	(d)	subject to obtaining the Interim Order, convene and hold the Company Meeting as soon as reasonably practicable and in any event on or before December 5, 2007 in accordance with
the Interim Order and applicable Law for the purpose of having Shareholders consider the Arrangement Resolution and for any other proper purpose as may be set out in the Circular (as agreed to with the prior written consent of Parent, acting
reasonably and in a manner consistent with the purposes of this Agreement and the transactions contemplated thereby); provided that: 

  

	 	(i)	the Company Meeting shall be held regardless of whether the Board determines at any time that this Agreement is no longer advisable or recommends that the Shareholders reject the
Arrangement Resolution or any other Change of Recommendation has occurred at any time; and 

	 	(ii)	the Arrangement Resolution shall be voted on before any other matter at the Company Meeting, unless otherwise previously agreed to in writing by Parent or required by a Governmental
Authority; 

  

	 	(e)	except to the extent required by a Governmental Authority or for quorum purposes (in the case of an adjournment), not adjourn, postpone or cancel (or propose the adjournment,
postponement or cancellation of) the Company Meeting without Parent’s prior written consent, and without limiting the generality of the foregoing, the Company agrees that its obligations pursuant to Section 2.2(d) and this
Section 2.2(e) shall not be affected by the commencement, public proposal, public disclosure or communication to the Company or any other Person of any Acquisition Proposal; 

  

	 	(f)	include in the Circular the unanimous recommendation of the Board that the Shareholders vote in favour of the Arrangement Resolution; 

  

	 	(g)	solicit and take all steps reasonably necessary (including relevant disclosure in the Circular) to allow Parent and any Subsidiary of Parent, directly or through representatives, to
solicit from Shareholders proxies in favour of the approval of the Arrangement Resolution and against any resolution submitted by any other Shareholder, including, if so requested by Parent (and at the expense of the Company), using the services of
dealers and proxy solicitation services, and take all other actions that are reasonably necessary or desirable to seek the approval of the Arrangement by the Shareholders; 

  

	 	(h)	provide notice to Parent of the Company Meeting and allow representatives of Parent to attend and speak at the Company Meeting; 

  

	 	(i)	subject to obtaining all approvals as required by the Interim Order, bring an application as soon as reasonably practicable after the Company Meeting but in any event not later than
three Business Days thereafter, before the Court pursuant to section 192 of the CBCA for the Final Order in a manner and form acceptable to Parent, acting reasonably, and thereafter proceed with and diligently pursue obtaining the Final Order in
such form; 

  

	 	(j)	subject to obtaining the Final Order and the satisfaction or waiver of the conditions set forth in Article 9, send to the Director, for endorsement and filing by the Director, the
Articles of Arrangement and such other documents as may be required in connection therewith under the CBCA to give effect to the Arrangement pursuant to section 192 of the CBCA in a manner and form acceptable to Parent, acting reasonably;

  

	 	(k)	permit Parent (and its counsel) to review and comment upon drafts of all material to be filed by the Company with the Court, the Director or any Governmental Authority in connection
with the Arrangement (including the Circular and any supplement or amendment contemplated by Section 2.5) prior to the service (if applicable) and/or filing of such materials, give Parent and its counsel reasonable time to review and comment
upon such materials and accept any reasonable comments of Parent and its counsel. The Company shall also provide to Parent’s counsel on a timely basis copies of any notice of appearance or other Court documents served on the Company in respect
of the application for the Interim Order or the Final Order or any appeal therefrom and of any notice, whether written or oral, received by the Company indicating any intention to oppose the granting of the Interim Order or the Final Order or to
appeal the Interim Order or the Final Order; 

	 	(l)	instruct counsel acting for the Company to bring the applications referred to in Section 2.2(b) and Section 2.2(i) in cooperation with counsel to Parent; and

  

	 	(m)	not: 

  

	 	(i)	file any material with the Court in connection with the Arrangement or serve any such material, and not agree to modify or amend materials so filed or served; or

  

	 	(ii)	send to the Director, for endorsement and filing by the Director, the Articles of Arrangement, 

 except, in either case, as contemplated hereby or with Parent’s prior consent, such consent not to be unreasonably withheld or delayed. 

 

	2.3	Interim Order 

 The notice of motion for the motion
for the Interim Order referred to in Section 2.2(b) shall request that the Interim Order provide: 
  

	 	(a)	for confirmation of the record date for the Company Meeting; 

  

	 	(b)	for the classes of Persons to whom notice is to be provided in respect of the Arrangement and the Company Meeting and for the manner in which such notice is to be provided;

  

	 	(c)	that the requisite approval for the Arrangement Resolution shall be approval by two-thirds or more of the votes cast on the Arrangement Resolution by Shareholders present in person
or by proxy at the Company Meeting; 

  

	 	(d)	that, in all other respects, the terms, restrictions and conditions of the Company’s articles and bylaws, including quorum requirements and all other matters, shall apply in
respect of the Company Meeting; 

  

	 	(e)	for the grant of the Dissent Rights as contemplated in the Plan of Arrangement; 

  

	 	(f)	for the notice requirements with respect to the making of the application to the Court for the Final Order; and 

  

	 	(g)	for such other matters as Parent or Subco may reasonably require subject to obtaining the prior consent of the Company, such consent not to be unreasonably withheld or delayed.

  

	2.4	Articles of Arrangement 

 The Articles of
Arrangement shall, upon the endorsement of a certificate thereon by the Director under section 192(7) of the CBCA, with such other matters as are necessary to effect the Arrangement and subject to the provisions of the Plan of Arrangement,
consummate the Plan of Arrangement. The Articles of Arrangement shall be in form satisfactory to Parent. 
  

	2.5	Circular 

 As promptly as practicable after the
execution and delivery of this Agreement, the Company, in consultation with Parent, will prepare and complete the Circular together with any other documents required by the CBCA or other applicable Law in connection with the Arrangement and the
Company Meeting. The Circular and such other documents, together with any amendments thereto, shall be in form 

 
and substance satisfactory to Parent acting reasonably. The Company will file the Circular and any other documentation required to be filed under the Interim
Order and applicable Law in all jurisdictions where the Circular is required to be filed by the Company and mail or cause to be mailed the Circular and any other documentation required to be mailed under the Interim Order and applicable Law to
Shareholders, the directors of the Company, the auditors of the Company and any other required Persons on or before November 9, 2007, all in accordance with the terms of the Interim Order and applicable Law. In a timely and expeditious manner,
the Company shall prepare (in consultation with Parent) and file amendments or supplements to the Circular (which amendments or supplements shall be in a form satisfactory to Parent, acting reasonably) required by applicable Law or as otherwise
agreed between the Company and Parent with respect to the Company Meeting and mail or otherwise disseminate such amendments or supplements, as required by the Interim Order and in accordance with all applicable Law, to such persons and in all
jurisdictions where such amendments or supplements are required to be mailed or disseminated, complying in all material respects with all applicable Law on the date of the mailing or dissemination thereof. 
  

	2.6	Preparation of Filings 

  

	 	(a)	The Company shall (in consultation with Parent) diligently do all such acts and things as may be necessary to comply, in all material respects, with National Instrument 54-101
– “Communication with Beneficial Owners of Securities of a Reporting Issuer” in relation to the Company Meeting . 

  

	 	(b)	Parent and the Company shall cooperate in: (i) the preparation of the Circular as described in Section 2.5; (ii) the preparation and filing of any exemption or other
applications or orders and any other documents required by either of them to discharge their respective obligations under applicable Law in connection with the Arrangement; and (iii) the taking of all such action as may be required under any
applicable Securities Laws or the CBCA in connection with the Arrangement and the Plan of Arrangement. 

  

	 	(c)	Each of Parent and the Company shall furnish to the other of them, on a timely basis, all information as may be reasonably required to effect the actions contemplated by
Section 2.6(a) and Section 2.6(b), and each covenants that no information so furnished by it in writing in connection with those actions or otherwise in connection with the consummation of the Arrangement will contain any
Misrepresentation. Each of the parties hereto will ensure that the information relating to it and its Subsidiaries, which is provided in the Circular, will not contain any Misrepresentation. 

  

	 	(d)	Each of Parent and the Company shall promptly notify the other of them if, at any time before the Effective Time, it becomes aware that the Circular or an application for the
Interim Order, the Final Order or any other filing under applicable Law contains a Misrepresentation or otherwise requires an amendment or supplement to the Circular or such application. In any such event, each of the parties hereto will co-operate
in the preparation of a supplement or amendment to the Circular or such other document, as the case may be, that corrects that Misrepresentation, and the Company will cause the same to be distributed or otherwise communicated to the Shareholders in
accordance with the Interim Order, the directors of the Company, the auditors of the Company and any other required Persons and filed as required under applicable Law. 

  

	 	(e)	The Company shall ensure that the Circular provides Shareholders with information in sufficient detail to permit them to form a reasoned judgment concerning the matters to be placed
before them at the Company Meeting and include in the Circular a statement that the Board has unanimously determined that the Arrangement is in the best interests of the Company and that the Board unanimously recommends that Shareholders vote in
favour of the Arrangement Resolution (as contemplated by Section 2.2(f)). 

	2.7	Dissenting Shareholders 

 The Plan of Arrangement
shall provide that registered Shareholders may exercise Dissent Rights with respect to their Shares in connection with the Arrangement pursuant to the Interim Order and the Plan of Arrangement and in the manner set forth in section 190 of the CBCA
as modified by the Interim Order and the Plan of Arrangement. The Company shall give Parent prompt notice of any written notice of a dissent, withdrawal of such notice, and any other instruments served pursuant to such Dissent Rights and received by
the Company. The Company shall not make any payment or settlement offer prior to the Effective Time with respect to any such notice of dissent unless Parent shall have given its prior written consent to such payment or settlement offer. 

 

	2.8	Amendment 

 This Agreement may, at any time and from
time to time before and after the holding of the Company Meeting, but not later than the Effective Time, be amended by mutual written agreement of the parties hereto, without, subject to applicable Law, further notice to or authorization on the part
of the Shareholders, and any such amendment may, without limitation: 
  

	 	(a)	change the time for the performance of any of the obligations or acts of the parties, including an extension of the Outside Date; 

  

	 	(b)	waive any inaccuracies or modify any representation or warranty contained herein or in any document to be delivered pursuant hereto; 

  

	 	(c)	waive compliance with or modify any of the covenants contained herein or waive or modify the performance of any of the obligations of the parties; and 

  

	 	(d)	waive compliance with and modify any conditions precedent contained herein, 

 provided, however, that after receipt of approval of the Arrangement Resolution by the Shareholders, there shall be no amendment that by applicable Law requires further approval by the Shareholders without further approval of such
Shareholders. 
  

	2.9	List of Shareholders 

 At the reasonable request of
Parent from time to time, the Company shall provide Parent with a list (in both written and electronic form) of the registered Shareholders, together with their addresses and respective holdings of Shares, with a list of the names and addresses and
holdings of all Persons having rights issued by the Company to acquire Shares (including Optionholders) and a list of non-objecting beneficial owners of Shares, together with their addresses and respective holdings of Shares. The Company shall from
time to time require that its registrar and transfer agent furnish Parent with such additional information, including updated or additional lists of Shareholders and lists of holdings and other assistance as Parent may reasonably request.

  

	2.10	Withholding 

 The Company, Parent, Subco, one or
more other Subsidiaries of Parent or the Depositary, as the case may be, shall be entitled to directly or indirectly deduct and withhold from any amount otherwise payable pursuant to this Agreement or the Plan of Arrangement to any Shareholder,
Optionholder or DSU Holder such amounts as are entitled or required to be deducted and withheld with respect to the making of 

 
such payment under the Tax Act or any other provision of domestic or foreign (whether national, federal, provincial, state, local or otherwise) applicable
Law relating to Taxes. To the extent that amounts are so deducted and withheld and paid to the appropriate Governmental Authority directly or indirectly by the Company, Parent, Subco or one or more Subsidiaries of Parent or the Depositary, as the
case may be, such deducted and withheld amounts shall be treated for all purposes of this Agreement and the Plan of Arrangement as having been paid to the Shareholders, Optionholders or DSU Holders, as the case may be, in respect of which such
deduction and withholding was made by the Company, Parent, Subco, one or more Subsidiaries of Parent or the Depositary, as the case may be, provided that such withheld amounts are actually remitted to the appropriate Governmental Authority within
the time required and in accordance with the Tax Act or any other provision of domestic or foreign (whether national, federal, provincial, state, local or otherwise) applicable Law relating to Taxes. 
  

	2.11	Alternative Transaction Structure 

 At the request
of Parent, the Company shall use commercially reasonable efforts to assist Parent to successfully implement and complete any alternative transaction structure that: (a) does not have negative financial consequences to the Company and its
Subsidiaries in any material respect, would provide Shareholders, Optionholders and DSU Holders with cash consideration not less than the cash consideration per security receivable under Section 2.13 and would provide for the acquisition of all
of the outstanding Shares, Options and Deferred Share Units; (b) would reasonably be expected to be completed prior to the Outside Date; and (c) is otherwise on terms and conditions no more onerous in any material respect than the
Arrangement and this Agreement. In the event that the transaction structure is so modified, the relevant provisions of this Agreement shall be modified as necessary in order that they shall apply with full force and effect, mutatis mutandis,
but with the adjustments necessary to reflect the revised transaction structure, and the parties hereto shall execute and deliver an agreement in writing giving effect to and evidencing such amendments as may be reasonably required as a result of
such modifications and adjustments. 
  

	2.12	Closing 

 The closing of the transactions
contemplated by this Agreement (the “Closing”) shall take place at the offices of Osler, Hoskin & Harcourt LLP, 1 First Canadian Place, Toronto, Ontario, M5X 1B8, as soon as possible, but in any event no later than two
Business Days after satisfaction or waiver of the conditions set forth in Article 9 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at the Closing),
or on such other date or at such other place as Parent and the Company may mutually agree (the “Closing Date”). 
  

	2.13	Consideration 

 The Articles of Arrangement shall
provide that the Shareholders, Optionholders and holders of Deferred Share Units shall receive the following consideration: 
  

	 	(a)	$3.25 in cash per Share (the “Share Consideration”); 

  

	 	(b)	for each Cashed-Out Option outstanding as of the Effective Time, a cash payment equal to the product of (i) the excess, if any, of the Share Consideration over the exercise
price per share of such Cashed-Out Option, multiplied by (ii) the number of Shares issuable upon exercise of such Cashed-Out Option, less applicable withholdings; and 

  

	 	(c)	for each Deferred Share Unit outstanding as of the Effective Time, a cash payment equal to the product of (i) the Share Consideration, multiplied by (ii) the number of
Shares underlying such Deferred Share Unit, less applicable withholdings. 

 Any Options and Deferred Share Units outstanding as of the Effective Time will be cancelled in accordance
with the terms of the Plan of Arrangement. 
 If between the date of this Agreement and the Effective Time, the outstanding Shares shall have
been changed into a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or any similar event, the Share Consideration and any
other amounts payable pursuant to this Agreement shall be correspondingly adjusted to the extent appropriate to reflect such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or similar event.

  

	2.14	Safe-Income Transactions 

  

	 	(a)	Subject to Shareholder Approval, Parent will permit any Person (“Holdco Shareholders”) who is resident in Canada for purposes of the Tax Act (including a
partnership if all of the members of the partnership are resident in Canada) and who is the sole registered and beneficial owner, free and clear of all Encumbrances, of all of the shares of a corporation (“Holdco”) which:
(i) was incorporated under the laws of Canada on or after September 1, 2007; (ii) at all times was a single purpose corporation that has had not carried on any business, no employees and has not held any assets other than Shares and a
nominal amount of cash; (iii) at all times had no contingent or absolute liabilities or obligations whatsoever save and except to Parent under the terms of the Holdco Agreement or an obligation to pay a dividend to a Holdco Shareholder, which
obligation is extinguished at the time of closing and immaterial liabilities related to the creation of Holdco; (iv) has no liabilities whatsoever; and (v) at all times is a resident of Canada for purposes of the Tax Act and is not a
resident of the United States and has no taxable presence in the United States; to elect in respect of all the Shares held by such Holdco (the “Holdco Election”), by notice in writing provided to Parent at least 15 Business Days
prior to the Effective Date (the “Holdco Election Deadline”), to have all the issued and outstanding shares of the Holdco (“Holdco Shares”) transferred to Parent in exchange for the consideration which such Holdco
would have been entitled to receive if the Shares held by such Holdco had been acquired directly by Subco pursuant to the Plan of Arrangement (a “Holdco Alternative”), provided that: (A) such Holdco Alternative will be
completed in accordance with applicable Law (including Securities Laws) prior to the Effective Time so long as Parent, acting reasonably, agrees to such timing; (B) the entering into or implementation of the Holdco Alternative will not result
in any delay in completing any other transaction contemplated by this Agreement; (C) the Holdco Shareholder will be required to pay all of the reasonable out-of pocket expenses incurred by the Company in connection with the Holdco Alternative,
including any reasonable costs associated with any due diligence conducted in accordance with clause (D) of this Section 2.14(a); (D) access to the books and records of Holdco and all documents necessary to effect the transaction
contemplated herein shall have been provided on or before 10 Business Days prior to the Effective Date and Parent and its counsel shall have completed their due diligence regarding the business and affairs of Holdco to their satisfaction, acting
reasonably; and (E) the Holdco Shareholders shall indemnify Parent and any successor thereof, for any and all liabilities of the Holdco in a form satisfactory to Parent in its sole discretion. 

  

	 	(b)	 Each Holdco Shareholder that has made the Holdco Election will be required to enter into a share purchase agreement (the “Holdco Agreement”) with
Parent providing for the acquisition by Parent of all issued and outstanding Holdco Shares and containing such representations and warranties, terms, conditions and indemnities as Parent may reasonably request in connection therewith and containing
the requirement for the Holdco Shareholder to arrange for the provision of a legal opinion satisfactory to Parent, acting 

	 	 
reasonably, in connection with the purchase and sale of such Holdco Shares. Failure of any Holdco Shareholder to properly make a Holdco Election on or prior
to the Holdco Election Deadline or failure of Holdco Shareholders to properly enter into a Holdco Agreement will disentitle such Holdco Shareholders to the Holdco Election. 

  

	 	(c)	Any Holdco Shareholder who elects the Holdco Election will be required to make full disclosure to Parent of all transactions involved in such Holdco Election. In the event that the
terms and conditions of such Holdco Election or any transactions involved in the Holdco Election are not satisfactory to Parent, acting reasonably, no Holdco Election shall be offered and the other transactions contemplated by this Agreement shall
be completed subject to the other terms and conditions hereof. 

  

	 	(d)	The Company shall use reasonable commercial efforts to facilitate and support the Holdco Alternative contemplated by this Section 2.14, in respect of the Arrangement, which
obligation shall survive any termination of this Agreement. 

  

	2.15	Confidentiality Agreement 

 The Parties acknowledge
that the Company and Parent have previously entered into the Confidentiality Agreement, which shall continue in full force and effect in accordance with its terms except for the standstill provisions included therein from which Parent and Subco are
hereby released; provided that, if this Agreement is terminated pursuant to Section 10.1 (other than pursuant to Section 10.1(c), 10.1(d) or 10.1(e)), such standstill provisions shall be immediately reinstated. 
  

	2.16	Registrar and Transfer Agent 

 The Company agrees to
permit the registrar and transfer agent for the Company to act as depositary in connection with the Plan of Arrangement and instruct that registrar and transfer agent to furnish to Parent (and such Persons as it may designate) at such times as it
may request such information and provide to Parent (and such Persons as it may designate) such other assistance in each case as it may reasonably request in connection with the implementation and completion of the transactions contemplated
hereunder. 
 ARTICLE 3 REPRESENTATIONS 
 AND WARRANTIES OF PARENT AND SUBCO 
 Parent and Subco hereby acknowledge that the Company is
relying upon each of the following representations and warranties in connection with the entering into of this Agreement. 
  

	3.1	Organization and Qualification 

 Parent is a
corporation duly incorporated, organized and validly existing under the laws of the State of Delaware and has the requisite corporate power and authority to own the assets it currently owns and to carry on its business as it is now being conducted.
Subco is a corporation duly incorporated, organized and validly existing under the laws of Canada and has the requisite corporate power and authority to own the assets it currently owns and to carry on its business as it is now being conducted.
Since the date of its incorporation, Subco has not engaged in any activities other than in connection with or as contemplated by this Agreement. 
  

	3.2	Authority Relative to this Agreement 

 Each of
Parent and Subco has the requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution and delivery of this Agreement and 

 
the consummation by each of Parent and Subco of the transactions contemplated hereby have been duly authorized by Parent and Subco and no other proceedings
need to be completed or consents need to be obtained by Parent or Subco which are or will be necessary to authorize this Agreement and the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Parent and
Subco and constitutes a legal, valid and binding obligation of each of them enforceable against Parent and Subco in accordance with its terms, except as may be limited by bankruptcy and insolvency and other laws affecting the enforcement of
creditors’ rights generally and subject to the qualification that equitable remedies may only be granted in the discretion of a court of competent jurisdiction. 
  

	3.3	No Violation 

  

	 	(a)	Except as contemplated by the Required Consents and Approvals of Parent and Subco, the execution and delivery of this Agreement by Parent and Subco and the completion of the
transactions contemplated hereby will not: 

  

	 	(i)	violate, conflict with, or result in a breach of any provision of, require any consent, approval or notice under, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) or result in a right of termination or acceleration under, any of the terms, conditions or provisions of the Charter Documents of Parent or Subco or any material Contract to which Parent or Subco is a party;
or 

  

	 	(ii)	violate any judgment, ruling, order, writ, injunction, award, law, decree, statute, ordinance, rule or regulation applicable to Parent or Subco. 

  

	 	(b)	Other than in connection with or in compliance with the Required Consents and Approvals of Parent and Subco and except as otherwise contemplated herein, no filing or registration by
Parent or Subco with, or authorization, consent or approval of, any Governmental Authority need be obtained by Parent or Subco in connection with the performance of their obligations hereunder or the consummation of the Arrangement.

  

	3.4	Circular 

 The information with respect to Parent
and any of its Subsidiaries (including Subco) that Parent furnishes to the Company in writing specifically for use in the Circular or any amendment or supplement thereto will not contain any Misrepresentation at: (i) the time such Circular or
any amendment or supplement thereto is first mailed to Shareholders; and (ii) at the time the Shareholders vote on the Arrangement. 
  

	3.5	Funds Available 

 Parent has sufficient funds
available, or adequate arrangements for financing are in place, to ensure that it will have sufficient funds to pay the aggregate Share Consideration contemplated by Section 2.13. 
  

	3.6	Share Ownership 

 Neither Parent nor any of its
Affiliates beneficially owns any Common Shares or securities convertible or exchangeable for Common Shares except as previously disclosed in writing to the Company. 

	3.7	Knowledge 

 As of the date of this Agreement, Parent
has no knowledge of any fact or circumstance not contemplated herein that would adversely affect the ability of Parent to fulfil its obligations hereunder. 
  

	3.8	Other Agreements 

 Parent has no arrangements or
agreements with any director or officer of the Company or any of the Affiliates, other than the Support Agreements. 
 ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 
 The Company represents and warrants to Parent as set forth below and acknowledges
that Parent is relying upon these representations and warranties in connection with the entering into of this Agreement. 
  

	4.1	Organization and Qualification 

 The Company is a
corporation duly organized and validly existing under the laws of Canada and has full power and authority to own or lease the property and assets it currently owns or leases and to carry on its business as it is now being conducted. The Company is
duly registered to do business and is in good standing in each jurisdiction in which the character of its properties, owned or leased, or the nature of its activities makes such qualification necessary, except when the absence of such registration
or lack of good standing would not constitute a Material Adverse Effect. The copy of the Charter Documents heretofore made available to Parent in the Data Room Information is accurate and complete as of the date hereof and has not been amended or
superseded, and the Company has not taken any action to amend or supersede such document. The Charter Documents are in full force and effect. No proceedings have been taken or authorized by the Company in respect of the bankruptcy, insolvency,
liquidation, dissolution or winding up of the Company and, to the knowledge of the Company, no such proceedings are contemplated or threatened against the Company. 
  

	4.2	Subsidiaries 

 The Company has no subsidiaries
except for Excel-Tech Ltd. USA, a wholly-owned subsidiary of the Company which has no assets or liabilities, other than nominal assets and liabilities, and has been inactive since its incorporation in the State of Delaware on May 31, 2001. This
subsidiary shall remain inactive. 
  

	4.3	Authority Relative to this Agreement 

 The Company
has the requisite corporate power and authority to enter into this Agreement and to perform and carry out its obligations hereunder. The execution and delivery of this Agreement by the Company and the completion by the Company of the transactions
contemplated hereby have been duly authorized by the Board and no other proceedings need to be completed or consents need to be obtained by the Company which are or will be necessary to authorize this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy,
insolvency and other laws affecting the enforcement of creditors’ rights generally and subject to the qualification that equitable remedies may only be granted in the discretion of a court of competent jurisdiction. 

	4.4	Support of the Arrangement 

  

	 	(a)	RBC Capital Markets Corporation has delivered to the Company an opinion dated the date of this Agreement to the effect that, as of such date and based upon and subject to the
qualifications and assumptions set forth therein, the consideration to be received by the Shareholders pursuant to the Arrangement is fair to such Shareholders from a financial point of view, a copy of which will have been delivered to Parent within
five days of the date of this Agreement. 

  

	 	(b)	The Board of Directors, following consultation with its financial and legal advisors and on receipt of a recommendation of the Special Committee, has unanimously:

  

	 	(i)	determined that the Arrangement is fair to the Shareholders and it is in the best interests of the Company; and 

  

	 	(ii)	approved the entering into of this Agreement and the making of recommendation that Shareholders vote in favour of the Arrangement Resolution. 

  

	4.5	Circular 

 The Circular, and any amendments or
supplements thereto, will when filed, distributed or disseminated, as applicable, comply as to form in all material respects with the applicable requirements of applicable Law. The Circular and any amendment or supplement thereto, at: (i) the
time such Circular or any such amendment or supplement is first mailed to the Shareholders; and (ii) the time the Shareholders vote on adoption of this Agreement, will not contain any Misrepresentation; provided that the representations and
warranties contained in this Section 4.5 will not apply to statements or omissions included in the Circular based upon information furnished to the Company by or on behalf of Parent or Subco specifically for use therein. 
  

	4.6	No Violation 

  

	 	(a)	Except as contemplated by the Required Consents and Approvals of the Company, the execution and delivery of this Agreement by the Company and the completion of the transactions
contemplated hereby will not: 

  

	 	(i)	violate, conflict with, or result in breach of any provision of, require any consent, approval or notice under, give rise to a lien or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) or result in a right of termination or acceleration under any of the terms, conditions or provisions of: 

  

	 	A.	the Charter Documents of the Company, or 

  

	 	B.	any Material Contract to which the Company is a party; or 

  

	 	(ii)	violate any judgment, ruling, order, writ, injunction, award, Laws, decree, statute, ordinance, rule or regulation applicable to the Company. 

  

	 	(b)	Other than in connection with or in compliance with the Required Consents and Approvals of the Company and except as otherwise contemplated herein, no filing or registration by the
Company with, or authorization, consent or approval of, any Governmental Authority need be obtained by the Company in connection with the performance of its obligations hereunder. 

	4.7	Capitalization 

 The authorized capital stock of the
Company consists of an unlimited number of Common Shares and an unlimited number of preferred shares, issuable in series. As of the date of this Agreement: 
  

	 	(i)	19,024,974 Common Shares are issued and outstanding, all of which are validly issued, fully paid and nonassessable, 

  

	 	(ii)	648,000 Common Shares are reserved for future issuance pursuant to outstanding Company stock options and other purchase rights granted pursuant to the Company stock option plans,
including the Company’s stock option plan adopted April 25, 2006 (each, an “Option”), 

  

	 	(iii)	no preferred shares are issued and outstanding; and 

  

	 	(iv)	100,850 Deferred Share Units are issued and outstanding. 

 Except as set
forth in this Section 4.7, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued share capital of the Company or any Subsidiary of the Company or obligating
the Company or any Subsidiary of the Company to issue or sell any shares or other equity interests in, the Company or any Subsidiary of the Company. 
 Section 4.7 of the Disclosure Letter of the Company sets forth the following information with respect to each Option outstanding on the date of this Agreement: 
  

	 	(i)	the name and address of the Optionholder; 

  

	 	(ii)	the particular plan pursuant to which such Option was granted; 

  

	 	(iii)	the number of Common Shares subject to such Option; 

  

	 	(iv)	the exercise or purchase price of such Option; 

  

	 	(v)	the date on which such Option was granted; 

  

	 	(vi)	the applicable vesting schedule; 

  

	 	(vii)	the date on which such Option expires; and 

  

	 	(viii)	whether the exercisability of or right to repurchase of such Option will be accelerated in any way by the transactions contemplated by this Agreement. 

 Section 4.7 of the Disclosure Letter of the Company sets forth the following information with respect to each deferred share unit issued pursuant to
the Company’s deferred share unit plan adopted June 13, 2006 (each, a “Deferred Share Unit”) issued and outstanding by the Company on the date of this Agreement: 
  

	 	(i)	the name and address of each DSU Holder; 

  

	 	(ii)	the deferred share unit plan pursuant to which each such Deferred Share Units have been granted; 

	 	(iii)	the number of such Deferred Share Units; 

  

	 	(iv)	the redemption price of each such Deferred Share Unit; 

  

	 	(v)	the date on which such Deferred Share Units were granted and on which they expire; and 

  

	 	(vi)	whether the exercisability of or right of redemption of such Deferred Share Units will be accelerated in any way by the transactions contemplated by this Agreement.

 Except as set out in the Disclosure Letter of the Company, there are no commitments or agreements of any character to which
the Company is bound obligating the Company to accelerate the vesting of any Option or Deferred Share Unit as a result of the transactions contemplated by the Agreement. No options to purchase Common Shares from the Company are outstanding other
than the Options. The Company has made available to Parent accurate and complete copies of all Company stock option plans and deferred share unit plans. All Common Shares subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. 
 There are no outstanding contractual obligations of the Company or any Subsidiary of the Company to repurchase, redeem or otherwise acquire any Common Shares or any share capital of any Subsidiary of the Company or to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary of the Company or any other person. 
 All
outstanding Common Shares, all outstanding Options and all outstanding shares of capital stock of each Subsidiary of the Company have been issued and granted in compliance with (i) all applicable securities laws and other applicable Law and
(ii) all requirements set forth in applicable contracts. 
 Each outstanding share of capital stock of each Subsidiary of the Company is
duly authorized, validly issued, fully paid and nonassessable, and each such share is owned by the Company or another Subsidiary of the Company free and clear of all security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company’s or any of its Subsidiary’s voting rights, charges and other encumbrances of any nature whatsoever. 
  

	4.8	No Material Adverse Effect 

 Since January 31,
2007, there has not been any Material Adverse Effect. 
  

	4.9	Advisory Fees 

 The Company has not retained nor
will it retain any financial advisor, broker, agent or finder or has not paid or agreed to pay any financial advisor, broker, agent or finder on account of this Agreement or any transaction contemplated hereby, other than RBC Capital Markets
Corporation that has been retained as the Company’s financial advisor in connection with certain matters including the transactions contemplated hereby pursuant to the agreements disclosed in the Disclosure Letter of the Company. 
  

	4.10	Conduct of Business 

 Since January 31, 2007,
the Company has carried on its business in the ordinary course consistent with past practice and, except to the extent disclosed in the Disclosure Letter of the Company, the Company has not: 
  

	 	(a)	amended its Charter Documents; 

	 	(b)	made any change in its accounting principles and practices as previously applied including the basis upon which its assets and liabilities are recorded on its books and its earnings
and profits and losses are ascertained; 

  

	 	(c)	declared, paid or set aside for payment any dividend or distribution of any kind in respect of any of its outstanding securities nor made any repayments of capital to Shareholders;

  

	 	(d)	incurred any indebtedness for borrowed money or any other material liability or obligation, other than trade credit or for capital expenditures in the ordinary course of business,
or issued any debt securities or assumed, guaranteed, endorsed or otherwise become responsible for, the obligations of any other Person (other than in respect of the Company) or made any loans or advances except in the ordinary course of business
consistent with past practice; 

  

	 	(e)	transferred, assigned, sold or otherwise disposed of any of its assets except in the ordinary course of business; 

  

	 	(f)	granted any loan to, or guaranteed any loans of, or increased the compensation paid or payable to its Employees or entered into any severance or change of control agreement with any
of its Employees or changed the benefits to which such Employees and former employees are entitled under any employee benefit plan or created any new employee benefit plan or modified, amended or terminated any existing employee benefit plan for any
such employees other than increases or changes made in the ordinary course of business consistent with past practice; 

  

	 	(g)	purchased, redeemed or otherwise acquired any Common Shares or agreed to do so; 

  

	 	(h)	waived or released any material right under any Material Contract or any material indebtedness or liability owed to it; 

  

	 	(i)	entered into or become bound by any Contract for, or made or authorized any capital expenditure, involving, or which may result in, the payment of money by the Company of an amount
in excess of $250,000; or 

  

	 	(j)	subjected any of its assets, or permitted any of its assets to be subjected, to any Encumbrances, other than Permitted Encumbrances, 

 and the Company has no present intention to undertake any of the foregoing actions. 
  

	4.11	Licences, Permits 

 The Company holds all permits,
licences, approvals, certificates and other rights, qualifications and authorizations of or from Governmental Authorities necessary for the conduct of its business as presently conducted except where the failure to hold such permits, licences,
approvals, certificates, other rights, qualifications or authorizations would not reasonably be expected to cause a Material Adverse Effect. Other than the Required Consents and Approvals of the Company, there are no material consents required under
such permits, licences, approvals, certificates and other rights, qualifications and authorizations in connection with the consummation of the transactions contemplated by this Agreement. Section 4.11 of the Disclosure Letter of the Company
lists all material permits, licenses, approvals, certificates and other material rights, qualifications and authorizations of or from Governmental Authorities necessary for the conduct of the Company’s business as presently conducted.

	4.12	Financial Statements and Public Disclosure 

  

	 	(a)	The Financial Statements were prepared in accordance with GAAP applied on a basis consistent with prior periods (except as may be otherwise indicated in the notes thereto) and
fairly and accurately present, in all material respects, the assets, liabilities, including any accrued liability in respect of taxes, and financial condition of the Company on a consolidated basis as at the dates indicated and the revenues,
earnings and results of operations of the Company on a consolidated basis for the specified period. 

  

	 	(b)	The documents comprising the Company Public Disclosure, as of their respective dates: (i) did not contain any Misrepresentation; and (ii) complied in all material respects
with the requirements of applicable Securities Laws. The Company has not filed any confidential material change report with the Securities Authorities which at the date hereof remains confidential. Since January 31, 2007, there has been no
change in a “material fact” or a “material change” (as such terms are defined under the Securities Act) except for changes in material facts or material changes that are reflected in the Company Public Disclosure.

  

	 	(c)	The management of the Company has (i) implemented disclosure controls and procedures to ensure that material information relating to the Company is made known to the management
of the Company by others within those entities, which disclosure controls and procedures are, given the size of the Company and the nature of its business, reasonably expected by management to be effective in alerting, on a timely basis, the
Company’s principal executive officer and principal financial officer to material information required to be disclosed to the public pursuant to Securities Laws, and (ii) disclosed in its Management’s Discussion & Analysis
for the financial year ended January 31, 2007 and for the six months ended July 31, 2007 any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent interim period that had
materially affected, or was reasonably likely to materially affect, the Company’s internal control over financial reporting. 

  

	4.13	Material Contracts 

 The Company is not in default
or breach of, nor has the Company received any notice of default or breach of, or termination under, any Material Contract, and, to the knowledge of the Company, there exists no state of facts which after notice or lapse of time or both would
constitute a default or breach of such Material Contract, or that would give any Person the right to (i) declare a default, seek damages or exercise any other remedy under any such Material Contract, (ii) accelerate the maturity or
performance of any such Material Contract or (iii) cancel, terminate or modify in a manner materially adverse to the interests of the Company any such Material Contract. All Material Contracts are identified in the Disclosure Letter of the
Company. Except as disclosed in the Disclosure Letter of the Company, copies of all Material Contracts have been included in the Data Room Information and all such Material Contracts are accurate and complete in all material respects as of the date
hereof and have not been amended or superseded and the Company has not taken any action to amend or supersede such Material Contracts. Other than the Required Consents and Approvals of the Company, there are no material third party consents required
under the Material Contracts in connection with the consummation of the transactions contemplated by this Agreement. 
  

	4.14	Litigation 

 Except as set out in the Disclosure
Letter of the Company, there are no actions, arbitrations, claims, suits, proceedings or investigations commenced or, to the knowledge of the Company, contemplated or threatened against or by the Company or any of its Consultants, directors or
officers 

 
before or by any Governmental Authority, nor to the knowledge of the Company are there any existing facts or conditions which may reasonably be expected to
be a proper basis for any such actions, suits, proceedings or investigations. None of the actions, claims, suits, proceedings or investigations disclosed in the Disclosure Letter of the Company, considered individually or in the aggregate, are
material to the Company. 
  

	4.15	Officer Obligations 

 Except as set out in the
Disclosure Letter of the Company, no Officer Obligations will become payable upon completion of the Arrangement. 
  

	4.16	Reporting Issuer Status 

 The Company is a reporting
issuer or its equivalent under, and is in compliance in all material respects with, the Securities Laws of each of the Provinces of Canada and is in compliance in all material respects with the rules and regulations of the TSX. No delisting,
suspension of trading in or cease trading order with respect to the Common Shares or to the knowledge of the Company, no inquiry, review or investigation (formal or informal) of any Securities Authority is in effect or ongoing or expected to be
implemented or undertaken, other than any future continuous disclosure reviews to be conducted in the ordinary course by Securities Authorities. 
  

	4.17	Business in Compliance with Laws 

 The operations of
the Company are conducted in compliance with all Laws of each jurisdiction in which the Company carries on its business and the Company has not received any notice of any violation of any such Laws, except for any such non-compliance or violations
which would not reasonably be expected to cause a Material Adverse Effect. 
  

	4.18	Employment Matters 

  

	 	(a)	Schedule 4.18(a) of the Disclosure Letter of the Company sets forth a complete list of all Employees and Consultants, together with the titles, service dates and material terms of
employment or retention, including current wages, salaries or hourly rates of pay, fees and bonus (whether monetary or otherwise) paid since the beginning of the most recently completed fiscal year or payable to each such Employee or Consultant.
Except as disclosed in the Disclosure Letter of the Company, no Employee is on long-term disability leave, extended absence or receiving benefits pursuant to the Workplace Safety and Insurance Act (Ontario) or similar worker’s
compensation legislation in other provinces. 

  

	 	(b)	Except as disclosed in the Disclosure Letter of the Company, the Company does not have any employment contracts or arrangements which are not terminable on the giving of reasonable
notice in accordance with Laws, nor does it have any management, employment, severance, change of control, consulting, retention or like agreements providing for cash payments or other compensation or benefits upon the consummation of the
transactions contemplated by this Agreement. 

  

	 	(c)	The Company is not a party, either directly or indirectly, voluntarily or by operation of law, to any Collective Agreement, letters of understanding, letters of intent or other
written communication with any trade union or association which may qualify as a trade union, which would cover any of the Employees or Consultants. 

	 	(d)	All obligations of the Company under the Company Plans now payable or due have been satisfied in all respects, and there are no outstanding defaults or violations thereunder by the
Company that would result in or give rise to any liability to the Company, nor does the Company have knowledge of any such default or violation by any other party to any Company Plan, except in any cases where such defaults or violations would not
reasonably be expected to cause a Material Adverse Effect. 

  

	 	(e)	Section 4.18(e) of the Disclosure Letter of the Company sets forth a list of the Company Plans. 

  

	 	(f)	All employer payments, contributions or premiums currently required to be remitted or paid to or in respect of each Company Plan have been remitted and paid in a timely fashion in
accordance with the terms thereof and all Laws, and all Taxes, penalties or fees required by any Laws to be paid by the Company in respect of any Company Plan have been paid when due. 

  

	 	(g)	All current assessments under the Workplace Safety and Insurance Act (Ontario) or similar legislation in other provinces in relation to the Company have been paid or accrued
and the Company has not been and is not subject to any special or penalty assessment under such legislation which has not been paid. 

  

	 	(h)	Except as set out in the Disclosure Letter of the Company, neither the execution of this Agreement nor the consummation of any of the transactions contemplated in this Agreement
will: 

  

	 	(i)	result in any payment (including bonus, golden parachute, retirement, severance, unemployment compensation, or other benefit or enhanced benefit) becoming payable under any Company
Plan or employment agreement; 

  

	 	(ii)	increase any benefits otherwise payable under any Company Plan or employment agreement; or 

  

	 	(iii)	result in the acceleration of the time of payment or vesting of any benefits otherwise payable under any Company Plan or employment agreement, or result in any Company Plan or
employment agreement becoming terminable other than at the sole and unfettered discretion of the Company. 

  

	4.19	Tax Matters 

  

	 	(a)	The Company has duly and timely filed all Tax Returns required to be filed prior to the date hereof with the appropriate Governmental Authorities and all such Tax Returns were, at
the time of filing, true and correct in all material respects. 

  

	 	(b)	The Company has duly and timely paid all Taxes due and payable by it on or before the date hereof, including all instalments on account of Taxes for the current year that are due
and payable by it, whether or not assessed by the appropriate Governmental Authority and the Company has provided adequate accruals in accordance with GAAP in the most recently published Financial Statements of the Company for any Taxes for the
period covered by such Financial Statements that have not yet been paid whether or not shown as being due on any Tax Returns. As of the date of the Financial Statements, the Company has no liability for unpaid taxes not shown on the Financial
Statements. Since that date, the Company has incurred no liability for taxes except in the ordinary course of business. 

	 	(c)	The Company has not requested, or entered into any agreement or other arrangement or executed any waiver providing for, any extension of time within which: 

 

	 	(i)	to file any Tax Return covering any Taxes for which the Company is or may be liable; 

  

	 	(ii)	to file any elections, designations or similar filings relating to Taxes for which the Company is or may be liable; 

  

	 	(iii)	the Company is required to pay or remit any Taxes or amounts on account of Taxes; or 

  

	 	(iv)	any Governmental Authority may assess or collect Taxes for which the Company is or may be liable. 

  

	 	(d)	There are no material proceedings, investigations, audits or claims now pending or, to the knowledge of the Company, threatened against the Company in respect of any Taxes. The
Company has not received from any Governmental Authority any (i) notice indicating an intent to open an audit or other review pertaining to the Company’s Taxes, or (ii) notice of deficiency or proposed adjustment for any amount of Tax
proposed, asserted, or assessed by any taxing authority against the Company. 

  

	 	(e)	The Company has provided to Parent correct and complete copies of all Tax Returns, examination reports, and statements of deficiencies proposed or assessed in respect of all
non-statute-barred taxation years. 

  

	 	(f)	The Company has retained all supporting and backup papers, receipts, spreadsheets and other information necessary for the preparation of all material Tax Returns that have not yet
been filed and the defence of any Tax audits involving all Taxable years or periods that are not closed by the statute of limitations. 

  

	 	(g)	The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the
date hereof as a result of any (i) instalment sale or open transaction disposition made on or prior to the date hereof; or (ii) prepaid amount received on or prior to the date hereof. 

  

	 	(h)	The Company has not at any time had a trade or business or permanent establishment within the United States. 

  

	 	(i)	In all material respects, the Company has duly and timely collected or withheld from any amount received, paid or credited by it from, to or for the account or benefit of any
Person, including any Employees, Consultants and any non-resident Person, the amount of all Taxes and other deductions required by any Laws to be collected or withheld from any such amount and has duly and timely remitted the same to the appropriate
Governmental Authority. 

  

	 	(j)	The Company has duly filed in a timely manner all Workplace Safety and Insurance Board returns and other similar reports and information required to be filed with all Governmental
Authorities. 

  

	 	(k)	The Company has duly and timely collected all material amounts on account of any sales or transfer taxes, including goods and services, harmonized sales and provincial or
territorial sales taxes, required by any Laws to be collected by it and has duly and timely remitted such amounts to the appropriate Governmental Authority. 

	4.20	Environmental Matters 

  

	 	(a)	All operations of the Company are in compliance with all Environmental Laws, except for any such non-compliance or violations which would not reasonably be expected to cause a
Material Adverse Effect. 

  

	 	(b)	The Company is not subject to: 

  

	 	(i)	any written demand, written notice or other obligation with respect to environmental remediation or the breach of or liability under any Environmental Laws applicable to the
Company, including any regulations respecting the use, storage, treatment, transportation or disposition (including disposal or arranging for disposal) of Contaminants; or 

  

	 	(ii)	written demand, written notice or other obligation with respect to environmental remediation or liability, by contract or operation of Laws, under Environmental Laws applicable to
the Company or any of its predecessor entities, divisions or any formerly owned, leased or operated properties or assets of the foregoing, including liability with respect to the presence, release, migration or discharge of Contaminants in, on,
under or from any formerly owned, leased or operated properties or assets of the foregoing. 

  

	4.21	Real Property 

  

	 	(a)	The Company has good and marketable legal and beneficial title or interest to its real property interests including leases, licences, easements, rights of way and permits permitting
the use and disposition of land or premises by the Company (collectively, “Real Property Rights”) necessary to permit the operation of the Company’s current business, as that business is now being conducted, free and clear of
all claims, liens, charges, encumbrances, leases, subleases and legal notations, other than Permitted Encumbrances or except where such failure of title or interest in respect of any real property or failure to hold such Real Property Rights as
would, individually or in the aggregate, not cause a Material Adverse Effect. 

  

	 	(b)	The Real Property Rights are described in Section 4.21 of the Disclosure Letter of the Company and there are no other Real Property Rights. 

  

	 	(c)	Other than the Required Consents and Approvals of the Company, to the knowledge of the Company, there are no agreements, options, rights of first refusal, contracts or commitments
to sell, transfer or otherwise dispose of or encumber any real property interests or leased properties or which would restrict the ability of the Company to transfer its legal and/or beneficial interest in and to the whole or any part of any of its
real property or leased properties. 

  

	 	(d)	 The Real Property Rights permitting the use and disposition of the land or premises by the Company necessary to permit the operation of the Company’s current
business, as that business is now being conducted, are up to date and in good standing in all respects and no event of default has occurred thereunder or under the Permitted Encumbrances affecting the Real Property Rights (and no event has occurred
thereunder or under the Permitted Encumbrances affecting the Real Property Rights that with the passage of time 

	 	 
would constitute an event of default if not cured in accordance with any right to cure provided therefor) which would, individually or in the aggregate,
cause a Material Adverse Effect. 

  

	 	(e)	All land or premises owned or leased by the Company, used for the operation of the Company’s current business, as that business is now being conducted, are zoned to permit such
use. The Company has not made application for any minor variance, rezoning or official plan amendment in respect of any of the land and premises owned or leased by the Company and has no knowledge of any proposed or pending changes to any zoning
regulation or official plan affecting the land and premises owned or leased by the Company. There is no actual or written threat of expropriation of any land or premises owned or leased by the Company that is used for the operation of the
Company’s current business, as that business is now being conducted. There is no improvement on the lands and premises owned or leased by the Company that encroaches on any adjoining land and no buildings, structures or other improvements on
adjoining lands encroach upon real property owned or leased by the Company. 

  

	 	(f)	There are no outstanding orders or notices issued by any Governmental Authority relating to property standards, health or fire department matters or general building safety
standards for any land or premises owned or leased by the Company, used for the operation of the Company’s current business, as that business is now being conducted which would, individually or in the aggregate, cause a Material Adverse Effect.

  

	 	(g)	The buildings, structures, fixtures, mechanical, electrical, plumbing, heating and air-conditioning systems, and other improvements located on, over, under or upon the real property
owned or leased by the Company are in good condition, repair and proper working order, having regard to their use and age and such assets have been properly and regularly maintained. 

  

	 	(h)	Each real property owned or leased by the Company has direct legal access to a municipal right-of-way and the Company otherwise has such rights of entry and exit to and from the
such real property as are reasonably necessary to carry on the Company’s current business upon such real property. 

  

	 	(i)	No part of the real property owned or leased by the Company is subject to any building or use restriction that restricts or would restrict or prevent the use and operation of such
real property as it is used or operated by the Company for the Company’s current business, or is located in a flood plain or subject to flooding. 

  

	 	(j)	All accounts for work and services performed or materials placed or furnished upon or in respect of the construction and completion of any buildings, structures, fixtures,
mechanical, electrical, plumbing, heating and air-conditioning systems or other improvements located on, over, under or upon the real property owned or leased by the Company have been fully paid and no one is entitled to claim a lien under the
Construction Lien Act (Ontario) or other similar legislation for such work performed by or on behalf of the Company. 

  

	4.22	Intellectual Property Rights 

  

	 	(a)	 The Company either owns or has sufficient right, title and interest in, or a valid and binding right under a Contract to (i) use all Company Intellectual
Property without infringing the Intellectual Property rights of any Person, except as to patents and patent applications, as to which the foregoing representation is made on the basis of Company’s 

	 	 
knowledge. The Company has not been sued in any suit, action or proceeding, or received notice of any pending suit, action or proceeding, based on a claim
that the Company is infringing any Intellectual Property of any other Person. The Company has title to the Company Intellectual Property that is owned by the Company, free and clear of Encumbrances (other than Permitted Encumbrances).

  

	 	(b)	To the knowledge of the Company, the Company Intellectual Property has not been used or enforced, or failed to be used or enforced, in a manner that would result in the abandonment,
cancellation or unenforceability of the Company Intellectual Property. The Company has not taken any action it is prohibited from taking, or failed to take any action it is required to take, that would result in or provide any basis for a material
default by, or a material reduction or dilution of the rights of, the Company pursuant to any of the Material Contracts entered into by the Company in respect of any of the Company Intellectual Property and all such agreements and licences are in
full force and effect and the proposed transaction will not require the consent or payment to any other parties to such Material Contracts. 

  

	 	(c)	The Company has taken all reasonable actions necessary to maintain the Company Intellectual Property, including payment of applicable maintenance fees, filing of applicable
statements of use, timely response to office actions and disclosure of any required information, and all assignments (and licenses where required) of the Company Intellectual Property have been duly recorded with the appropriate governmental
authorities. 

  

	 	(d)	The Company does not have knowledge of any violations or infringements of the Company Intellectual Property or any challenges to the enforceability of the Company Intellectual
Property. None of the Company Intellectual Property has been adjudged invalid or unenforceable in whole or part. 

  

	 	(e)	The Company Intellectual Property constitutes all the Intellectual Property necessary to conduct the business of the Company as presently conducted in all material respects, and
upon consummation of the transactions contemplated by this Agreement, the Company shall have the valid right to use all licensed Company Intellectual Property and Company Intellectual Property owned by the Company to the same extent such licensed
Company Intellectual Property and owned Company Intellectual Property are currently used in the business of the Company. The consummation of the transactions contemplated by this Agreement will not result in the creation of any Encumbrance (other
than Permitted Encumbrances) with respect to any Company Intellectual Property. 

  

	 	(f)	Each current and former employee, consultant, or independent contractor of the Company who is or was involved in, or who has contributed to, the creation or development of any
Company Intellectual Property has executed and delivered (and to the Company’s knowledge, is in compliance with) an agreement which provides a valid written assignment to the Company of all title and rights to all such Intellectual Property. No
third party has “moral rights” or rights to terminate any assignment or license with respect thereto which it has not waived in favour of the Company. Without limiting the foregoing, no current or former employee, consultant or independent
contractor of the Company has any right, license, claim or interest whatsoever in or with respect to any of the Company Intellectual Property that it has not waived in favour of the Company. 

  

	 	(g)	 (i) The Company has the right to use all trade secrets, customer lists, hardware designs, programming processes, databases, software and other information required
for its products, services or its business as presently conducted or contemplated; (ii) the 

	 	 
Company has taken reasonable measures to protect and preserve the security and confidentiality of its trade secrets and other confidential information;
(iii) all employees and consultants of the Company involved in the design, review, evaluation, development, implementation or support of services or products of the Company or the creation or development of any Intellectual Property have
executed nondisclosure and assignment of inventions agreements to protect the confidentiality of the Company’s trade secrets and other confidential information and to vest in the Company exclusive ownership of such Intellectual Property.

  

	 	(h)	The Company has not granted any third party any exclusive rights to any of the Company Intellectual Property, or any exclusive right to sublicense any Company Intellectual Property
rights. 

  

	 	(i)	To the extent that any third party Intellectual Property is incorporated into, integrated or bundled with, or used by the Company in any of the Company’s products, the Company
has written agreements with such third parties with respect to all such Intellectual Property pursuant to which the Company: (a) has obtained complete, unencumbered and unrestricted ownership of, and are the exclusive owners of such
Intellectual Property by operation of law or by valid assignment, or (b) has obtained perpetual, non terminable (other than for breach) licenses, sufficient for the conduct of its business as it is now being conducted by the Company to all such
third party Intellectual Property. 

  

	4.23	Insurance 

 The Company has policies of insurance in
force as of the date hereof naming the Company as an insured which, having regard to the nature of such risk and the relative cost of obtaining insurance, the Company believes are reasonable. 
  

	4.24	Absence of Undisclosed Liabilities 

 Except to the
extent reflected or reserved in the Financial Statements or incurred in the ordinary course since January 31, 2007, the Company has no outstanding indebtedness or any liabilities or obligations (whether accrued, absolute, contingent or
otherwise). 
  

	4.25	Net Debt 

 As at the Effective Time, the Company
will have outstanding Net Debt in an aggregate amount not exceeding $1,885,000, representing the Net Debt publicly disclosed in the Company’s consolidated balance sheet as at July 31, 2007. It is understood that any permitted capital
expenditures shall be funded using Working Capital. 
  

	4.26	Restrictions on Business Activities 

 There is no
agreement, judgement, injunction, order or decree binding upon the Company, that purports to have, has or could reasonably be expected to have or (including following the transactions contemplated by this Agreement), the effect of prohibiting,
restricting or impairing: (a) any material business practice of the Company or any Affiliate of the Company; (b) any acquisition of any business or property by the Company or any Affiliate of the Company; (c) the ability of the
Company to solicit or engage any customers, suppliers or employees, including any most favoured nations clauses; (d) the nature of the business which may be conducted by the Company, any Affiliate of the Company or the manner or geographic area
in which all or a material portion of the business of the Company or any Affiliate of the Company may be conducted by the Company or any Affiliate of the Company. 

	4.27	Relationships with Licensees, Customers, Suppliers, Distributors and Sales Representatives 

 The Company has no outstanding material disputes with any licensee, customer, supplier, distributor or sales representative, and has not received any
notice that any such licensee, customer, supplier, distributor or sales representative intends to cancel, terminate, renegotiate or otherwise modify or not renew its relationship with the Company, and, to the knowledge of the Company, no such action
has been threatened, which in either case individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. 
  

	4.28	Rights Plan 

 The Company has no shareholder rights
plan or similar plan contemplated to be put in place by the Company. 
  

	4.29	Related Party Transactions 

 Except as disclosed in
the notes to the Financial Statements, all Contracts of the Company have been entered into on an arm’s length basis (within the meaning of the Tax Act) and there has been no forgiveness or similar release or, except in the ordinary course of
business, repayment of debt owed by or to a Person not at arm’s length. 
  

	4.30	No Expropriation 

 No property or asset of the
Company has been taken or expropriated by any Governmental Authority nor has any notice or proceeding in respect thereof been given or commenced nor, to the knowledge of the Company, is there any intent or proposal to give any such notice or to
commence any such proceeding. 
  

	4.31	Full Disclosure 

 To the knowledge of the Company,
the Company has not omitted to disclose to Parent any information about facts or circumstances related to the Company which could reasonably be expected to result in a Material Adverse Effect. 
  

	4.32	Government Regulation 

 (a) To the knowledge of the Company, none of
the Company, its Subsidiaries, or any of their key employees has been, or is being investigated with respect to, any activity that constitutes or could constitute, a material violation of any Healthcare Law. 
 (b) The Company and its Subsidiaries have not, and, to the knowledge of the Company, none of their managing key employees during his or her employment or association
with the Company or its Subsidiaries has, engaged in any activity that constitutes a material violation of any Healthcare Law. There have been no complaints or findings made or charges laid against the Company, its Subsidiaries or any key managing
employees during his or her employment or association with the Company or its Subsidiaries that, if proven true pursuant to legal process, would constitute a material violation of any Healthcare Law. 
 (c) Neither the Company nor any of its Subsidiaries have: (i) had a material civil monetary penalty assessed against it under Section 1128A of the SSA or any
regulations promulgated thereunder; or (ii) been convicted (as that term is defined in 42 C.F.R. Section 1001.2) of any of the following categories of offenses as described in SSA Section 1128(A) and (b)(1), (2), (3), or any
regulations promulgated thereunder: (A) criminal offenses relating to the delivery of an item or service under any state or federal 

 
healthcare program; (B) criminal offenses under federal or state law for misconduct in connection with the delivery of a healthcare item or service or
with respect to any act or omission in a program operated by or financed in whole or in part by any federal, state or local government agency; or (C) violations of federal or state laws relating to the interference with or obstruction of any
investigation into any criminal offense described in this paragraph (c). 
 (d) Except as set out in the Disclosure Letter of the Company, since
January 31, 2007, neither the Company nor any of its Subsidiaries have received or been subject to: (i) any United States Food and Drug Administration (“FDA”) Form 483’s or any similar Canadian Department of Health
(“Health Canada”) report including any inspection observation report, investigation report or other similar audit or deficiency report relating to any product manufactured, sold, leased or delivered by the Company or any Subsidiary;
(ii) any FDA Notices of Adverse Findings or similar regulatory notice, warning letter or other correspondence from Health Canada setting forth adverse findings or non-compliance with applicable Law, regulations, rules or guidelines relating to
any product manufactured, sold, leased or delivered by the Company or any Subsidiary; or (iii) any warning letters or other written correspondence from any Governmental Authority concerning any product manufactured, sold, leased or delivered by
the Company or any Subsidiary in which any Governmental Authority asserted that the operations of the Company or any Subsidiary were not in compliance with applicable Law, regulations, rules or guidelines with respect to any product manufactured,
sold, leased or delivered by the Company or any Subsidiary. 
  

	4.33	No “Collateral Benefit” under OSC Rule 61-501. 

 No related party of the Company (within the meaning of OSC Rule 61-501) will receive a “collateral benefit” (within the meaning of such rule) as a consequence of the transactions contemplated by this Agreement. 
  

	4.34	Investment Canada Act (Canada) 

 None of the Company
or any of its Subsidiaries is engaged in any of the activities described in section 14.1(5) of the Investment Canada Act (Canada). 
  

	4.35	Effect of Disclosure 

 Each of the representations
and warranties of the Company set forth in Sections 4.1 to 4.34 inclusive is qualified by and is made subject to the disclosures made in the corresponding sections of the Disclosure Letter of the Company. No investigation by or on behalf of Parent
will mitigate, diminish or affect the representations or warranties made by the Company in this Agreement. 
 ARTICLE 5 CONDUCT OF
BUSINESS 
  

	5.1	Conduct of Business by the Company 

 The Company
covenants and agrees that, during the period from the date of this Agreement until the earlier of the Effective Time or the date that this Agreement is terminated by its terms, unless Parent shall otherwise agree in writing, and except (i) as
otherwise expressly permitted or specifically contemplated by this Agreement, including the Holdco Election, (ii) as otherwise required by applicable Law, and (iii) as otherwise disclosed in the Disclosure Letter of the Company:

  

	 	(a)	the business of the Company shall be conducted only in, and the Company shall not take any action except in a prudent manner in, the ordinary course of business and consistent with
past practice. The Company shall use commercially reasonable efforts to maintain and preserve its business organization and goodwill and assets; 

	 	(b)	the Company shall not directly or indirectly do or permit to occur any of the following: 

  

	 	(i)	amend its Charter Documents, 

  

	 	(ii)	declare, pay or set aside for payment any dividend or distribution of any kind (whether in cash, securities, property or otherwise) in respect of Common Shares or other securities
owned by any Person, 

  

	 	(iii)	issue, sell, pledge, dispose of or in any way encumber or agree to issue, sell, pledge, dispose of or encumber any Common Shares or other securities of the Company, or securities
convertible into or exchangeable or exercisable for, or otherwise evidencing a right to acquire Common Shares, other than the Common Shares issuable on the exercise of options outstanding as of the date hereof, 

  

	 	(iv)	redeem, purchase or otherwise acquire any of its outstanding Common Shares or other securities, 

  

	 	(v)	split, combine or reclassify any of its Common Shares, 

  

	 	(vi)	adopt a plan of liquidation or resolutions providing for the liquidation, dissolution, merger, consolidation or reorganization of the Company, or 

  

	 	(vii)	reorganize, amalgamate or merge the Company with any other Person; 

  

	 	(c)	without limiting the generality of Section 5.1(a), the Company shall not directly or indirectly do any of the following: 

  

	 	(i)	sell, pledge, license, lease, dispose of or encumber any assets, except in the ordinary course of business consistent with past practice, including for greater certainty, real
property or any right thereto; 

  

	 	(ii)	acquire (by merger, amalgamation, consolidation, acquisition of shares or assets or otherwise) another Person or division thereof or make any investment either by purchase of shares
or securities, contribution of capital, property transfer or purchase of any property or assets of any other Person or division thereof, except for purchases or expenditures in the ordinary course of business consistent with past practice;

  

	 	(iii)	incur or commit to any indebtedness for borrowed money or any other liability or obligation, or issue any debt securities or assume, guarantee, endorse or otherwise become
responsible for, the obligations of any other Person if, after giving effect thereto, the Net Debt as at the Effective Time would exceed the amount referenced in Section 4.25 or the outstanding balance of the Company’s credit facility with
the Bank of Nova Scotia would exceed $500,000; 

  

	 	(iv)	make any loans or advances (other than non-material advances to Employees or Consultants for travel expenses or the like); 

  

	 	(v)	expend or commit to expend any amounts with respect to capital expenditures that, when added to other such capital expenditures since July 31, 2007, is in excess of $250,000,
with any additional capital expenditures exceeding $50,000 being mutually agreed upon by the Parties; 

	 	(vi)	incur transaction expenses in connection with the transactions contemplated by this Agreement, including any fees, costs and expenses incurred to enter into this Agreement,
exceeding $2.5 million; 

  

	 	(vii)	discharge or satisfy any claims, liabilities or obligations other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the Financial Statements or of liabilities incurred since July 31, 2007 in the ordinary course of business consistent with past practice or incurred in connection with the transactions contemplated
by this Agreement; 

  

	 	(viii)	enter into any Material Contract or Collective Agreement or waive, release, grant or transfer any rights of value or modify or change in any respect any existing Material Contract;

  

	 	(ix)	make any material changes to existing accounting principles and practices, except as required by GAAP; 

  

	 	(x)	enter into any Contract other than on an arm’s length basis; or 

  

	 	(xi)	enter into any agreement to do any of the foregoing prohibited matters; 

  

	 	(d)	the Company shall use its commercially reasonable efforts to cause the current insurance policies of the Company or replacements therefor not to be cancelled or terminated or any of
the coverage thereunder to lapse, unless simultaneously with such termination, cancellation or lapse, replacement policies providing coverage similar to or greater than the coverage under the cancelled, terminated or lapsed policies for
substantially similar premiums are in full force and effect; 

  

	 	(e)	the Company shall continue to manage its Working Capital in a prudent manner in the ordinary course of business consistent with past practice; 

  

	 	(f)	the Company shall not create any new Officer Obligations, other than those disclosed in the Disclosure Letter of the Company and referenced in Section 4.15, and the Company
shall not grant to any Consultant, officer, director or Employee an increase in compensation in any form, make any loan to any Consultant, officer, director or Employee, or take any action with respect to the grant of any severance or termination
pay arising from the Arrangement or a change of control of the Company or enter into any employment agreement with any officer, director or Employee, or consulting agreement with a Consultant, or enter into any other agreement with respect to any
increase of benefits payable under its current severance or termination pay or any other policies or to give effect to practices regarding non-executive employee wages and benefits other than in the normal course consistent with past practice;

  

	 	(g)	the Company shall not adopt or amend or make any contribution to any bonus, profit sharing, option, pension, retirement, deferred compensation, insurance, incentive compensation,
other compensation or other similar plan, agreement, trust, or arrangements for the benefit of Employees or Consultants or with respect to its obligations under existing provisions of any of the Company Plans; 

  

	 	(h)	The Company shall: 

  

	 	(i)	duly and timely file all Tax Returns required to be filed by it on or after the date hereof and all such Tax Returns will be true, complete and correct in all material respects;

	 	(ii)	timely withhold, collect, remit and pay all Taxes which are to be withheld, collected, remitted or paid by it to the extent due and payable; 

  

	 	(iii)	not make or rescind any election relating to Taxes; 

  

	 	(iv)	not enter into any agreement with any taxing authorities or consent to any extension or waiver of any limitation period with respect to Taxes; 

  

	 	(v)	not change any of its methods of reporting income, deductions or accounting for income Tax purposes from those employed in the preparation of its most recent income Tax Return
except as may required by applicable Law; and 

  

	 	(vi)	promptly inform Parent as to any material communication in respect of Taxes received by it after the date of this Agreement from any Governmental Authority.

 ARTICLE 6 COVENANTS OF THE COMPANY 
  

	6.1	Non-Solicitation 

  

	 	(a)	Except as expressly provided in this Section 6.1, the Company shall not, directly or indirectly, through any officer, director, employee, representative (including any
financial or other advisor) or agent of the Company (collectively, “Representatives”): (i) solicit, assist, initiate, encourage (including by furnishing information or entering into any Contract) or otherwise facilitate any
inquiries, proposals, offers or expressions of interest regarding any actual or potential Acquisition Proposal; (ii) participate in any substantive discussions or negotiations with any Person (other than Parent) regarding any actual or
potential Acquisition Proposal; (iii) accept, approve, endorse, recommend, remain neutral, or propose publicly to accept, approve, endorse or recommend, or remain neutral regarding any Acquisition Proposal; (iv) withdraw, modify or
qualify, or propose publicly to withdraw, modify or qualify, in any manner adverse to Parent, the approval or recommendation of the Board (including any committee thereof) of this Agreement or the Arrangement; or (v) accept, approve, endorse,
recommend or enter into or publicly propose to accept, approve, endorse or recommend or enter into any Contract in respect of an Acquisition Proposal. 

  

	 	(b)	Except as otherwise provided in this Section 6.1, the Company shall, and shall cause its Representatives to, immediately cease and cause to be terminated any solicitation,
encouragement, discussion or negotiation with any Persons other than Parent conducted heretofore by the Company or any Representatives with respect to any Acquisition Proposal, and, in connection therewith, the Company will discontinue access to the
Data Room (and not establish or allow access to any other data rooms, virtual or otherwise or otherwise furnish information) and shall as soon as possible request, to the extent that it is entitled to do so (and exercise all rights it has to
require) the return or destruction of all confidential information regarding the Company previously provided to any such Person or any other Person and will request (and exercise all rights it has to require) the destruction of all material
including or incorporating or otherwise reflecting any confidential information regarding the Company. The Company agrees that it shall not terminate, waive, amend, modify or release any third party from any confidentiality agreement relating to a
potential Acquisition Proposal or any standstill agreement to which such third party is a party. 

	 	(c)	Notwithstanding Sections 6.1(a) and 6.1(b) hereof and any other provision of this Agreement or of any other agreement between the Parties or between the Company and any other
Person, including the provisions of any confidentiality or standstill agreement, if at any time following the date of this Agreement and prior to the Effective Time, the Company receives any written Acquisition Proposal which is unsolicited after
the date hereof that did not result from a breach of this Section 6.1 that the Board determines in good faith, after consultation with its financial advisors and outside counsel, constitutes or is likely to lead to a Superior Proposal, then the
Company may: 

  

	 	(i)	furnish information with respect to the Company to the Person making such Acquisition Proposal; and/or 

  

	 	(ii)	enter into, participate, facilitate and maintain discussions or negotiations with, and otherwise cooperate with or assist, the Person making such Acquisition Proposal,

 provided that the Company shall not, and shall not allow its Representatives to, disclose any non-public information to such
Person without having entered into a confidentiality agreement with such Person that contains provisions that are no less favourable in the aggregate to the Company and that are not individually or in the aggregate materially more favourable to such
Person than those contained in the Confidentiality Agreement, and provided that such confidentiality agreement may not include any provision calling for an exclusive right to negotiate with the Company and may not restrict the Company from complying
with this Section 6.1, and will promptly provide to Parent any non-public information concerning the Company provided to such other Person which was not previously provided to Parent. Notwithstanding the foregoing, the Company shall not provide
any commercially sensitive non-public information to any of its competitors that might be considering an Acquisition Proposal except in a manner consistent with the Company’s past practice in dealing with the disclosure of such information to
competitors. 
  

	 	(d)	From and after the date of this Agreement, the Company shall promptly (and in any event within 24 hours) notify Parent at first orally and then in writing of any actual or
potential Acquisition Proposal, including a copy of any confidentiality agreement entered into by the Company, the identity of the Person making such Acquisition Proposal and the material terms and conditions thereof, and shall, at Parent’s
reasonable request, inform it as to the status of developments and negotiations with respect to such Acquisition Proposal, including any changes to the material terms or conditions of such Acquisition Proposal. 

  

	 	(e)	 The Board or any committee thereof shall not effect a Change of Recommendation unless (i) the Company has received an unsolicited bona fide Acquisition
Proposal from such Person (in circumstances not involving any breach of Section 6.1), (ii) the Board determines in good faith, after consultation with its financial advisors and outside counsel, that such Acquisition Proposal constitutes a
Superior Proposal, (iii) the Company has provided Parent with a copy of such Acquisition Proposal, (iv) a period (the “Matching Period”) consistent with the Response Period has lapsed from the date (the “Notice
Date”) that is the later of (a) the date Parent received written notice of the Company’s proposed determination to take such action, and (b) the date Parent received a copy of the Acquisition Proposal, (v) during the
Matching Period, Parent shall have the 

	 	 
opportunity (but not an obligation) to offer to amend the terms and conditions of this Agreement such that the Acquisition Proposal would cease to be a
Superior Proposal, (vi) after the Matching Period, the Board (a) determines in good faith, after consultation with its financial advisors and outside counsel, that such Acquisition Proposal continues to constitute a Superior Proposal and
(b) determines in good faith, after consultation with outside legal counsel, that failure to take such action would be inconsistent with its fiduciary duties under applicable Law, and (vii) after the Matching Period, the Board or any
committee thereof effects a Change of Recommendation. Each successive material modification (including any increase in the proposed price) of any Acquisition Proposal shall constitute a new Acquisition Proposal for purposes of Section 6.1(c),
provided that the Matching Period in respect of such new Acquisition Period shall extend only until the later of the end of the initial five Business Day Matching Period and 48 hours after the Notice Date in respect of the new Acquisition
Proposal. 

  

	6.2	Right to Match 

  

	 	(a)	Subject to Section 6.1(c), the Company covenants that it will not effect a Change of Recommendation unless: 

  

	 	(i)	the Company has complied with its obligations under the other provisions of this Article 6 and has provided Parent with a copy of the Superior Proposal; and

  

	 	(ii)	a period (the “Response Period”) of five Business Days shall have elapsed from the date on which Parent received written notice from the Board that the Board has
determined, subject only to compliance with this Section 6.2, to effect a Change of Recommendation. 

  

	 	(b)	During the Response Period, Parent will have the right, but not the obligation, to offer to amend the terms of the Arrangement. The Board will review any such proposal by Parent to
amend the terms of the Arrangement, including an increase in, or modification of, the consideration to be received by the Shareholders, to determine whether the Acquisition Proposal to which Parent is responding would be a Superior Proposal when
assessed against the Arrangement as it is proposed by Parent to be amended. If the Board does not in good faith so determine, the Board will reaffirm its recommendation of the Arrangement, as so amended. If the Board does in good faith so determine,
the Board or any committee thereof may effect a Change of Recommendation; provided that the Company has complied with the terms and conditions under Section 6.1(e). 

  

	 	(c)	Each successive amendment to any Acquisition Proposal that results in an increase in, or modification of, the consideration (or value of such consideration) to be received by the
Shareholders shall constitute a new Acquisition Proposal for the purposes of this Section 6.2 and Parent shall be afforded a new Response Period in respect of each such Acquisition Proposal. 

  

	 	(d)	The Company shall ensure that the directors and officers of the Company and its other Representatives are aware of the provisions of Sections 6.1 and the Company shall be
responsible for any breach of Sections 6.1 by such Representatives. 

  

	6.3	Termination Fee and Expense Reimbursement 

  

	 	(a)	Notwithstanding any other provision relating to the payment of fees, if after the execution of this Agreement: 

  

	 	(i)	Parent shall have terminated this Agreement pursuant to Section 10.1(e); 

	 	(ii)	the Company shall have breached in any material respect any of its obligations or covenants under Section 6.1 or Section 6.2 and Parent shall have terminated this
Agreement pursuant to Section 10.1(c)(B); 

  

	 	(iii)	Parent or the Company shall have terminated this Agreement pursuant to Section 10.1(g) where the Board or a committee thereof effected a Change of Recommendation (in accordance
with this Agreement) before the Company Meeting was held; or 

  

	 	(iv)	in a case where none of (i), (ii) or (iii) above is applicable, a bona fide Acquisition Proposal shall have been made or proposed to the Company or publicly
announced, or a Person shall have publicly announced an intention to do so (which has not been publicly withdrawn) and this Agreement is subsequently terminated by Parent pursuant to Section 10.1(c)(B) or 10.1(d) or by Parent or the Company
pursuant to Section 10.1(g) and within a period of twelve months from the date of termination of this Agreement: (A) any Shares or assets are acquired under such Acquisition Proposal (as the same may be amended or replaced from time to
time), or (B) an Acquisition Proposal (as the same may be amended or replaced from time to time) is completed, 

 then the
Company shall pay to Parent, within five Business Days of the first to occur of (i), (ii) (iii) or (iv) above, the amount of $2.75 million (the “Termination Fee”) in immediately available funds to an account
designated by Parent; provided that in the case of (ii) or (iv), where this Agreement had been terminated by Parent pursuant to Section 10.1(c)(B) or 10.1(d), the amount payable pursuant to this Section 6.3(a) shall be the amount
equal to the Termination Fee less the Parent Expense Reimbursement paid or owing pursuant to Section 6.3(b). 
  

	 	(b)	The Company shall pay such amount as is required to reimburse Parent for all reasonable costs and expenses incurred in connection with the Arrangement, including all reasonable
fees, costs and expenses of its financial, legal, auditing and other professional and other advisors and of all the reasonable expenses whatsoever and howsoever incurred in connection with the Arrangement up to a maximum amount equal to $1,000,000
(the “Parent Expense Reimbursement”) if Parent terminates this Agreement pursuant to Section 10.1(c), 10.1(d) or 10.1(i) and Parent is not in breach in any material respect of its representations, warranties or covenants under
this Agreement, in which case such amount shall be paid on the fifth Business Day following termination of this Agreement. 

  

	 	(c)	Parent shall pay such amount as is required to reimburse the Company for all reasonable costs and expenses incurred in connection with the Arrangement, including all reasonable
fees, costs and expenses of its financial, legal, auditing and other professional and other advisors and all of the reasonable costs and expenses whatsoever and howsoever incurred in connection with the Arrangement up to a maximum amount equal to
$1,000,000 (the “Company Expense Reimbursement”) if the Company terminates this Agreement pursuant to Section 10.1(b) and the Company is not in breach in any material respect of its representations, warranties or covenants
under this Agreement, in which case such amount shall be paid on the fifth Business Day following termination of this Agreement. 

	6.4	Injunctive Relief 

 Nothing contained herein shall
preclude a Party from seeking injunctive relief to restrain any breach or threatened breach of the covenants or agreements set forth in this Agreement or the Confidentiality Agreement or otherwise to obtain specific performance of any of such acts,
covenants or agreements, without the necessity of posting a bond or security in connection therewith. 
  

	6.5	Board of the Company 

 Immediately prior to the
Effective Time, the Board shall be reconstituted through the resignation of some or all, as applicable, of incumbent directors (upon receipt of a full discharge from the Company regarding their duties as directors and confirmation satisfactory to
the directors, acting reasonably, that the Company has purchased insurance coverage as contemplated by Section 7.2) and the appointment of nominees of Parent in their stead. The Company shall, in accordance with the foregoing and subject to the
provisions of the Charter Documents and the CBCA, assist Parent to secure the resignations of such directors to be effective at such time as may be required by Parent and to use reasonable efforts to cause the election or appointment of
Parent’s nominees to fill some or all (at the discretion of Parent) of the vacancies so created in order to effect the foregoing without the necessity of a Shareholders meeting. 
  

	6.6	Additional Covenants 

  

	 	(a)	The Company shall advise Parent, as reasonably requested, and on a daily basis on each of the last seven Business Days prior to the Company Meeting, as to the aggregate tally of
proxies and votes received in respect of the Company Meeting and the number of Shares for which Dissent Rights have been exercised. 

  

	 	(b)	The Company shall execute and deliver, or cause to be executed and delivered, at the Closing such customary agreements, certificates, resolutions and other closing documents as may
be reasonably requested by Parent. 

  

	 	(c)	The Company shall use its reasonable best efforts to maintain the listing of the Shares on the TSX until the Effective Date and shall cooperate with Parent and shall use reasonable
best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under applicable Law and the rules and policies of the TSX to enable the delisting by the Company
of the Shares from the TSX promptly after the Effective Date. 

  

	 	(d)	The Company shall use its reasonable best efforts to maintain in effect all material registrations, permits, licences, approvals, certificates and other rights, qualifications and
authorizations pursuant to which the Company operates. 

  

	 	(e)	The Company shall, as soon as reasonably practicable, advise Parent orally and in writing of any Material Adverse Effect in respect of the Company. 

  

	 	(f)	The Company shall not take any action or enter into any transaction, or permit any of its Subsidiaries to take any action or enter into any transaction, which would, or which
reasonably may be expected to: (i) result in a breach of any of its covenants or obligations under this Agreement; (ii) cause any condition in Section 9.1 or 9.2 to become incapable of satisfaction or materially more difficult to
satisfy; or (iii) render the transactions contemplated by this Agreement incapable of completion or more difficult to complete. 

	6.7	Accuracy of Representations 

 The Company covenants
and agrees solely on its own behalf that at all times until the Effective Time, that the Company shall not intentionally take any action, or fail to take any action, which would reasonably be expected to result in the representations and warranties
set out in Article 4 being untrue at any time until the Effective Time. 
  

	6.8	Pre-Closing Reorganization 

  

	 	(a)	The Company will agree to effect such reorganization of its business, operations, subsidiaries and assets or such other transactions (each, a “Pre-Acquisition
Reorganization”) as Parent or Subco may reasonably request prior to the Effective Date, and the Plan of Arrangement, if required, shall be modified accordingly; provided, however, that the Company need not effect a Pre-Acquisition
Reorganization which in the opinion of the Company, acting reasonably: (i) would materially impede or materially delay the consummation of the Arrangement; (ii) would prejudice the Shareholders in any material respects; or
(iii) cannot be reversed or unwound or rendered ineffective without adversely affecting the Company and its Subsidiaries taking into account Parent’s reimbursement obligations. Parent shall provide written notice to the Company of any
proposed Pre-Acquisition Reorganization at least 10 Business Days prior to the date of the Company Meeting. Any step or action taken by the Company or its Subsidiaries in furtherance of a proposed Pre-Acquisition Reorganization shall not be
considered to be a breach of any representation, warranty or covenant of the Company contained in this Agreement. If the Arrangement is not completed, Parent or Subco shall forthwith reimburse the Company for all reasonable fees and expenses
(including any professional fees and expenses) incurred by the Company and its Subsidiaries in considering or effecting a Pre-Acquisition Reorganization and shall be responsible for any costs of the Company and its Subsidiaries in reversing or
unwinding any Pre-Acquisition Reorganization that was effected prior to the Effective Date. 

  

	 	(b)	To the extent that a Pre-Acquisition Reorganization requires approval of the Shareholders under the CBCA, the Company shall: (i) seek approval of the Shareholders for such
Pre-Acquisition Reorganization at the Company Meeting, (ii) include in the Circular a form of special resolution of the Shareholders (the “Reorganization Resolution”) approving such Pre-Acquisition Reorganization in form and
substance acceptable to Parent, acting reasonably, either included within the Arrangement Resolution or separate from the Arrangement Resolution if so requested by Parent; and (iii) include in the Circular the unanimous recommendation of the
Board that the Shareholders vote in favour of the Reorganization Resolution, provided that the Parent and Subco agree to amend the provisions of this Agreement requiring the Company to take certain action by specified times, including such
provisions contained in Sections 2.2(a), 2.2(d) and 2.5, to the extent necessary to facilitate the foregoing. Subject to the provisions of this Section 6.8, the provisions in this Agreement regarding the Company’s obligations respecting
the approval of the Arrangement Resolution shall apply mutatis mutandis to the approval of the Reorganization Resolution. 

  

	6.9	Real Property Restrictive Covenants 

 The Company shall, on or
before the Effective Date, either: (a) discharge from title to the Property all restrictive covenants registered in favour of Purple (the “Restrictive Covenants”) and provide evidence of such discharge satisfactory to Parent,
acting reasonably; or (b) (i) obtain from Purple a waiver in form and substance satisfactory to Parent, acting reasonably, wherein Purple waives all of its rights under the Restrictive Covenants in favour of the Company, its corporate
successors and successors in title to the Property, mortgagees of the Property and any entity designated thereby, and all tenants and other occupants of the Property from time to time; and (ii) register such waiver on title to the Property.

 ARTICLE 7 OTHER COVENANTS OF PARENT 
  

	7.1	Accuracy of Representations 

 Parent covenants and
agrees solely on its own behalf and on behalf of Subco that at all times until the Effective Time, that Parent shall not intentionally take any action, or fail to take any action, or cause Subco to take any action, or fail to take any action, which
would reasonably be expected to result in the representations and warranties set out in Article 3 being untrue at any time until the Effective Time. 
  

	7.2	Indemnification 

  

	 	(a)	Parent shall, and shall cause Subco and the Company (or their successors) to, indemnify the directors and officers of the Company to the fullest extent to which Parent, Subco and
the Company are permitted to indemnify such officers and directors under the Charter Documents, applicable Law and Contracts of indemnity and such obligations shall survive the Effective Time and shall continue in full force and effect in accordance
with the terms of the Charter Documents and such individual indemnity agreements from the Effective Time. 

  

	 	(b)	Parent hereby acknowledges that the Company has in place directors’ and officers’ liability insurance. Parent shall cause the Company or any successor to the Company
(including the successor resulting from the winding-up or liquidation or dissolution of the Company) to obtain as of the Effective Time directors’ and officers’ liability insurance for the current and former directors and officers of the
Company on a six year “trailing” (or “run-off”) basis. 

  

	 	(c)	In the event the Company or any of its successors or assigns, after the Effective Time, (i) consolidates or amalgamates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that such
successors and assigns of the Company or, at Parent’s option, Parent, shall assume the obligations set forth in this Section 7.2. 

  

	 	(d)	The Company shall not amend the Charter Documents of the Company or any Subsidiary after the Effective Time if such action would adversely affect the rights of individuals who, on
or prior to the Effective Time, were entitled to advances, indemnification or exculpation thereunder for actions or omissions by such individuals at any time prior to the Effective Time. The individuals referred to in the preceding sentence shall
include any individuals who served at any time as directors or officers of any Subsidiary or joint venture of the Company at the Company’s request, it being acknowledged by the Parties hereto that each director or officer of a Subsidiary of the
Company or joint venture is or was doing so at such request of the Company. 

  

	 	(e)	The provisions of this Section 7.2 shall survive the consummation of the transactions contemplated by this Agreement and are intended for the benefit of, and shall be
enforceable by, each insured or indemnified person, his or her heirs and his or her legal representatives and, for such purpose, the Company confirms that it is acting as agent and trustee on their behalf. 

	7.3	Employment and Benefits Matters 

 Parent
acknowledges that the acquisition of Common Shares pursuant to the Arrangement shall constitute a change-of-control transaction under certain of the Company employment agreements and consulting agreements, as disclosed in Section 4.13 of the
Disclosure Letter of the Company, and that following the Effective Time Parent shall cause the Company to honour its obligations thereunder, as further described in Section 7.3 of the Disclosure Letter of the Company. 
  

	7.4	Additional Covenants 

  

	 	(a)	Except as otherwise provided in this Agreement, neither Parent nor Subco shall take any action or enter into any transaction, which would, or which reasonably may be expected to:
(i) result in a breach of any of Parent’s or Subco’s covenants or obligations under this Agreement; (ii) cause any condition in Section 9.1 or 9.3 to become incapable of satisfaction or materially more difficult to satisfy;
or (iii) render the transactions contemplated by this Agreement incapable of completion or more difficult to complete. 

  

	 	(b)	Parent unconditionally and irrevocably guarantees the due and punctual performance by Subco of its obligations under this Agreement and the Plan of Arrangement and undertakes to
perform such obligations to the extent that Subco fails to do so. 

 ARTICLE 8 MUTUAL COVENANTS 
  

	8.1	Notice Provisions 

  

	 	(a)	Each Party will give prompt notice to the other of the occurrence, or failure to occur, at any time from the date hereof until the earlier to occur of the termination of this
Agreement and the Effective Time of any event or state of facts of which it is aware which occurrence or failure would, or would be likely to: 

  

	 	(i)	cause any of the representations or warranties of either Party contained herein to be untrue or inaccurate in any material respect; or 

  

	 	(ii)	result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by either Party hereunder. 

  

	 	(b)	Each Party will give prompt notice to the other if, at any time before the Effective Time, it becomes aware that application for an order or exemption, any registration, consent,
circular or approval, or any other filing under Laws in connection with the transactions contemplated hereby contains a Misrepresentation, or that otherwise requires an amendment or supplement to such application, registration, consent, circular,
approval or filing, and Parent, Subco and the Company shall cooperate in the preparation of any amendment or supplement to the application, registration, consent, circular, approval or filing, as required. 

  

	8.2	Additional Agreements and Filings 

 Subject to the
terms and conditions herein provided, each of the Parties agrees to use its reasonable efforts to take, or cause to be taken, all reasonable actions and to do, or cause to be done, all things reasonably necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by this Agreement and to cooperate with each other in connection with the foregoing, including using reasonable best efforts: 
  

	 	(a)	to obtain all necessary consents, approvals, exemptions, registrations, and authorizations as are required to be obtained under applicable Law including the Required Consents and
Approvals of Parent and Subco and Required Consents and Approvals of the Company; 

	 	(b)	to defend all lawsuits or other legal proceedings challenging this Agreement or the consummation of the transactions contemplated hereby; 

  

	 	(c)	to cause to be lifted or rescinded any injunction or restraining order or other order adversely affecting the ability of the Parties to consummate the transactions contemplated
hereby; 

  

	 	(d)	to obtain all necessary exemptions and effect all necessary registrations and other filings and submissions of information requested by Governmental Authorities or required under
any applicable Securities Laws, or any other Laws relating to the transactions contemplated herein; 

  

	 	(e)	to execute and deliver such documents as any other Party may reasonably require; and 

  

	 	(f)	to fulfil all conditions within its power and satisfy all provisions of this Agreement. 

  

	8.3	Access to Information 

 Upon reasonable notice, the
Company shall afford to Parent and its respective officers, employees, counsel, accountants, lenders and other authorized representatives and financial and legal advisors reasonable access, during normal business hours and at such other time or
times as Parent may reasonably request, from the date hereof and until the earlier of the Effective Time or the termination of this Agreement, to the Company’s properties, books, contracts and records, as well as to its management personnel
(who shall be instructed to cooperate) and, during this period, the Company shall furnish promptly to the other party all information concerning its businesses, properties and personnel as Parent may reasonably request. The Parties acknowledge that
the information provided to them under this Section 8.3 will be non-public and/or proprietary in nature and will be subject to the terms of the Confidentiality Agreement. 
  

	8.4	Publicity 

 Parent and the Company agree to make a
joint press release with respect to this Agreement and the transactions contemplated herein as soon as practicable after the date hereof. Except to the extent necessary to comply with Laws, Parent, Subco and the Company further agree that, from the
date hereof until the earlier of the completion of the Arrangement and the termination of this Agreement, neither Parent, Subco nor the Company shall make any public announcement or statement with respect to the Arrangement or this Agreement without
the approval of the other party, such approval not to be unreasonably withheld or delayed. Moreover, in any event, each Party agrees to give prior notice to the other Parties of any public announcement relating to the Arrangement or this Agreement
and agrees to consult with the other Parties, and acting reasonably and in good faith, to consider comments provided by the other Parties, prior to issuing each such public announcement. 
 ARTICLE 9 CONDITIONS TO THE ARRANGEMENT 
  

	9.1	Conditions to the Obligations of Each Party 

 The
obligations of Parent, Subco and the Company to consummate the Arrangement are subject to the satisfaction (or, to the extent permissible, waiver) on or prior to the Effective Date of the following conditions: 
  

	 	(a)	Shareholder Approval shall have been obtained; 

	 	(b)	the Interim Order and the Final Order shall each have been obtained on terms consistent with this Agreement and will not have been set aside; and 

  

	 	(c)	no Law shall be in effect that prohibits the consummation of the Arrangement. 

  

	9.2	Conditions to the Obligations of Parent and Subco. 

 The obligations of Parent and Subco to consummate the Arrangement are subject to the satisfaction (or waiver by Parent in its sole discretion) of the following further conditions: 
  

	 	(a)	(A) no act, action, suit, demand or proceeding shall have been taken by or before any Canadian or foreign court, tribunal or Governmental Authority or administrative agency or
commission or by or before any elected or appointed public official in Canada or elsewhere, and (B) no Law shall have been proposed, enacted, promulgated or applied by a Governmental Authority; in either case: 

  

	 	(i)	to enjoin, prohibit or impose material limitations or conditions on the acquisition by Parent or Subco of any of the Common Shares or the right of Parent or Subco to own or exercise
full rights of ownership of the Common Shares; or 

  

	 	(ii)	which, if the Arrangement was consummated, would reasonably be expected to lead to a Material Adverse Effect or to materially adversely affect Parent or Subco;

  

	 	(b)	all Canadian and foreign government or regulatory approvals, waivers, permits, consents, reviews, orders, rulings, decisions and exemptions (including those of applicable Securities
Authorities) that in Parent’s reasonable judgment are necessary to complete the Arrangement shall have been obtained or concluded or, in the case of waiting or suspensory periods, expired or been terminated, each on terms and conditions
satisfactory to Parent, acting reasonably; 

  

	 	(c)	there shall not have occurred any Material Adverse Effect: (i) since the date of this Agreement; or (ii) prior to the date of this Agreement that has not previously been
publicly disclosed, and Parent shall have received a certificate dated the Closing Date signed on behalf of the Company by two senior officers of the Company (without personal liability) in form and substance satisfactory to Parent, acting
reasonably, confirming same; 

  

	 	(d)	(i) all representations and warranties of the Company in this Agreement other than the representation and warranty contained in Section 4.7: (A) that are qualified by a
reference to a Material Adverse Effect or materiality shall be true and correct in all respects; and (B) that are not qualified by a reference to a Material Adverse Effect or materiality shall be true and correct in all material respects, in
each case as if made at and as of the Effective Time; (ii) the representation and warranty contained in Section 4.7 shall be true and correct, except for such failure to be true and correct as does not represent a deviation in the fully
diluted outstanding share capital of the Company of one-half of one percent or more; and (iii) the Company shall have observed and performed its covenants in this Agreement in all material respects to the extent that such covenants were to have
been observed by the Company at or prior to the Effective Time, and Parent shall have received a certificate dated the Closing Date signed on behalf of the Company by two senior officers of the Company (without personal liability) in form and
substance satisfactory to Parent, acting reasonably, certifying the foregoing clauses (i), (ii) and (iii) after due inquiry; 

	 	(e)	in respect of the Company Public Disclosure as filed on or before the date of this Agreement, neither the Company nor Parent shall have become aware of any Misrepresentation (after
giving effect to all subsequent filings (filed before the date of this Agreement) in relation to all matters covered in earlier filings), in any of the Company Public Disclosure filed on or before the date of this Agreement;

  

	 	(f)	the Interim Order and the Final Order shall not have been set aside or modified in a manner unacceptable to Parent, acting reasonably, on appeal or otherwise;

  

	 	(g)	all Required Consents and Approvals of the Company shall have been obtained or received on terms that are satisfactory to Parent, acting reasonably, and reasonable evidence shall
have been delivered to Parent; and 

  

	 	(h)	Dissent Rights shall not have been exercised with respect to more than 10% of the Shares in connection with the Arrangement. 

  

	9.3	Conditions to the Obligation of the Company 

 The
obligation of the Company to consummate the Arrangement is subject to the satisfaction (or waiver by the Company in its sole discretion) of the following further conditions: 
  

	 	(a)	all representations and warranties of Parent in this Agreement: (A) that are qualified by materiality shall be true and correct in all respects; and (B) that are not
qualified by materiality shall be true and correct in all material respects, in each case as if made at and as of the Effective Time, and the Company shall have received a certificate dated the Closing Date signed on behalf of Parent and Subco by a
senior officer of Parent in form and substance satisfactory to the Company, acting reasonably, certifying the foregoing after due inquiry; and 

  

	 	(b)	Parent and Subco shall have observed and performed their respective covenants in this Agreement in all material respects to the extent that such covenants were to have been observed
by Parent or Subco at or prior to the Effective Time, and the Company shall have received a certificate dated the Closing Date signed on behalf of Parent and Subco by a senior officer of Parent in form and substance satisfactory to the Company,
acting reasonably, certifying the foregoing after due inquiry. 

 ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER 

  

	10.1	Termination 

 This Agreement may be terminated and
the Arrangement abandoned at any time prior to the Effective Time (with any termination by Parent also being an effective termination by Subco): 
  

	 	(a)	by Parent or by the Company, if any Law makes the consummation of the Arrangement or the transactions contemplated by this Agreement illegal or otherwise prohibited;

  

	 	(b)	by the Company, if Parent shall not have performed in all material respects any covenant to be performed by it under this Agreement or if any representation or warranty of Parent
shall have been untrue in any material respect provided that the Company delivers written notice to Parent of such breach or default and, if curable, such breach or default shall not have been cured by Parent by the earlier of the Effective Time and
the end of the fifth Business Day following the giving of such notice; 

	 	(c)	by Parent, if (A) any representation and warranty of the Company in this Agreement (other than the representation and warranty given under Section 4.25) (i) that is
qualified by a reference to Material Adverse Effect or materiality shall have been untrue or incorrect in any respect; or (ii) that is not qualified by a reference to Material Adverse Effect or materiality shall have been untrue or incorrect in
any material respect, or (B) the Company shall not have observed or performed in all material respects any covenant to be observed or performed by it under this Agreement; provided that Parent delivers written notice to the Company of such
breach or default and, if curable, such breach or default shall not have been cured by the Company by the earlier of the Effective Time and the end of the fifth Business Day following the giving of such notice; 

  

	 	(d)	by Parent, if the representation and warranty given at Section 4.25 shall have been untrue or incorrect as at the Effective Time; 

  

	 	(e)	by Parent, if a Change of Recommendation has occurred prior to the Company Meeting being held; 

  

	 	(f)	by either Parent or the Company, if the Effective Date does not occur on or prior to the Outside Date, provided that the failure of the Effective Date to so occur is not the result
of the breach of a representation, warranty or covenant by the party terminating this Agreement; 

  

	 	(g)	by either Parent or the Company, if Shareholder Approval shall have not have been obtained at the Company Meeting; 

  

	 	(h)	by mutual written consent of Parent and the Company; or 

  

	 	(i)	by Parent, if there shall have occurred after the date hereof any Material Adverse Effect. 

  

	10.2	Effect of Termination 

  

	 	(a)	In the event of the termination of this Agreement as provided in Section 10.1, this Agreement shall forthwith have no further force or effect and there shall be no obligation
on the part of Parent or the Company hereunder except as set forth in Section 6.3, Section 6.4, this Article 10, and Section 11.4 which provisions shall survive the termination of this Agreement; 

  

	 	(b)	In the event the Termination Fee or Parent Expense Reimbursement is paid to Parent, no other amounts will be due and payable as damages or otherwise by the Company, and Parent
hereby accepts the payment of such Termination Fee or Parent Expense Reimbursement in lieu of any damages or other payment or remedy to which it may be entitled; provided, however, that this limitation shall not apply in the event of fraud or wilful
breach of this Agreement by the Company. Parent agrees that the payment of such Termination Fee or Parent Expense Reimbursement constitutes payment of liquidated damages, which are a genuine anticipated assessment or estimate of the damages which it
will suffer or incur as a result of the termination of this Agreement. The Company hereby irrevocably waives any right it may have to raise as a defence that any such liquidated damages are excessive or punitive. 

	 	(c)	In the event the Termination Fee or the Company Expense Reimbursement is paid to the Company, no other amounts will be due and payable as damages or otherwise by Parent and the
Company hereby accepts the payment of such Termination Fee or Company Expense Reimbursement in lieu of any damages or other payment or remedy to which it may be entitled; provided, however, that this limitation shall not apply in the event of fraud
or wilful breach of this Agreement by Parent. The Company agrees that the payment of such Termination Fee or Company Expense Reimbursement constitutes payment of liquidated damages, which are a genuine anticipated assessment or estimate of the
damages which it will suffer or incur as a result of the termination of this Agreement. Parent hereby irrevocably waives any right it may have to raise as a defence that any such liquidated damages are excessive or punitive.

  

	10.3	Amendment 

 This Agreement may be amended by mutual
agreement between the Parties; provided that Section 7.2 may not be amended without the consent of the persons entitled to the benefit of that section. It may not be amended except by an instrument in writing signed on behalf of each of the
Parties hereto. 
  

	10.4	Waiver 

 Each of Parent, on the one hand, and the
Company, on the other hand, may: 
  

	 	(a)	extend the time for the performance of any of the obligations or other acts of the other; 

  

	 	(b)	waive compliance with the other’s agreements or the fulfilment of any conditions to its own obligations contained herein; or 

  

	 	(c)	waive inaccuracies in any of the other’s representations or warranties contained herein or in any document delivered by the other party; 

 provided, however, that any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. 
 ARTICLE 11 GENERAL PROVISIONS 
  

	11.1	Notices 

 Any notice, consent, waiver, direction or
other communication required or permitted to be given under this Agreement by a Party shall be in writing and may be given by delivering same or sending same by facsimile transmission or by delivery addressed to the Party to which the notice is to
be given at its address for service herein. Any notice, consent, waiver, direction or other communication aforesaid shall, if delivered, be deemed to have been given and received on the date on which it was delivered to the address provided herein
(if a Business Day, if not, then the next succeeding Business Day, in the place of receipt) and if sent by facsimile transmission be deemed to have been given and received at the time of receipt (if a Business Day, if not, then the next succeeding
Business Day) unless actually received after 5:00 p.m. (local time in the place of receipt) at the point of receipt in which case it shall be deemed to have been given and received on the next Business Day. 
 The address for service for each of the Parties hereto shall be as follows: 
  

	 	(a)	if to the Company: 

 Excel-Tech Ltd. 
 2568 Bristol Circle 
 Oakville, Ontario

 L6H 5S1 

 Attention:          John Mumford, President and Chief
Executive Officer 
 Facsimile No.    (905) 829-5304 
 Attention:          Peter Kastelic, Chief Financial Officer 
 Facsimile No.    (905) 829-5304 
 with a copy (which shall not be deemed notice) to: 
 Gowling Lafleur Henderson LLP 
 1 First Canadian Place 
 Suite 1600

 100 King Street West 
 Toronto,
Ontario 
 M5X 1G5 
 Attention:          Harold Chataway and Jason Saltzman 
 Facsimile
No.    (416) 863-3495 and (416) 862-7661 
  

	 	(b)	if to Parent or Subco: 

 Natus Medical Incorporated

 1501 Industrial Road 
 San
Carlos, CA 94070 
 Attention:          Jim Hawkins, President and Chief Executive Officer

 Facsimile No.:   (650) 802-0401 
 with a copy (which shall not be deemed notice) to: 
 Fenwick & West LLP 
 Silicon Valley Center 
 801 California Street

 Mountain View, California 94041 
 Attention:          Daniel J. Winnike 
 Facsimile:          (650) 938-5200 
 With a required copy (which shall not be
deemed notice) to: 
 Osler, Hoskin & Harcourt LLP 
 Suite 1500 
 50 O’Connor Street 
 Ottawa, Ontario K1P 6L2 
 Attention:          Craig Wright 
 Facsimile:         (613) 235-2867 

	11.2	Miscellaneous 

 This Agreement: 
  

	 	(a)	except for the Confidentiality Agreement, constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, between the Parties,
with respect to the subject matter hereof; 

  

	 	(b)	shall be binding upon and enure to the benefit of the Parties and their respective successors and assigns; and 

  

	 	(c)	does not give any other Person (including any Shareholder, Employees or Consultants) any right or recourse whatsoever other than as otherwise expressly provided in this Agreement.

 The Parties shall be entitled to rely upon delivery of an executed facsimile copy of the Agreement, and such facsimile copy
shall be legally effective to create a valid and binding agreement among the Parties. 
  

	11.3	Binding Effect and Assignment 

 Except as expressly
permitted by the terms hereof, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the Parties without the prior express written consent of the other Parties, except that Parent, without the
prior written consent of the other Parties, may assign this Agreement to any of its Affiliates provided that (i) such assignment shall not relieve the assigning party from any of its obligations under this Agreement; (ii) such assignment
shall not unduly delay or hinder the obtaining or completion of the Regulatory Approvals; and (iii) such assignee covenants and agrees to be bound by all of the same obligations, covenants, liabilities and guarantees of the assignor provided
for in this Agreement and the assignor acknowledges it guarantees all of the assignee’s obligations hereunder. If not providing a guarantee pursuant to this Section 11.3, upon the completion of such assignment, the assignor completing such
assignment shall be released from its obligations under this Agreement and the Company shall acknowledge such release in writing. 
  

	11.4	Expenses 

 Except as provided in Sections 6.3
and 10.2, all fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such fee, cost or expense, whether or not the Arrangement is consummated.

  

	11.5	No Personal Liability 

  

	 	(a)	No director or officer of the Company or any of its Subsidiaries shall have any personal liability whatsoever to Parent or Subco under this Agreement or any other document delivered
in connection with this Agreement or the Arrangement on behalf of the Company or any of its Subsidiaries. 

  

	 	(b)	No director or officer of Parent or Subco shall have any personal liability whatsoever to the Company under this Agreement or any other document delivered in connection with this
Agreement or the Arrangement on behalf of Parent or Subco. 

	11.6	Survival 

 Subject to Section 10.2, the
representations and warranties of the Company and Parent contained in this Agreement shall not survive the Effective Time or the termination of this Agreement, and shall expire and be terminated on the earlier of the Effective Time or the
termination of this Agreement in accordance with its terms. Sections 6.3, 7.3, 10.2 and 11.4 shall survive the Effective Time and the termination of this Agreement. Section 7.2 shall survive the Effective Time. 
  

	11.7	Counterpart Execution 

 This Agreement may be
executed by facsimile or other electronic means and in any number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same agreement. 
 [The remainder of this page has been left intentionally blank.] 

 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above by
their respective representatives thereunto duly authorized. 
  

			
	NATUS MEDICAL INCORPORATED
		
	Per:	 	  

		 	Authorized Signatory
		
	Per:	 	  

		 	Authorized Signatory
	
	4437713 CANADA INC.
		
	Per:	 	  

		 	Authorized Signatory
		
	Per:	 	  

		 	Authorized Signatory
	
	EXCEL-TECH LTD.
		
	Per:	 	  

		 	Authorized Signatory
		
	Per:	 	  

		 	Authorized Signatory

 Signature Page to Arrangement Agreement

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